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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 28, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 00028230
PLANET HOLLYWOOD INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 59-3283783
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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8669 COMMODITY CIRCLE
ORLANDO, FLORIDA 32819
(Address of principal executive office, including zip code)
(407) 363-7827
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Class A Common Stock, $0.01 par value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
(TITLE OF CLASS)
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None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter) period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The approximate aggregate market value of the registrant's Class A voting
common stock held by non-affiliates of the registrant, based on the closing
price of $11.125 per share as reported on the New York Stock Exchange as of the
close of business on March 12, 1998 is $316,873,431. The approximate aggregate
market value of the registrant's non-voting common stock held by non-affiliates
of the registrant, based on the assumption that such stock on a per share basis
should be valued at approximately 65% of the value per share of the registrant's
Class A voting common stock, as of the close of business on March 12, 1998 is
$30,533,794. Such assumption is based in part on the convertibility restrictions
imposed upon, and the lack of public trading in, the registrant's Class B
non-voting common stock.
As of March 12, 1998, there were approximately 97,028,247 shares of the
registrant's Class A voting common stock and 11,764,144 shares of the
registrant's Class B non-voting common stock outstanding.
The Registrant's Definitive Proxy Statement to be filed in connection with
the registrant's annual stockholders meeting to be held on May 22, 1998, is
incorporated by reference into Part III hereof.
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PART I
ITEM 1. BUSINESS
The statements that follow which express belief, anticipation or
expectation, as well as other statements which are not historical fact, are
forward looking statements. Consequently, actual results may vary materially
from these beliefs, anticipations and expectations. Meaningful factors which
could cause actual results to differ include, but are not limited to,
uncertainty of future profitability, ability to obtain satisfactory financing,
uncertainty of market acceptance, impact of competitive products, as well as
other factors discussed in Item 7 of this Form 10-K--"Management's Discussion
and Analysis of Financial Condition and Results of Operation."
GENERAL
Planet Hollywood International, Inc., a Delaware corporation (the
"Company"), is a creator and worldwide developer of consumer brands that
transcend international barriers and capitalize on the universal appeal of
movies, sports and other entertainment-based themes. Since the Company commenced
operations in October 1991, the PLANET HOLLYWOOD name and distinctive logo
design have become among the most widely-recognized trademarks in the world. To
date, the Company has promoted its brands primarily through the operation of
theme restaurants, most notably PLANET HOLLYWOOD and the OFFICIAL ALL STAR CAFE,
that provide a unique dining and entertainment experience in a high-energy
environment and, through their integrated retail stores, offer a broad selection
of merchandise displaying the Company's logos. During fiscal 1997, more than 20
million people visited the Company's 53 Company-owned and 34 franchised
restaurant units located in 29 countries throughout the world. The Company had
revenues of approximately $475.1 million and EBITDA (earnings before interest,
taxes, depreciation, amortization and $68.2 million of noncash charges
associated with a $71.2 million charge in fiscal 1997) of approximately $120.2
million in fiscal 1997.
An important part of the Company's strategy is to promote its brands through
the active involvement as stockholders of some of the world's most famous movie
stars, including Arnold Schwarzenegger, Sylvester Stallone, Bruce Willis, Demi
Moore and Whoopi Goldberg, and sports stars, including Andre Agassi, Wayne
Gretzky, Ken Griffey, Jr., Joe Montana, Shaquille O'Neal, Monica Seles and Tiger
Woods. The Company's celebrity stockholders generate significant media attention
and publicity for the PLANET HOLLYWOOD and OFFICIAL ALL STAR CAFE brands. The
Company is continuing to expand its roster of celebrity stockholders, with an
emphasis on new, up-and-coming stars, in order to appeal to broader segments of
consumers.
The Company's strategy is to capitalize on its brand recognition across a
wide range of businesses in addition to theme restaurants. Accordingly, the
Company has embarked on several strategic ventures in movie theaters, lodging,
gaming and consumer products. To reflect this diversification of its business,
the Company has recently organized its operations into five divisions, each of
which is described below.
FOOD & BEVERAGE DIVISION
The Food & Beverage division is primarily responsible for the development
of, and the food and beverage operations associated with, the Company's theme
restaurants other than those associated with its joint venture projects. The
Company's theme restaurants are characterized by distinctive design features and
are generally located at high profile sites in major tourist markets. Units
generally range in size from approximately 12,000 to 36,000 square feet and in
seating capacity from 230 to 600 persons, and offer high-quality, popular
cuisine, attentive service and an atmosphere of excitement created by combining
unique layouts and decor with custom-designed videos and audio soundtracks. See
Note 13 to the Company's Consolidated Financial Statements for information
relating to direct revenues and cost of sales relating to food and beverage.
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Each PLANET HOLLYWOOD unit features authentic movie memorabilia, including
props and costumes ranging from movie classics, such as GONE WITH THE WIND, to
the academy award winning film, FORREST GUMP, as well as items from the
celebrity stockholders' movies, such as Arnold Schwarzenegger's cyborg from
TERMINATOR, Sylvester Stallone's boxing shorts from ROCKY, Bruce Willis'
motorcycle from PULP FICTION and Demi Moore's uniform from A FEW GOOD MEN. Each
OFFICIAL ALL STAR CAFE unit resembles the inside of a sports arena or stadium
and displays sports memorabilia such as the contract for Babe Ruth's trade from
the Red Sox to the Yankees, authentic celebrity-owned uniforms and athletic
equipment, the basketball backboard that Shaquille O'Neal shattered while
dunking in his rookie season, Andre Agassi's high school trophies and ponytail
and other items of personal interest from the careers of the sports celebrity
stockholders. Diners are entertained by custom-designed videos, recorded music,
movie trailers, footage of famous moments in sports, movie montages, live music
events and live coverage of patrons displayed on large screens throughout the
units. Certain of the PLANET HOLLYWOOD and OFFICIAL ALL STAR CAFE units have
separate screening or private rooms for viewing movies and special sporting
events.
The Company will soon launch its third major theme concept, a tribute to the
world of live music (the "Music Concept"). As with the Company's two existing
theme concepts, the Music Concept will have substantial celebrity involvement
and a distinctive brand name and logo that can be applied to restaurants,
lodging and merchandise. The Music Concept will be promoted initially through
theme restaurants with integrated retail stores. Each of the Music Concept theme
restaurants will feature live performances by a broad range of musical artists,
either in a connected club facility or in an integrated stage area within the
restaurant itself. The Company's two flagship units are expected to open in the
summer of 1998 in Leicester Square in London and Times Square in New York City.
Each will have approximately 15,000 square feet of restaurant space seating up
to 350 people and an adjacent live music club with room for approximately 500
people in London and 1,000 people in New York. The restaurants will feature
items of personal interest donated or loaned by the music industry celebrities
who will be associated with the Music Concept. Each unit will also be configured
to allow patrons to view a wide range of music events and videos from their
seating location.
RETAIL & MERCHANDISING DIVISION
The Retail & Merchandising division is primarily responsible for the
development of, and sales of products and merchandise through, retail stores
located within the Company's theme restaurants as well as stand-alone retail
stores and other distribution channels, including mass market and specialty
retailers. Management believes the Company will derive significant benefit from
the creation of a separate division that focuses on sales of merchandise.
Merchandise sales yield higher operating margins than do food and beverage sales
and provide additional off-site promotion for the Company's brands. See Note 13
to the Company's Consolidated Financial Statements for information relating to
direct revenues and cost of sales relating to merchandise.
Most of the Company's theme restaurants include an integrated merchandise
store that offers premium-quality fashion merchandise, such as jackets,
T-shirts, sweatshirts and hats, as well as watches, pins, key chains, glasses,
stuffed animals and other souvenir items. The OFFICIAL ALL STAR CAFE units also
offer athletic apparel for various sports, such as tennis, basketball and
baseball, as well as duffle and equipment bags, all of which incorporates an
OFFICIAL ALL STAR CAFE "team" theme. Music Concept units will also offer fashion
and souvenir merchandise that incorporate the Music Concept theme. All
merchandise prominently displays the colorful and distinctive trademark and logo
design and typically the name of the city in which the unit is located, which
enhances the collectible nature of the items. Each unit's product mix varies to
meet the demand of the particular market in which the unit is located. In
cooperation with some of its celebrity stockholders, the Company has also
developed a line of "celebrity series" merchandise. Items in this line feature
artwork and designs created by a celebrity and a portion of the proceeds from
sales of these items is directed to a charity designated by the celebrity.
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The Company also operates six stand-alone retail "SuperStores." Each
SuperStore offers a broader variety of clothing and other merchandise than is
offered in the Company's integrated retail stores. Items offered include
clothing for children, such as baby sleepers and bibs, clothing for adults, such
as polo shirts, hats and jackets, and housewares, such as glassware and plastic
tumblers. All merchandise bears one of the Company's distinct brand names or
logos. The SuperStores also offer "celebrity series" merchandise and
periodically feature lines of "Movie Studio" merchandise devoted to the latest
film releases.
The Company continually updates and refreshes its merchandise mix to
reinforce the appeal and collectibility of its branded merchandise. For example,
the Company has begun to introduce special seasonal product lines two times per
year, as a complement to the base merchandise business. The seasonal product
lines will reflect current color and style trends, such as brightly-colored,
fitted ladies T-shirts for spring and fleece outerware for fall. Although new
items are being added, it is the Company's long-range goal to reduce its total
SKUs (the number of different inventory items) by 25% and it has implemented an
"open-to-buy" inventory management system that as of March 1, 1998 had already
reduced domestic inventory levels by approximately 7% since the end of fiscal
1997.
THEATERS & ENTERTAINMENT DIVISION
The Theaters & Entertainment division is primarily responsible for the
development and oversight of the Company's joint venture with AMC Entertainment,
Inc. ("AMC") and for the creation and development of other entertainment
ventures.
The Company and AMC, through a 50/50 joint venture, will develop, own and
operate a series of multi-screen, movie theater megaplexes under the brand name
PLANET MOVIES BY AMC. Each megaplex facility will feature as many as 30 screens
and a dramatically designed entertainment center that will include restaurants,
including in certain facilities a PLANET HOLLYWOOD unit and/or an OFFICIAL ALL
STAR CAFE unit, as well as various refreshment and merchandise kiosks. The first
PLANET MOVIES BY AMC megaplex, which is projected to open in the first half of
1999 near Columbus, Ohio, will occupy an approximately 160,000 square foot
facility consisting of 30 screens with total seating capacity for 6,100 persons,
an approximately 9,500 square foot PLANET HOLLYWOOD restaurant and a similar
size OFFICIAL ALL STAR CAFE restaurant, each with its own integrated merchandise
store, and various refreshment kiosks.
Although the Company anticipates that the joint venture will develop and
operate additional units beyond the facility under construction in Columbus, no
minimum number of units has been agreed upon and the development of additional
sites will require the approval of both partners. The Company expects that the
build-out of the Columbus site will be financed out of the $9.0 million capital
contribution that each partner is required to make to the joint venture and that
additional sites will be financed through borrowings by the joint venture. In
connection with the contribution of certain other sites by AMC to the joint
venture, the Company has agreed to contribute an additional $1.0 million plus
certain direct costs associated with such sites. To the extent that the joint
venture is unable to obtain sufficient financing or financing on commercially
reasonable terms, the Company expects that it and AMC will make additional
capital contributions. The Company expects to use a portion of the proceeds from
the proposed 1998 Notes Offering (see description in Item 7--Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources) to make additional capital
contributions to the joint venture when needed.
The joint venture is structured so that each partner, for accounting
purposes, will be able to consolidate the revenues and profits of approximately
half of the units that are developed, including, in the case of the Company, the
first unit in Columbus, Ohio, which will be leased and operated by an entity
controlled by the Company. The Company has guaranteed the lease obligations of
such entity.
The joint venture has a term of 100 years. Except for transfers to
affiliates and involuntary transfers, transfers of interests in the joint
venture are subject to rights of first negotiation and rights of first refusal.
Distributions from the joint venture to its partners will require the approval
of both partners and are not anticipated in the near future. In addition, to the
extent that the joint venture obtains financing for the
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build-out of its units, such indebtedness may limit or prohibit the payment of
dividends or distributions to the Company and AMC.
LODGING & GAMING DIVISION
The Lodging & Gaming division is primarily responsible for the Company's
participation in the Las Vegas Project, the OFFICIAL ALL STAR HOTEL and the
PLANET HOLLYWOOD Hotel (as described below) and similar ventures that may be
pursued in the future.
LAS VEGAS PROJECT. The Company and a subsidiary of Aladdin Gaming Holdings,
LLC ("Aladdin") intend to form a 50/50 joint venture to construct, own and
operate a music-themed hotel, casino and entertainment center (the "Las Vegas
Project") as part of a 35-acre complex on the site of the existing Aladdin hotel
and casino at the center of the Strip in Las Vegas, Nevada. The Las Vegas
Project, which will be an extension of the Company's soon-to-be-launched Music
Concept brand and is targeted for completion in 2000, is expected to include a
1,000-room hotel, a 50,000 square foot casino containing approximately 1,500
slot machines and 50 gaming tables, a Music Concept-themed restaurant with a
merchandise store and live performance club facility accommodating 1,000 people,
as well as additional restaurants, an outdoor swimming pool and other amenities.
The joint venture also is expected to acquire from Aladdin for nominal
consideration a long-term lease of the existing 7,000-seat Theater of the
Performing Arts (located in the center of the complex), which will be renovated
into a state-of-the-art concert venue. The existing Aladdin hotel, which has
been closed and is expected to be razed during the Spring of 1998, will be
replaced by a new 2,600-room hotel and casino to be owned and operated by a
subsidiary of Aladdin. The new Aladdin hotel and casino will be linked to the
Las Vegas Project and the Theater of the Performing Arts by an entertainment and
shopping mall, to be named the Desert Passage, that will include approximately
462,000 square feet of retail space.
Definitive agreements relating to the Las Vegas Project have not yet been
completed, although the Company and Aladdin are presently operating under a
letter of intent. The Company anticipates that the joint venture will operate
substantially as described below. However, the terms discussed herein are
subject to further negotiation and may be modified prior to the execution of
definitive documentation.
The total cost of the Las Vegas Project is estimated to be approximately
$250.0 million. The Company and Aladdin each expect to contribute approximately
$41.3 million to the Las Vegas Project, with the Company's contribution in cash
and Aladdin's contribution in cash and property. The Company expects to use a
portion of the proceeds from the proposed 1998 Notes Offering (see description
in Item 7-- Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources) to finance its capital
contributions. The joint venture is expected to obtain a $120.0 million credit
facility for the construction of the Las Vegas Project and up to an additional
$50.0 million in debt financing for equipment and operations. In connection with
the $120.0 million credit facility, Aladdin, a trust for the benefit of certain
members of the family of the chairman of Aladdin (the "Trust") and the Company
are expected to provide a keep-well agreement (the "Keep-Well Agreement") to
provide additional cash to the Las Vegas Project after its opening to the extent
necessary to comply with the financial covenant requirements under the credit
facility. The Company's obligation under the Keep-Well Agreement for a
particular period, after reimbursement by Aladdin and the Trust, will be limited
to the amount by which the Las Vegas Project's merchandise revenues fall below
certain designated targets. The Keep-Well Agreement will terminate if the Las
Vegas Project (without the benefit of any such contributions) complies with all
financial covenant requirements for six consecutive quarterly periods following
the completion date.
In addition to its participation in the Las Vegas Project's profits through
its 50% interest in the joint venture, the Company will receive licensing fees
for the use of the Music Concept name and logo and consulting fees for the
provision of certain services. The Company is expected to enter into a long-term
agreement to provide promotional services to the Las Vegas Project and to
arrange for performers to
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appear at the Theater for the Performing Arts and the live performance music
club associated with the Music Concept-themed restaurant.
OFFICIAL ALL STAR HOTEL. A joint venture among the Company, Vornado Realty
Trust and an affiliate of Mr. Ong (a director and principal stockholder of the
Company) acquired the Hotel Pennsylvania in New York City in September 1997. The
1,700-room hotel, which is the fourth largest in New York City, is located
directly opposite the entrance to Madison Square Garden, one of the most
well-known sports arenas in the world. While continuing its normal operations,
the hotel is being renovated and remodeled into a unique sports-themed facility
that will be renamed the OFFICIAL ALL STAR HOTEL. Renovation is expected to be
substantially completed by the end of 1999. The renovated guest rooms and common
areas will feature themes that celebrate the world of sports, including
memorabilia from the Company's sports celebrity stockholders and other prominent
athletes and sports legends. In addition to its guest rooms, restaurants and
banquet and conference facilities, the renovated hotel will also contain
approximately 400,000 square feet of rentable retail space. The Company has
contributed $9.6 million to the joint venture for its 20% equity interest and is
obligated to contribute up to an additional $10.4 million for capital
expenditures in connection with the renovation of the hotel. The Company expects
to use a portion of the proceeds from the proposed 1998 Notes Offering (see
description in Item 7--Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources) for this
contribution.
The joint venture has a term of 99 years. Except for transfers to
affiliates, transfers of interests in the joint venture are subject to certain
rights of first offer, first refusal and co-sale. Distributions of profits are
to be made pro rata among the partners based on their respective ownership
interests in the joint venture. It is expected that income derived from the
joint venture's activities associated with its retail, office and parking
rentals will be distributed to the joint venture partners on a current basis,
while distributions of income derived from the hotel itself will be
discretionary. In addition to participation in the hotel's profits through its
20% equity interest in the joint venture, the Company will also receive royalty
payments from the joint venture under a ten-year license (renewable by the joint
venture for two additional five-year periods) of the OFFICIAL ALL STAR name and
logo and certain other intellectual property rights.
The joint venture has entered into a $120.0 million loan agreement with
Salomon Brothers Realty Corp. and LaSalle National Bank in order to finance the
acquisition of the hotel. In connection with this loan, the joint venture
granted the lenders a security interest in certain assets of the joint venture,
an assignment of its interests in rents and leases relating to the hotel and a
mortgage on certain real property. In addition, if the joint venture does not
deposit $45.0 million dollars into a reserve account by September 24, 1999, each
of the partners will contribute a portion of any shortfall based on its
ownership interest in the joint venture.
PLANET HOLLYWOOD HOTEL. The Company and several prominent real estate
developers, through a joint venture, plan to construct and own a 50-story,
560-room, movie-themed hotel at the intersection of Broadway and 47th Street in
New York City's Times Square redevelopment area. The new PLANET HOLLYWOOD HOTEL
will be characterized by striking, modern decor and will include motion picture
memorabilia from the Company's collection. Upon its completion--presently
anticipated for late 1999, in time for the millennial New Year's Eve
celebration--the hotel will also become the site for a new Company-owned PLANET
HOLLYWOOD flagship restaurant with seating for more than 400 patrons that will
replace the Company's existing restaurant on West 57th Street in New York City.
As part of the operations of the PLANET HOLLYWOOD restaurant, the Company has
the exclusive right to provide all food and beverage services to the hotel
(excluding mini-bar operations, in-room guest amenities and self-serve coffee),
and will provide and prepare the food for room service, serve breakfast to the
hotel's guests in its restaurant and provide bar service in the hotel's lobby
area.
In addition to its participation in the hotel's profits through its 20%
equity interest in the joint venture, the Company will receive royalties from
the joint venture under a ten-year license (renewable by the joint venture for
two additional five-year periods) for the hotel's use of the PLANET HOLLYWOOD
name and
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logo. The joint venture may terminate the license under certain circumstances in
which it would be required to rename the hotel.
The Company is required to make a $7.0 million capital contribution (of
which $5.0 million has been paid) for its 20% interest in the joint venture. In
addition, the Company has entered into a synthetic lease of a condominium unit
that will constitute the site of the new flagship PLANET HOLLYWOOD restaurant.
If the joint venture fails to make certain required payments to the lenders
under the joint venture's credit facility, the Company may increase its interest
in the joint venture by making such payments.
The term of the joint venture is until December 31, 2050. The Company and
its joint venturers have granted each other rights of first refusal with respect
to transfers of the restaurant and hotel units, respectively. If, within five
years after the opening of the hotel, the hotel is sold to a third party and
such third party terminates the license agreement with the Company, the Company
has the right to require the joint venture to reacquire its membership interest
at fair market value and to pay $1.0 million to the Company.
CONSUMER PRODUCTS DIVISION
The Consumer Products division is primarily responsible for the licensing of
the Company's brands in connection with selected consumer products, such as ice
cream, toys and games.
COOL PLANET ICE CREAM. The Company has formed a strategic alliance with
Dreyer's Grand Ice Cream, Inc. ("Dreyer's"), a leading manufacturer of ice cream
and frozen desserts. Under a license from the Company, Dreyer's will produce and
distribute through supermarkets and other retail food outlets a new line of
premium-plus ice cream under the name COOL PLANET. In addition, the Company
plans to develop and open its own COOL PLANET ice cream and dessert shops that
will feature COOL PLANET ice cream products. The shops generally will range in
size from 800 to 1,400 square feet, will have counter service and a small table
seating area, and will feature unique decor derived from the PLANET HOLLYWOOD
theme concept. COOL PLANET ice cream also will be added to the menu in all of
the Company's theme restaurants and is anticipated to be sold in PLANET MOVIES
BY AMC megaplexes. COOL PLANET ice cream products are expected to become
available to consumers beginning in 1998 and the Company anticipates opening ten
COOL PLANET shops, primarily in California and Florida, by the end of 1998.
Whoopi Goldberg, one of the Company's principal celebrity stockholders, will
become the spokesperson for COOL PLANET products and COOL PLANET shops.
The Company has granted Dreyer's and its wholly owned subsidiary, Edy's
Grand Ice Cream, subject to certain exceptions, an exclusive 30-year license to
use the COOL PLANET trademarks and designs in connection with manufacturing,
distributing, promoting and selling ice cream and similar frozen products. The
Company and Dreyer's have agreed to co-develop at least five ice cream flavors
for sale under the COOL PLANET brand. Dreyer's ice cream will pay quarterly
royalties to the Company based on its net sales of COOL PLANET ice cream to
customers other than the Company's existing and future theme restaurants and
COOL PLANET shops. Either party may terminate the license if net sales in the
fourth year of the license fall below a specified minimum threshold.
OTHER CONSUMER PRODUCTS. The Company has entered into licensing
arrangements to create, in conjunction with Hasbro, Inc., the "PLANET
HOLLYWOOD--The Game" board game and, in conjunction with Mattel, Inc., the
PLANET HOLLYWOOD Barbie-Registered Trademark- doll. The Company has also entered
into a licensing arrangement for a PLANET HOLLYWOOD
Visa-Registered Trademark-card and for a PLANET HOLLYWOOD "entertainment minute
update" to be broadcast on radio stations around the United States. The Company
is continuing to seek additional licensing arrangements to promote its brands
and capitalize on its brand recognition.
CELEBRITY INVOLVEMENT
A number of motion picture and sports celebrities promote the Company and
allow the Company to use their names, pictures and select memorabilia in
advertising, promoting and operating its units. These
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celebrities include, in addition to the founding movie and sports celebrities,
such stars as Tom Arnold, Cindy Crawford, Danny Glover, Melanie Griffith, Don
Johnson, Luke Perry, Steven Seagal, Charlie Sheen, Wesley Snipes, Jean-Claude
Van Damme and Tiger Woods. The Music Concept is also expected to have
substantial celebrity involvement from leading recording artists.
Each celebrity generally grants the Company the right to use his or her
name, approved likeness, approved biography and selected career memorabilia in
connection with the promotion, advertising and operation of the Company's units.
The Company must obtain prior consent with respect to any use of a celebrity's
name or likeness in connection with sales of merchandise. In addition, each
celebrity generally assists/participates in various promotional activities,
including attending the grand openings of new units, screening new movies at the
units and making periodic appearances at parties and other special events at the
units. The Company generally issues to these celebrities shares or options to
acquire shares of its common stock. Resale of the shares is restricted for
varying periods of years and the options are subject to forfeiture in certain
circumstances.
The Company is continuing to expand its roster of celebrity stockholders,
with an emphasis on new, up-and-coming stars, in order to further expand its
appeal to broader segments of consumers. The Company anticipates that it will be
able to continue to attract new celebrities to enter into promotional agreements
with the Company similar to those currently in effect, including provision for
the issuance to those celebrities of shares or options to acquire shares of its
common stock in amounts that, in the aggregate, are not expected to be material.
There can be no assurance, however, of the extent to which major motion picture,
sports, music or other celebrities will promote the Company or its brands in the
future.
ADVERTISING AND PROMOTION
The Company attracts new customers through word-of-mouth, the visibility of
its branded merchandise, radio and print advertising, billboards and the
extensive media coverage typically associated with grand openings of new units
due to the attendance of celebrities. In addition, certain Company-owned units
employ their own public relations manager. In connection with unit openings,
local public relations firms are retained to generate local interest and
industry magazines and television shows are alerted to the upcoming "photo
opportunities" with celebrities. Motion picture premieres have become occasions
for large-scale, major media events at the Company's units, further enhancing
the awareness and cachet of the brand. The Company issues redeemable vouchers
for food and merchandise purchases to tour operators in an effort to encourage
tourists to include certain of the Company's units on their itineraries. The
Company also hosts fund-raising parties for local charities at its units with
the support of celebrities, including pre-opening staff-training events where
the charity collects the receipts and uses the unit free of charge.
FRANCHISING
A significant number of overseas theme-restaurant units have been
franchised. The Company's standard franchise agreement grants the exclusive
right for up to 50 years to operate restaurant and/or merchandise locations, and
sell branded merchandise in a specified market and to use the Company's brands
and trademarks. In addition, some of the franchisees have obtained the exclusive
rights to open up units in specified countries, and the Company has entered into
master franchise arrangements with respect to several larger territories. In
return for the franchise, the Company has been paid initial nonrefundable fees
typically ranging from $1.0 million to $2.0 million upon execution of the
franchise agreements as well as royalties based on a percentage of the total
revenues from the units, usually 5% to 10% of food and beverage revenues and 10%
to 15% of merchandise revenues. See Note 13 to the Company's Consolidated
Financial Statements for condensed financial information, summarized by
geographic area.
The franchisee assumes responsibility for the development and construction
of the unit, including all costs. The Company provides limited pre-opening
consultation services to the franchisee and has the right to reject sites, plans
and proposals that do not meet its specifications or standards. The franchisee
is
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obligated to operate the unit in accordance with the Company's operating manual,
which provides strict guidelines for the unit's design, decor and furnishings,
dress style of the staff, food menus and operating procedures. The arrangements
also include specific requirements regarding accounting and records and the
leasing and display of the Company's memorabilia.
The licensed rights for Asia are currently held by Planet Hollywood (Asia)
Pte Ltd. ("PH Asia"), an entity that is 50% owned by each of the Company and
Leisure Ventures Pte Ltd., a Singapore company of which Mr. Ong Beng Seng (a
director of the Company) is the largest stockholder. From time to time, some of
the Company's franchisees have also entered into management agreements with PH
Asia pursuant to which PH Asia has agreed to manage the franchisee's
restaurants. See Note 5 to the Company's Consolidated Financial Statements for
condensed financial information relating to affiliated companies, including PH
Asia.
The Company is party to a master franchise agreement with ECE, a
publicly-traded Mexican company in which the Company is a 20% stockholder. Mr.
Claudio Gonzalez (a director of the Company) is one of ECE's principal
stockholders and the Chairman of its Board of Directors. ECE is currently
operating PLANET HOLLYWOOD and OFFICIAL ALL STAR CAFE units in Cancun, Buenos
Aires, Los Cabos, Puerto Vallarta, Nassau, Cozumel, Acapulco and Sao Paolo.
Pursuant to the franchise agreement, ECE has paid nonrefundable franchise fees
of $5.0 million for the right to open a total of five PLANET HOLLYWOOD units and
two OFFICIAL ALL STAR CAFE units in Mexico through 2000. In addition, ECE has
the right, upon payment of the customary initial, non-refundable per unit
franchise fees, to open up to eight additional OFFICIAL ALL STAR CAFE units and,
with the Company's approval, up to an additional five PLANET HOLLYWOOD units in
Mexico. ECE has also acquired the rights to open PLANET HOLLYWOOD and OFFICIAL
ALL STAR CAFE units in Rio de Janiero, Brazil and Santiago, Chile. ECE is
obligated to pay continuing royalties to the Company consistent with the
Company's standard franchise arrangements, based on a percentage of the total
revenues from its units.
During fiscal 1997, the Company and an affiliate of HRH Prince Alwaleed Bin
Talal Abdulaziz Al Saud of Saudi Arabia ("Kingdom") entered into a franchise
agreement pursuant to which Kingdom may develop up to 15 PLANET HOLLYWOOD units,
and has a right of first refusal for an additional 19 units, in a total of 23
countries throughout the Middle East and Europe. To date, Kingdom has paid the
Company $9.5 million for seven locations and has the option for an additional
$1.5 million to develop up to two more units in Italy. Additional franchise fees
will be payable under the franchise agreement. Kingdom also purchased
approximately 1,087,000 shares of the Company's common stock directly from the
Company for approximately $19.6 million.
INTELLECTUAL PROPERTY
The Company has registered the PLANET HOLLYWOOD and OFFICIAL ALL STAR CAFE
names and associated designs and logos, and has applied for the registration of
the PLANET MOVIES, COOL PLANET and Music Concept brand names and associated
designs and logos, as trademarks, trade names and service marks with the United
States Patent and Trademark Office. The Company also has registered or has
applied for registrations in corresponding offices in all other countries in
which its units are located and, wherever legally permissible, has filed
applications to register its trademarks, designs, trade names and service marks
in foreign countries where it has an expectation of opening units in future
years. There can be no assurance that such registrations and other steps will
prove effective in protecting the proprietorship of the Company's brands. The
Company regards its trademarks, designs, trade names, service marks and trade
dress as having significant value and as material to its business.
The Company licenses its brands and trademarks to its franchisees and joint
ventures. A typical license agreement grants the licensee the right to use on a
non-exclusive basis and to sublicense certain intellectual property rights of
the Company, including the Company's brand names, logos, trademarks and service
marks. These intellectual property rights may be used only in connection with
the operation and promotion of a unit and the sale of branded merchandise at a
specified unit.
9
<PAGE>
The Company has entered into a master license agreement with PH Asia
entitling PH Asia to use and sublicense the PLANET HOLLYWOOD name in connection
with developing, franchising and operating PLANET HOLLYWOOD units throughout
most of Asia and in certain Middle East countries. The Company receives no
royalties from PH Asia under this agreement but through its 50% equity interest
in PH Asia is entitled to 50% of the distributable profits realized by PH Asia.
Sales of counterfeit merchandise bearing the Company's trademarks have
occurred from time to time. The Company has attempted, and will continue to
attempt, to control the sale of counterfeit merchandise by instituting legal
proceedings against manufacturers or distributors of counterfeit merchandise.
Management believes that sales of such counterfeit merchandise have not had a
material adverse effect on the Company's merchandise sales.
COMPETITION
The restaurant and retail merchandising industries are affected by changes
in consumer tastes and by international, national, regional and local economic
conditions and demographic trends. Discretionary spending priorities, traffic
patterns, tourist travel, weather conditions, employee availability and the
type, number and location of competing restaurants, among other factors, also
directly affect the performance of the Company's units. Changes in any of these
factors in the markets where the Company currently operates units could
adversely affect the Company's results of operations. Moreover, the theme
restaurant industry is relatively young, is particularly dependent on tourism
and has seen the emergence of a number of new competitors.
The restaurant and retail merchandising industries are highly competitive
based on the type, quality and selection of the food or merchandise offered,
price, service, location and other factors. Many well-established companies with
greater financial, marketing and other resources and longer operating histories
than the Company compete with the Company in many markets. In addition, some
competitors have design and operating concepts similar to those of the Company.
There can be no assurance that the Company will be able to respond to various
competitive factors affecting the restaurant and retail industries.
Competition in the hotel industry is vigorous and is generally based on
quality of service, attractiveness of facilities and locations, price and other
factors. Competition in the gaming industry, and in particular in Las Vegas, is
intense and is generally based on the quality of the facilities and services and
the entertainment offered at such facilities. The Company believes its
properties are distinguishable from those of its competitors by their
theme-orientations and celebrity involvement. However, many well-established
lodging and gaming companies with greater financial, marketing and other
resources and longer operating histories than the Company will compete with the
Company in the markets where the Company plans to open its facilities.
The motion picture exhibition industry is affected by a number of factors,
including the availability of desirable motion pictures and their performance in
the exhibitors' markets. Poor performance of, or disruption in the production of
or access to, motion pictures, whether produced by the major studios or
independent producers, could adversely affect the performance of the PLANET
MOVIES BY AMC joint venture. In addition, were the joint venture to experience
poor relationships with one or more major motion picture distributors, its
business could be adversely affected. The joint venture will be subject to
varying degrees of competition with respect to licensing films, attracting
patrons, obtaining new theater sites and acquiring theater circuits. In
addition, the joint venture's theaters face competition from a number of motion
picture exhibition delivery systems, such as pay television, pay-per-view and
home video systems, and from other forms of entertainment that compete for the
public's leisure time and disposable income.
10
<PAGE>
EMPLOYEES
As of December 28, 1997, the Company employed approximately 9,100 persons,
300 of whom were corporate management and administrative employees, 1,100 were
restaurant and merchandise management personnel, and 7,700 were employed in
non-management restaurant and merchandising operations. The Company's employees
are not covered by a collective bargaining agreement, and the Company has never
experienced an organized work stoppage, strike or labor dispute. The Company
considers relations with its employees to be satisfactory.
GOVERNMENTAL REGULATION
ALCOHOLIC BEVERAGE REGULATION. The Company's units are subject to licensing
and regulation by a number of governmental authorities. The Company is required
to operate its units in strict compliance with federal licensing requirements
imposed by the Bureau of Alcohol, Tobacco and Firearms of the United States
Department of Treasury, as well as the licensing requirements of the states and
municipalities where its units are located. Alcoholic beverage control
regulations require each of the Company's units to apply to a state authority
and, in certain locations, county and municipal authorities for a license and
permit to sell alcoholic beverages on the premises. Typically, licenses must be
renewed annually and may be revoked or suspended for cause at any time.
Alcoholic beverage control regulations relate to numerous aspects of the daily
operations of the units, including minimum age of patrons and employees, hours
of operation, advertising, wholesale purchasing, inventory control and handling,
storage and dispensing of alcoholic beverages. The Company has obtained all
regulatory permits and licenses necessary to operate its units that are
currently open, and intends to do the same for all future units. Failure on the
part of the Company to comply with federal, state or local regulations could
cause the Company's licenses to be revoked and force it to terminate the sale of
alcoholic beverages at its units. To reduce this risk, each Company unit is
operated in accordance with procedures intended to ensure compliance with
applicable laws and regulations. The failure to receive or retain, or any delay
in obtaining, a liquor license in a particular location could adversely affect
the Company's ability to obtain such a license elsewhere.
The Company is subject to "dram-shop" laws in several of the states in which
it has units. These laws generally provide a person injured by an intoxicated
person the right to recover damages from an establishment that wrongfully served
alcoholic beverages to such person. While the Company carries liquor liability
coverage as part of its existing comprehensive general liability insurance,
there can be no assurance that it will not be subject to a judgment in excess of
such insurance coverage or that it will be able to obtain or continue to
maintain such insurance coverage at reasonable costs or at all. The imposition
of a judgment substantially in excess of the Company's insurance coverage, or
the failure or inability of the Company to obtain and maintain insurance
coverage, could materially and adversely affect the Company.
NEVADA GAMING REGULATION. The ownership and operation of casino gaming
facilities in Nevada are subject to: (i) the Nevada Gaming Control Act and the
regulations promulgated thereunder (collectively, the "Nevada Act"); and (ii)
various local regulations. The gaming operations of the gaming facilities that
will form a part of the Las Vegas Project are subject to the licensing and
regulatory control of the Nevada Commission, the Nevada State Gaming Control
Board (the "Nevada Board") and the Clark County Liquor and Gaming Licensing
Board (the "Clark County Board"). The Nevada Commission, the Nevada Board, and
the Clark County Board are collectively referred to as the "Nevada Gaming
Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming
11
<PAGE>
Authorities; (iv) the prevention of cheating and fraudulent practices; and (v)
providing a source of state and local revenues through taxation and licensing
fees. Changes in such laws, regulations and procedures could have an adverse
effect on the Company's proposed gaming operations.
The Company will be required to apply for and obtain Gaming Licenses in
connection with its ownership interest (through a subsidiary) in the Las Vegas
Project. The Las Vegas Project will be required to obtain Gaming Licenses in
order to conduct casino gaming operations. The Las Vegas Project will be a
limited liability company licensee (a "Company Licensee") upon the receipt of
all required Gaming Licenses. The Gaming Licenses that will be held by the Las
Vegas Project will require the payment of fees and taxes and will not be
transferable. The Company will also be required to be registered with the Nevada
Commission as a publicly traded corporation (a "Registered Corporation") and to
be found suitable to own the stock of its subsidiary that will have an ownership
interest in the Las Vegas Project (the "Gaming Subsidiary") which will be
required to be licensed as a member of the Joint Venture. The following
regulatory requirements will be applicable to the Company, the Gaming Subsidiary
and the Las Vegas Project upon their receipt of all necessary Gaming Licenses
from the Nevada Gaming Authorities. The Company, the Gaming Subsidiary and the
Las Vegas Project have not yet applied for or obtained from the Nevada Gaming
Authorities the Gaming Licenses required in order for the Las Vegas Project to
conduct gaming operations and there can be no assurances that such Gaming
Licenses will be obtained, or that they will be obtained on a timely basis.
There can also be no assurances that the officers, directors and key employees
of the Company and the Gaming Subsidiary will obtain Gaming Licenses from the
Nevada Gaming Authorities.
As a Registered Corporation, the Company will be required to periodically
submit detailed financial information and operating reports to the Nevada
Commission and furnish any other information that the Nevada Commission may
require. No person may become a member of, or receive any percentage of profits
from a Company Licensee without first obtaining Gaming Licenses from the Nevada
Gaming Authorities.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company, the Gaming
Subsidiary or the Las Vegas Project in order to determine whether such
individual is suitable or should be licensed as a business associate of a gaming
licensee. Officers, directors and certain key employees of the Company and the
Gaming Subsidiary must file applications with the Nevada Gaming Authorities and
may be required to be licensed or found suitable by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny an application for licensing
for any cause which they deem reasonable. A finding of suitability is comparable
to licensing and both require submission of detailed personal and financial
information followed by a thorough investigation. The applicant must pay all
costs of the investigations. Changes in licensed positions must be reported to
the Nevada Gaming Authorities and in addition to their authority to deny an
application for a finding of suitability or licensure, the Nevada Gaming
Authorities have jurisdiction to disapprove a change in a corporate position. If
the Nevada Gaming Authorities were to find an officer, director or key employee
unsuitable for licensing or unsuitable to continue having a relationship with
the Company or the Gaming Subsidiary, the Company or the Gaming Subsidiary would
have to sever all relationships with such person. Determinations of suitability
or of questions pertaining to licensing are not subject to judicial review in
Nevada.
The Las Vegas Project will be required to submit detailed financial and
operating reports to the Nevada Commission and furnish any other information the
Nevada Commission may require. If the Company obtains Gaming Licenses from the
Nevada Commission, any restrictions on the transfer of the equity securities of
the Gaming Subsidiary, and any agreements not to encumber the equity securities
of the Gaming Subsidiary, in respect of the notes to be issued in the proposed
1998 Notes Offering (see description in Item 7--Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources) will require the approval of the Nevada Commission in order to remain
effective. No assurances can be given that such approvals will be obtained.
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<PAGE>
If it were determined that the Nevada Act was violated by the Company, the
Gaming Subsidiary or the Las Vegas Project, the gaming licenses they hold could
be limited, conditioned, suspended or revoked, subject to compliance with
certain statutory and regulatory procedures. In addition, the Company, the
Gaming Subsidiary, the Las Vegas Project and the persons involved could be
subject to substantial fines for each separate violation of the Nevada Act at
the discretion of the Nevada Commission. Further, a supervisor could be
appointed by the Nevada Commission to operate the gaming properties held by the
Las Vegas Project and, under certain circumstances, earnings generated during
the supervisor's appointment (except for the reasonable rental value of the
gaming properties) could be forfeited to the State of Nevada. Limitation,
conditioning or suspension of any Gaming License or the appointment of a
supervisor could (and revocation of any Gaming License would) materially
adversely affect the Company's proposed gaming operations.
Any beneficial holder of a Registered Corporation's voting securities,
regardless of the number of shares owned, may be required to file an
application, be investigated, and have his suitability as a beneficial holder of
the Registered Corporation's voting securities determined if the Nevada
Commission has reason to believe that such ownership would otherwise be
inconsistent with the declared policies of the State of Nevada. The applicant
must pay all costs of investigation incurred by the Nevada Gaming Authorities in
conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of a Registered
Corporation's voting securities to report the acquisition to the Nevada
Commission. The Nevada Act requires that beneficial owners of more than 10% of a
Registered Corporation's voting securities apply to the Nevada Commission for a
finding of suitability within thirty days after the Chairman of the Nevada Board
mails the written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires more than
10%, but not more than 15%, of a Registered Corporation's voting securities may
apply to the Nevada Commission for a waiver of such finding of suitability if
such institutional investor holds the voting securities for investment purposes
only. An institutional investor shall not be deemed to hold voting securities
for investment purposes unless the voting securities were acquired and are held
in the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Registered Corporation, any change in
the Registered Corporation's corporate charter, bylaws, management, policies or
operations of the Registered Corporation, or any of its gaming affiliates, or
any other action which the Nevada Commission finds to be inconsistent with
holding the Registered Corporation's voting securities for investment purposes
only. Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters voted
on by stockholders; (ii) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and not
to cause a change in its management, policies or operations; and (iii) such
other activities as the Nevada Commission may determine to be consistent with
such investment intent. If the beneficial holder of voting securities who must
be found suitable is a corporation, partnership or trust, it must submit
detailed business and financial information including a list of beneficial
owners. The applicant is required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the voting securities
beyond such period of time as may be prescribed by the Nevada Commission may be
guilty of a criminal offense. The Company will be subject to disciplinary action
if, after it receives notice that a person is unsuitable to be a stockholder or
to have any other relationship with the Company or the Gaming Subsidiary, the
Company (i) pays that person any dividend or interest upon voting securities of
the Company, (ii) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person, (iii) pays
remuneration in any form to
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that person for services rendered or otherwise, or (iv) fails to pursue all
lawful efforts to require such unsuitable person to relinquish his voting
securities including, if necessary, the immediate purchase of said voting
securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation, such as the notes to be issued in the
proposed 1998 Notes Offering (see description in Item 7--Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources), to file applications, be investigated and be found suitable
to own the debt security of a Registered Corporation if the Nevada Commission
has reason to believe that such ownership would otherwise be inconsistent with
the declared policies of the State of Nevada. If the Nevada Commission
determines that a person is unsuitable to own such security, then pursuant to
the Nevada Act, the Registered Corporation can be sanctioned, including the loss
of its approvals, if without the prior approval of the Nevada Commission, it:
(i) pays to the unsuitable person any dividend, interest, or any distribution
whatsoever; (ii) recognizes any voting right by such unsuitable person in
connection with such securities; (iii) pays the unsuitable person remuneration
in any form; or (iv) makes any payment to the unsuitable person by way of
principal, redemption, conversion, exchange, liquidation or similar transaction.
After becoming a Registered Corporation, the Company may not make a public
offering of its securities without the prior approval of the Nevada Commission
if the securities or proceeds therefrom are intended to be used to construct,
acquire or finance gaming facilities in Nevada, or to retire or extend
obligations incurred for such purposes. Such approval, if given, does not
constitute a finding, recommendation or approval of the Nevada Commission or the
Nevada Board as to the accuracy or adequacy of the prospectus or the investment
merits of the securities offered. Any representation to the contrary is
unlawful.
The regulations of the Nevada Board and the Nevada Commission also provide
that any entity which is not an "affiliated company," as such term is defined in
the Nevada Act, or which is not otherwise subject to the provisions of the
Nevada Act or such regulations, such as the Company, which plans to make a
public offering of securities intending to use such securities, or the proceeds
from the sale thereof for the construction or operation of gaming facilities in
Nevada, or to retire or extend obligations incurred for such purposes, may apply
to the Nevada Commission for prior approval of such offering. The Nevada
Commission may find an applicant unsuitable based solely on the fact that it did
not submit such an application, unless upon a written request for a ruling, the
Nevada Board Chairman has ruled that it is not necessary to submit an
application. The Exchange Offer (as defined in the disclosure regarding the
proposed 1998 Notes Offering described in Item 7--Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources) will qualify as a public offering. The Company intends to file a
written request (the "Ruling Request") with the Nevada Board Chairman for a
ruling that it is not necessary to submit the Exchange Offer for prior approval.
No assurance can be given that the Ruling Request will be granted or that it
will be considered on a timely basis. If the Nevada Board Chairman rules that
approval of the Exchange Offer is required, the Company will file an application
for such approval. If the Ruling Request is not granted, the Exchange Offer
could be significantly delayed, while the Company seeks approval of the Nevada
Board and the Nevada Commission for the Exchange Offer. No assurance can be
given that approval of the Exchange Offer, if required, will be granted.
Regulations of the Nevada Commission also prohibit certain repurchases of
securities by Registered Corporations without the prior approval of the Nevada
Commission. Transactions covered by these regulations are generally aimed at
discouraging repurchases of securities at a premium over market price from
certain holders of more than 3% of the outstanding securities of the Registered
Corporation. The regulations of the Nevada Commission also require prior
approval for a "plan of recapitalization," as such term is defined in the Nevada
regulations; generally, a plan of recapitalization is a plan proposed by the
management of a Registered Corporation that contains recommended action in
response to a proposed
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<PAGE>
corporate acquisition opposed by management of the corporation which acquisition
itself would require the prior approval of the Nevada Commission.
Changes in control of a Registered Corporation through merger,
consolidation, stock or asset acquisitions, management or consulting agreements,
or any act or conduct by a person whereby such person obtains control, may not
occur without the prior approval of the Nevada Commission. Entities seeking to
acquire control of a Registered Corporation must satisfy the Nevada Board and
Nevada Commission in a variety of stringent standards prior to assuming control
of such Registered Corporation. The Nevada Commission may also require
controlling stockholders, officers, directors and other persons having material
relationship or involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process relating to the
transaction.
Licensee fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either (i) a percentage of the gross revenues received, (ii) the number of
gaming devices operated or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where certain entertainment
is furnished in a cabaret, nightclub, cocktail lounge or casino showroom in
connection with the serving or selling of food, refreshments or merchandise.
A person who is licensed, required to be licensed, registered, required to
be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation of
the Nevada Board of their participation in such foreign gaming. The revolving
fund is subject to increase or decrease at the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standard of honesty
and integrity required of Nevada gaming operations, engage in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
OTHER REGULATIONS. The Company's units are subject to regulation by federal
and foreign agencies and to licensing and regulation by foreign, state and local
health, sanitation, building, zoning, safety, fire and other departments
relating to the development and operation of restaurants and retail
establishments. These regulations include matters relating to environmental,
building construction, zoning requirements and the preparation and sale of food.
Various federal, foreign and state labor laws govern the Company's relationship
with its employees, including minimum wage requirements, overtime, working
conditions and citizenship requirements. Significant additional government
imposed increases in minimum wages, paid leaves of absence and mandated health
benefits, or increased tax reporting and tax payment requirements for employees
who receive gratuities could have an adverse effect on the Company. Delays or
failures in obtaining the required construction and operating licenses, permits
or approvals could delay or prevent the opening of new units.
Units established in countries other than the United States are subject to
governmental regulation in the jurisdiction in which they are established
principally in respect of sales of liquor, construction of premises and working
conditions of employees. The Company does not believe that such regulations
materially adversely affect its business.
15
<PAGE>
ITEM 2. PROPERTIES
As of December 28, 1997, the Company, together with its franchisees and
licensees, operated 87 theme restaurants located in 29 countries throughout
North America, Europe and Asia, of which 53 are Company-owned. At present, all
Company-owned units are located on leased sites, with lease terms (including
renewal options) generally ranging from 15 to 25 years. Typically, the lease
rental includes a minimum fixed rent and additional rent based on a percentage
of total revenue from the unit. In fiscal 1997, total rental expense represented
approximately 10.0% of Direct Revenues. As of December 28, 1997, the following
tables provide information about the Company-owned and franchised units that
were operating. The Company may franchise or close certain underperforming
Company-owned units, none of which is material to its operations.
COMPANY-OWNED UNITS
PLANET HOLLYWOOD
<TABLE>
<CAPTION>
LOCATION YEAR OPENED LOCATION YEAR OPENED
- ---------------------------------------- --------------- ---------------------------------------- ---------------
<S> <C> <C> <C>
New York, New York...................... 1991 Helsinki, Finland....................... 1995
Costa Mesa, California.................. 1992 San Antonio, Texas...................... 1996
London, England......................... 1993 Myrtle Beach, South Carolina............ 1996
Chicago, Illinois....................... 1993 Nashville, Tennessee.................... 1996
Washington, D.C......................... 1993 Seattle, Washington..................... 1996
Mall of America, Minnesota.............. 1993 Disneyland Paris, France................ 1996
Aspen, Colorado......................... 1994 Berlin, Germany......................... 1996
Phoenix, Arizona........................ 1994 Oberhausen, Germany..................... 1996
Miami, Florida.......................... 1994 Amsterdam, Netherlands.................. 1996
Maui, Hawaii............................ 1994 Gatwick Airport, England................ 1996
Lake Tahoe, Nevada...................... 1994 Vancouver, Canada....................... 1996
Las Vegas, Nevada....................... 1994 Toronto, Canada......................... 1997
Dallas, Texas........................... 1994 Cannes, France.......................... 1997
Reno, Nevada............................ 1994 Prague, Czech Republic.................. 1997
Orlando, Florida........................ 1994 Key West, Florida....................... 1997
San Diego, California................... 1995 Indianapolis, Indiana................... 1997
Atlantic City, New Jersey............... 1995 Edmonton, Canada........................ 1997
New Orleans, Louisiana.................. 1995 Gurnee Mills, Illinois.................. 1997
Honolulu, Hawaii........................ 1995 Houston, Texas.......................... 1997
Atlanta, Georgia........................ 1995 Ft. Lauderdale, Florida................. 1997
San Francisco, California............... 1995 Munich, Germany......................... 1997
Paris, France........................... 1995 St. Louis, Missouri..................... 1997
Beverly Hills, California............... 1995 Dublin, Ireland......................... 1997
</TABLE>
OFFICIAL ALL STAR CAFE
<TABLE>
<CAPTION>
LOCATION YEAR OPENED LOCATION YEAR OPENED
- ---------------------------------------- --------------- ---------------------------------------- ---------------
<S> <C> <C> <C>
New York, New York...................... 1995 Myrtle Beach, South Carolina............ 1997
Orlando, Florida(a)..................... 1996 Miami, Florida.......................... 1997
Las Vegas, Nevada....................... 1996 Atlanta, Georgia........................ 1997
Atlantic City, New Jersey............... 1997
</TABLE>
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<PAGE>
FRANCHISED UNITS
PLANET HOLLYWOOD
<TABLE>
<CAPTION>
LOCATION YEAR OPENED LOCATION YEAR OPENED
- ---------------------------------------- --------------- ---------------------------------------- ---------------
<S> <C> <C> <C>
Cancun, Mexico(b)....................... 1992 Zurich, Switzerland..................... 1996
Hong Kong(c)............................ 1994 Hamburg, Germany(a)..................... 1996
Jakarta, Indonesia(c)................... 1994 Tel Aviv, Israel(d)..................... 1996
Barcelona, Spain........................ 1995 Singapore............................... 1997
Sydney, Australia....................... 1996 Guam.................................... 1997
Buenos Aires, Argentina (a)(b).......... 1996 Johannesburg, South Africa(a)........... 1997
Los Cabos, Mexico(b).................... 1996 Melbourne, Australia.................... 1997
Puerto Vallarta, Mexico(b).............. 1996 Manila, Philippines(a).................. 1997
Nassau, Bahamas(b)...................... 1996 Rome, Italy............................. 1997
Cozumel, Mexico(b)...................... 1996 Kuala Lumpur, Malaysia(a)............... 1997
Acapulco, Mexico(b)..................... 1996 Gold Coast, Australia(a)................ 1997
Moscow, Russia.......................... 1996 Madrid, Spain(a)........................ 1997
Bangkok, Thailand....................... 1996 Sao Paolo, Brazil(a)(b)................. 1997
Cape Town, South Africa................. 1996 Taipei, Taiwan(a)....................... 1997
Beirut, Lebanon(a)...................... 1996 Niagara Falls, Canada(a)................ 1997
Dubai, United Arab Emirates(a).......... 1996 Brussels, Belgium(a).................... 1997
</TABLE>
OFFICIAL ALL STAR CAFE
<TABLE>
<CAPTION>
LOCATION YEAR OPENED
- ---------------------------------------- ---------------
<S> <C> <C> <C>
Cancun, Mexico(b)....................... 1996
Melbourne, Australia.................... 1996
</TABLE>
- ------------------------
(a) A stand-alone retail store is presently operating at this location and the
Company expects to open a restaurant-merchandise store on the site within
twelve months.
(b) The PLANET HOLLYWOOD and OFFICIAL ALL STAR CAFE units in Cancun, Buenos
Aires, Los Cabos, Puerto Vallarta, Nassau, Cozumel, Acapulco and Sao Paolo
are owned by ECE. See "Franchising."
(c) The Hong Kong and Jakarta units operate under both a single master franchise
agreement and site franchise agreements that provide for royalty payments to
PH Asia, of which the Company owns a 50% interest, as the assignee of the
Company. PH Asia owns a 64% equity interest in the entity that operates the
Hong Kong unit and 20% equity interest in the entity that operates the
Jakarta unit.
(d) The Company is leasing the assets at this location to a third party that
operates the facility.
The Company has entered into certain lease agreements with the Walt Disney
Co. or its affiliates, for various Planet Hollywood and Official All Star Cafe
restaurants and merchandise stores. Each of the respective leases contain
certain unique provisions which are consistent with the standard terms imposed
by the Walt Disney Co. One such provision requires the consent of the landlord
prior to certain transfers of a controlling interest in the Company, the tenant
or its subsidiaries, which may include transfers of 50% or more of the share of
any such entity, the transfer of a controlling interest in the entity by the
Company or Robert Earl, or the termination of Mr. Earl's active management of
any such entity. In addition, the landlord has a right of first refusal to match
certain offers to acquire more than 10% of the stock of the Company, the tenant
or its affiliates. Similarly, the landlord has a right of first refusal to match
any offer to locate a restaurant within or adjacent to any theme park that is
not owned or licensed by the landlord or its affiliates. Another provision
grants the landlord an option to terminate the lease for any reason upon 60 days
notice and acquire the improvements on the premises at fair market value, as
defined by the particular lease agreement.
17
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant from time to time in routine lawsuits incidental
to its business, which, individually and in the aggregate, are not expected to
have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
18
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Class A voting common stock, $0.01 par value (the "Class A
Common Stock"), is registered and was traded on the Nasdaq National Market from
April 19, 1996 through Friday, September 19, 1997. Beginning Monday, September
22, 1997, the Class A Common Stock has been traded on the New York Stock
Exchange under the symbol "PHL." The Company's Class B non-voting common stock,
$0.01 par value (the "Class B Common Stock") is not traded on an establish
public trading market and transfer of such stock is generally restricted. As of
March 12, 1998 there were approximately 3,226 stockholders of record of the
Class A Common Stock and 19 stockholders of record of the Class B Common Stock.
The following table shows the high and low per share bid prices for the Class A
Common Stock for each full quarterly period beginning April 19, 1996, the date
of the Company's Initial Public Offering, through December 28, 1997:
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
(JAN.-MAR.) (APRIL-JUNE) (JULY-SEPT.) (OCT.-DEC.)
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Fiscal 1996............................... High n/a $ 27.50 $ 28.50 $ 28.00
Low n/a $ 18.00 $ 22.63 $ 19.00
Fiscal 1997............................... High $ 21.75 $ 22.69 $ 27.00 $ 19.63
Low $ 13.63 $ 16.13 $ 18.31 $ 12.50
</TABLE>
The Company has never declared any cash dividends on its Class A or Class B
Common Stock. The Company does not anticipate paying any cash dividends in the
foreseeable future, and intends to retain its available cash to finance the
development and growth of the Company. Any future dividend policy will be
determined by the Company's Board of Directors based upon conditions then
existing, including the Company's earnings, financial condition and capital
requirements, as well as such economic conditions, tax implications and other
factors as the Board of Directors may deem relevant. Although the Company does
not anticipate declaring any common stock dividends or any other distributions
on the Company's common stock in the foreseeable future, even if it desired to
do so, the amount of any such dividend would be limited under the terms of its
revolving credit arrangements and the proposed 1998 Notes Offering.
RECENT SALES OF UNREGISTERED SECURITIES
In April 1997, the Company issued 1,087,000 shares of its Class A Common
Stock to an investor in conjunction with the consummation of a franchise
agreement with the investor. Approximately $19.6 million was received for the
shares issued.
In July 1997, the Company filed two Registration Statements on Form S-8 with
the Securities and Exchange Commission (file nos. 333-31683 and 333-31685),
registering, in total, 12,000,000 shares of the Company's Class A Common Stock
which may be issued pursuant to certain stock award and incentive plans.
Accordingly, all options granted, and all stock issued pursuant to such
Registration Statements, will no longer be reported as sales of unregistered
securities. See Note 8 to the Company's Consolidated Financial Statements for a
discussion of stock options granted in fiscal 1997.
In January 1997, the Company issued 218,438 shares of its restricted Class B
non-voting common stock to certain celebrities. The restrictions lapse over a
period of years, generally three to four years. The shares were valued at their
estimated market value totaling $4.0 million.
All of the aforementioned transactions, other than those pursuant to the S-8
Registration Statements, were consummated in reliance on the exemption from
registration provided in Section 4(2) of the Securities Act of 1933.
19
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
PLANET HOLLYWOOD INTERNATIONAL, INC.
SELECTED FINANCIAL AND OPERATING DATA
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
--------- ---------- ---------- ---------- ----------
STATEMENTS OF OPERATIONS DATA:
REVENUES:
Food and beverage................................... $ 18,311 $ 78,377 $ 160,997 $ 222,481 $ 273,344
Merchandise......................................... 9,185 41,826 104,051 124,955 173,966
Royalties........................................... 3,181 1,729 1,558 4,528 11,715
Franchise fees...................................... -- 4,000 4,000 21,400 16,100
--------- ---------- ---------- ---------- ----------
TOTAL REVENUES........................................ 30,677 125,932 270,606 373,364 475,125
--------- ---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Food and beverage cost of sales..................... 4,372 19,891 38,537 50,190 61,930
Merchandise cost of sales........................... 3,590 15,401 37,925 43,236 62,878
Operating expenses.................................. 13,120 59,683 116,805 156,893 208,484
General and administrative.......................... 12,203 19,641 20,057 20,431 49,324
Depreciation and amortization....................... 2,818 16,231 22,182 27,295 38,825
Impairment of long-lived assets..................... -- -- -- -- 48,699
--------- ---------- ---------- ---------- ----------
TOTAL COSTS AND EXPENSES.............................. 36,103 130,847 235,506 298,045 470,140
--------- ---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS......................... (5,426) (4,915) 35,100 75,319 4,985
--------- ---------- ---------- ---------- ----------
Interest (expense) income, net...................... 142 (4,054) (11,229) (2,874) 1,327
Equity in income (loss) of unconsolidated
affiliates........................................ (198) -- 848 4,308 6,900
Gain on sale of subsidiary interests................ -- -- 611 -- --
Minority interests.................................. 223 (299) (3,728) (1,037) --
Provision for income taxes.......................... -- -- (875) (27,636) (4,954)
--------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM............... (5,259) (9,268) 20,727 48,080 8,258
Extraordinary item, net............................. -- -- -- (10,421) --
--------- ---------- ---------- ---------- ----------
NET INCOME (LOSS)..................................... ($ 5,259) ($ 9,268) $ 20,727 $ 37,659 $ 8,258
--------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ----------
EARNINGS PER SHARE:
Basic income before extraordinary item.............. -- -- $ 0.26 $ 0.47 $ 0.08
Diluted income before extraordinary item............ -- -- 0.25 0.47 0.08
Basic Net Income.................................... -- -- 0.26 0.37 0.08
Diluted Net Income.................................. -- -- 0.25 0.37 0.08
Basic weighted average shares outstanding........... -- -- 80,000 100,741 108,465
--------- ---------- ---------- ---------- ----------
Diluted weighted average shares outstanding......... -- -- 82,233 102,590 109,805
--------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ----------
FINANCIAL POSITION:
Working capital..................................... $ 17,231 $ 3,925 $ 15,528 $ 60,551 $ 30,431
Total assets........................................ 80,183 144,923 240,185 401,260 505,559
Long-term debt...................................... 30,091 82,819 122,745 7,529 70,491
Minority interests.................................. 4,507 8,959 10,466 -- --
Redeemable warrants................................. -- -- 15,000 -- --
Stockholders' equity................................ 16,298 7,459 28,145 312,131 338,541
--------- ---------- ---------- ---------- ----------
OTHER STATISTICS:
Cash flow from operations........................... ($ 9,560) ($ 3,146) $ 33,370 $ 48,830 $ 35,766
Capital expenditures................................ 29,345 52,131 80,291 81,675 124,526
Units open at fiscal year end:
Company-owned..................................... 4 15 23 37 53
Franchised........................................ 3 3 6 21 34
--------- ---------- ---------- ---------- ----------
Total............................................. 7 18 29 58 87
--------- ---------- ---------- ---------- ----------
</TABLE>
20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto included elsewhere
in this Form 10-K. All statements contained herein that are not historical facts
including, but not limited to, statements regarding the Company's current
business strategy, the Company's projected sources and uses of cash, and the
Company's plans for future development and operations, are based upon current
expectations. Such statements are forward-looking in nature and involve a number
of risks and uncertainties. Consequently, actual results may differ materially
from the forward-looking statements. Among the factors that could cause actual
results to differ materially are the following: the availability of sufficient
capital to finance the Company's business plans on terms satisfactory to the
Company; the impact of competitive products and pricing; changes in labor,
equipment, food and capital costs; changes in, or the failure to comply with,
regulations affecting the Company's business; future acquisitions or strategic
partnerships; the availability, locations and terms of sites for development;
the timing and costs associated with new location openings; acceptance of new
guests of the Company's brands and concepts as the Company continues to expand
into new brands and/or regions; success of the Company's franchisees and
licensees and the manner in which they promote, operate and develop the
Company's brands; general business and economic conditions; and factors
described from time to time in the Company's reports filed with the Securities
and Exchange Commission. The Company cautions readers not to place undue
reliance on any such forward-looking statements, which statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995.
OVERVIEW
Historically, the Company has derived substantially all of its revenues from
its theme restaurants, which revenues have consisted of (i) food and beverage
revenues, (ii) merchandise revenues, (iii) royalties and (iv) franchise fees.
Food and beverage revenues and merchandise revenues derived from Company-owned
units, as well as merchandise revenues from other retail channels, are referred
to herein collectively as "Direct Revenues." For fiscal 1997, food and beverage
revenues were approximately 61.1% of Direct Revenues and merchandise revenues
were approximately 38.9% of Direct Revenues.
Franchisees are typically required to pay an up-front franchise fee ranging
from $1.0 million to $2.0 million, which is recognized when all the Company's
pre-opening obligations in respect of the unit are fulfilled and the franchised
unit opens. Thereafter, the franchisee is required to pay royalties based on its
gross revenues from food, beverage and merchandise sales. These royalties
typically range from 5% to 10% of the franchisee's food and beverage revenues
and 10% to 15% of the franchisee's merchandise revenues.
The Company historically has capitalized pre-opening costs for each of its
new units and has amortized such costs over the 12-month period following the
opening of the unit. Pre-opening costs consist of direct costs related to hiring
and training the initial workforce and other direct costs related to opening a
new unit, including expenses related to the grand opening. A new accounting
standard is currently under consideration by the American Institute of Certified
Public Accountants which, if adopted, would require a change in the Company's
accounting for pre-opening costs to an expense-as-incurred basis. See "--New
Accounting Standards."
During the initial period following its opening, a new unit typically
realizes higher revenues than in subsequent periods of operation, due primarily
to the substantial promotional activity during this period, including its
celebrity grand opening event. Because of this "honeymoon" period, a unit is
included in the "same unit" analysis, which only includes Company-owned units,
discussed below only after it has been open for a full fiscal period after the
eighteenth month of its operations, at which time its performance for that
period can be compared to its performance for the first full period following
the first sixth months of its operations (the comparable year ago period). In
fiscal 1997, only 18 of the 53 Company-owned units were included in the "same
unit" analysis.
21
<PAGE>
The Company believes that its future growth will come from expansion of its
theme restaurant operations, including its new Music Concept, as well as
capitalizing on its brands through various strategic ventures outside the
restaurant industry. New Company-owned PLANET HOLLYWOOD, and OFFICIAL ALL STAR
CAFE units will be smaller than most existing Company-owned units and
correspondingly will have lower development and operating costs than existing
units. However, because of their smaller size, new units also are expected to
generate lower revenues than have historically been realized by the Company's
existing units.
During fiscal 1997, the Company organized its operations into five separate
operational divisions to support the further diversification of its business.
The Food & Beverage division is primarily responsible for the development of,
and the food and beverage operations associated with, the Company's theme
restaurants (other than those theme restaurants associated with the Company's
joint venture projects). The Retail & Merchandising division is primarily
responsible for the development of, and sales of products and merchandise
through, retail stores located within the Company's theme restaurants as well as
stand-alone retail stores and other distribution channels. The Theaters &
Entertainment division is primarily responsible for the development and
oversight of the Company's joint venture with AMC and for the creation and
development of other entertainment ventures. The Lodging & Gaming division is
responsible for the Company's participation in the Las Vegas Project, the
OFFICIAL ALL STAR HOTEL and the PLANET HOLLYWOOD HOTEL, as well as similar
ventures that may be pursued in the future. The Consumer Products division is
primarily responsible for the licensing of the Company's brands in connection
with selected consumer products, such as "PLANET HOLLYWOOD--The Game" and COOL
PLANET ice cream. For additional discussion regarding these five operational
divisions, see Item 1--Business. In the future, the Company expects to report
its financial results in line with the new divisional structure.
22
<PAGE>
OPERATING RESULTS
The following table sets forth various components of the Company's operating
results expressed as a percentage of total revenues (except where otherwise
indicated) for fiscal 1995, 1996 and 1997. The table also sets forth certain
relevant operating data for the periods presented.
<TABLE>
<CAPTION>
FISCAL
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
INCOME STATEMENT DATA:
Revenues:
Food and beverage...................................................................... 59.5% 59.6% 57.5%
Merchandise............................................................................ 38.4 33.5 36.6
Royalties.............................................................................. 0.6 1.2 2.5
Franchise fees......................................................................... 1.5 5.7 3.4
--------- --------- ---------
Total revenues....................................................................... 100.0% 100.0% 100.0%
--------- --------- ---------
--------- --------- ---------
Costs and expenses:
Food and beverage cost of sales (a).................................................... 23.9% 22.6% 22.7%
Merchandise cost of sales (b).......................................................... 36.4 34.6 36.1
Operating expenses(c).................................................................. 44.1 45.2 46.6
General and administrative expenses.................................................... 7.4 5.5 10.4
Depreciation and amortization.......................................................... 8.2 7.3 8.2
Equity in earnings of unconsolidated affiliates........................................ (0.3) (1.2) (1.5)
Total costs and expenses................................................................. 87.0 79.8 99.0
Income from operations................................................................... 13.0 20.2 1.0
Interest income (expense), net........................................................... (4.1) (0.8) 0.3
Minority interests....................................................................... 1.4 0.3 --
Provision for income taxes............................................................... 0.3 7.4 1.0
Net income............................................................................... 7.7 10.1 1.7
OPERATING DATA:
Food and beverage sales (c).............................................................. 60.7% 64.0% 61.1%
Merchandise sales (c).................................................................... 39.3 36.0 38.9
--------- --------- ---------
Total Direct Revenues................................................................ 100.0% 100.0% 100.0%
--------- --------- ---------
--------- --------- ---------
Units in operation at fiscal year end:
Company-owned units.................................................................... 23 37 53
Franchised units....................................................................... 6 21 34
--------- --------- ---------
Total................................................................................ 29 58 87
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------
(a) As a percentage of food and beverage revenues.
(b) As a percentage of merchandise revenues.
(c) As a percentage of Direct Revenues.
In fiscal 1997, "same unit" revenues of Company-owned units declined 11%
compared to fiscal 1996. In addition, the Company recorded a charge in the 1997
fourth quarter of $71.2 million ($44.5 million after tax), $3.0 million of which
represented a cash charge. The principal components of this charge were (i)
$48.7 million related to a writedown of long-lived assets, associated with
underperforming domestic and foreign Company-owned restaurant units, (ii) $19.0
million related to the write-off of certain franchise and other receivables as
well as the abandonment of certain marketing initiatives and (iii) $3.0 million
related
23
<PAGE>
to the write-off of obsolete merchandise inventories. In response to these lower
than expected results, the Company has begun to undertake the following measures
to improve its performance:
INTRODUCING NEW MARKETING INITIATIVES IN THE PLANET HOLLYWOOD RESTAURANT
BUSINESS. One of the Company's key priorities in the near term is to inject new
excitement into the PLANET HOLLYWOOD restaurant business in order to stimulate
greater customer traffic. The Company plans to increase the frequency of
celebrity events and promotions and broaden the number of celebrities associated
with PLANET HOLLYWOOD, with an emphasis on new, up-and-coming stars. A senior
executive has relocated from the Company's headquarters in Orlando, Florida to
Hollywood, California, where he is responsible for developing new relationships
with celebrities and other members of the film industry. In addition, the
Company is taking steps to broaden the appeal of its restaurants through menu
revisions, the acceptance of reservations in certain markets and greater
promotion of group sales, in order to attract more local residents to augment
the Company's primarily tourist customer base.
ENHANCING THE MIX OF MERCHANDISE SOLD IN PLANET HOLLYWOOD AND OFFICIAL ALL
STAR CAFE UNITS. The Company is developing programs to continually update and
refresh its merchandise mix. For example, the Company has begun to introduce
special seasonal product lines two times per year, as a complement to the base
souvenir merchandise business. At the same time, although new items are being
added, the Company intends to reduce its total SKUs by 25% and has implemented
an "open-to-buy" inventory management system that by March 1, 1998 had already
reduced domestic inventory levels by approximately 7% since the end of fiscal
1997. In addition to the merchandise stores in its theme restaurants, the
Company will continue to pursue merchandise sales through its own stand-alone
retail stores and other global retail distribution channels.
FOCUSING ON THREE KEY BRAND CONCEPTS. The Company continuously evaluates
new themes for brand marketing. Such themes have included MARVEL MANIA, of which
there is currently one unit in operation at Universal Studios, California, and
CHEFS OF THE WORLD, which has only been in the development stage. However, the
Company believes that PLANET HOLLYWOOD, the OFFICIAL ALL STAR CAFE and the Music
Concept offer the greatest potential for long- term growth. Accordingly, the
Company has terminated its relationship with MARVEL MANIA, due in part to the
recent bankruptcy of the parent company of the Company's partner in the concept,
and has shelved further development of its CHEFS OF THE WORLD concept.
SCALING BACK EXPANSION OF PLANET HOLLYWOOD AND OFFICIAL ALL STAR CAFE
UNITS. As it revitalizes its existing unit base, the Company will scale back
expansion of Company-owned PLANET HOLLYWOOD and OFFICIAL ALL STAR CAFE units. In
1998, the Company plans to open three new PLANET HOLLYWOOD units, compared to 12
opened in 1997, and two new OFFICIAL ALL STAR CAFE units, compared to four
opened in 1997. The Company previously anticipated opening nine PLANET HOLLYWOOD
and six OFFICIAL ALL STAR CAFE units in 1998. The Company expects franchisees to
open approximately ten PLANET HOLLYWOOD units and one OFFICIAL ALL STAR CAFE
unit during 1998.
REALIGNING AND STREAMLINING MANAGEMENT STRUCTURE. To support the further
diversification of its business, the Company has created five operating
divisions: Food & Beverage; Retail & Merchandise; Lodging & Gaming; Theaters &
Entertainment; and Consumer Products. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Overview". In the future, the
Company expects to report its financial results in line with this new divisional
structure. The Company is realigning management responsibilities to ensure the
strongest team for each division and will consider augmenting its in-house team
through the recruitment of additional individuals with special expertise.
Executives will be held strictly accountable for their results and their
compensation will be tied to meeting performance targets. The Company has
eliminated certain management layers to streamline its organization and increase
operating efficiencies. This action has resulted in the elimination of a total
of approximately 40 positions, including a 10% reduction at corporate
headquarters.
24
<PAGE>
APPOINTING AN EXECUTIVE TO OVERSEE FRANCHISING. In connection with its
management realignment, the Company has appointed an executive to oversee all of
its franchising activities, including the development of new international
franchises. The Company believes that all of its existing and newly developed
brands have substantial franchising potential and, as a result, franchising will
continue to play a key role in future growth.
HIRING A SENIOR OPERATIONS EXECUTIVE. Robert Earl, the Company's President
and Chief Executive Officer, has reassumed primary responsibility for the
Company's day-to-day operations in the near term. The Company has commenced a
search for an experienced senior executive to oversee all of its operations in
order to enable Mr. Earl to devote greater attention to strategic activities and
the creative and marketing aspects of the Company's business.
REDUCING OPERATING COSTS. The Company has conducted a thorough review of
its operating and expense structure and has identified several areas for cost
reduction, including, among other things, staff reductions, enhanced purchasing
efficiencies and streamlined operating procedures that are estimated to yield up
to $5.0 million in annual cost savings.
Because these measures will be implemented gradually over the balance of
fiscal 1998, the Company expects relatively flat revenues and modestly lower
earnings in 1998. However, the Company expects to resume its growth in fiscal
1999 as its strategic ventures and other initiatives begin to contribute
meaningfully to its performance.
FISCAL 1997 COMPARED TO FISCAL 1996
REVENUES. Total revenues increased 27.2% from $373.4 million in fiscal 1996
to $475.1 million in fiscal 1997. The increase in revenues is due primarily to
the Company's continued expansion through the development of new themed
restaurants, franchising activities and the expansion of its retail distribution
system, including direct merchandise sales.
Direct Revenues increased 28.8% from $347.4 million in fiscal 1996 to $447.3
million in fiscal 1997, due primarily to the opening of 16 new Company-owned
units in fiscal 1997 ($42.1 million of the increase) and the inclusion in fiscal
1997 results of a full year of operations of 14 Company-owned units that were
opened in fiscal 1996 ($47.6 million of the increase). Increased sales of
merchandise to specialty retailers and through other retail distribution
channels also contributed to higher Direct Revenues in fiscal 1997. Fiscal 1997
Direct Revenues were adversely impacted by the 11% decline in "same unit"
revenues. The decline in "same unit" revenues was due to a decline in customer
traffic that was attributable principally to (i) increased competition in the
theme-dining sector and (ii) a diversion of management's focus from existing
unit operations to new unit openings and strategic initiatives. Competition in
major tourist markets increased significantly in fiscal 1997. Four PLANET
HOLLYWOOD units accounted for 46% of the dollar amount of the decline in "same
unit" revenues, while contributing only 27% of "same unit" revenues as a whole.
In addition, fiscal 1997 "same unit" revenues at certain of the Company's units
were adversely impacted by the particularly strong revenues realized by these
units in fiscal 1996 due to increased customer traffic generated by the Summer
Olympics. In the near term, the Company anticipates further declines in "same
unit" revenues, primarily as a result of decreased customer traffic due to
increased competition.
As a percentage of Direct Revenues, merchandise sales increased from 36.0%
in fiscal 1996 to 38.9% in fiscal 1997. The increase in merchandise sales as a
percentage of Direct Revenues was primarily due to the introduction of new
product lines, sales to specialty retailers and promotional sales. To increase
the exposure of its brands to consumers worldwide, the Company markets its
branded products in innovative ways, including the sale of merchandise to
specialty retailers having a worldwide distribution and marketing presence.
Franchise fees were $21.4 million in fiscal 1996 and $16.1 million in fiscal
1997. In fiscal 1996, a total of 16 franchised units were opened, compared to 13
in fiscal 1997. Royalties and other revenues increased
25
<PAGE>
from $4.5 million in fiscal 1996 to $11.7 million in fiscal 1997, due primarily
to growth in the number of franchised units and the licensing of the Company's
brands.
COSTS AND EXPENSES. Food and beverage costs as a percentage of food and
beverage revenues increased slightly from 22.6% in fiscal 1996 to 22.7% in
fiscal 1997. In fiscal 1997, merchandise costs as a percentage of merchandise
revenues increased to 36.1% from 34.6% in fiscal 1996 due to a write-off of
certain discontinued inventories (including inventories affected by a redesign
of the Company's OFFICIAL ALL STAR CAFE logo), which resulted in a $3.0 million
charge. Operating expenses, which consist primarily of occupancy, labor and
other direct unit operating costs, increased from 45.2% of Direct Revenues in
fiscal 1996 to 46.6% of Direct Revenues in fiscal 1997. Occupancy costs
increased as a percentage of Direct Revenues in fiscal 1997 because revenues at
many of the Company's units were below the minimum rent thresholds in the
applicable leases. In fiscal 1997, labor costs increased as a percentage of
Direct Revenues because salaried labor costs remained relatively constant as the
Company opened smaller units in new markets. The increase in operating expenses
as a percentage of Direct Revenues was also a result of the decline in "same
unit" sales.
General and administrative expenses increased to $49.3 million in fiscal
1997 from $20.4 million in fiscal 1996. Approximately $19.0 million of the $28.9
million increase was attributable to the fourth quarter charge, consisting
primarily of write-offs of certain franchise and other receivables as a result
of the change in the Company's business strategy and financial uncertainties
facing certain franchisees in Eastern Europe and Asia. The remainder of the
increase was due principally to the expansion of the Company's corporate
infrastructure, including increased employee headcounts.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from
7.3% of total revenues in fiscal 1996 to 8.2% of total revenues in fiscal 1997
due to increased depreciation on units constructed in 1996 and 1997 and a full
year's amortization of goodwill on the units acquired by the Company in fiscal
1996.
IMPAIRMENT OF LONG-LIVED ASSETS. As a result of operating losses incurred
and projected to continue at certain restaurant units, the Company recorded a
noncash impairment charge of $48.7 in fiscal 1997 related to the writedown of
long-lived assets associated with certain underperforming units. The Company
considers continued and projected operating losses or significant and long-term
change in market conditions to be its primary indicators of potential
impairment. An impairment was recognized as the future projected undiscounted
cash flows for these units were estimated to be insufficient to recover the
related carrying value of the long-lived assets relating to the units. As a
result, the carrying values of these assets were written down to their estimated
fair values based on the projected discounted cash flows. No such charges were
required in fiscal 1996.
INTEREST INCOME (EXPENSE), NET. Net interest expense was $2.9 million in
fiscal 1996 compared to net interest income of $1.3 million in fiscal 1997.
Proceeds from the Company's initial public offering in April of 1996 were
utilized to extinguish Company debt and interest was earned on the investment of
remaining funds.
EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES. Equity in earnings of
unconsolidated affiliates increased from $4.3 million in fiscal 1996 to $6.9
million in fiscal 1997, primarily due to additional franchise openings by ECE
and PH Asia in 1997 and earnings from the Company's investment in the Hotel
Pennsylvania.
OTHER. Minority interests decreased from $1.0 million in fiscal 1996 to
zero in fiscal 1997 due to the acquisition by the Company of all minority
interests during fiscal 1996.
PROVISION FOR INCOME TAXES. The provision for income taxes was $27.6
million or 36.5% of pretaxable income in fiscal 1996 compared to $5.0 million or
37.5% in fiscal 1997. The increase in the Company's effective tax rate is
primarily due to an increase in the percentage of total earnings from domestic
units in fiscal 1997.
26
<PAGE>
EXTRAORDINARY ITEM, NET. In fiscal 1996, the Company incurred an
extraordinary charge of $10.4 million, net of $5.9 million in taxes, as a result
of the early extinguishment of long-term notes payable.
SEASONALITY AND QUARTERLY COMPARISONS. The Company's revenues have been
seasonal, due to the greater number of tourists who patronize the Company's
units during the summer and year-end holiday season. Although units in certain
locations are affected by different seasonal influences, the Company has
historically experienced its strongest operating results from June through
August. Moreover, as a result of the substantial revenues associated with each
new Company-owned unit and the recognition of franchise fees, the timing of new
unit openings may result in significant fluctuations in quarterly results.
Additionally, in 1997 the Company realized substantial revenues through its
retail distribution system. Quarterly results may fluctuate significantly in
association with the timing of these transactions.
FISCAL 1996 COMPARED TO FISCAL 1995
REVENUES. Total revenues increased 38.0% from $270.6 million in fiscal 1995
to $373.4 million in fiscal 1996.
Direct Revenues increased 31.1% from $265.0 million in fiscal 1995 to $347.4
million in fiscal 1996, due primarily to the opening of 14 new Company-owned
units in fiscal 1996 ($43.3 million of the increase) and the inclusion of a full
year of operations of the nine Company-owned PLANET HOLLYWOOD units opened in
fiscal 1995 ($49.2 million of the increase). Direct Revenues on a "same unit"
basis decreased 2.0% from $200.6 million in fiscal 1995 to $196.6 million in
fiscal 1996. As a percentage of Direct Revenues, merchandise sales decreased
from 39.3% in fiscal 1995 to 36.0% in fiscal 1996. The decrease in merchandise
mix is mostly due to the timing of new unit openings and development of new
concepts which typically have a lower merchandise mix in their development
stage.
Franchise fees were $4.0 million in fiscal 1995 and $21.4 million in fiscal
1996 due to the opening of 16 franchises during 1996. Royalties increased 190.7%
from $1.6 million in fiscal 1995 to $4.5 million in fiscal 1996, due primarily
to the growth in the number of franchised units.
COSTS AND EXPENSES. Food and beverage costs decreased from 23.9% of food
and beverage revenues in fiscal 1995 to 22.6% in fiscal 1996 as a result of
improved buying power and efficiencies from the greater unit base, allowing for
favorable negotiations with suppliers. Merchandise costs decreased from 36.4% of
merchandise revenues in fiscal 1995 to 34.6% in fiscal 1996 primarily as a
result of improved buying power and favorable negotiation with suppliers.
Operating expenses, which consist primarily of labor, occupancy and other direct
unit operating costs, increased from 44.1% of Direct Revenues in fiscal 1995 to
45.2% in fiscal 1996, due primarily to opening of Company-owned units in Europe,
which generally have higher operating costs.
General and administrative expenses increased slightly from $20.1 million in
fiscal 1995 to $20.4 million in fiscal 1996, as the Company continued to develop
its infrastructure. However, these expenses were offset by reduced legal costs
and cost savings generated from the sale of a Company-owned aircraft to an
unaffiliated third party. As a percent of total revenues, general and
administrative expenses decreased from 7.4% in fiscal 1995 to 5.5% in fiscal
1996 due to the greater number of Company-owned units contributing to total
revenues. Depreciation and amortization increased 23.1% from $22.2 million in
fiscal 1995 to $27.3 million in fiscal 1996, due primarily to the larger number
of units in operation in 1996. Equity in income of unconsolidated affiliates
increased from $0.8 million in fiscal year 1995 to $4.3 million in fiscal year
1996, attributable to various unit openings by the Company's minority
investments in ECE and PH Asia.
INTEREST INCOME (EXPENSE), NET. Net interest expense decreased 74.4% from
$11.2 million in fiscal 1995 to $2.9 million in fiscal 1996 as a result of
repayment of debt with the proceeds from the Company's initial public offering.
27
<PAGE>
OTHER. Minority interests decreased from $3.7 million in fiscal 1995 to
$1.0 million in fiscal 1996, due to the acquisition by the Company of all
minority interests during fiscal 1996. In fiscal 1995, the Company realized a
$0.6 million gain on the sale of a portion of its interest in the entity that
owns the Washington, D.C. PLANET HOLLYWOOD unit.
PROVISION FOR INCOME TAXES. The provision for income taxes was $27.6
million for fiscal year 1996. In fiscal 1995, the Company recorded a provision
for income taxes of $0.9 million.
The Company incurred an extraordinary charge during fiscal 1996 of $10.4
million, net of $5.9 million in taxes, as a result of the early retirement of
long-term notes payable.
LIQUIDITY AND CAPITAL RESOURCES
The following table presents a summary of the Company's cash flows for
fiscal 1995, 1996 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL
----------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ---------- ----------
Net cash provided by operating activities..................................... $ 33,370 $ 48,830 $ 35,766
Net cash used in investing activities......................................... (75,599) (73,870) (156,445)
Net cash provided by financing activities..................................... 52,128 59,948 81,153
Net effect of exchange rates on cash.......................................... -- -- (1,216)
Net increase (decrease) in cash and cash equivalents.......................... $ 9,899 $ 34,908 ($ 40,742)
</TABLE>
In its operations, the Company does not have significant receivables and
receives trade credit based upon negotiated terms in purchasing food products
and other supplies. The Company does have accounts receivable arising out of
franchise fees and royalties which will vary depending on the number of
franchises in operation and the number of franchises granted in a given year.
The Company's business has not required significant working capital to meet its
operating requirements. The Company requires capital primarily for the
development and operation of Company-owned units and has historically financed
these activities from development loans and capital contributions by its
stockholders, cash generated from operations and fees received in connection
with the sale of franchises. In addition, in August 1995 the Company received
net proceeds of $57.2 million from the private placement of $60.0 million
principal amount of senior subordinated notes and common stock purchase
warrants. In April 1996, the Company received proceeds of $196.6 million from
the initial public offering of its common stock, which were used in part to
retire the senior subordinated notes. In fiscal 1997, the Company utilized
borrowings against its credit facility and funds received from a private sale of
its common stock to help finance development activity.
Net cash provided by financing activities in fiscal 1995, 1996 and 1997 was
$52.1 million, $59.9 million and $81.2 million, respectively. In fiscal 1995,
the primary sources of financing were the sale of the senior subordinated notes
and warrants and development loans from stockholders. In fiscal 1996, the
primary source of financing was the initial public offering of the Company's
common stock. In fiscal 1997, the primary sources of financing were borrowings
on the Company's credit facility and proceeds from a private sale of its common
stock.
Net cash provided by operating activities in fiscal 1995, 1996 and 1997 was
$33.4 million, $48.8 million and $35.8 million, respectively. The increase in
cash provided by operating activities from fiscal 1995 to fiscal 1996 was
primarily due to the increased profitability of the Company. The decrease in
cash provided by operating activities from fiscal 1996 to fiscal 1997 was due
primarily to the utilization of cash in fiscal 1997 for inventory and operating
expenses. Expenditures for pre-opening expenses, which are capitalized and
amortized over a 12-month period following the opening of a unit, were $15.5
million, $13.9 million and $18.8 million for fiscal 1995, 1996 and 1997,
respectively, and averaged $1.3 million per unit during the three-year period.
28
<PAGE>
Net cash used in investing activities in fiscal 1995, 1996 and 1997 was
$75.6 million, $73.9 million and $156.4 million, respectively. The increase in
net cash used in investing activities from fiscal 1996 to fiscal 1997 was
primarily the result of the increased development and construction of new units
and the construction of the Company's corporate headquarters. Capital
expenditures for fiscal 1995, 1996 and 1997 were $80.3 million, $81.7 million
and $124.5 million, respectively.
Of the $196.6 million net proceeds from the initial public offering of the
Company's common stock in fiscal 1996, the Company used approximately $130.8
million to prepay indebtedness consisting of approximately $70.8 million of
notes payable to stockholders and $60.0 million of senior subordinated notes
held by institutional investors. The remaining proceeds were used for general
corporate purposes, including the development and construction of new units.
In September 1997, the Company replaced its existing $50 million credit
facility with a $155 million multi-currency, long-term credit agreement (the
"Credit Agreement") with a consortium of lenders for which SunTrust Bank,
Central Florida, N.A., acted as agent. The Credit Agreement provides for a $100
million revolving credit facility, a $20 million long-term loan facility and a
$35 million LIBOR-based leveraged lease facility. The Credit Agreement carries
an annual facility fee on the total revolving credit portion and a commitment
fee on the unused amount of the revolving credit portion. Interest rates are
variable, with either prime or LIBOR indexes. At year end, the Company's
weighted average borrowing rate under the Credit Agreement was 6.96%. The
revolving credit facility matures in September 2000, the term loan facility
matures in 1999 and the LIBOR-based leveraged lease facility has a base lease
term of three years that can be extended up to 21 years. During 1997, the
Company borrowed an aggregate of $42.0 million under the revolving credit
facility. The Credit Agreement also provides for the issuance of up to $10.0
million of letters of credit. At year end, the Company had outstanding letters
of credit totaling $5.8 million.
Under the terms of the Credit Agreement, the Company is required to meet
certain minimum quarterly net worth, interest coverage and various other
financial ratios. At December 28, 1997, the Company was in violation of one of
the financial covenants. In March 1998, the lenders modified the covenant and
waived the violation retroactively to December 28, 1997. In addition, the
lenders have agreed to amend various provisions of the Credit Agreement at or
prior to the consummation of the proposed sale of the notes under the proposed
1998 Notes Offering (see description below).
In March 1998, the Company announced that it is offering in a Rule 144A
distribution $250 million principal amount of seven-year senior subordinated
notes (the "proposed 1998 Notes Offering"). This proposed private offering is
expected to close by the end of March 1998. The notes to be issued in the
proposed 1998 Notes Offering (the "Notes") will be general unsecured obligations
subordinated to certain existing and future senior indebtedness of the Company.
Subject to certain limitations, the Notes are expected to be redeemable by the
Company after approximately four years from the date of issuance at
predetermined redemption prices. Certain covenants of the proposed 1998 Notes
Offering are expected to restrict, in some manner, the Company's ability to: (i)
declare or pay any dividend or make any other payment or distribution to
stockholders, (ii) incur certain additional indebtedness or issue preferred
stock, (iii) consolidate, merge, or sell its properties and assets, and (iv)
transact with affiliates. No director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes.
In connection with the proposed 1998 Notes Offering, the Company will be
required to file a registration statement with the Securities and Exchange
Commission with respect to a series of notes substantially identical to the
Notes (the "Exchange Notes"). Upon the effectiveness of such registration
statement certain holders of the Notes may have the opportunity to exchange
their Notes for Exchange Notes (the "Exchange Offer"). The Company will also be
obligated, under certain circumstances, to file with the Securities and Exchange
Commission a registration statement (the "Shelf Registration Statement") to
cover resales of the Notes by certain holders. Holders of the Notes will be
required to make
29
<PAGE>
certain representations and provide certain information to the Company in order
to participate in the Exchange Offer and/or the Shelf Registration Statement.
The net proceeds from the proposed 1998 Notes Offering are anticipated to be
used for capital expenditures associated with the construction of additional
theme restaurants and with new strategic ventures, the repayment of outstanding
bank borrowings and general corporate purposes. The Notes will not be registered
under the Securities Act of 1933 or any state securities laws and, unless so
registered, may not be offered or sold except pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the Securities
Act of 1933 and applicable state securities laws.
The Company anticipates total capital expenditures to approximate $200.0
million in fiscal 1998. Expenditures related to the opening of theme restaurants
are estimated to be $86.4 million. The Company's new strategic ventures are
estimated to require $88.3 million, including $30.0 million for the PLANET
MOVIES BY AMC venture, $41.3 million for the Las Vegas Project, $10.0 million
for the OFFICIAL ALL STAR HOTEL, $3.0 million for the PLANET HOLLYWOOD HOTEL and
$4.1 million for COOL PLANET shops. The remaining $25.3 million is expected to
be utilized for restaurant refurbishments, purchases of memorabilia and
expenditures related to the new corporate headquarters and computer system
upgrades. Actual capital expenditures in 1998 could differ materially from this
projection if the number of unit openings varies, if any strategic venture is
delayed or if the Company accelerates or postpones certain other capital
expenditures.
The Company has never paid, and does not anticipate paying in the
foreseeable future, any dividends on its common stock. The Company intends to
retain its available cash to finance the development and growth of the Company.
Furthermore, even if the Company desired to declare a dividend or other
distribution on the Company's common stock, certain terms of the Company's
revolving credit arrangements and the proposed 1998 Notes Offering would limit
the amount of any such dividend or distribution. Because the Company has never
paid any stock dividends, and does not anticipate paying any in the foreseeable
future, such restrictive terms should not have an impact on the Company's
ability to meet its cash obligations.
The Company expects that cash generated from operations, together with
proceeds from the proposed 1998 Notes Offering in excess of the amount used to
retire indebtedness and available borrowings under the Company's Credit
Agreement, will be sufficient to meet its cash requirements for at least the
next 18 months.
NEW ACCOUNTING STANDARDS. In February 1997, the Financial Accounting
Standards Board (FASB) adopted Statement of Financial Accounting Standards
(SFAS) no. 128, "Earnings Per Share," which caused the Company to change in
fiscal 1997 statements the way that it calculates and displays per share
information. Under the new rules, the Company displays "basic" earnings per
share, which is net income divided by weighted average shares outstanding during
the period. Also displayed is "diluted" earnings per share, which considers the
impact of common stock equivalents. Based on the Company's capital structure,
its common stock equivalents are employee and director stock options and
restricted stock. The difference between basic and diluted earnings per share is
not significant for the Company, nor is the difference between per share
earnings computed under the new and previous methods. Earnings per share
presented for prior periods has been restated to the new method.
In June 1997, the FASB adopted two standards, SFAS Nos. 130 and 131,
"Reporting Comprehensive Income" and "Disclosures about Segments of an
Enterprise and Related Information." Both of these new standards relate to the
display of financial information rather than impacting the computation of net
income or earnings per share, and both will be effective for the Company
beginning with its 1998 annual financial statements. SFAS 130 requires that
companies display "comprehensive income," which in addition to the current
definition of net income, includes certain amounts currently recorded directly
in equity. For the Company, the only such item is foreign currency translation
adjustments. The new standard
30
<PAGE>
will be adopted by adding a column, which will show comprehensive income, to the
statement of changes in stockholders' equity.
SFAS 131 mandates the management approach to identifying business segments.
Under the management approach, segments are defined as the organizational units
that have been established for internal performance evaluation purposes. For the
Company, this will mean segmenting the Company's current operations into five
segments: Food & Beverage, Retail, Consumer Products, Lodging and Gaming, and
Theaters and Entertainment.
The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants has issued a proposed Statement of Position (SOP)
entitled "Reporting on the Cost of Start-Up Activities." The Company currently
capitalizes costs relating to opening of units and amortizes such costs over the
twelve months following the opening date of the unit. The proposed SOP, if
adopted in it's current form, would require the Company to expense all such
preopening costs as incurred. If issued, the proposed SOP would be effective for
fiscal 1999 and all costs capitalized at the date the SOP is adopted would be
charged to income as a cumulative effect of a change in accounting principle.
YEAR 2000 COMPLIANCE. The Company has studied the issue of year 2000
compliance and its potential effects on the Company's operations. Based on its
assessment, the Company expects to upgrade its critical computer systems to make
them year 2000 compliant by the end of fiscal 1998 without material
expenditures. Year 2000 compliance is not expected to have a material adverse
effect on the Company's operations.
IMPACT OF INFLATION. Inflation as measured by consumer price indices has
continued at a low level in most of the countries in which the Company operates.
A portion of the Company's sales comes from its international operations (See
Note 13 to the Consolidated Financial Statements). Although these operations are
geographically dispersed, which partially mitigates the risks associated with
operating in particular countries, the Company is subject to the usual risks
associated with international operations. These risks include local political
and economic environments and relations between foreign and U.S. governments.
CURRENCY EXCHANGE RISK. The Company's international operations expose it to
fluctuations in exchange rates when translating foreign currency to U.S. dollars
for financial reporting purposes. The Company is not able to project the effect
of future exchange rate fluctuations on its operating results. Currency
fluctuations did not have a material effect on the Company's results in fiscal
1997.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In January 1997, the Securities and Exchange Commission adopted new rules
that require disclosure of certain quantitative and qualitative information
about market risk exposures. Because of the Company's market capitalization, the
Company is not currently required to make such disclosures. These disclosures,
if any, will be required in Company filings that include audited financial
statements for fiscal years ended after June 15, 1998.
31
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS: PAGE
- ------------------------------------------------------------------------------------- -----
<S> <C>
Report of Independent Accountants.................................................. 33
Consolidated Balance Sheets at December 29, 1996 and December 28, 1997............. 34
Consolidated Statements of Operations for the three years ended December 28,
1997............................................................................. 35
Consolidated Statements of Changes in Stockholders' Equity for the three years
ended December 28, 1997.......................................................... 36
Consolidated Statements of Cash Flows for the three years ended December 28,
1997............................................................................. 37
Notes to the Consolidated Financial Statements..................................... 38
FINANCIAL STATEMENT SCHEDULES:
- -------------------------------------------------------------------------------------
For the year ended December 28, 1997
II--Valuation and Qualifying Accounts
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
Financial statements of two 50% owned companies have been omitted because
the registrant's proportionate share of the income from continuing operations
before income taxes is less than 20% of the respective consolidated amount, and
the investment in and advances to each company is less than 20% of consolidated
total assets.
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Planet Hollywood International,
Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Planet Hollywood International, Inc. and its subsidiaries at
December 29, 1996 and December 28, 1997, and the results of their operations and
their cash flows for each of the three years in the period ended December 28,
1997, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Orlando, Florida
March 3, 1998
33
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................................... $ 49,831 $ 9,089
Accounts receivable, less allowance of $1,500 in 1997.............................. 22,697 25,084
Inventories........................................................................ 20,604 42,612
Deferred taxes..................................................................... 7,166 10,427
Pre-opening cost, net.............................................................. 8,096 6,716
Prepaid expenses and other assets.................................................. 5,479 7,082
------------ ------------
Total current assets............................................................. 113,873 101,010
Property and equipment, net.......................................................... 250,108 322,949
Goodwill, net........................................................................ 25,779 29,922
Deferred taxes....................................................................... -- 6,015
Other assets, net.................................................................... 1,487 5,259
Investment in affiliated entities.................................................... 10,013 40,404
------------ ------------
Total assets..................................................................... $ 401,260 $ 505,559
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................... $ 41,668 $ 54,100
Accrued expenses................................................................... 10,908 15,215
Notes payable--current............................................................. 746 1,264
------------ ------------
Total current liabilities........................................................ 53,322 70,579
Deferred rentals..................................................................... 10,329 10,798
Deferred taxes....................................................................... 849 --
Notes payable........................................................................ 7,529 70,491
Deferred credits..................................................................... 17,100 15,150
------------ ------------
Total liabilities................................................................ 89,129 167,018
------------ ------------
Commitments and contingencies (Note 7 and Note 11)
Stockholders' equity:
Preferred stock, $.01 par value; 25,000,000 shares authorized; none issued;
preferences, limitations and rights to be established by the Board of
Directors........................................................................ -- --
Common stock--Class A voting, $.01 par value; 250,000,000 shares authorized;
95,972,563 and 97,127,526 issued and outstanding, respectively................... 960 972
Common stock--Class B non-voting, $.01 par value; 25,000,000 shares authorized;
11,545,706 and 11,764,144 issued and outstanding, respectively................... 115 118
Capital in excess of par value..................................................... 252,695 279,372
Deferred compensation.............................................................. (525) (4,125)
Retained earnings.................................................................. 58,386 66,644
Cumulative currency translation adjustment......................................... 500 (4,440)
------------ ------------
Total stockholders' equity....................................................... 312,131 338,541
------------ ------------
Total liabilities and stockholders' equity..................................... $ 401,260 $ 505,559
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT FOR EARNINGS PER SHARE)
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Direct..................................................................... $ 265,048 $ 347,436 $ 447,310
Franchise.................................................................. 4,000 21,400 16,100
Royalty and other.......................................................... 1,558 4,528 11,715
---------- ---------- ----------
270,606 373,364 475,125
Costs and expenses:
Cost of sales.............................................................. 76,462 93,426 124,808
Operating.................................................................. 116,805 156,893 208,484
General and administrative................................................. 20,057 20,431 49,324
Depreciation and amortization.............................................. 22,182 27,295 38,825
Impairment of long-lived assets............................................ -- -- 48,699
---------- ---------- ----------
235,506 298,045 470,140
Income from operations....................................................... 35,100 75,319 4,985
Non-operating (income) expense
Interest income............................................................ (598) (2,121) (1,327)
Interest expense........................................................... 11,827 4,995 --
Equity in earnings of unconsolidated affiliates............................ (848) (4,308) (6,900)
Minority interests......................................................... 3,728 1,037 --
Gain on sale of subsidiary interests....................................... (611) -- --
---------- ---------- ----------
13,498 (397) (8,227)
Income before provision for income taxes..................................... 21,602 75,716 13,212
Provision for income taxes................................................... 875 27,636 4,954
---------- ---------- ----------
Income before extraordinary item............................................. 20,727 48,080 8,258
Extraordinary loss on early extinguishment of debt (net of income tax benefit
of $5,991)................................................................. -- 10,421 --
---------- ---------- ----------
Net income................................................................... $ 20,727 $ 37,659 $ 8,258
---------- ---------- ----------
---------- ---------- ----------
Earnings per share:
BASIC
Income before extraordinary item......................................... $ 0.26 $ 0.47 $ 0.08
Extraordinary item....................................................... -- (0.10) --
---------- ---------- ----------
Net income............................................................... $ 0.26 $ 0.37 $ 0.08
---------- ---------- ----------
---------- ---------- ----------
DILUTED
Income before extraordinary item......................................... $ 0.25 $ 0.47 $ 0.08
Extraordinary item....................................................... -- (0.10) --
---------- ---------- ----------
Net income............................................................... $ 0.25 $ 0.37 $ 0.08
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
CLASS A CLASS B CAPITAL IN CUMULATIVE
------------------------ ---------------------- EXCESS OF RETAINED DEFERRED TRANSLATION
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS COMPENSATION ADJUSTMENT
----------- ----------- --------- ----------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995.................. 80,000 $ 800 -- $ -- $ 7,568 $ -- ($ 990) $ 81
Net Income 20,727
Celebrity restricted
stock options......... 140
Employee restricted
stock awards.......... 100 1 99 220
Currency translation
adjustment............ (501)
----------- ----------- --------- ----------- ----------- ----------- ------- -----------
Balance at December 31,
1995.................. 80,100 801 -- -- 7,807 20,727 (770) (420)
Net Income 37,659
Proceeds from public
offering.............. 11,609 116 193,020
Shares issued for
All-Star
acquisition........... 11,547 115
Shares issued for
acquisition of
minority interests.... 1,709 17 35,167
Conversion of redeemable
warrants.............. 2,555 26 14,974
Celebrity restricted
stock options and
awards................ 1,727
Employee restricted
stock awards.......... 245
Currency translation
adjustment............ 920
----------- ----------- --------- ----------- ----------- ----------- ------- -----------
Balance at December 29,
1996.................. 95,973 960 11,547 115 252,695 58,386 (525) 500
Net Income.............. 8,258
Celebrity restricted
stock options and
awards................ 218 3 5,959 (3,800)
Proceeds from sale of
stock................. 1,087 11 19,555
Exercise of stock
options............... 108 1 1,163
Employee restricted
stock awards.......... 200
Retirement of employee
restricted stock...... (40)
Currency translation
adjustment............ (4,940)
----------- ----------- --------- ----------- ----------- ----------- ------- -----------
Balance at December 28,
1997.................. 97,128 $ 972 11,765 $ 118 $ 279,372 $ 66,644 $ (4,125) ($ 4,440)
----------- ----------- --------- ----------- ----------- ----------- ------- -----------
----------- ----------- --------- ----------- ----------- ----------- ------- -----------
<CAPTION>
TOTAL
STOCKHOLDERS
EQUITY
------------
<S> <C>
Balance at January 1,
1995.................. $ 7,459
Net Income 20,727
Celebrity restricted
stock options......... 140
Employee restricted
stock awards.......... 320
Currency translation
adjustment............ (501)
------------
Balance at December 31,
1995.................. 28,145
Net Income 37,659
Proceeds from public
offering.............. 193,136
Shares issued for
All-Star
acquisition........... 115
Shares issued for
acquisition of
minority interests.... 35,184
Conversion of redeemable
warrants.............. 15,000
Celebrity restricted
stock options and
awards................ 1,727
Employee restricted
stock awards.......... 245
Currency translation
adjustment............ 920
------------
Balance at December 29,
1996.................. 312,131
Net Income.............. 8,258
Celebrity restricted
stock options and
awards................ 2,162
Proceeds from sale of
stock................. 19,566
Exercise of stock
options............... 1,164
Employee restricted
stock awards.......... 200
Retirement of employee
restricted stock......
Currency translation
adjustment............ (4,940)
------------
Balance at December 28,
1997.................. $ 338,541
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from operations................................................ $ 20,727 $ 48,080 $ 8,258
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation............................................................ 7,727 11,620 18,173
Amortization............................................................ 14,455 15,676 20,652
Impairment of long-lived assets......................................... -- -- 48,699
Amortization of discount on senior subordinated notes, debt issue costs
and line of credit costs.............................................. 1,563 1,167 --
Amortization of celebrity restricted stock options and awards........... 140 1,268 2,864
Gain on sale of subsidiary interests.................................... (611) -- --
Minority interests...................................................... 3,728 1,037 --
Equity in income of unconsolidated affiliates........................... (848) (4,308) (6,900)
Changes in assets and liabilities:
Accounts receivable................................................... (2,599) (15,604) (4,959)
Inventories........................................................... 2,245 (7,747) (22,008)
Prepaid expenses and other assets..................................... (1,188) (1,778) (3,604)
Preopening costs...................................................... (15,498) (13,916) (18,782)
Deferred income taxes................................................. (10,706) 5,711 (10,125)
Accounts payable and accrued expenses................................. 8,924 3,230 4,780
Deferred rentals...................................................... 3,441 3,827 469
Deferred credits...................................................... 2,000 100 (1,950)
Other, net............................................................ (130) 467 199
---------- ---------- -----------
Net cash provided by operating activities............................. 33,370 48,830 35,766
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment....................................... (80,291) (81,675) (124,526)
Proceeds from sale of subsidiary interest................................. 900 -- --
Proceeds from sale of transportation equipment............................ 6,450 7,936 --
Purchase of restaurant from franchisee.................................... -- -- (8,083)
Purchase of minority interest............................................. (250) -- --
Investment in affiliated entities......................................... (2,408) (131) (22,721)
Other..................................................................... -- -- (1,115)
---------- ---------- -----------
Net cash used in investing activities................................. (75,599) (73,870) (156,445)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in restricted cash and investments................................. 3,064 610 --
Proceeds from issuance of senior subordinated notes....................... 60,000 -- --
Distributions to minority interests....................................... (3,209) (271) --
Proceeds from issuance of common stock.................................... -- 196,581 19,137
Proceeds from exercise of options......................................... -- -- 891
Proceeds from issuance of notes payable................................... 6,350 3,360 63,028
Proceeds from notes and advances from stockholders........................ 29,583 -- --
IPO costs and financing costs capitalized................................. -- (3,445) --
Deferred financing costs.................................................. (3,750) (698) (1,020)
Repayment of stockholder notes payable.................................... (25,194) (70,750) --
Repayment of notes payable................................................ (14,716) (65,439) (883)
---------- ---------- -----------
Net cash provided by financing activities............................. 52,128 59,948 81,153
---------- ---------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH..................................... -- -- (1,216)
---------- ---------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................ 9,899 34,908 (40,742)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................ 5,024 14,923 49,831
---------- ---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................. $ 14,923 $ 49,831 $ 9,089
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Planet
Hollywood International, Inc. ("PHI") and its wholly and majority owned
subsidiaries (collectively, the "Company"). All material intercompany
transactions and accounts have been eliminated in consolidation. The Company has
interests in various entities which are not majority owned or controlled. The
Company uses the equity method to account for these interests.
The Company's fiscal year is the 52 or 53 weeks ending the Sunday closest to
December 31. The fiscal years ended December 31, 1995, December 29, 1996 and
December 28, 1997 are herein referred to as "fiscal 1995", "fiscal 1996" and
"fiscal 1997", respectively. All years presented herein are 52 week years.
DESCRIPTION OF BUSINESS
The Company's primary business is to create and develop consumer brands. To
date, the Company has promoted its brands primarily through the operation of
distinctive entertainment-oriented theme restaurants and their associated
merchandise sales. The Company currently operates under the PLANET HOLLYWOOD and
OFFICIAL ALL STAR CAFE brands. Direct revenues in the accompanying financial
statements include sales of food, beverage and merchandise.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as highly liquid investments with
original maturities of three months or less and consist of amounts held as bank
deposits and certificates of deposit.
INVENTORIES
Inventories, consisting primarily of merchandise, are valued at the lower of
cost (determined by the first-in, first-out method) or market.
PREOPENING COSTS
The Company capitalizes costs relating to opening of units and amortizes
such costs over the twelve months following the opening date of the unit.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided for by using the straight-line method over the
following useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Furniture and equipment................................................................ 5-10
Memorabilia............................................................................ 20
Leasehold improvements................................................................. 5-40
</TABLE>
38
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Expenditures for additions and improvements which extend the life of the
assets are capitalized. Expenditures for normal repairs and maintenance are
charged to expense as incurred. Depreciation of memorabilia commences when it is
placed in service upon its installation at a unit location.
GOODWILL
The excess of purchase price over the fair value of assets acquired is
amortized on a straight-line basis over 20 years. Accumulated amortization of
goodwill at December 29, 1996 and December 28, 1997 was $1,028 and $2,393,
respectively.
DEBT ISSUANCE COSTS
Costs related to the issuance of debt are capitalized and amortized to
interest expense using the effective interest method over the term of the
related debt.
MINORITY INTERESTS
Minority interests represent third parties' equity in the earnings or losses
in the entities which are majority owned by the Company.
FOOD, BEVERAGE AND MERCHANDISE REVENUES
Food, beverage and merchandise revenues are recognized as the products are
sold to customers.
FRANCHISE AND ROYALTY REVENUES
Revenues from the sale of franchises are deferred until the Company fulfills
its obligations under the franchise agreement, which is generally upon the
opening of a franchise restaurant or merchandise shop. The franchise agreements
provide for continuing royalty fees based on a percentage of gross receipts.
ADVERTISING AND PROMOTIONAL COSTS
All costs associated with advertising and promoting the Company's brands are
expensed in the period incurred. Advertising expense for fiscal 1995, 1996 and
1997 totaled $2,103, $2,753 and $6,309, respectively.
INCOME TAXES
Deferred taxes are provided for the tax effects of the differences between
the carrying value of assets and liabilities for tax and financial reporting
purposes. These differences relate primarily to differences in depreciable lives
and amortization periods for property and equipment and preopening costs,
deferred rentals, the timing of franchise revenue recognition, net operating
losses, certain accrued expenses and reserves. Deferred tax assets and
liabilities represent the future tax consequence of those differences.
No provision is made for United States income taxes applicable to
undistributed earnings of foreign subsidiaries or affiliates that are
indefinitely reinvested in the foreign operations.
39
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations are translated into United
States dollars at the year-end rate of exchange. Revenue and expense accounts
are translated at the average rate of exchange. Resulting translation
adjustments are included in the caption "Cumulative currency translation
adjustment" as a separate component of stockholders' equity. Gains and losses
from foreign currency transactions which are included in the consolidated
statements of operations were not material.
STOCK-BASED COMPENSATION
The Company accounts for compensation costs related to employee stock
options and other forms of employee stock-based compensation plans in accordance
with the requirements of Accounting Principles Board Opinion 25 ("APB 25"). APB
25 requires compensation costs for stock-based compensation plans to be
recognized based on the difference, if any, between the fair market value of the
stock on the date of grant and the option exercise price. In October 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ("SFAS 123"). SFAS
123 established a fair value-based method of accounting for compensation costs
related to stock options and other forms of stock-based compensation plans.
However, SFAS 123 allows an entity to continue to measure compensation costs
using the principles of APB 25 if certain pro forma disclosures are made. The
Company adopted the provisions for pro forma disclosure requirements of SFAS
123.
Options granted to celebrities and other non-employees are recorded at their
estimated fair value at the date of grant and the expense is recognized over the
periods benefitted, generally 5 years.
EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" in the fourth quarter of 1997. As a result of this
adoption, the Company has restated all periods presented in these financial
statements to reflect "basic" and "diluted" earnings per share. Basic earnings
per share is computed by dividing net income by the weighted average number of
common shares outstanding for the period. Diluted earnings per share is computed
by dividing net income by the weighted average number of common shares
outstanding plus common stock equivalents related to stock options for each
period.
A reconciliation of weighted average number of common shares to weighted
average number of common shares plus common stock equivalents is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Weighted average number of common shares...................... 80,000 100,741 108,465
Stock options and awards...................................... 399 1,849 1,340
Warrants...................................................... 1,834 -- --
--------- --------- ---------
Weighted average number of common shares plus common stock
equivalents................................................. 82,233 102,590 109,805
--------- --------- ---------
--------- --------- ---------
</TABLE>
Options to purchase 3 million shares of common stock were not included in
the computation of diluted earnings per common share in fiscal 1997 because the
option exercise price was greater than the average market price of the common
stock.
40
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LEASES
The Company has various noncancelable operating and capital lease
agreements, primarily unit sites. Unit leases are established using a base
amount and/or a percentage of sales. Certain of these leases provide for
escalating lease payments over the terms of the leases. For financial statement
purposes, the total amount of base rentals over the terms of the leases is
charged to expense on the straight-line method over the lease terms. Rental
expense in excess of lease payments is recorded as a deferred rental liability.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, cash equivalents, receivables and accounts
payable approximate the fair value because of the short maturity of these
instruments. The carrying value of notes payable approximate fair value as
interest rates vary with market interest rates.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Estimates are used in the determination of allowances for
doubtful accounts, impairment of long-lived assets, depreciation and
amortization, and taxes, among others. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain reclassifications have been made in the prior years' consolidated
financial statements to conform with the fiscal 1997 presentation.
2. IMPAIRMENT OF LONG LIVED ASSETS
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS 121"), was implemented by the Company in fiscal 1996. SFAS 121 states
that if the carrying value of an asset, including associated intangibles,
exceeds the sum of estimated undiscounted cash flows from the operation of the
asset, an impairment loss should be recognized for the difference between the
asset's estimated fair value and carrying value.
As a result of operating losses incurred in fiscal 1997 and projected to
continue at certain restaurant units, the Company recorded a non-cash impairment
charge of $48.7 million related to a write-down of long-lived assets relating to
these non-performing domestic and foreign restaurant units. The Company
considers continued and projected operating losses or significant and long-term
changes in market conditions to be its primary indicators of potential
impairment. An impairment was recognized as the future undiscounted cash flows
for these units were estimated to be insufficient to recover the related
carrying value of the long-lived assets relating to the units. As a result, the
carrying values of these assets were written down to their estimated fair
values, based on the Company's estimates of future discounted cash flows.
41
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. ACQUISITIONS AND DIVESTITURES
In August 1995, the Company entered into an agreement whereby the Company
purchased a 57.9% interest in All Star Cafe, Inc. ("All Star") for $567 from the
Company's President, who is a stockholder of All Star, and the All Star Cafe
Trust (the "Trust"), a trust established for the benefit of the President's
children (collectively the "Sellers").
The acquisition of the 57.9% interest in All Star was accounted for using
the purchase method of accounting and the purchase price was allocated to the
assets acquired and the liabilities assumed based on their fair values at the
date of acquisition. The excess of the purchase price over the fair value of the
net assets acquired of $738 was recorded as goodwill.
In February 1996, the Company entered into an agreement to acquire the
remaining minority interests in All Star. Under the terms of the agreement, the
Company issued 11,545,706 shares of Class B non-voting stock in exchange for all
of the minority interests in All Star. Due to the high degree of common control
between the Company and All Star and the lack of an exchange of monetary
consideration, the acquisition was accounted for as a reorganization of entities
under common control. Accordingly, the bases of All Star's assets and
liabilities are carried at historical cost.
The following unaudited pro forma information has been prepared assuming
that the acquisition of All Star took place at the beginning of fiscal 1995. The
unaudited pro forma financial information does not purport to be indicative of
the results of operations had the transaction been effected at the beginning of
fiscal 1995, nor to project results for any future period:
<TABLE>
<CAPTION>
FISCAL 1995
-----------
<S> <C>
Revenues.......................................................................... $ 270,606
Net income........................................................................ 19,374
Basic earnings per share--net income.............................................. .21
Diluted earnings per share--net income............................................ .21
</TABLE>
During 1996, the Company acquired the remaining minority interests in PH
London and the minority interests in the Company's subsidiaries that operate
Planet Hollywood units in Maui, Washington D.C. and New York. These acquisitions
were accounted for using the purchase method of accounting and the purchase
price was allocated to the assets purchased and the liabilities assumed based on
their fair values at the date of acquisition. The excess of the purchase price
over the fair value of the net assets acquired was $23,090 and has been recorded
as goodwill which is being amortized on a straight line basis over twenty years.
The results of operations for All Star, PH London and the minority interests
in Maui, Washington D.C. and New York after their respective acquisition dates
are included in the consolidated statement of operations.
The following unaudited pro forma information has been prepared assuming
that the acquisitions of the minority interests took place at the beginning of
fiscal 1995 and 1996, respectively. The unaudited pro forma financial
information does not purport to be indicative of the results of operations had
the
42
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. ACQUISITIONS AND DIVESTITURES (CONTINUED)
transaction been effected at the beginning of fiscal 1995 and 1996, nor to
project results for any future period:
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1996
----------- -----------
<S> <C> <C>
Revenues............................................................. $ 270,606 $ 373,364
Income before extraordinary item..................................... 22,671 48,500
Net income........................................................... 22,671 38,079
Basic earnings per share before extraordinary item................... .28 .48
Basic earnings per share--net income................................. .28 .38
Diluted earnings per share before extraordinary item................. .27 .47
Diluted earnings per share--net income............................... .27 .37
</TABLE>
In January 1997, the Company acquired the net assets of a domestic franchise
unit for $8,000. The acquisition was accounted for using the purchase method of
accounting and the purchase price was allocated to the assets purchased and
liabilities assumed based on their fair values at the date of acquisition. The
excess of the purchase price over the fair value of the net assets acquired,
$5,835, was recorded as goodwill and is being amortized on a straight-line basis
over twenty years.
In December 1994, the Company purchased the PLANET HOLLYWOOD Cancun unit
from a former franchisee (see Note 5) for $5,600. The purchase was funded by a
$4,600 bank loan. In July 1995, the Cancun unit was sold to an affiliated
company, ECE, S.A. de C.V. ("ECE") for net book value ($1,000) and the
assumption of the related bank loan (see Note 9).
During 1995, the Company sold minority interests in a limited partnership
that operated one of its units. The gain on the sale is included in the caption
"Gain on sale of subsidiary interests" in the accompanying financial statements.
4. PROPERTY AND EQUIPMENT
The components of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
Leasehold improvements............................................................... $ 181,107 $ 211,030
Furniture and equipment.............................................................. 50,855 63,396
Memorabilia.......................................................................... 26,244 33,274
Land................................................................................. -- 5,051
Capital lease facility............................................................... 3,900 3,900
Construction in progress............................................................. 11,854 43,965
------------ ------------
273,960 360,616
Less--accumulated depreciation....................................................... (23,852) (37,667)
------------ ------------
$ 250,108 $ 322,949
------------ ------------
------------ ------------
</TABLE>
43
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. INVESTMENT IN UNCONSOLIDATED AFFILIATES
The Company's investments in affiliated companies which are not majority
owned or controlled are accounted for using the equity method.
In January 1995, the Company obtained a 50% equity interest in PH Asia,
which operates and franchises PLANET HOLLYWOOD and OFFICIAL ALL STAR units in
the Pacific Rim. The remaining interest in PH Asia is owned by an entity
controlled by a company in which a director of the Company is a major
stockholder.
In July 1995, the Company acquired a 20% equity interest in ECE for $5,000.
ECE operates themed restaurant/retail units in Mexico (see Notes 3 and 9). At
the acquisition date, the Company's share of the underlying net assets of ECE
exceeded the investment by $2,900. The excess is being amortized over 20 years.
A director of the Company is also a principal stockholder of ECE. In January
1997, ECE issued 21,587,145 shares of common stock in an initial public offering
in Mexico. The Company purchased 4,317,429 shares for $6,050 in order to retain
its 20% equity interest in ECE.
In September 1997, the Company entered into a venture to remodel and
renovate the Hotel Pennsylvania in New York City. During 1997, the Company
advanced the venture $9.6 million and estimates that total funding requirements
for its 20% equity investment in the venture will be $20 million. The renovated
hotel will be branded the OFFICIAL ALL STAR HOTEL, and the Company will receive
royalties for the use of its OFFICIAL ALL STAR HOTEL trademark.
In December 1997, the Company entered into a venture to construct a
50-story, 560-room movie-themed hotel in New York City. During 1997, the Company
contributed $5.0 million to the venture and estimates that its total funding
requirements for its 20% equity investment in the venture will be $7.0 million.
In addition to participation in the hotel's profits through its equity interest
in the venture, the Company will receive a license fee for the use of the Planet
Hollywood name and logo. A PLANET HOLLYWOOD restaurant will be constructed in
the lobby of the hotel. The Company has entered into a $35 million LIBOR-based
leveraged lease for this facility. The lease has a base term of three years and
can be extended up to 21 years.
44
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. INVESTMENT IN UNCONSOLIDATED AFFILIATES (CONTINUED)
Condensed financial information for affiliated companies accounted for by
the equity method is as follows:
<TABLE>
<CAPTION>
1996 1997
------------------------------- ---------------------------------
BALANCE SHEET DATA: PH ASIA OTHER TOTAL PH ASIA OTHER TOTAL
- ------------------------------------------------------ --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Current assets........................................ $ 15,537 $ 13,884 $ 29,421 $ 17,370 $ 206,142 $ 223,512
Non-current assets.................................... 24,363 32,427 56,790 24,578 89,767 114,345
--------- --------- --------- --------- ---------- ----------
Total assets.......................................... $ 39,900 $ 46,311 $ 86,211 $ 41,948 $ 295,909 $ 337,857
--------- --------- --------- --------- ---------- ----------
--------- --------- --------- --------- ---------- ----------
Current liabilities................................... $ 7,081 $ 27,968 $ 35,049 $ 9,255 $ 13,300 $ 22,555
Other liabilities..................................... 31,349 319 31,668 25,219 139,804 165,023
Stockholders' equity.................................. 1,470 18,024 19,494 7,474 142,805 150,279
--------- --------- --------- --------- ---------- ----------
Total liabilities and stockholders' equity............ $ 39,900 $ 46,311 $ 86,211 $ 41,948 $ 295,909 $ 337,857
--------- --------- --------- --------- ---------- ----------
--------- --------- --------- --------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
1995 1996 1997
------------------------------- ------------------------------- --------------------------------
OPERATING DATA: PH ASIA OTHER TOTAL PH ASIA OTHER TOTAL PH ASIA OTHER TOTAL
- --------------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $ 14,771 $ 17,330 $ 32,101 $ 27,993 $ 55,126 $ 83,119 $ 43,332 $ 72,606 $ 115,938
Operating income........... 414 8,537 8,951 3,073 19,194 22,267 7,073 25,893 32,966
Net income................. 550 2,181 2,731 2,530 6,818 9,348 6,196 15,296 21,492
Company's interest in net
income................... 100 748 848 1,200 3,108 4,308 3,250 3,650 6,900
</TABLE>
6. ACCRUED EXPENSES
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
Accrued taxes.................................................... $ 4,658 $ 1,820
Accrued rent..................................................... 878 3,318
Accrued payroll and related benefits............................. 3,304 3,776
Other............................................................ 2,068 6,301
------------ ------------
$ 10,908 $ 15,215
------------ ------------
------------ ------------
</TABLE>
45
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. NOTES PAYABLE
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1996 1997
------------- ------------
<S> <C> <C>
Revolving line of credit......................................... $ -- $ 42,000
Term loan........................................................ -- 20,000
Capital lease payable............................................ 3,897 3,872
Other notes payable.............................................. 4,378 5,883
------ ------------
8,275 71,755
Less current portion............................................. (746) (1,264)
------ ------------
$ 7,529 $ 70,491
------ ------------
------ ------------
</TABLE>
In August 1995, the Company issued $60,000 10% Senior Subordinated Notes
(the "1995 Notes") due in 2000 with warrants to purchase Class A common stock
(see Note 8). In connection with the 1996 initial public offering of stock, the
Company repaid the 1995 Notes from a portion of the offering's proceeds. The
Company incurred a one-time extraordinary charge of $10.4 million, net of $5.9
million in taxes, as a result of the early extinguishment of the 1995 Notes.
In September 1997, the Company replaced its existing $50 million credit
facility with a multi-currency, long-term credit facility with a consortium of
financial institutions. This facility consists of a $100 million revolving
credit facility and a $20 million term loan facility. The credit agreement
carries a commitment fee of .25% on the unused amount of the revolving credit
portion. Interest rates are variable, with either prime or LIBOR indexes. At
December 28, 1997, the Company's weighted average rate on outstanding borrowings
under the facility was 6.96%. The revolving credit facility matures in September
2000, while the term loan facility matures in 1999. During 1997, the Company
drew $42 million under the revolving credit facility. The credit facility also
provides for the Company to have up to $10 million in letters of credit. At
December 28, 1997, the Company had outstanding letters of credit totaling $5.8
million.
Under the terms of the credit facility, the Company is required to meet
certain minimum quarterly net worth, interest coverage and various other
financial ratios. At December 28, 1997, the Company was in violation of one of
the financial covenants. In March 1998, the lenders modified the covenant and
the Company was in compliance with the revised covenants at December 28, 1997.
In fiscal 1996, notes due to stockholders totaling $70,750 were repaid from
the proceeds of the initial public offering of stock.
During fiscal 1995, the principal stockholders or their affiliates advanced
or guaranteed various loans and credit facilities to the Company totaling
$21,600. These borrowings were repaid with proceeds of the 1995 Notes. During
fiscal 1995 and 1996, approximately $7,705 and $2,202, respectively, was charged
to interest expense under these loans.
During fiscal 1995, 1996 and 1997, approximately $12,661, $6,093 and $2,555,
respectively, was charged to interest expense and approximately $834, $1,098 and
$2,555 in fiscal 1995, 1996 and 1997, respectively, of interest was capitalized.
46
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. NOTES PAYABLE (CONTINUED)
Aggregate principal amounts maturing in each of the five fiscal years
subsequent to fiscal 1997 and thereafter are summarized as follows:
<TABLE>
<CAPTION>
FISCAL
- -----------------------------------------------------------------------------------
<S> <C>
1998............................................................................... $ 1,264
1999............................................................................... 20,486
2000............................................................................... 42,490
2001............................................................................... 530
2002............................................................................... 575
Thereafter......................................................................... 6,410
---------
$ 71,755
---------
---------
</TABLE>
8. STOCKHOLDERS' EQUITY AND REDEEMABLE WARRANTS
STOCKHOLDERS' EQUITY
On January 1, 1995, the Company issued 1,333,333 shares of Class A common
stock to certain employees, including 466,666 shares issued under a
participation agreement with an employee dated January 1, 1994. The shares are
restricted and cannot be transferred or sold unless the Company waives its right
of first refusal to purchase any shares. The shares are subject to forfeiture by
the employee in the event the employee is no longer employed by the Company. The
forfeiture restriction lapses generally over a five year period. The shares were
valued at their estimated market value totaling $1,100. Compensation expense is
recognized over the vesting period. Deferred compensation expense has been
reflected as a reduction of stockholders' equity.
In April 1996, the Company completed an initial public offering of
12,406,452 shares of common stock at an offering price of $18.00 per share,
including 1,618,233 shares from the exercise of the Underwriters' over allotment
option. The Company received net proceeds of approximately $193.1 million.
In April 1997, the Company issued 1,087,000 shares of Class A Common Stock
to an investor in conjunction with the consummation of a franchise agreement
with the investor. Approximately $19.6 million was received for the shares
issued (Note 9).
In January 1997, the Company issued 218,438 shares of restricted Class B
Common Stock to certain celebrities. The restrictions lapse over a period of
years, generally three to four years. The shares were valued at their estimated
market value totaling $4.0 million. Compensation expense is recognized ratably
over the period benefitted. Deferred compensation expense has been reflected as
a reduction of stockholders equity.
REDEEMABLE WARRANTS
In connection with the issuance of the 1995 Notes (see Note 7), the Company
issued warrants to purchase up to 5,112,765 shares of common stock at an
exercise price of $0.01 per share. The proceeds of the offering were allocated
between the 1995 Notes and warrants based upon their fair values at the date of
issuance. The number of shares which may be purchased upon exercise of the
warrants were subject to increase or decrease by up to 50% based upon the total
rate of return to the holders upon repayment of
47
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. STOCKHOLDERS' EQUITY AND REDEEMABLE WARRANTS (CONTINUED)
the 1995 Notes, including the fair value of the warrants at the date they become
exercisable or are deemed exercised. The warrants became exercisable upon the
repayment of the 1995 Notes. The number of warrants which may be exercised were
reduced by 50% to 2,556,383 based upon the total rate of return to the holders
at the date of repayment of the 1995 Notes. In connection with the initial
public offering of stock in fiscal 1996, warrants to purchase 788,219 shares
were exercised. In 1996, the Company registered the shares issued upon the
exercise of the remaining warrants.
STOCK OPTIONS
During 1995, the Board of Directors adopted the 1995 Stock Option Award and
Incentive Plan ("1995 Stock Plan"). The 1995 Stock Plan calls for up to
4,000,000 shares of Class A common stock to be available for issuance upon the
exercise of options and stock appreciation rights. In October 1996, the 1995
Stock Plan was amended to provide for 5,000,000 shares of Class A common stock
to be available. In May 1997, the 1995 Stock Plan was amended to provide for
6,000,000 shares of Class A common stock to be available. Under the 1995 Stock
Plan, options and/or stock appreciation rights may be granted to officers and
employees of the Company, and certain of the Company's independent contractors,
to purchase Class A common stock. During fiscal 1995, 1996 and 1997, options to
purchase 1,130,733, 3,051,161 and 839,800 shares, respectively, of Class A
common stock were granted under the 1995 Stock Plan at the estimated fair market
value at the date of grant. These options vest and are exercisable over a period
of four years and expire five years from the date of grant.
During 1995, the Board of Directors adopted the 1995 Celebrity Stock Option
Award and Incentive Plan ("1995 Celebrity Plan"). The 1995 Celebrity Plan calls
for up to 4,000,000 shares of the Class A common stock to be available for
issuance upon the exercise of options and stock appreciation rights. In October
1996, the 1995 Celebrity Plan was amended to provide for 6,000,000 shares of
Class A Common Stock to be available. During fiscal 1995, 1996, and 1997,
options to purchase 2,250,000, 1,895,000, and 180,000 shares, respectively, of
Class A common stock were granted under the 1995 Celebrity Plan at the estimated
fair market value at the date of grant. These options vest and are exercisable
over a period of four years and expire five years from the date of grant. During
fiscal 1995, 1996, and 1997, approximately $140, $1,268, and $2,081,
respectively, was charged to expense relating to the grants.
48
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. STOCKHOLDERS' EQUITY AND REDEEMABLE WARRANTS (CONTINUED)
<TABLE>
<CAPTION>
STOCK PLAN CELEBRITY PLAN
------------------------- -------------------------
NUMBER WEIGHTED AVG. NUMBER WEIGHTED AVG.
OF SHARES OPTION PRICE OF SHARES OPTION PRICE
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Granted during 1995 and outstanding at December 31,
1995,................................................... 1,130,733 $ 7.88 2,250,000 $ 7.88
Exercisable at December 31, 1995,......................... -- --
Available for grant at December 31, 1995.................. 2,869,267 1,750,000
Granted during 1996....................................... 3,051,161 18.70 1,895,000 17.65
Canceled.................................................. (440,579) 11.08 (50,000) 7.88
Outstanding at December 29, 1996,......................... 3,741,315 16.34 4,095,000 12.40
Exercisable at December 29, 1996,......................... -- --
Available for grant at December 29, 1996.................. 1,258,685 1,905,000
Granted during 1997....................................... 839,800 18.11 180,000 16.28
Canceled.................................................. (649,343) 17.00 (796,334) 17.64
Exercised................................................. (77,297) 8.40 (30,666) 7.88
Outstanding at December 28, 1997,......................... 3,854,475 16.76 3,448,000 10.55
Exercisable at December 28, 1997,......................... 237,801 1,082,655
Available for grant at December 28, 1997.................. 2,068,228 2,552,000
</TABLE>
The following tables summarize the stock options outstanding at December 28,
1997:
<TABLE>
<CAPTION>
EMPLOYEES: WEIGHTED
RANGE OF NUMBER WEIGHTED-AVERAGE AVERAGE
EXERCISE OUTSTANDING AT REMAINING EXERCISE
PRICES DECEMBER 28, 1997 CONTRACTUAL LIFE PRICE
- ---------------- ----------------- ---------------- -----------
<C> <C> <S> <C>
$ 7.88 662,289 3 Years $ 7.88
14.00--18.63 873,086 4 Years 17.03
19.00 2,095,100 4 Years 19.00
20.00--21.63 224,000 4 Years 21.05
<CAPTION>
CELEBRITIES: WEIGHTED
RANGE OF NUMBER WEIGHTED-AVERAGE AVERAGE
EXERCISE OUTSTANDING AT REMAINING EXERCISE
PRICES DECEMBER 28, 1997 CONTRACTUAL LIFE PRICE
- ---------------- ----------------- ---------------- -----------
<C> <C> <S> <C>
$ 7.88 2,169,334 3 Years $ 7.88
14.00--15.00 1,138,666 3 Years 14.42
19.00--24.00 140,000 4 Years 20.50
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS 123.
Accordingly, no compensation expense has been recognized for the 1995 Stock
Plan. Had compensation cost for the 1995 Stock Plan been determined based on the
fair value at the date of grant for awards in 1995 and 1996 consistent with the
provisions of SFAS 123, the Company's net income and earnings per share would
approximate the following pro forma amounts:
49
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. STOCKHOLDERS' EQUITY AND REDEEMABLE WARRANTS (CONTINUED)
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Net income--as reported........................................................... $ 20,727 $ 37,659 $ 8,258
Net income--pro forma............................................................. 20,723 36,987 4,852
Basic earnings per share--as reported............................................. .26 .37 .08
Basic earnings per share--pro forma............................................... .26 .37 .04
Diluted earnings per share--as reported........................................... .25 .37 .08
Diluted earnings per share--pro forma............................................. .25 .36 .04
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black Scholes option pricing model with the following weighted-average
assumptions for grants in 1995, 1996 and 1997: no dividend yield for all three
years; expected volatility of 33% in 1995 and 1996, 40% in 1997; risk free rates
of 5.95% in 1995 and 1996, 5.70% in 1997; and expected lives of 4 years for all
periods presented. The weighted-average fair value of options granted during
each year was $1.63, $6.83, and $6.32 for fiscal 1995, 1996 and 1997,
respectively.
9. FRANCHISE REVENUES
The Company has an agreement with PH Asia, whereby PH Asia was granted the
right to license the PLANET HOLLYWOOD name and rights within a number of
countries, primarily in the Pacific Rim. In 1996, PH Asia opened or franchised
four units, and the Company received the initial franchise fee revenue for three
of the units. In 1997, PH Asia opened or franchised eight units, and the Company
received the initial franchise fee revenue for five of the units.
During 1995, the Company entered into a franchise agreement with ECE, an
affiliated company (see Note 5), which allows ECE to develop and operate up to
five PLANET HOLLYWOOD units and up to ten OFFICIAL ALL STAR CAFE units in
Mexico. Upon Company approval, ECE may open an additional five PLANET HOLLYWOOD
units. In 1996, ECE opened 5 units. No units were opened in 1997. ECE pays
continuing royalty fees as defined in the agreement.
In December 1995, the Company terminated the site franchise agreement of an
existing franchisee and purchased the franchise rights to four undeveloped
locations. The Company assumed certain liabilities and lease obligations
relating to the four undeveloped locations. In consideration for the franchise
rights, the Company will pay the seller an amount equal to a multiple of each
unit's first year profits less the costs to develop and open the site, as
defined. The franchisee forfeited the nonrefundable initial franchise fees of
$2,000 each for four sites. Unearned franchise fees are included in deferred
credits and any consideration paid for the sites will be offset against each
site's related unearned franchise fee. In fiscal 1997, the Company recognized
the deferred credit for two of the sites.
In March 1997, the Company entered into a franchise agreement which provides
for the development of up to 34 Planet Hollywood restaurant-merchandise units in
23 countries throughout the Middle East and Europe. The franchise agreement
provided for and the investor made a payment to the Company of $8.0 million for
six sites. Additional franchise fees may be payable to the Company under the
terms of the franchise agreement for the additional sites. In connection with
the agreement, the investor purchased 1% of the Company's total common stock
outstanding directly from the Company for approximately $19.6 million.
50
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. FRANCHISE REVENUES (CONTINUED)
The number of franchised units opened in fiscal 1995, 1996 and 1997 were 6,
21 and 34, respectively.
10. INCOME TAXES
The sources of income before income taxes are presented as follows:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
United States.................................................................... $ 18,977 $ 47,370 $ 15,529
Foreign.......................................................................... 2,625 28,346 (2,317)
--------- --------- ---------
Income before taxes.............................................................. $ 21,602 $ 75,716 $ 13,212
--------- --------- ---------
--------- --------- ---------
</TABLE>
The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1995 1996 1997
--------- --------- ----------
<S> <C> <C> <C>
Current:
Federal....................................................................... $ 5,949 $ 12,616 $ 9,927
State and local............................................................... 1,857 1,472 1,777
Foreign....................................................................... 1,592 3,168 3,375
--------- --------- ----------
9,398 17,256 15,079
--------- --------- ----------
Deferred:
Federal....................................................................... (7,586) 2,941 (7,499)
State and local............................................................... (937) 1,448 (337)
Foreign....................................................................... -- -- (2,289)
--------- --------- ----------
(8,523) 4,389 (10,125)
--------- --------- ----------
$ 875 $ 21,645 $ 4,954
--------- --------- ----------
--------- --------- ----------
</TABLE>
In 1997, the Company recognized $783 of benefits for deductions from the
exercise of employee stock options and the vesting of certain celebrity
restricted stock awards. The benefits were recorded directly to capital in
excess of par value and are not reflected in the provision for income taxes.
Income tax expense included in the financial statements is as follows:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1995 1996 1997
----------- --------- ---------
<S> <C> <C> <C>
Continuing operations................................................................ $ 875 $ 27,636 $ 4,954
Extraordinary item................................................................... -- (5,991) --
----- --------- ---------
$ 875 $ 21,645 $ 4,954
----- --------- ---------
----- --------- ---------
</TABLE>
Deferred income taxes were recorded to reflect the tax effects of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts for income tax purposes for December 31,
1995, December 29, 1996 and December 28, 1997.
51
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. INCOME TAXES (CONTINUED)
Temporary differences and carryforwards which give rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28,
1996 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Preopening costs..................................................................... $ 6,483 $ 4,712
Deferred credits..................................................................... 6,584 6,104
Accrued expenses & reserves.......................................................... 588 5,177
Deferred rental expense.............................................................. 3,977 4,157
Net operating loss carryforwards..................................................... 1,034 4,884
Tax credit carryforwards............................................................. 269 1,047
Other................................................................................ 410 809
------------ ------------
19,345 26,890
Valuation allowance.................................................................. -- (1,925)
------------ ------------
19,345 24,965
------------ ------------
Deferred tax liabilities:
Depreciation and amortization........................................................ (12,893) (8,473)
Deferred compensation................................................................ (104) --
Other................................................................................ (31) (50)
------------ ------------
(13,028) (8,523)
------------ ------------
Net deferred tax asset............................................................... $ 6,317 $ 16,442
------------ ------------
------------ ------------
</TABLE>
The valuation allowance for the deferred tax asset as of January 1, 1995 was
$8,478. The allowance was decreased in fiscal 1995 due to the taxable income
generated by the Company in fiscal 1995 and the expectation of sufficient
taxable income in the future to utilize the deductible temporary differences and
carryforwards. A valuation allowance of $1,925 was established during fiscal
1997 for the deferred tax assets relating to foreign operations. Deferred tax
assets are required to be reduced by a valuation allowance if it is more likely
than not that some portion or all of the deferred tax asset will not be
realized.
52
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. INCOME TAXES (CONTINUED)
Reconciliation of the federal statutory tax rate and the effective tax rate
is as follows:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1995 1996 1997
--------- ----------- -----------
<S> <C> <C> <C>
Federal statutory tax rate................................................................ 35.0% 35.0% 35.0%
Nondeductible expenses.................................................................... 2.2 0.6 1.9
Tax benefit of foreign operations......................................................... (1.3) (1.8) (1.5)
State and local income taxes, net of federal tax benefit.................................. 5.7 3.2 7.1
Utilization of tax loss carryforward...................................................... (1.4) -- --
Valuation allowance....................................................................... (35.4) -- --
Tax credits............................................................................... (2.4) (1.2) (6.5)
Other..................................................................................... 1.7 0.7 1.5
--------- --- ---
Effective tax rate........................................................................ 4.1% 36.5% 37.5%
--------- --- ---
--------- --- ---
</TABLE>
The amount of domestic net operating loss carryforwards generated by certain
subsidiaries prior to their acquisition was $4,288 with expiration dates through
the fiscal year 2011. The use of pre-acquisition operating loss carryforwards is
subject to limitations imposed by the Internal Revenue Code. The Company does
not anticipate that these limitations will affect utilization of the
carryforwards prior to their expiration.
The amount of foreign net operating loss carryforwards at December 28, 1997
was $8,220, of which $5,674 has no expiration date and $2,546 expires between
2002 and 2007.
Provision has not been made for United States or foreign taxes on the
undistributed earnings of foreign affiliates, as those earnings are considered
to be permanently invested. It is not practicable to estimate the amount of the
tax on such earnings. Such earnings would become taxable upon the sale or
liquidation of the investment in these foreign affiliates or upon the remittance
of dividends. Upon remittance, certain foreign countries impose withholding
taxes that are then available, subject to certain limitations, for use as
credits against the Company's United States tax liability.
53
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. COMMITMENTS AND CONTINGENCIES
LEASES
Future minimum lease payments under the terms of operating and capital lease
agreements at December 28, 1997 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
---------- ---------
<S> <C> <C>
1998....................................................................................... $ 36,915 $ 400
1999....................................................................................... 37,636 400
2000....................................................................................... 38,003 400
2001....................................................................................... 38,190 400
2002....................................................................................... 38,144 400
Thereafter................................................................................. 654,512 9,400
---------- ---------
Total.................................................................................. $ 843,400 11,400
----------
----------
Less: amount representing interest......................................................... (7,523)
---------
Present value of net minimum lease payments................................................ $ 3,877
---------
---------
</TABLE>
Rent expense approximated $23,900, $34,540 and $44,607 for fiscal 1995, 1996
and 1997, respectively. Included in fiscal 1995, 1996 and 1997 rent expense is
approximately $7,300, $8,600 and $8,620, respectively, of contingent rental
payments.
OTHER
In connection with the construction and development of future restaurants
and corporate headquarters, the Company has entered into various construction
contracts. As of December 28, 1997, these outstanding contract commitments
totaled approximately $20,473.
In July 1997, the Company entered into a venture with AMC Entertainment,
Inc. ("AMC") to develop, own and operate "Planet Movies By AMC", an integrated
moviegoing, dining and retail concept worldwide. The Company anticipates funding
$30 million to the joint venture in fiscal 1998 for the purpose of developing
and operating "Planet Movies By AMC" complexes throughout the world.
In fiscal 1997, the Company and Aladdin Gaming, LLC announced their intent
to form a venture to develop, own and operate a 1,000 room hotel and 50,000
square foot casino in Las Vegas, Nevada. Each partner will be required to
contribute initial equity of approximately $41 million. The Company will
initially contribute cash for its ownership interest and receive ongoing
licensing and marketing fees.
LITIGATION
The Company is a defendant in certain lawsuits for which counsel has been
retained. In the opinion of management, the ultimate outcome of these matters
will not have a material adverse effect upon the financial condition, results of
operations, or cash flows of the Company.
54
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. RELATED PARTY TRANSACTIONS
In December 1994, the Company transferred ownership of an aircraft to a
company owned by two of the Company's stockholders. The transportation equipment
was leased to the Company on a month-to-month basis, and the debt assumed by the
stockholders was guaranteed by the Company. The results of operations for this
company are included in the Company's consolidated results until June 1995, when
the Company repurchased the aircraft at its book value. No gain or loss was
recognized on the transactions.
Through fiscal 1995, certain of the Company's officers and employees were
employed by a service company owned by the Company's president and stockholder.
The service company's expenses were allocated to the Company and other entities
based upon the employees' time spent on each entity. During fiscal 1995, the
Company was allocated $890. During fiscal 1996 and fiscal 1997, the Company paid
officers' and employees' salaries directly.
A company that is controlled by a director and stockholder of the Company
bought the franchise rights to develop one PLANET HOLLYWOOD unit in 1995 and two
units in 1997 for $5,250. The franchise fees were recognized by the Company in
1997.
In fiscal 1997, the Company paid approximately $1 million in investment
banking fees for services rendered by a firm in which a director of the Company
is also a member of that firm's board of directors.
13. OTHER FINANCIAL DATA
GEOGRAPHIC SEGMENT DATA
Condensed financial information, summarized by geographic area, is as
follows:
<TABLE>
<CAPTION>
UNITED OTHER
STATES EUROPE AREAS(1) CORPORATE(2) TOTAL
---------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues.............................................. 1997 $ 355,641 $ 103,083 $ 16,401 $ -- $ 475,125
1996 305,221 67,824 319 -- 373,364
1995 228,833 36,150 5,623 -- 270,606
Operating income (loss)............................... 1997 11,273 (6,834) 546 6,900 11,885
1996 71,282 3,972 65 4,308 79,627
1995 27,828 5,284 1,988 848 35,948
Identifiable assets................................... 1997 362,363 85,411 10,392 47,393 505,559
1996 297,470 41,241 2,704 59,845 401,260
1995 185,058 34,020 -- 21,107 240,185
</TABLE>
- ------------------------
(1) Includes Mexico and Canada
(2) Corporate assets include cash and cash equivalents and investment in
unconsolidated affiliates. Corporate operating income includes equity in
earnings in unconsolidated affiliates.
55
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. OTHER FINANCIAL DATA (CONTINUED)
DIRECT REVENUES AND COST OF SALES
Direct revenues and cost of sales are summarized as follows:
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Direct revenues:
Food and beverage.......................................................... $ 160,997 $ 222,481 $ 273,345
Merchandise................................................................ 104,051 124,955 173,965
---------- ---------- ----------
$ 265,048 $ 347,436 $ 447,310
---------- ---------- ----------
---------- ---------- ----------
Cost of sales:
Food and beverage.......................................................... $ 38,537 $ 50,190 $ 61,930
Merchandise................................................................ 37,925 43,236 62,878
---------- ---------- ----------
$ 76,462 $ 93,426 $ 124,808
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
14. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
Issuance of common stock for the purchase of minority interests................. $ -- $ 35,185 $ --
Additions to property and equipment, construction in process and other assets
included in accounts payable and accrued expenses............................. 3,821 12,538 9,459
Capital lease................................................................... -- 3,900 --
Sale of franchise in exchange for equity interest in unconsolidated affiliate... 661 -- --
Transfer of deposit to minority interest contributions.......................... 500 -- --
Purchase of franchise for assumption of franchisee liabilities.................. -- 3,181 --
Receivable exchanged for stock in an affiliate.................................. -- -- 770
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of amount capitalized............................... 7,605 10,132 --
Cash paid for income taxes...................................................... 7,518 13,398 14,848
</TABLE>
56
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
15. QUARTERLY DATA (UNAUDITED)
Summarized quarterly data for 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
FISCAL 1996--QUARTERS ENDED
-------------------------------------------------------
MAR. 31 JUNE 30 SEP. 29 DEC. 29 TOTAL
--------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................................. $ 77,025 $ 85,366 $ 111,840 $ 99,133 $ 373,364
Income from operations............................... 9,323 17,422 28,213 20,361 75,319
Income before provision for income taxes............. 5,276 17,546 30,598 22,296 75,716
Income before extraordinary item..................... 3,350 11,142 19,430 14,158 48,080
Net income........................................... 3,350 721 19,430 14,158 37,659
Basic EPS--income before extraordinary item.......... $ 0.04 $ 0.11 $ 0.18 $ 0.13 $ 0.47
Diluted EPS--income before extraordinary item........ $ 0.04 $ 0.11 $ 0.18 $ 0.13 $ 0.47
Basic EPS--net income................................ $ 0.04 $ 0.01 $ 0.18 $ 0.13 $ 0.37
Diluted EPS--net income.............................. $ 0.04 $ 0.01 $ 0.18 $ 0.13 $ 0.37
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1997--QUARTERS ENDED
----------------------------------------------------------
MAR. 30 JUNE 29 SEP. 28 DEC. 28 TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................................. $ 101,647 $ 121,892 $ 149,598 $ 101,988 $ 475,125
Income from operations............................... 13,296 23,150 39,111 (70,572) 4,985
Income before provision for income taxes............. 16,858 26,059 40,167 (69,872) 13,212
Net income........................................... 10,536 16,287 25,245 (43,810) 8,258
Basic EPS--net income................................ $ 0.10 $ 0.15 $ 0.23 ($ 0.40) $ 0.08
Diluted EPS--net income.............................. $ 0.10 $ 0.15 $ 0.23 ($ 0.40) $ 0.08
</TABLE>
In the fourth quarter of fiscal 1997, the Company recorded a pre-tax charge
of $71.2 million ($44.5 million after tax). The charge was primarily related to
the writedown of impaired assets ($48.7 million); the writeoff of accounts
receivable due to the Company's change in business strategy and the financial
uncertainties of certain franchisees ($13.5 million); and other costs associated
with the Company's change in business strategy ($9.0 million).
57
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As provided in General Instruction G(3), the information contained in the
Company's definitive proxy statement to be filed pursuant to SEC Regulation 14A
with respect to the upcoming Annual Meeting of Stockholders to be held on May
22, 1998, is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
As provided in General Instruction G(3), the information contained in the
Company's definitive proxy statement to be filed pursuant to SEC Regulation 14A
with respect to the upcoming Annual Meeting of Stockholders to be held on May
22, 1998, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As provided in General Instruction G(3), the information contained in the
Company's definitive proxy statement to be filed pursuant to SEC Regulation 14A
with respect to the upcoming Annual Meeting of Stockholders to be held on May
22, 1998, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As provided in General Instruction G(3), the information contained in the
Company's definitive proxy statement to be filed pursuant to SEC Regulation 14A
with respect to the upcoming Annual Meeting of Stockholders to be held on May
22, 1998, is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(A) 1. FINANCIAL STATEMENTS
Report of Independent Accountants
Consolidated Balance Sheets at December 29, 1996
and December 28, 1997
Consolidated Statements of Operations for the three years ended December 28,
1997
Consolidated Statements of Changes in Stockholders' Equity for the three
years ended
December 28, 1997
Consolidated Statements of Cash Flows for the three years ended December 28,
1997
Notes to the Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
For the year ended December 28, 1997
II--Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
58
<PAGE>
Financial statements of two 50% owned companies have been omitted because
the registrant's proportionate share of the income from continuing operations
before income taxes is less than 20% of the respective consolidated amount, and
the investment in and advances to each company is less than 20% of consolidated
total assets.
3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
3.1* Restated Certificate of Incorporation of the Registrant
3.2* First Amended and Restated Bylaws of the Registrant
4.1* Form of Warrant
4.2* Revolving Credit Agreement dated as of January 29, 1996 among the Registrant and SunTrust Bank
4.3 Revolving Credit and Term Loan Agreement dated as of September 18, 1997 among the Registrant, SunTrust
Bank and certain other banks
4.4 First Amendment to Revolving Credit and Term Loan Agreement dated as of October 1, 1997 among the
Registrant, SunTrust Bank and certain other banks
10.1* Form of Master Franchise Agreement
10.2* Form of Memorabilia Lease
10.3* Form of License Agreement
10.4* Asset Purchase Agreement dated November 8, 1995 between the Registrant and America Europe Asia
International Trade and Management Consultants, Ltd.
10.5* Ground Lease Agreement between Lake Buena Vista Communications, Inc. And Planet Hollywood (Orlando), Inc.
10.6* License Agreement dated as of December 4, 1992, by and between the Registrant and Planet Hollywood (Asia)
Pte. Ltd.
10.7* First Amendment to the License Agreement dated as of July 1, 1995, by and between the Registrant and
Planet Hollywood (Asia) Pte. Ltd.
10.7A Second Amendment to the License Agreement dated as of October 1, 1995, by and between the Registrant and
Planet Hollywood (Asia) Pte. Ltd.
10.7B Third Amendment to the License Agreement dated as of November 6, 1998, by and between the Registrant and
Planet Hollywood (Asia) Pte. Ltd.
10.8* Form of Master Franchise Agreement for All Star Cafe, Inc.
10.9* Form of Letter Agreement, dated February 15, 1996, among stockholders of All Star Cafe, Inc.
10.10* Joint Venture Agreement dated December 9, 1994, between Marvel Restaurant Venture Corp. And EBCO
Management, Inc.
10.11* License Agreement dated March 19, 1996, between Marvel Entertainment Group, Inc. And M Restaurant Venture
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.12* 1995 Celebrity Stock Award and Incentive Plan
10.13* 1995 Stock Award and Incentive Plan
10.14* Form of Stock Option Award Agreement for options granted under the 1995 Celebrity Stock Award and
Incentive Plan
10.15* Form of Stock Option Award Agreement for options granted under the 1995 Stock Award and Incentive Plan
10.16* Employment Agreement dated August 8, 1995, between the Registrant and Robert Earl
10.17* Employment Agreement dated January 1, 1993, between the Registrant and Keith Barish
10.18* Letter Agreement dated March 18, 1994, between the Registrant and Kraft Foodservice, Inc.
10.19 Limited Partnership Agreement of Planet Movies Company, L.P. dated October 17, 1997
10.20 Master Agreement dated as of December 2, 1997 relating to the joint venture transaction between Planet
Hospitality Holdings, Inc. and Times Square Partners LLC and others [relating to Planet Hollywood Hotel
venture]
21.1 Subsidiaries
23.1 Consent of Price Waterhouse LLP
24.1 Powers of Attorney (included in signature page)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* Incorporated by reference to the exhibits with the corresponding exhibit
numbers in the Registration Statement on Form S-1 previously filed by the
Registrant (file no. 333-1490)
(B) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.
60
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 23rd day of
March, 1998.
PLANET HOLLYWOOD INTERNATIONAL, INC.
BY: /S/ ROBERT I. EARL
-----------------------------------------
Robert I. Earl
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BY: /S/ THOMAS AVALLONE
-----------------------------------------
Thomas Avallone
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND CHIEF ACCOUNTING OFFICER
61
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on
the following page constitutes and appoints Robert I. Earl and or Scott Johnson
to sign any amendments to this Report on Form 10-K, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that the
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 23rd day of March, 1998.
<TABLE>
<S> <C>
/s/ KEITH BARISH /s/ ROBERT I. EARL
- ---------------------------------------- ----------------------------------------
Keith Barish Robert I. Earl
CHAIRMAN OF THE BOARD OF DIRECTORS AND PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR DIRECTOR
/s/ THOMAS AVALLONE /s/ ISADORE SHARP
- ---------------------------------------- ----------------------------------------
Thomas Avallone Isadore Sharp
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL DIRECTOR
OFFICER AND DIRECTOR
/s/ ROBERT KRASNOW /s/ ONG BENG SENG
- ---------------------------------------- ----------------------------------------
Robert Krasnow Ong Beng Seng
DIRECTOR DIRECTOR
/s/ CLAUDIO GONZALEZ /s/ MARK MCCORMACK
- ---------------------------------------- ----------------------------------------
Claudio Gonzalez Mark McCormack
DIRECTOR DIRECTOR
/s/ MICHAEL L. TARNOPOL
- ----------------------------------------
Michael L. Tarnopol
DIRECTOR
</TABLE>
62
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC.
FINANCIAL STATEMENT SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE CHARGED TO CHARGED TO BALANCE
DESCRIPTION 12/29/96 COSTS AND EXPENSES OTHER ACCOUNTS DEDUCTIONS 12/28/97
- ---------------------------------- ----------- ------------------ ----------------- ------------- -----------
Allowance for uncollectible
accounts receivable............. $ -- $ 13,486,245 $ -- $ (11,986,245)(1) $ 1,500,000
</TABLE>
- ------------------------
(1) Represents the writeoff of specific accounts receivable in 1997.
63
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC.
Exhibit 4.3
Revolving Credit and Term Loan Agreement
dated as of September 18, 1997
among the Registrant, SunTrust Bank and
certain other banks
<PAGE>
================================================================================
REVOLVING CREDIT AND TERM LOAN AGREEMENT
Dated as of September 18, 1997
By And Among
PLANET HOLLYWOOD INTERNATIONAL, INC.
and
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION,
individually and as Agent,
AMSOUTH BANK,
THE BANK OF NOVA SCOTIA,
individually and as Documentation Agent,
BANQUE PARIBAS,
DAI-ICHI KANGYO BANK, LIMITED, ATLANTA AGENCY,
THE FUJI BANK AND TRUST COMPANY,
LLOYDS BANK PLC,
NATIONAL WESTMINSTER BANK PLC, and
THE SAKURA BANK, LIMITED
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS; CONSTRUCTION ........................................... 1
Section 1.1 Definitions ....................................... 1
Section 1.2 Accounting Terms and Determination ................ 19
Section 1.3 Other Definitional Provisions ..................... 19
Section 1.4 Exhibits and Schedules ............................ 20
ARTICLE II
REVOLVING LOANS; LETTERS OF CREDIT .................................. 20
Section 2.1 Commitment; Use of Proceeds ....................... 20
Section 2.2 Notes; Repayment of Principal ..................... 21
Section 2.3 Voluntary Reduction of Revolving Loan Commitments . 22
Section 2.4 Letters of Credit ................................. 22
Section 2.5 Manner of Issuance ................................ 23
Section 2.6 Drawings Under Letters of Credit .................. 23
Section 2.7 General Provisions as to Letters of Credit ........ 23
Section 2.8 Participation ..................................... 26
ARTICLE III
TERM LOANS .......................................................... 27
Section 3.1 Term Loan Commitment; Use of Proceeds ............. 27
Section 3.2 Notes; Interest; Repayment of Principal ........... 28
ARTICLE IV
GENERAL LOAN TERMS .................................................. 29
Section 4.1 Funding Notices ................................... 29
Section 4.2 Disbursement of Funds ............................. 31
Section 4.3 Interest .......................................... 33
Section 4.4 Interest Periods .................................. 35
Section 4.5 Fees .............................................. 36
Section 4.6 Voluntary Prepayments of Borrowings ............... 38
Section 4.7 Payments, etc ..................................... 39
Section 4.8 Interest Rate Not Ascertainable, etc .............. 41
Section 4.9 Illegality ........................................ 42
Section 4.10 Increased Costs ................................... 43
Section 4.11 Lending Offices ................................... 45
Section 4.12 Funding Losses .................................... 46
Section 4.13 Assumptions Concerning Funding of LIBOR
Advances and Term Loans ........................... 46
Section 4.14 Apportionment of Payments ......................... 47
Section 4.15 Sharing of Payments. Etc .......................... 47
Section 4.16 Capital Adequacy .................................. 48
Section 4.17 Benefits to Guarantors ............................ 48
i
<PAGE>
Section 4.18 Limitations on Certain Payment
Obligations ....................................... 48
Section 4.19 Affected Lenders .................................. 49
Section 4.20 Return of Payments ................................ 50
ARTICLE V
CONDITIONS TO BORROWINGS ............................................ 50
Section 5.1 Conditions Precedent to Initial Loans ............. 50
Section 5.2 Conditions to All Loans ........................... 53
ARTICLE VI
REPRESENTATIONS AND WARRANTIES ...................................... 54
Section 6.1 Organization and Qualification .................... 54
Section 6.2 Corporate Authority ............................... 55
Section 6.3 Financial Statements .............................. 55
Section 6.4 Tax Returns ....................................... 55
Section 6.5 Actions Pending ................................... 56
Section 6.6 Representations; No Defaults ...................... 56
Section 6.7 Title to Properties; Capitalized Leases ........... 56
Section 6.8 Enforceability of Agreement ....................... 57
Section 6.9 Consent ........................................... 57
Section 6.10 Use of Proceeds; Federal Reserve Regulations ...... 57
Section 6.11 ERISA ............................................. 57
Section 6.12 Subsidiaries ...................................... 58
Section 6.13 Outstanding Debt .................................. 58
Section 6.14 Conflicting Agreements ............................ 58
Section 6.15 Environmental Matters ............................. 59
Section 6.16 Possession of Franchises, Licenses, Etc ........... 60
Section 6.17 Patents, Trademarks, Etc .......................... 60
Section 6.18 Governmental Consent .............................. 61
Section 6.19 Disclosure ........................................ 61
Section 6.20 Insurance Coverage ................................ 61
Section 6.21 Labor Matters ..................................... 62
Section 6.22 Intercompany Loans; Dividends ..................... 62
Section 6.23 Securities Acts ................................... 62
Section 6.24 Investment Company Act; Holding Company ........... 62
Section 6.25 Regulation G, Etc. ................................ 62
Section 6.26 Changes in Financial Condition; Adverse
Developments ...................................... 63
ARTICLE VII
AFFIRMATIVE COVENANTS ............................................... 63
Section 7.1 Corporate Existence, Etc. ......................... 63
Section 7.2 Compliance with Laws, Etc. ........................ 63
Section 7.3 Payment of Taxes and Claims, Etc .................. 63
Section 7.4 Keeping of Books .................................. 64
Section 7.5 Visitation, Inspection, Etc. ...................... 64
Section 7.6 Insurance; Maintenance of Properties .............. 64
Section 7.7 Reporting Covenants ............................... 65
Section 7.8 Financial Covenants ............................... 69
Section 7.9 Notices Under Certain Other Indebtedness .......... 70
ii
<PAGE>
Section 7.10 Additional Guarantors ............................. 70
Section 7.11 Fiscal Year ....................................... 71
Section 7.12 Ownership of Guarantors ........................... 71
Section 7.13 Subordination of Intercompany Loans. .............. 71
ARTICLE VIII
NEGATIVE COVENANTS .................................................. 71
Section 8.1 Liens ............................................. 71
Section 8.2 Mergers, Acquisitions, Sales. Etc ................. 73
Section 8.3 Investments, Loans, Etc. .......................... 73
Section 8.4 Sale and Leaseback Transactions ................... 75
Section 8.5 Transactions with Affiliates ...................... 75
Section 8.6 Optional Prepayments .............................. 76
Section 8.7 Changes in Business ............................... 76
Section 8.8 ERISA ............................................. 76
Section 8.9 Additional Negative Pledges ....................... 76
Section 8.10 Limitation on Payment Restrictions
Affecting Consolidated Companies .................. 77
Section 8.11 Use of Proceeds ................................... 77
Section 8.12 Subsidiary Indebtedness. .......................... 77
Section 8.13 Dividends ......................................... 77
ARTICLE IX
EVENTS OF DEFAULT ................................................... 77
Section 9.1 Payments .......................................... 77
Section 9.2 Covenants Without Notice .......................... 77
Section 9.3 Other Covenants ................................... 77
Section 9.4 Representations ................................... 78
Section 9.5 Non-Payments of Other Indebtedness ................ 78
Section 9.6 Defaults Under Other Agreements ................... 78
Section 9.7 Bankruptcy ........................................ 78
Section 9.8 ERISA ............................................. 79
Section 9.9 Money Judgment .................................... 79
Section 9.10 Ownership of Credit Parties ....................... 80
Section 9.11 Change in Control of Borrower ..................... 80
Section 9.12 Default Under Other Credit Documents .............. 80
Section 9.13 Attachments ....................................... 80
Section 9.14 Default Under the Lease ........................... 80
ARTICLE X
THE AGENT ........................................................... 81
Section 10.1 Appointment of Agent .............................. 81
Section 10.2 Nature of Duties of Agent ......................... 81
Section 10.3 Lack of Reliance on the Agent ..................... 82
Section 10.4 Certain Rights of the Agent ....................... 82
Section 10.5 Reliance by Agent ................................. 83
Section 10.6 Indemnification of Agent .......................... 83
Section 10.7 The Agent in its Individual Capacity .............. 83
Section 10.8 Holders of Notes .................................. 84
Section 10.9 Successor Agent ................................... 84
iii
<PAGE>
ARTICLE XI
MISCELLANEOUS ....................................................... 85
Section 11.1 Notices ........................................... 85
Section 11.2 Amendments, Etc ................................... 85
Section 11.3 No Waiver; Remedies Cumulative .................... 86
Section 11.4 Payment of Expenses, Etc. ......................... 86
Section 11.5 Right of Setoff ................................... 88
Section 11.6 Benefit of Agreement .............................. 88
Section 11.7 Governing Law; Submission to Jurisdiction;
Waiver of Jury Trial .............................. 91
Section 11.8 Independent Nature of Lenders' Rights ............. 92
Section 11.9 Counterparts ...................................... 92
Section 11.10 Effectiveness; Survival ........................... 93
Section 11.11 Severability ...................................... 93
Section 11.12 Independence of Covenants ......................... 93
Section 11.13 Change in Accounting Principles, Fiscal
Year or Tax Laws .................................. 93
Section 11.14 Headings Descriptive; Entire Agreement ............ 94
Section 11.15 Time is of the Essence ............................ 94
Section 11.16 Usury ............................................. 94
Section 11.17 Construction ...................................... 94
Section 11.18 European Monetary Union ........................... 94
iv
<PAGE>
[TO BE PROVIDED UPON REQUEST]
SCHEDULES
Schedule 6.1 Organization and Ownership of Subsidiaries
Schedule 6.4 Tax Filings and Payments
Schedule 6.5 Certain Pending and Threatened Litigation
Schedule 6.7 Capitalized Lease Obligations
Schedule 6.11 Employee Benefit Matters
Schedule 6.13(a) Outstanding Indebtedness
Schedule 6.13(b) Defaults Under Existing Indebtedness
Schedule 6.14 Conflicting Agreements
Schedule 6.15(a) Environmental Compliance
Schedule 6.15(b) Environmental Notices
Schedule 6.15(c) Environmental Permits
Schedule 6.15(d) Equal Employment and Employee Safety
Schedule 6.17 Patent, Trademark, License, and Other
Intellectual Property Matters
Schedule 6.21 Labor and Employment Matters
Schedule 6.22 Intercompany Loans
Schedule 8.1 Existing Liens
Schedule 8.3(c) Existing Investments
EXHIBITS
Exhibit A Form of Assignment, and Acceptance
Exhibit B Form of Subsidiary Guaranty Agreement
Exhibit C Form of Contribution Agreement
Exhibit D Form of Revolving Credit Note
Exhibit E Form of Term Note
Exhibit F Form of Closing Certificate
Exhibit G Form of Opinion of Borrower's Counsel
Exhibit H Form of Joinder to this Agreement
Exhibit I Form of Supplement to Subsidiary Guaranty Agreement
Exhibit J Form of Supplement to Contribution Agreement
Exhibit K Description of Headquarters Real Property
Exhibit L Form of Negative Pledge
v
<PAGE>
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS REVOLVING CREDIT AND TERM LOAN AGREEMENT, dated as of September 18,
1997 (the "Agreement") by and among PLANET HOLLYWOOD INTERNATIONAL, INC.
("Borrower"), a Delaware corporation, SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL
ASSOCIATION, ("SunTrust") a national banking association, AMSOUTH BANK, a bank
organized under the laws of the State of Alabama, THE BANK OF NOVA SCOTIA, a
Canadian chartered bank, BANQUE PARIBAS, a foreign bank chartered under the laws
of France licensed to do business under the laws of New York, DAI-ICHI KANGYO
BANK, LIMITED, ATLANTA AGENCY, a banking corporation organized and existing
under the laws of Japan acting through its Atlanta, Georgia agency, THE FUJI
BANK AND TRUST COMPANY, a bank organized under the laws of the State of New
York, LLOYDS BANK PLC, a foreign bank chartered under the laws of the United
Kingdom, NATIONAL WESTMINSTER BANK PLC, a foreign bank chartered under the laws
of the United Kingdom, and THE SAKURA BANK, LIMITED, a foreign bank chartered
under the laws of Japan (collectively, the "Lenders" and, individually, a
"Lender"), and SunTrust as Agent for the Lenders and The Bank of Nova Scotia as
Documentation Agent.
WITNESSETH:
THAT for and in consideration of the mutual covenants made herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
Section 1.1 Definitions. As used in this Agreement, and in any instrument,
certificate, document or report delivered pursuant thereto, the following terms
shall have the following meanings (to be equally applicable to both the singular
and plural forms of the term defined):
"Adjusted Funded Debt" shall mean the sum of (i) Funded Debt and
(ii) the product of (A) seven (7) times (B) minimum operating lease obligations
for the next four quarters for the
<PAGE>
Borrower and its Subsidiaries, as determined in accordance with GAAP.
"Advance" shall mean any principal amount advanced and remaining
outstanding at any time under the Revolving Loans which Advance shall be made or
outstanding as a Base Rate Advance or a LIBOR Advance.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by, or under common control with, such
Person, whether through the ownership of voting securities, by contract or
otherwise. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person.
"Agent" shall mean SunTrust Bank, Central Florida, National
Association, as agent for the Lenders hereunder and under the other Credit
Documents, and each successor Agent.
"Agreement" shall mean this Revolving Credit and Term Loan
Agreement, either as originally executed or as it may be from time to time
supplemented, amendment, restated, renewed or extended and in effect.
"Applicable Margin" shall mean the number of basis points designated
below based on the Borrower's ratio of Adjusted Funded Debt to Total Capital
("AFD/TC"), measured quarterly:
=======================================================================
APPLICABLE MARGINS
--------------------------------------------
LIBOR/FOREIGN CURRENCY
AFD/TC RATE/LETTER OF CREDIT FEE COMMITMENT FEE
- -----------------------------------------------------------------------
>= 55% 125 bp 37.5 bp
- -----------------------------------------------------------------------
>= 45% & < 55% lOO bp 3O bp
- -----------------------------------------------------------------------
>= 35% & < 45% 75 bp 25 bp
- -----------------------------------------------------------------------
< = 35% 5O bp 2O bp
=======================================================================
provided, however, that adjustments, if any, to the Applicable
Margin based on changes in the Borrower's ratio of Adjusted Funded
Debt to Total Capital as set forth above shall be calculated by the
Agent quarterly, based upon the Borrower's quarterly financial
statements, beginning with the Borrower's statements for the period
ended March 29, 1997, and shall become effective for the next fiscal
quarter following the quarter in which the Agent receives (or should
have received) the financial statements reflecting such
2
<PAGE>
change in the Borrower's ratio of Adjusted Funded Debt to Total
Capital occurred; and provided that the initial Applicable Margin
for Revolving Loans which are LIBOR Advances shall be 75 basis
points.
"Asset Value" shall mean, with respect to any property or asset of
any Consolidated Company as of any particular date, an amount equal to the
greater of (i) the then book value of such property or asset as established in
accordance with GAAP, and (ii) the then fair market value of such property or
asset as determined in good faith by the board of directors of such Consolidated
Company.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an Eligible Assignee in accordance with the terms
of this Agreement and substantially in the form of Exhibit A.
"Available Foreign Currency" shall mean, individually or
collectively, as the context shall require, each of the following currencies, if
offered and subject to availability to all Lenders: (i) Japanese Yen, (ii)
French Francs, (iii) German Deutsche Marks, (iv) United Kingdom Pounds Sterling,
(v) Spanish Pesetas, (vi) Italian Lira, and (vii) at the option of all Lenders,
any other currency which is freely transferrable and convertible into U.S.
Dollars; provided, however, no such other currency shall be included as an
Available Foreign Currency hereunder unless (A) the Borrower has submitted a
written request to the Agent and Lenders that it be so included and (B) the
Agent and all Lenders have agreed to such request.
"Bankruptcy Code" shall mean The Bankruptcy Code of 1978, as amended
and in effect from time to time (11 U.S.C. ss.5101 et seq.).
"Base Rate" shall mean (with any change in the Base Rate to be
effective as of the date of change of either of the following rates):
with respect to the Revolving Loans the higher of (a) the rate which
SunTrust Banks of Florida, Inc., ("SunTrust Banks") announces from
time to time as its prime lending rate, as in effect from time to
time (the "Prime Rate") or (b) the Federal Funds Rate, as in effect
from time to time, plus one-half of one percent (0.50%) per annum.
The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate charged borrowing customers of any
subsidiary bank of SunTrust Banks; any subsidiary of SunTrust Banks,
including the
3
<PAGE>
Agent, may make commercial loans or other loans at rates of interest
at, above or below the Prime Rate.
"Base Rate Advance" shall mean any Loan or Advance made or
outstanding hereunder and bearing interest based on the Base Rate.
"Base Rate Option" shall mean the option of the Borrower to select
an interest rate determined by reference to the Base Rate for any applicable
Interest Period for any Loan.
"Borrowing" shall mean the incurrence by Borrower under the Facility
of Advances of one Type concurrently having the same Interest Period or the
continuation or conversion of an existing Borrowing or Borrowings in whole or in
part.
"Business Day" shall mean any day other than Saturday, Sunday and a
day on which commercial banks are required or authorized to be closed for
business in Orlando, Florida, or the State of New York or London, England;
provided, that in the case of an Advance as a LIBOR Loan in U.S. Dollars or a
Multicurrency Loan in an Available Foreign Currency, such day is also a day on
which dealings between banks are carried on in U.S. Dollar and Available Foreign
Currency deposits in the London interbank market.
"Capitalized Lease Obligations" shall mean all lease obligations
which have been or are required to be, in accordance with GAAP, capitalized on
the books of the lessee.
"CERCLA" has the meaning set forth in Section 6.15 of this
Agreement.
"Closing Date" shall mean the date on or before September 18, 1997,
on which the initial Loans may be made and the conditions set forth in Section
5.1 are satisfied or waived in accordance with Section 11.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" shall mean, for any Lender at any time, its Revolving
Loan Commitment and Term Loan Commitment.
"Commitment Fee" shall mean the fee payable by the Borrower to the
Agent for the account of and distribution to each Lender with respect to the
Commitments, in the amounts and at the times as provided in Section 4.5(b).
4
<PAGE>
"Consolidated Companies" shall mean, collectively, Borrower and all
of its Subsidiaries.
"Consolidated EBIT" shall mean, for any fiscal period of the
Borrower, an amount equal to the sum of its Consolidated Net Income (Loss), plus
to the extent deducted in determining Consolidated Net Income (Loss) (i)
Consolidated Interest Expense and (ii) Consolidated Income Tax Expense.
"Consolidated EBITDAR" shall mean, for any fiscal period of the
Borrower, an amount equal to the sum of its Consolidated EBITR, plus (i)
depreciation and (ii) amortization to the extent each is deducted in determining
Consolidated Net Loss (Income), determined on a consolidated basis in accordance
with GAAP, for such period.
"Consolidated EBITR" shall mean, for any fiscal period of the
Borrower, an amount equal to the sum of its Consolidated EBIT plus Consolidated
Rental Expense.
"Consolidated Funded Debt" shall mean, without duplication, all
Funded Debt of the Borrower and its Subsidiaries, on a consolidated basis plus
all Funded Debt of other entities or Persons, other than Subsidiaries, which has
been guaranteed by the Borrower or any Subsidiary or which is supported by a
letter of credit issued for the account of the Borrower or any Subsidiary.
Consolidated Funded Debt shall also include the redemption amount with respect
to any stock of the Borrower or its Subsidiaries required to be redeemed within
the next twelve months.
"Consolidated IR" shall mean, for any fiscal period of the Borrower,
an amount equal to the sum of its Consolidated Interest Expense plus
Consolidated Rental Expense.
"Consolidated Interest Expense" shall mean, for any fiscal period of
Borrower, total interest expense (including without limitation, interest expense
attributable to capitalized leases in accordance with GAAP) of Borrower and its
Subsidiaries on a consolidated basis.
"Consolidated Income Tax Expense" shall mean, for any fiscal period
of the Borrower, the aggregate of (i) all taxes based upon or measured by the
income of the Borrower and its Subsidiaries on a consolidated basis and (ii)
franchise taxes payable by the Borrower and its Subsidiaries on a consolidated
basis, determined in accordance with GAAP.
"Consolidated Net Income (Loss)" shall mean, for any fiscal period
of Borrower, the consolidated net income (or loss) of Borrower and its
Subsidiaries for such period (taken as a
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single accounting period); provided that there shall be excluded therefrom (i)
any items of gain or loss resulting from the sale of assets other than in the
ordinary course of business; and (ii) the income (or loss) of any party accrued
prior to the date such party becomes a Subsidiary of Borrower or is merged into
or consolidated with Borrower or any of its Subsidiaries, or such party's assets
are acquired by the Borrower or any of its Subsidiaries.
"Consolidated Net Worth" shall mean, for any period of
determination, the Borrower's consolidated total assets less consolidated total
liabilities determined in accordance with GAAP.
"Consolidated Rental Expense" shall mean for any fiscal period of
Borrower, total rental expense and operating lease expense of Borrower and its
Subsidiaries on a consolidated basis.
"Contractual Obligation" of any Person shall mean any provision of
any security issued by such Person or of any agreement, instrument or
undertaking under which such Person is obligated or by which it or any of the
property owned by it is bound.
"Contribution Agreement" shall mean the Contribution Agreement
executed by each of the Guarantors in favor of the Lenders and the Agent,
substantially in the form of Exhibit C attached hereto, as the same may be
amended, restated or supplemented from time to time.
"Credit Documents" shall mean, collectively, the Agreement, as
amended from time to time, the Notes, the Negative Pledge, the Guaranty
Agreements, and all other Guaranty Documents, together with all other documents,
agreements, certificates, schedules, notes, statements and opinions, however
described, referenced herein or delivered pursuant hereto or in connection with
or arising out of the Loans or the transactions contemplated by this Agreement.
"Credit Parties" shall mean, collectively, each of Borrower, the
Guarantors, and every other Person who from time to time executes a Credit
Document with respect to all or any portion of the Obligations.
"Default" shall mean any condition or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"Default Rate" shall mean the higher of (i) Base Rate plus two
percent (2%), or (ii) the interest rate otherwise applicable to said amount
outstanding plus two percent (2%), but
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in no event shall such interest rate exceed the highest lawful rate.
"Documentation Agent" shall mean The Bank of Nova Scotia, a Canadian
chartered bank.
"Dollar" and the sign "$" shall mean lawful money of the United
States of America.
"Eligible Assignee" shall mean (i) a commercial bank organized under
the laws of the United States, or any state thereof, having total assets in
excess of $1,000,000,000 or any commercial finance or asset based lending
Affiliate of any such commercial bank, (ii) any Lender or any Affiliate of any
Lender and (iii) any other financial institution approved in writing by the
Agent and the Borrower.
"Environmental Laws" shall mean all federal, state, local and
foreign statutes and codes or regulations, rules or ordinances issued,
promulgated, or approved thereunder, and having the force of laws, now or
hereafter in effect (including, without limitation, those with respect to
asbestos or asbestos containing material or exposure to asbestos or asbestos
containing material), relating to pollution or protection of the environment and
relating to public health and safety, including, without limitation, those
imposing liability or standards of conduct concerning (i) emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals or
industrial toxic or hazardous materials, substances or wastes, including without
limitation, any Hazardous Substance, petroleum including crude oil or any
fraction thereof, any petroleum product or other waste, chemicals or substances
regulated by any Environmental Law into the environment (including without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), or (ii) the manufacture, processing, distribution, use, generation,
treatment, storage, disposal, transport or handling of any Hazardous Substance,
petroleum including crude oil or any fraction thereof, any petroleum product or
other waste, chemicals or substances regulated by any Environmental Law, and
(iii) underground storage tanks and related piping, and emissions, discharges
and releases or threatened releases therefrom, such Environmental Laws to
include, without limitation (i) the Clean Air Act (42 U.S.C. ss.7401 et seq.),
(ii) the Clean Water Act (33 U.S.C. ss.1251 et seq.), (iii) the Resource
Conservation and Recovery Act (42 U.S.C. ss.6901 et seq.), (iv) the Toxic
Substances Control Act (15 U.S.C. ss.2601 et seq.) and (v) the Comprehensive
Environmental Response Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act (42 U.S.C. ss.9601 et seq.).
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended and in effect from time to time.
"ERISA Affiliate" shall mean, with respect to any Person, each trade
or business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control within the meaning of
the regulations promulgated under Section 414 of the Tax Code.
"Event of Default" shall have the meaning set forth in Article IX.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute thereto.
"Executive Officer" shall mean with respect to any Person (other
than a Guarantor), the President, Vice Presidents, Chief Financial Officer,
Treasurer, Secretary and any Person holding comparable offices or duties, and
with respect to a Guarantor, the President, Chief Financial Officer or Treasurer
and any Person holding comparable offices or duties.
"Extension of Credit" shall mean the making of a Loan or the
conversion of a Loan of one Type into a Loan of another Type.
"Facility" or "Facilities" shall mean the Revolving Loan Commitments
and Revolving Loans, the Letters of Credit and/or the Term Loan Commitments and
Term Loans, as the context may indicate.
"Federal Funds Rate" shall mean for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with member banks
of the Federal Reserve System arranged by Federal funds brokers, as published
for such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of Atlanta, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations for
such day on such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by the Agent.
"Fee Letter" shall mean that certain engagement letter, dated April
7, 1997, entered into by and among the Agent, the Borrower and SunTrust Capital
Markets, Inc., as amended by an Addendum thereto dated September 3, 1997.
"Final Maturity Date" shall mean the date on which all Commitments
have been terminated and all amounts outstanding
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under this Agreement have been declared or have automatically become due and
payable pursuant to the provisions of Article IX.
"Fixed Charge Coverage Ratio" shall mean, as at the end of any
fiscal period of the Borrower, the ratio of (A) Consolidated EBITR to (B)
Consolidated IR.
"Foreign Currency Business Day" shall mean any Business Day,
excluding a day on which trading is not carried on by banks in deposits of the
applicable Available Foreign Currency in the applicable interbank market for
such Available Foreign Currency.
"Foreign Currency Rate" shall mean the offered rate for deposits in
the applicable Available Foreign Currency for a one, two or three month period
with respect to any Multicurrency Loan as quoted on the Telerate System
subscribed to by Agent, and which appears on Telerate Page 3750 of the Telerate
System Incorporated Service for German Deutsche Marks, Japanese Yen and United
Kingdom Pounds Sterling, and Telerate Page 3740 of the Telerate System
Incorporated Service for Italian Lira, French Francs and Spanish Pesetas (or
such other page of the Telerate System on which any applicable Available Foreign
Currency then appears), as of 11:00 a.m., London time, two (2) Business Days
prior to the beginning of the applicable Interest Period. If the one, two or
three month Foreign Currency Rate pertaining to an Available Foreign Currency is
unavailable on the Telerate System, then such rate shall be determined by and
based on any other interest rate reporting service of generally recognized
standing designated by the Agent to the Borrower. The Foreign Currency Rate may
be adjusted by the Agent for any applicable reserve requirements or withholding
taxes.
"Foreign Subsidiary" shall mean a Subsidiary not organized under the
laws of any of the fifty (50) states of the United States of America or the
District of Columbia or the U.S. Virgin Islands or Puerto Rico, or that is
operating entirely outside of the United States.
"Funded Debt" shall mean, without duplication, all indebtedness for
money borrowed, purchase money mortgages, capitalized leases, outstandings under
asset securitization vehicles, conditional sales contracts and similar title
retention debt instruments, including any current maturities of such
indebtedness, which by its terms matures more than one year from the date of any
calculation thereof and/or which is renewable or extendable at the option of the
obligor to a date beyond one year from such date. The calculation of Funded Debt
shall include all Funded Debt of the Borrower and its subsidiaries, plus all
Funded Debt of other entities or persons, other than subsidiaries, which has
been guaranteed by the Borrower or any subsidiary or which is supported by a
letter of credit issued for the account of the Borrower or any subsidiary,
except the guaranties to be executed
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by the Borrower in connection with the Lease. Funded Debt shall also include the
redemption amount with respect to any stock of the Borrower or its Subsidiaries
required to be redeemed within the next twelve months.
"GAAP" shall mean generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligation") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) to indemnify the owner of such
primary obligation against loss in respect thereof.
"Guarantors" shall mean each and all of the Borrower's Material
Subsidiaries other than Foreign Subsidiaries.
"Guaranty Agreements" shall mean, collectively, the Subsidiary
Guaranty Agreement executed by each of the Guarantors in favor of the Lenders
and the Agent, substantially in the form of Exhibit B attached hereto as the
same may be amended, restated or supplemented from time to time, and the
Contribution Agreement executed by each of the Guarantors, substantially in the
form of Exhibit C, as the same may be amended, restated or supplemented from
time to time.
"Guaranty Documents" shall mean, collectively, the Guaranty
Agreements, and each other guaranty agreement, mortgage, deed of trust, security
agreement, pledge agreement, or other security or collateral document
guaranteeing or securing the Obligations, as the same may be amended, restated,
or supplemented from time to time, and the Contribution Agreements executed by
each of the Guarantors, as the same may be amended, restated or supplemented
from time to time.
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"Hazardous Substances" has the meaning assigned to that term in
CERCLA.
"Headquarters Facility" shall mean the approximately 106,000 square
foot corporate headquarters building and the approximately 80,000 square foot
warehouse building being constructed on the Headquarters Real Property.
"Headquarters Real Property" shall mean the real property located in
Orange County, Florida, and more particularly described in Exhibit K attached
hereto.
"Indebtedness" of any Person shall mean, without duplication (i) all
obligations of such Person which in accordance with GAAP would be shown on the
balance sheet of such Person as a liability (including, without limitation,
obligations for borrowed money and for the deferred purchase price of property
or services, and obligations evidenced by bonds, debentures, notes or other
similar instruments); (ii) all rental obligations under leases required to be
capitalized under GAAP; (iii) all Guaranteed Indebtedness of such Person
(including contingent reimbursement obligations under undrawn letters of
credit); (iv) Indebtedness of others secured by any Lien upon property owned by
such Person, whether or not assumed; and (v) obligations or other liabilities
under currency contracts, interest rate hedging contracts, or similar agreements
or combinations thereof.
"Intercompany Loans" shall mean, collectively, (i) the loans or
advances more particularly described on Schedule 6.22, (ii) those loans,
advances or other extensions of credit made by the Borrower or any Guarantor to
another Guarantor and (iii) those loans, advances or other extensions of credit
made by any Consolidated Company to another Consolidated Company as may be
approved in writing by the Agent and the Required Lenders.
"Interest Period" shall mean the period selected by the Borrower
from time to time and which shall be (i) with respect to LIBOR Advances, 1, 2, 3
or 6 months, and (ii) with respect to Multicurrency Loans, 1, 2 or 3 months;
provided, that (a) the first day of an Interest Period must be a Business Day,
(b) any Interest Period that would otherwise end on a day that is not a Business
Day for LIBOR Loans shall be extended to the next succeeding Business Day for
LIBOR Loans, unless such Business Day falls in the next calendar month, in which
case the Interest Period shall end on the next preceding Business Day for LIBOR
Loans, and (c) Borrower may not elect an Interest Period which would extend
beyond the Termination Date.
"Investment" shall mean, when used with respect to any Person, any
direct or indirect advance, loan or other extension
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of credit (other than the creation of receivables in the ordinary course of
business) or capital contribution by such Person (by means of transfers of
property to others or payments for property or services for the account or use
of others, or otherwise) to any Person, or any direct or indirect purchase or
other acquisition by such Person of, or of a beneficial interest in, capital
stock, partnership interests, bonds, notes, debentures or other securities
issued by any other Person.
"Lease" shall mean the lease to be entered into by and between
Atlantic Financial Group, Ltd., as the Lessor, and the Borrower, as the Lessee,
with respect to the New York Restaurant.
"Lender" or "Lenders" shall mean SunTrust, the other banks and
lending institutions listed on the signature pages hereof, and each assignee
thereof, if any, pursuant to Section 11.6.
"Lending Office" shall mean for each Lender the office such Lender
may designate in writing from time to time to Borrower and the Agent with
respect to each Type of Loan.
"Letter of Credit" means a Standby Letter of Credit.
"Letter of Credit Application" means an application to the Agent for
the issuance of a Letter of Credit in form and substance satisfactory to the
Agent.
"Letter of Credit Fees" shall mean the fees payable by the Borrower
with respect to each Letter of Credit issued hereunder, in the amounts and at
the times as set forth in Section 4.5(c) and (d).
"Letter of Credit Obligation" means, in respect of each Letter of
Credit, the undrawn face amount of such Letter of Credit, plus the aggregate
amount of all unreimbursed draws in respect of such Letter of Credit.
"Letter of Credit Obligations" means the sum of all Letter of Credit
Obligations.
"LIBOR" shall mean, for any Interest Period, the offered rates for
deposits in U.S. Dollars for a period comparable to the Interest Period
appearing on the Telerate System subscribed to by the Agent, and which appears
on Telerate Page 3750 as of 11:00 a.m., London time, on the day that is two (2)
Business Days prior to the first day of the Interest Period. If at least two
such rates appear on Telerate Page 3750, the rate for that Interest Period will
be the arithmetic mean of such rates, rounded, if necessary, to the next higher
1/16 of 1.0%; and in either case as such rates may be adjusted for any
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applicable reserve requirements. If the foregoing rate is unavailable from the
Telerate System for any reason, then such rate shall be determined by the Agent
from any other interest rate reporting service of recognized standing designated
in writing by the Agent to Borrower and the Lenders; in any such case rounded,
if necessary, to the next higher 1/16 of 1.0%, if the rate is not such a
multiple.
"LIBOR Advance" shall mean an Advance made or outstanding as a
Revolving Loan and bearing interest based on LIBOR.
"LIBOR Loan" shall mean any Loan hereunder which bears interest at a
rate based on LIBOR plus the Applicable Margin.
"LIBOR Option" shall mean the option of the Borrower to select an
interest rate determined by reference to LIBOR for any applicable Interest
Period for any Loan.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind or description and shall include,
without limitation, any agreement to give any of the foregoing, any conditional
sale or other title retention agreement, any capitalized lease in the nature
thereof including any lease or similar arrangement with a public authority
executed in connection with the issuance of industrial development revenue bonds
or pollution control revenue bonds, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction.
"Loans" shall mean, collectively, the Revolving Loans and the Term
Loans.
"Material Subsidiary" shall mean (i) each Credit Party other than
Borrower and (ii) each other Subsidiary of Borrower, now existing or hereafter
established or acquired, that at any time prior to the Final Maturity Date,
either has or acquires total assets having a book value equal to or greater than
five percent (5%) of the book value of the total assets of the Borrower, or that
accounted for or produced more than 5% of the Consolidated EBITR of Borrower on
a consolidated basis during any of the most recently completed immediately
preceding four quarterly periods of the Borrower.
"Materially Adverse Effect" shall mean a material adverse effect
upon, or a material adverse change in, any of the (i) business, results of
operations, properties, or financial condition or prospects of the Consolidated
Companies taken as a whole, (ii) legality, validity, binding effect or
enforceability of any Credit Document, or (iii) ability of the Credit Parties to
perform their obligations under the Credit Documents.
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"Maturity Date" shall mean, with respect to the Term Loan, the
earlier of (i) May 16, 1999, (ii) 365 Days after the issuance of a certificate
of occupancy for the Headquarters Facility, or (iii) the occurrence of an Event
of Default; or such later date as may be approved by the Agent and the Lenders,
in their sole discretion.
"Maximum Letter of Credit Amount" shall mean $5,000,000.00.
"Maximum Multicurrency Loan Amount" shall mean the U.S. Dollar
Equivalent of $50,000,000.00.
"Moody's" shall mean Moody's Investors Service, Inc. and its
successors and assigns.
"Multicurrency Loans" shall mean Revolving Loans made in an
Available Foreign Currency and bearing interest at the Foreign Currency Rate
plus the Applicable Margin.
"Multiemployer Plan" shall have the meaning set forth in Section
4001 (a) (3) of ERISA.
"Negative Pledge" shall mean the Agreement Not to Sell, Mortgage or
Encumber Real Property executed by Corner Enterprises, Inc., a Subsidiary of the
Borrower, in favor of the Agent and the Lenders with respect to the Headquarters
Real Property in the form of Exhibit L attached hereto.
"New York Restaurant" shall mean a restaurant site in New York City
at the corner of Broadway and 47th Street in Times Square, consisting of a
condominium on the ground floor of a hotel building.
"Note" or "Notes" shall mean, individually, or collectively, as the
context may require, any of the Revolving Credit Notes and/or the Term Notes,
either as originally executed or as the same may be from time to time
supplemented, modified, amended, renewed, extended or replaced.
"Notice of Borrowing" shall have the meaning provided in Section
4.1.
"Notice of Conversion/Continuation" shall have the meaning provided
in Section 4.1.
"Obligations" shall mean all amounts owing to the Agent or any
Lender pursuant to the terms of this Agreement or any other Credit Document,
including without limitation, all Loans (including all principal and interest
payments due thereunder),
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fees, expenses, indemnification and reimbursement payments, indebtedness,
liabilities, and obligations of the Credit Parties, direct or indirect, absolute
or contingent, liquidated or unliquidated, now existing or hereafter arising,
together with all renewals, extensions, modifications or refinancings thereof.
"Payment Office" shall mean the office of the Agent located at 200
S. Orange Avenue, Orlando, Florida; or such other location as may be designated
by the Agent from time to time in writing.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, and any
successor thereto.
"Persons" shall mean and shall include an individual, a partnership,
a joint venture, a corporation, a limited liability company, a trust, an
unincorporated association, a government or any department or agency thereof and
any other entity whatsoever.
"Plan" shall mean any employee benefit plan, program, arrangement,
practice or contract, maintained by or on behalf of the Borrower or an ERISA
Affiliate, which provides benefits or compensation to or on behalf of employees
or former employees, whether formal or informal, whether or not written,
including but not limited to the following types of plans:
(i) Executive Arrangements - any bonus, incentive compensation,
stock option, deferred compensation, commission, severance, "golden
parachute", "rabbi trust", or other executive compensation plan, program,
contract, arrangement or practice;
(ii) ERISA Plans - any "employee benefit plan" (as defined in
Section 3(3) of ERISA), including, but not limited to, any defined benefit
pension plan, profit sharing plan, money purchase pension plan, savings or
thrift plan, stock bonus plan, employee stock ownership plan,
Multiemployer Plan, or any plan, fund, program, arrangement or practice
providing for medical (including post-retirement medical),
hospitalization, accident, sickness, disability, or life insurance
benefits;
(iii) Other Employee Fringe Benefits - any stock purchase, vacation,
scholarship, day care, prepaid legal services, severance pay or other
fringe benefit plan, program, arrangement, contract or practice.
"Pro Rata Share" shall mean, with respect to the Commitment of each
Lender, each Letter of Credit and each Loan to be made by and each payment
(including, without limitation, any payment of principal, interest or fees) to
be made to each
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Lender, the percentage designated as such Lender's Pro Rata Share of such
Commitment, such Loans, Letter of Credit or such payments, as applicable, set
forth under the name of such Lender on the respective signature page for such
Lender, in each case as such Pro Rata Share may change from time to time as a
result of assignments or amendments made pursuant to this Agreement.
"Refinanced Indebtedness" shall mean the outstanding balance on the
Closing Date under the $20,000,000.00 term loan extended to the Borrower by
SunTrust.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be in effect from time to time.
"Required Lenders" shall mean, at any time, Lenders holding at least
sixty-six and two-thirds percent (66 2/3%) of the then aggregate amount of the
Commitments.
"Requirement of Law" for any Person shall mean the articles or
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other governmental authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Revolving Credit Notes" shall mean, collectively, the promissory
notes evidencing the Revolving Loans in the form attached hereto as Exhibit D,
either as originally executed or as the same may from time to time be
supplemented, modified, amended, renewed, extended or replaced.
"Revolving Loans" shall mean, collectively, the revolving credit
loans made to Borrower by the Lenders pursuant to Section 2.1, including
Multicurrency Loans.
"Revolving Loan Commitment" shall mean, at any time for any Lender,
the amount of such commitment set forth under such Lender's name on the
signature pages hereof, as the same may be increased or decreased from time to
time as a result of any reduction thereof pursuant to Section 2.3, any
assignment thereof pursuant to Section 11.6, or any amendment thereof pursuant
to Section 11.2, which amount shall include such Lender's Revolving Loans.
"S & P" shall mean the Standard & Poor's Ratings Services, a
division of the McGraw-Hill Companies, and its successors and assigns.
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"Spot Rate" for an Available Foreign Currency shall mean the rate
quoted to the Agent as the Spot Rate for the purchase of such currency with
another currency through the Agent's foreign exchange trading office at
approximately 11:00 a.m. (New York time) on the date when foreign exchange
settlement between the two currencies would normally occur.
"Standby Letter of Credit" means any letter of credit having terms
described in Section 2.4 and issued in response to a Letter of Credit
Application.
"Standby Letter of Credit Obligation" shall mean the sum of the
undrawn face amount of each Standby Letter of Credit plus the aggregate amount
of all drawings not paid pursuant to Section 2.6(b) in respect of each Standby
Letter of Credit.
"Subordinated Debt" shall mean Indebtedness of Borrower and its
Subsidiaries subordinated to all obligations of Borrower and its Subsidiaries or
any other Credit Party arising under this Agreement, the Notes, and the Guaranty
Agreements on terms and conditions satisfactory in all respects to the Agent and
the Required Lenders, including without limitation, with respect to interest
rates, payment terms, maturities, amortization schedules, covenants, defaults,
remedies, and subordination provisions, as evidenced by the written approval of
the Agent and Required Lenders.
"Subsidiary" shall mean, with respect to any Person, any corporation
or other entity (including, without limitation, partnerships, joint ventures,
limited liability companies and associations) regardless of its jurisdiction of
organization or formation, at least a majority of the total combined voting
power of all classes of voting stock or other ownership interests of which
shall, at the time as of which any determination is being made, be owned by
such Person, either directly or indirectly through one or more other
Subsidiaries.
"Syndicate Revolving Loan" shall mean, collectively, the Revolving
Loans made to Borrower hereunder.
"Taxes" shall mean any present or future taxes, levies, imposts,
duties, fees, assessments, deductions, withholdings or other charges of whatever
nature, including without limitation, income, receipts, excise, property, sales,
transfer, license, payroll, withholding, social security and franchise taxes now
or hereafter imposed or levied by the United States, or any state, local or
foreign government or by any department, agency or other political subdivision
or taxing authority thereof or therein and all interest, penalties, additions to
tax and similar liabilities with respect thereto.
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"Telerate" shall mean, when used in connection with any designated
page and LIBOR or Foreign Currency Rate, the pages so designated on the Telerate
System Incorporated Service for British Bankers Association LIBOR Rates for U.S.
Dollars or the applicable Available Foreign Currency (or such other page as may
replace that page on that service for the purpose of displaying the rates at
which U.S. Dollars or the applicable Available Foreign Currency are offered by
leading banks in the London interbank deposit market).
"Term Loan Commitment" shall mean at any time for any Lender, the
amount of such commitment set forth under such Lender's name on the signature
pages hereof, as the same may be decreased from time to time as a result of any
reduction thereof, any assignment thereof pursuant to Section 11.6, or any
amendment thereof pursuant to Section 11.2, which amount shall include such
Lender's Term Loans.
"Term Loans" shall mean, collectively, the term loans made to
Borrower by the Lenders pursuant to Section 3.1.
"Term Notes" shall mean, collectively the promissory notes
evidencing the Term Loans in the form attached hereto as Exhibit E, either as
originally executed or as the same may from time to time be supplemented,
modified, amended, renewed, extended or replaced.
"Termination Date" shall mean, with respect to Revolving Loans,
including Revolving Loans arising out of a draw on a Letter of Credit, the
earlier to occur of (i) September 18, 2000 or (ii) an Event of Default (unless
waived or cured); or such later date as may be approved by the Agent and the
Lenders, in their sole discretion
"Total Capital" shall mean the sum of Adjusted Funded Debt and
Consolidated Net Worth.
"Total Commitment" shall mean for any Lender at any time, the sum of
such Lender's Revolving Loan Commitment and the outstanding amount of such
Lender's Term Loan and "Total Commitments" shall mean for all Lenders at any
time, the sum of the Total Commitments of all Lenders as such Total Commitments
may be reduced by voluntary reduction, prepayment or nonrenewal of a Lender's
Commitment as provided herein.
"Total Revolving Loan Commitment" shall mean the sum of the
Revolving Loan Commitments of all the Lenders, as reduced from time to time as
provided herein.
"Type" of Borrowing shall mean a Borrowing consisting of Base Rate
Advances or LIBOR Advances.
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"Up Front Fee" shall mean the one-time, non-refundable fee payable
by the Borrower to the Lenders on the Closing Date, which shall be in the
amounts set forth in Section 4.5(f), based on the sum of the Revolving Loan
Commitment and Term Loan Commitment of each Lender.
"U.S. Dollar Equivalent" shall mean the equivalent in U.S. Dollars
of any Multicurrency Loan made in an Available Foreign Currency converted using
(i) the Spot Rate determined by the Agent on the date of the fixing of the
Foreign Currency Rate or (ii) with respect to Section 2.2(c), the Spot Rate on
the last Business Day of the calendar quarter.
"Wholly Owned Subsidiary" shall mean any Subsidiary, all the stock
or ownership interest of every class of which, except directors' qualifying
shares, shall, at the time as of which any determination is being made, be owned
by Borrower either directly or indirectly.
Section 1.2 Accounting Terms and Determination. Unless otherwise defined
or specified herein, all accounting terms shall be construed herein, all
accounting determinations hereunder shall be made, all financial statements
required to be delivered hereunder shall be prepared, and all financial records
shall be maintained in accordance with GAAP.
Section 1.3 Other Definitional Provisions.
(a) Except as otherwise specified herein, references herein to any
agreement or contract defined or referred to herein shall be deemed
a reference to any such agreement or contract (and in the case of
any instrument, any other instrument issued in substitution
therefor) as the terms thereof may have been or may be amended,
supplemented, waived or otherwise modified from time to time.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement, and
Article, Section, Schedule, Exhibit and like references are to this
Agreement unless otherwise specified.
(c) The singular pronoun, when used in this Agreement, shall include the
plural and neuter shall include the masculine and the feminine.
(d) All terms defined in this Agreement shall have the defined meanings
when used in any Note or, except as
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otherwise expressly stated herein, any certificate, opinion, or
other document delivered pursuant hereto.
Section 1.4 Exhibits and Schedules. All Exhibits and Schedules attached
hereto are by reference made a part hereof.
ARTICLE II
REVOLVING LOANS; LETTERS OF CREDIT
Section 2.1 Commitment; Use of Proceeds.
(a) Subject to and upon the terms and conditions herein set forth,
each Lender severally agrees from time to time on and after the Closing
Date, but prior to the Termination Date, (i) to make the Revolving Loans
as provided in this Section 2.1 and (ii) to purchase participations in
Standby Letters of Credit issued by the Agent for the account of the
Borrower as provided in Section 2.8. Borrower shall be entitled to repay
and reborrow Revolving Loans in accordance with the provisions hereof.
(b) The sum of (i) the aggregate unpaid principal amount of any
Lender's Revolving Loans outstanding, plus (ii) the aggregate amount of
such Lender's participations in Letter of Credit Obligations, shall not
exceed at any time such Lender's Revolving Loan Commitment.
(c) The sum of (i) the aggregate unpaid principal amount of all
Revolving Loans, plus (ii) the aggregate amount of all Standby Letter of
Credit Obligations, shall not exceed at any time the Total Revolving Loan
Commitment.
(d) The aggregate amount of all Standby Letter of Credit Obligations
shall not exceed at any time the Maximum Letter of Credit Amount.
(e) The aggregate U.S. Dollar Equivalent amount of all Multicurrency
Loans shall not exceed at any time the Maximum Multicurrency Loan Amount.
(f) Each Revolving Loan shall, at the option of Borrower, be made or
continued as, or converted into, part of one or more Borrowings that shall
consist entirely of Syndicate Revolving Loans (as Base Rate Advances or
LIBOR Advances). The aggregate principal amount of each Borrowing of
Syndicate Revolving Loans comprised of LIBOR Advances or Multicurrency
Loans shall be not less than $2,000,000 or a greater integral multiple of
$500,000 (Multicurrency Loans shall be in an Available Foreign Currency of
which the U.S. Dollar
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Equivalent is equal to not less than such amount(s)) and the aggregate
principal amount of each Borrowing of Syndicated Revolving Loans comprised
of Base Rate Advances shall be not less than $1,000,000.00 or a greater
integral multiple of $100,000.00. At no time shall the number of
Borrowings of Syndicate Revolving Loans comprised of LIBOR Advances,
outstanding under this Article II exceed eight (8); provided that, for the
purpose of determining the minimum amount for Borrowings resulting from
conversions or continuations, all Borrowings of Base Rate Advances under
this Facility shall be considered as one Borrowing. At no time shall the
number of Multicurrency Loans outstanding under this Article II exceed six
(6). The parties hereto agree that (i) the aggregate principal balance of
the Revolving Loans of the Lenders as a group shall not exceed the sum of
the Revolving Loan Commitments for each Lender and (ii) no Lender shall be
obligated to make Syndicate Revolving Loans in excess of the Revolving
Loan Commitment of such Lender.
(g) The proceeds of Revolving Loans shall be used for the following
purposes:
(i) For working capital and for other general corporate
purposes, including acquisitions and capital expenditures of the
Consolidated Companies;
(ii) To pay all transaction fees and expenses incurred in
connection with this financing including costs and expenses,
including the Up Front Fee, attorneys' fees of the Lenders, and,
with the written consent of the Agent, costs and expenses, including
attorneys' fees, of the Borrower; and
(iii) To pay other fees to the Agent or Lenders from time to
time under this Agreement including Commitment Fees, Letter
of Credit Fees and any other administrative fees due the Agent.
Section 2.2 Notes; Repayment of Principal.
(a) Borrower's obligations to pay the principal of, and interest on,
the Syndicate Revolving Loans to each Lender shall be evidenced by the
records of the Agent and such Lender and by the Revolving Credit Note
payable to such Lender (or the assignee of such Lender) completed in
conformity with this Agreement.
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(b) All outstanding principal amounts under the Revolving Loans
shall be due and payable in full on the Termination Date.
(c) If the aggregate U.S. Dollar Equivalent of Borrowings
outstanding under this Article II consisting of Multicurrency Loans
exceeds the Maximum Multicurrency Amount by more than ten percent (10%)
for any reason, including fluctuations in the value of the Available
Foreign Currency in which such Loans were made, the Borrower shall, within
three (3) Business Days of demand therefor by the Agent, make a payment
to the Agent of principal on the Multicurrency Loans sufficient to bring
the aggregate outstanding balance of all Multicurrency Loans down to an
amount which does not exceed the Maximum Multicurrency Amount.
Section 2.3 Voluntary Reduction of Revolving Loan Commitments. Upon at
least three (3) Business Days' prior telephonic notice (promptly confirmed in
writing) to the Agent, Borrower shall have the right, without premium or
penalty, to terminate the Revolving Loan Commitments, in part or in whole,
provided that (i) any such termination shall apply to reduce proportionately and
permanently the Revolving Loan Commitments of each of the Lenders, (ii) any
partial termination pursuant to this Section 2.3 shall be in an amount of at
least $5,000,000 and integral multiples of $1,000,000, and (iii) no such
reduction shall be permitted if prohibited or without payment of all costs
required to be paid hereunder with respect to a prepayment. If the aggregate
outstanding amount of the Revolving Loans exceeds the amount of the Revolving
Loan Commitments as so reduced, Borrower shall immediately repay the Revolving
Loans for the ratable account of the Lenders by an amount equal to such excess,
together with all accrued but unpaid interest on such excess amount and any
amounts due under Section 4.12 hereof.
Section 2.4 Letters of Credit. Upon the terms and subject to the
conditions of this Agreement, from the Closing Date to but excluding the
Termination Date, the Agent shall issue Standby Letters of Credit for the
account of the Borrower or the joint account of the Borrower and any Guarantor,
and each Lender shall thereupon be deemed to have purchased a participation in
each such Letter of Credit as provided in Section 2.8. Each Standby Letter of
Credit shall (i) have an expiration date not later than the earlier of (A) 365
days after the date of issuance of such Letter of Credit (which may include any
provision providing for the automatic extension of the term of such Letter of
Credit for an additional period of time beyond 365 days after the date of
issuance), or (B) the Termination Date, and (ii) be used for any corporate
purpose allowed under this Agreement including, without limitation, to secure
any surety bond or any self-insurance program of the Borrower.
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Section 2.5 Manner of Issuance. The Borrower shall forward a Letter of
Credit Application in the appropriate form to the Agent at the address specified
on the Letter of Credit Application prior to noon (Orlando, Florida time) at
least two Business Days before the requested date of issuance of a Letter of
Credit. The Agent shall provide to each Lender within ten (10) Business Days of
its issuance a copy of each Letter of Credit issued hereunder and shall give
each Lender a written (which may be by telecopier) report of all Letters of
Credit outstanding hereunder on a monthly basis. In the event there is a
conflict between any provision in the Letter of Credit Application and this
Agreement, the terms and provisions of this Agreement will prevail.
Section 2.6 Drawings Under Letters of Credit.
(a) Upon receipt by the Agent of any draft upon, or other notice of
drawing under, a Letter of Credit, the Agent shall promptly give the
Borrower written or telephone notice of the amount of such draft, of the
Letter of Credit against which it is drawn and of the date upon which the
Agent proposes to honor such draft.
(b) Subject to the following sentence, the Borrower shall pay to the
Agent for the ratable account of the Lenders the amount of each drawing
under a Letter of Credit on the date of such drawing. Subject to the
requirement contained in Section 2.1, the Borrower may elect to repay the
amount of such drawing with the proceeds of a Revolving Loan by delivering
a Notice of Borrowing complying with Section 4.1 hereof.
(c) The amount of any drawing under a Letter of Credit that is not
paid on the date of drawing pursuant to subsection (b) of this Section 2.6
shall bear interest, payable on demand, from the date of such drawing
until paid, at a rate per annum equal to the Default Rate.
(d) The Borrower agrees that it shall be indebted to each Lender in
an amount equal to the amount of each drawing paid by the Agent for the
account of such Lender in accordance with the provisions of this Section
2.6.
Section 2.7 General Provisions as to Letters of Credit.
(a) Limitation on Agent's Duty to Issue. The Agent shall have no
obligation to issue any Letter of Credit if (i) the aggregate undrawn face
amount of Letters of Credit outstanding, after giving effect to the
issuance of such Letter of Credit, would exceed any
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limit imposed on the Agent or any Lender by, or if the issuance of such
Letter of Credit would otherwise cause a violation of, applicable law or
any regulatory directive, interpretation or request, to which the Agent or
such Lender is subject; or (ii) such issuance would cause the Maximum
Letter of Credit Amount to be exceeded; or (iii) the issuance thereof
would exceed the limits provided in Section 2.1 above.
(b) Borrower's Obligations Absolute. The obligation of the Borrower
to reimburse the Agent for the account of the Lenders, for each drawing
under a Letter of Credit shall be irrevocable, shall not be subject to any
qualification or exception whatsoever and shall be binding in accordance
with the terms and conditions of this Agreement under all circumstances,
including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or right
which the Borrower may have at any time against a beneficiary of any
Letter of Credit or any transferee of any Letter of Credit (or any
person for whom any such transferee may be acting), the Agent, the
Lenders or any other Person, whether in connection with this
Agreement, or any Letter of Credit, the transactions contemplated
herein or any unrelated transactions;
(iii) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient (unless, in each case, manifestly so) in any respect
or any statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of this Agreement or
the other Credit Documents;
(v) any failure of the Agent to provide notice to the Borrower
of any drawing under any Letter of Credit; or
(vi) the occurrence or continuance of any Default.
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(c) Limitation of Liability With Respect to Letters of Credit. As
among the Borrower, any Guarantors, the Lenders, and the Agent, the
Borrower and the Guarantors assume all risks of the acts and omissions of,
or misuse of any Letter of Credit by the beneficiaries of such Letter of
Credit. Without limiting the foregoing, neither the Agent nor the Lenders
shall be responsible for:
(i) subject to clause (c) (iii), the form, validity,
sufficiency, accuracy, genuineness or legal effect of any draft,
demand, application or other documents submitted by any party in
connection with any Letter of Credit (but not including the Letter
of Credit itself), even if such document should in fact prove to be
in any and all respects invalid, insufficient, inaccurate,
fraudulent or forged;
(ii) the validity, genuineness or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part which may prove to be invalid
or ineffective for any reason;
(iii) failure of the beneficiary of a Letter of Credit to
comply fully with the conditions required in order to draw upon such
Letter of Credit to the extent that the documents presented in
connection with a drawing manifestly comply with the terms of the
Letter of Credit;
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher;
(v) errors in interpretations of technical terms;
(vi) any loss or delay in the transmission or otherwise of any
document required to make a drawing under any Letter of Credit or
with respect to the proceeds thereof;
(vii) the misapplication by the beneficiary of a Letter of
Credit or of the proceeds of any drawing under such Letter of
Credit; or
(viii) any consequences arising from causes beyond the control
of the Agent or the Lenders, including, without limitation, any act
or
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omission, rightfully or wrongfully of any present or future
governmental authority.
None of the above circumstances shall affect, impair or prevent the vesting of
any of the Agent's and the Lenders' rights or powers under this Section.
Section 2.8 Participation.
(a) Simultaneously with the issuance by the Agent of any Letter of
Credit, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from the Agent without recourse or
warranty, an undivided interest and participation in such Letter of Credit
(including, without limitation, all obligations of the Borrower with
respect thereto) and any security therefor or guaranty pertaining thereto,
equal to such Lender's Pro Rata Share of such Letter of Credit.
(b) Each Lender hereby agrees that it shall pay to the Agent, prior
to 11:00 a.m. (local time for the Agent) on the date of each Letter of
Credit drawing such Lender's Pro Rata Share of such Letter of Credit
drawing; provided, that if the Borrower should pay in full or in part any
Letter of Credit drawing on the date thereof with the proceeds of a
Revolving Loan, the obligation of each Lender to pay to the Agent pursuant
to this Section with respect to such drawing shall be reduced by an amount
equal to such Lender's Pro Rata Share of such payment by the Borrower that
is received by the Agent. Amounts paid in excess of the net amount so owed
shall promptly be refunded by the Agent to such Lender.
(c) The obligation of each Lender to pay to the Agent its Pro Rata
Share of each Letter of Credit drawing, or of the amount thereof not
repaid by the Borrower as described above, shall be irrevocable,
unconditional, shall not be subject to any qualification or exception
whatsoever and shall be binding in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, the following circumstances:
(i) any lack of validity or enforceability of this Agreement;
(ii) the existence of any claim, set-off, defense or other
right which the Borrower or any Lender may have at any time against
the other, the Agent, any Lender or any other Person, whether in
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connection with this Agreement, the transactions contemplated herein
or any unrelated transactions;
(iii) any draft or any other document presented under this
Agreement proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate
in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of this Agreement; or
(v) the occurrence or continuance of any Default.
(d) If any Lender shall fail to pay the amount of its participation
in a Letter of Credit drawing on the date such amount is due in accordance
with subparagraph (b) above, the Agent shall be deemed to have advanced
funds on behalf of such Lender. Each such advance shall be secured by such
Lender's participation interest, and the Agent shall be subrogated to such
Lender's rights hereunder in respect thereof. Such advance may be repaid
by application by the Agent of any payment which such Lender is otherwise
entitled to receive under this Agreement. Any amount not paid by such
Lender to the Agent hereunder shall bear interest for each day from the
day such payment was due until such payment shall be paid in full at a
rate per annum equal to the highest rate then payable by the Borrower
under this Agreement.
ARTICLE III
TERM LOANS
Section 3.1 Term Loan Commitment; Use of Proceeds.
(a) Subject to and upon the terms and conditions herein set forth,
each Lender severally agrees to make to Borrower on the Closing Date a
Term Loan in the aggregate amount equal to such Lender's Term Loan
Commitment. No Lender shall be obligated to make Term Loans in excess of
the Term Loan Commitment of such Lender.
(b) The proceeds of the Term Loans made on the Closing Date shall be
used solely to repay the Refinanced Indebtedness, the proceeds of which
have
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been or will be used solely to finance the construction of the
Headquarters Facility.
Section 3.2 Notes; Interest; Repayment of Principal.
(a) Borrower's obligations to pay the principal of, and interest on,
the Term Loans to each Lender shall be evidenced by the records of the
Agent and such Lender and by the Term Note payable to such Lender (or the
assignee of such Lender) completed in conformity with this Agreement.
(b) Term Loans shall bear interest at the rates set forth in Section
4.3, as selected by the Borrower from time to time, and shall be payable
as set forth in Section 4.3. The Borrower shall give the Agent written
notice prior to the Closing Date of the requested interest rate for the
Term Loans, and if the LIBOR Option is chosen, the Interest Period to be
applicable thereto. Thereafter, the Borrower shall give the Agent notice
(a "Notice of Selection of Interest Rate") at its Lending Office no later
than (i) 11:00 a.m. (local time for the Agent) on the Business Day on
which the applicable Interest Period terminates in the case of the
exercise of the Base Rate Option and (ii) 11:00 a.m. (local time for the
Agent) three (3) Business Days prior to the termination of the applicable
Interest Period in the case of the exercise of the LIBOR Option, which
notice shall specify (A) the selected interest rate for the succeeding
Interest Period and (B) in the case of the exercise of the LIBOR Option,
the Interest Period to be applicable thereto. Notices received after the
times set forth above shall be deemed received on the next Business Day.
If any Term Loan remains unpaid upon the expiration of any Interest Period
and the Borrower has not given the Agent a Notice of Selection of Interest
Rate as provided in this paragraph (b), such Term Loan shall, effective as
of the first day after the expiration of such Interest Period, accrue
interest at the rate determined by reference to the Base Rate. Thereafter,
subject to the limitations set forth in this Agreement, the Borrower may,
by giving the Agent an appropriate Notice of Selection of Interest Rate,
together with the requested Interest Period, if applicable, exercise the
LIBOR Option for any designated Interest Period for any Term Loan as of a
date designated by the Borrower, which date shall be no earlier than a
date two Business Days after the receipt by the Agent of such Notice;
provided, however, that the LIBOR Option may not be exercised when any
default or Event of Default has occurred and is continuing.
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(c) All outstanding principal amounts and interest thereon under the
Term Loans shall be due and payable as follows:
(i) Interest shall be due and payable in such amounts and at
the end of such periods as set forth in Sections 4.3 and 4.4 hereof;
(ii) The entire unpaid principal balance and all accrued but
unpaid interest shall be due and payable on the earlier of (1) the
Maturity Date or (2) the date of the execution and delivery of a
mortgage encumbering the Headquarters Real Property and/or the
Headquarters Facility.
ARTICLE IV
GENERAL LOAN TERMS
Section 4.1 Funding Notices.
(a) Whenever Borrower desires to make a Borrowing with respect to
the Syndicate Revolving Loan Commitments (other than one resulting from a
conversion or continuation pursuant to Section 4.1(c) or a Multicurrency
Loan, it shall give the Agent at its Payment Office prior written notice
(or telephonic notice promptly confirmed in writing) of such Borrowing (a
"Notice of Borrowing"), such Notice of Borrowing to be given prior to (i)
11:00 a.m. (local time for the Agent) the same Business Day of the
requested date of such Borrowing in the case of Revolving Loans comprised
of Base Rate Advances, and (i) 11:00 a.m. (local time for the Agent) three
(3) Business Days prior to the requested date of such Borrowing in the
case of LIBOR Advances. Notices received after the above times shall be
deemed received on the next Business Day. Each Notice of Borrowing shall
be irrevocable and shall specify that such Borrowing will be a Revolving
Loan, the aggregate principal amount of the Borrowing, the date of
Borrowing (which shall be a Business Day), whether the Borrowing is to
consist of Base Rate Advances or LIBOR Advances and (in the case of LIBOR
Advances) the Interest Period to be applicable thereto.
(b) Whenever Borrower desires to make a Borrowing consisting of one
or more Multicurrency Loans, it shall give the Agent at its Payment Office
prior written notice (or telephonic notice promptly confirmed in
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writing) of such Borrowing (a "Notice of Multicurrency Loan"), such Notice
of Multicurrency Loan to be given prior to 11:00 a.m. (local time for the
Agent) four (4) Foreign Currency Business Days prior to the requested date
of such Borrowing. Notices received after such time shall be deemed
received on the next Foreign Currency Business Day. Each Notice of
Multicurrency Loan shall be irrevocable and shall specify that such
Borrowing will be a Multicurrency Loan, the date of Borrowing (which shall
be a Business Day), the foreign currency in which the Borrowing is to be
made (which must be an Available Foreign Currency), the U.S. Dollar
Equivalent amount of the Borrowing to be made and the initial Interest
Period to be applicable thereto.
(c) Whenever Borrower desires to convert all or a portion of an
outstanding Borrowing under the Syndicate Revolving Loans (other than a
Multicurrency Loan), which Borrowing consists of Base Rate Advances or
LIBOR Advances, into one or more Borrowings consisting of Advances of
another Type, or to continue outstanding a Borrowing consisting of LIBOR
Advances for a new Interest Period, it shall give the Agent at least three
(3) Business Days' prior written notice (or telephonic notice promptly
confirmed in writing) of each such Borrowing to be converted into or,
continued as LIBOR Advances. Whenever Borrower desires to continue a
Multicurrency Loan, it shall give the Agent written notice (or telephonic
notice promptly confirmed in writing) thereof at least four (4) Foreign
Currency Business Days prior to the end of the applicable Interest Period.
Such notice (a "Notice of Conversion/Continuation") shall be given (a)
with respect to LIBOR Advances, prior to 11:00 a.m. (local time for the
Agent) and (b) with respect to Multicurrency Loans, prior to 11:00 a.m.
(local time for the Agent), on the date specified at the Payment Office of
the Agent. Each such Notice of Conversion/Continuation shall be
irrevocable and shall specify the aggregate principal amount of the
Advances to be converted or continued, or the amount of the Multicurrency
Loan to be continued, as the case may be, the date of such conversion or
continuation, in respect of LIBOR Advances, whether the Advances are being
converted into or continued as LIBOR Advances and (in the case of LIBOR
Advances and Multicurrency Loans) the Interest Period applicable thereto.
If, upon the expiration of any Interest Period in respect of any
Borrowing, Borrower shall have failed to deliver the Notice of
Conversion/Continuation, Borrower shall be deemed to have elected to
convert or continue such Borrowing to a Borrowing consisting of Base Rate
Advances. So long as any Default or Event of Default shall have occurred
and be
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continuing, no Borrowing may be converted into or continued (upon
expiration of the current Interest Period) as LIBOR Advances. No
conversion of any Borrowing of LIBOR Advances shall be permitted except
on the last day of the Interest Period in respect thereof.
(d) Any Multicurrency Loan which remains unpaid at the expiration of
the Interest Period applicable thereto shall be automatically continued
for an Interest Period of the same length.
(e) Without in any way limiting Borrower's obligation to confirm in
writing any telephonic notice, the Agent and the Lenders may act without
liability upon the basis of telephonic notice reasonably believed by the
Agent or the Lender in good faith to be from Borrower prior to receipt of
written confirmation.
(f) The Agent shall promptly give each Lender notice by telephone
(confirmed in writing) or by telex, telecopy or facsimile transmission of
the matters covered by the notices given to the Agent pursuant to this
Section 4.1 with respect to the Revolving Credit Commitments.
Section 4.2 Disbursement of Funds.
(a) No later than 1:00 p.m. (local time for the Agent) for LIBOR
Advances and as specified by the Agent based upon standard settlement
times applicable to the Available Foreign Currency for Multicurrency Loans
and 1:00 p.m. (local time for the Agent) for Base Rate Advances on the
date of each Borrowing pursuant to the Revolving Loan Commitments (other
than one resulting from a conversion or continuation pursuant to Section
4.1(c)), each Lender will make available its Pro Rata Share of the amount
of such Borrowing in immediately available funds at the Payment Office of
the Agent. The Agent will make available to Borrower the aggregate of the
amounts (if any) so made available by the Lenders to the Agent in a timely
manner by crediting such amounts to Borrower's demand deposit account
maintained with the Agent or at Borrower's option, to effect a wire
transfer of such amounts to Borrower's account specified by the Borrower,
by the close of business on such Business Day. In the event that the
Lenders do not make such amounts available to the Agent by the time
prescribed above, but such amount is received later that day, such amount
may be credited to Borrower in the manner described in the preceding
sentence on the next Business Day (with interest on
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such amount to begin accruing hereunder on such next Business Day).
(b) In the event that at the time of receipt by any Lender of
notice from the Agent of the receipt of a Notice of Multicurrency Loan
such Lender shall determine that the Available Foreign Currency in which
such Multicurrency Loan is to be made is not available to that Lender in a
sufficient amount and for a sufficient term to enable it to make its Pro
Rata Share of the Multicurrency Loan requested, such Lender shall notify
the Agent no later than 3:00 p.m. (local time for the Agent) on the same
day it receives notice from the Agent of such requested Multicurrency Loan
and the Agent shall promptly so notify the Borrower. If, after being
provided with such notice by the Agent, the Borrower decides not to obtain
such Multicurrency Loan, the Borrower must notify the Agent by no later
than 4:00 p.m. (local time for the Agent) on such day. If the Agent does
not receive such notice from the Borrower by such time, the Borrower shall
automatically be deemed to have verified its request for such
Multicurrency Loan. If the Agent does receive such notice of revocation
from the Borrower by 4:00 p.m. (local time for the Agent), the Agent shall
promptly notify the Lenders of such revocation. Such revocation shall not
require any payment under the funding indemnity set forth in Section 4.12
hereof. If the Lenders do not receive from the Agent notice of revocation
of the request for such Multicurrency Loan, each Lender that did not
notify the Agent by 3:00 p.m. (local time for the Agent) that the
requested Available Foreign Currency is unavailable to it to fund the
requested Multicurrency Loan shall make its Pro Rata Share of the
requested Multicurrency Loan in the requested Available Foreign Currency
in accordance with Section 4.2(a) hereof. Each Lender that did so notify
the Agent by 3:00 p.m. (local time for the Agent) that it would not be
able to make its Pro Rata Share of such Multicurrency Loan shall make its
Pro Rata Share of such Multicurrency Loan as a LIBOR Advance in the U.S.
Dollar Equivalent of its Pro Rata Share, and with the same Interest Period
as requested for such Multicurrency Loan. Such LIBOR Advance in U.S.
Dollars shall be made by such Lender on the same day as the other Lenders
make their Pro Rata Share of such Multicurrency Loan in the Available
Foreign Currency as part of the relevant Multicurrency Loan, but shall
bear interest with reference to LIBOR applicable to U.S. Dollars rather
than the relevant Foreign Currency Rate applicable to the relevant
Available Foreign Currency for the applicable Interest Period and shall be
made available in accordance with the procedures for
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disbursing LIBOR Advances in U.S. Dollars under Section 4.2(a) hereof.
(c) Unless the Agent shall have been notified by any Lender prior to
the date of a Borrowing that such Lender does not intend to make available
to the Agent such Lender's portion of the Borrowing to be made on such
date, the Agent may assume that such Lender has made such amount available
to the Agent on such date and the Agent may make available to Borrower a
corresponding amount. If such corresponding amount is not in fact made
available to the Agent by such Lender on the date of such Borrowing, the
Agent shall be entitled to recover such corresponding amount on demand
from such Lender together with interest at the Federal Funds Rate. If such
Lender does not pay such corresponding amount forthwith upon the Agent's
demand therefor, the Agent shall promptly notify Borrower, and Borrower
shall immediately pay such corresponding amount to the Agent together with
interest at the rate specified for the Borrowing. Nothing in this
subsection shall be deemed to relieve any Lender from its obligation to
fund its Commitments hereunder or to prejudice any rights which Borrower
may have against any Lender as a result of any default by such Lender
hereunder.
(d) All Borrowings under the Syndicate Revolving Loan shall be
loaned by the Lenders on the basis of their Pro Rata Share of the
Revolving Loan Commitments. No Lender shall be responsible for any default
by any other Lender in its obligations hereunder, and each Lender shall be
obligated to make the Loans provided to be made by it hereunder,
regardless of the failure of any other Lender to fund its Commitments
hereunder.
Section 4.3 Interest.
(a) Borrower agrees to pay interest in respect of all unpaid
principal amounts of the Revolving Loans and the Term Loans from the
respective dates such principal amounts were advanced to maturity (whether
by acceleration, notice of prepayment or otherwise) at rates per annum (on
the basis of a 360-day year, except with respect to United Kingdom Pounds
Sterling, in which case interest shall be calculated on the basis of a
365-day year) equal to the applicable rates indicated below:
(i) For Revolving Loans:
(A) For Base Rate Advances -- The Base Rate in effect
from time to time;
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(B) For Revolving Loan LIBOR Advances -- The applicable
LIBOR plus the Applicable Margin; and
(C) For Revolving Loans consisting of Multicurrency
Loans -- The applicable Foreign Currency Rate plus the
Applicable Margin.
(ii) For Term Loans:
(A) For Interest Periods during which the Base Rate
Option is selected -- The Base Rate in effect from time to
time; and
(B) For Interest Periods during which the LIBOR Option
is selected -- The applicable LIBOR plus the Applicable
Margin.
(b) Overdue principal (whether by non-payment at scheduled due date,
acceleration, notice of prepayment or otherwise) and, to the extent not
prohibited by applicable law, overdue interest, in respect of the
Revolving Loans and Term Loans and all other overdue amounts owing
hereunder, shall bear interest from each date that such amounts are
overdue at the Default Rate.
(c) Interest on each Loan shall accrue from and including the date
of such Loan to but excluding the date of any repayment thereof; provided
that, if a Loan is repaid on the same day made, one day's interest shall
be paid on such Loan. Interest shall be payable as follows:
(i) For Revolving Loans:
(A) For Base Rate Advances -- quarterly in arrears on
the last calendar day of each calendar quarter of Borrower's
fiscal year; and
(B) For LIBOR Advances and Multicurrency Loans -- on the
last day of each Interest Period applicable thereto, and, in
the case of LIBOR Advances having an Interest Period in excess
of three months, on each day which occurs every 3 months after
the initial date of such Interest Period.
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Interest on all Revolving Loans shall be payable on any conversion
of any Advances comprising such Loans into Advances of another Type,
prepayment (on the amount prepaid), at maturity (whether by
acceleration, notice of prepayment or otherwise) and, after
maturity, on demand. Interest in regard to any draw under any Letter
of Credit issued hereunder shall accrue on and from the date of such
draw, which draw shall constitute an Advance hereunder.
(ii) For Term Loans:
(A) For any Interest Period during which the Base Rate
Option is selected -- quarterly in arrears on the last
calendar day of each calendar quarter of Borrower's fiscal
year; and
(B) For any Interest Period during which the LIBOR
Option is selected -- on the last day of each Interest Period
applicable thereto, and, in the case of Interest Periods in
excess of three months, on each day which occurs every 3
months after the initial date of such Interest Period.
Interest on all Term Loans shall be payable on any conversion from
the Base Rate Option to the LIBOR Option or vice versa, prepayment
(on the amount prepaid), at maturity (whether by acceleration,
notice of prepayment or otherwise) and, after maturity, on demand.
Section 4.4 Interest Periods. In connection with the making or
continuation of, or conversion into, each Syndicate Revolving Loan comprised of
LIBOR Advances, or each Multicurrency Loan or each Term Loan for each Interest
Period during which the LIBOR Option is selected, Borrower shall select an
interest period (each an "Interest Period") to be applicable to such LIBOR
Advances, Multicurrency Loan or Term Loan, which Interest Period shall be either
a 1, 2, 3 or 6 month period with respect to LIBOR Advances and Term Loans for
each Interest Period during which the LIBOR Option is selected and either a 1, 2
or 3 month period with respect to Multicurrency Loans; provided that:
(a) The initial Interest Period for any Borrowing of LIBOR Advances
or any Multicurrency Loan or any Term Loan for which the LIBOR Option has
been selected shall commence on the date of such Borrowing (including the
date of any conversion from a Borrowing consisting of Advances of another
Type) or Loan and each Interest
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Period occurring thereafter in respect of such Borrowing or Loan shall
commence on the day on which the next preceding Interest Period expires;
(b) If any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period in respect
of LIBOR Advances or any Term Loan for which the LIBOR Option has been
selected would otherwise expire on a day that is not a Business Day but is
a day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business
Day;
(c) Any Interest Period in respect of LIBOR Advances or any
Multicurrency Loan or any Term Loan for which the LIBOR Option has been
selected which begins on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period
shall, subject to part (d) below, expire on the last Business Day of such
calendar month;
(d) No Interest Period shall extend beyond any date upon which any
principal payment is due with respect to the Revolving Loans or, Term
Loans.
Section 4.5 Fees.
(a) Structuring/Syndication Fee. Borrower shall pay, or have paid,
to SunTrust Capital Markets, Inc. on the date that the conditions set
forth in Section 5.1 are satisfied or waived in accordance with Section
11.2, the structuring and syndication fee as required by the Fee Letter.
(b) Commitment Fee. Borrower shall pay to the Agent, for the account
of and distribution to each Lender, a Commitment Fee for the period
commencing on the Closing Date to and including the Termination Date or
the Maturity Date, as the case may be, computed at a rate equal to the
Applicable Margin, based on the Borrower's ratio of Adjusted Funded Debt
to Total Capital, measured quarterly, on the average daily unused portions
of the Revolving Loan Commitment and Term Loan Commitment of each Lender,
such fee being payable quarterly in arrears on the last calendar day of
each fiscal quarter of Borrower and on the Termination Date or the
Maturity Date, as the case may be; provided, however, that adjustments, if
any, to such Commitment Fee based on changes in the Borrower's ratio of
Adjusted Funded Debt to Total Capital shall be calculated by the Agent
quarterly, based upon the
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Borrower's quarterly financial statements, beginning with the Borrower's
statements for the period ended March 29, 1997, and shall become effective
for the second fiscal quarter following the quarter in which such change
in the Borrower's ratio of Adjusted Funded Debt to Total Capital occurred.
(c) Standby Letter of Credit Fees. With respect to each Standby
Letter of Credit, the Borrower shall pay the Agent, (i) for the account of
each Lender, a non-refundable fee equal to the LIBOR/Foreign Currency
Rate Applicable Margin then in effect per annum on such Lender's Pro Rata
Share of the undrawn face amount of such Letter of Credit and (ii) for the
Agent's account, a facing fee as required by the addendum to the Fee
Letter. All fees due pursuant to this Section 4.5(d) shall be based on a
year of 360 days computed for the actual number of days elapsed, and shall
be payable in advance on the date of such Letter of Credit for the period
from the date of issuance to the first Business Day of such calendar
quarter and thereafter on the first Business Day of each calendar quarter.
(d) Letter of Credit Administrative Fees. In addition to the
foregoing fees, the Borrower shall pay to the Agent, for the Agent's
account, such other administrative fees as the Agent customarily charges
in respect of Letter of Credit transactions together with all
telecommunication fees and other expenses incurred by the Agent in
connection with the issuance or honoring of any Letter of Credit issued
for the Borrower's account.
(e) Annual Administrative Fee. Borrower shall pay to the Agent, for
the Agent's own account, an annual administrative fee as required by the
Fee Letter.
(f) Up Front Fee. Borrower shall pay to the Agent, for the account
of and distribution to each Lender, an Up Front Fee in the amount of the
number of basis points designated in the following chart, based upon such
Lender's Total Commitment on the Closing Date:
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============================================================
Total Commitment Up Front Fee
------------------------------------------------------------
> $19,354,839 0.175%
------------------------------------------------------------
>= $15,483,871 0.150%
------------------------------------------------------------
>= $l1,612,903 0.125%
------------------------------------------------------------
>= $ 7,741,936 0.075%
============================================================
Section 4.6 Voluntary Prepayment of Borrowings.
(a) Borrower may, at its option, prepay Borrowings consisting of
Base Rate Advances and Term Loans during any Interest Period in which the
Base Rate Option has been selected at any time in whole, or from time to
time in part, in amounts aggregating $1,000,000 or any greater integral
multiple of $100,000, by paying the principal amount to be prepaid
together with interest accrued and unpaid thereon to the date of
prepayment. Those Borrowings consisting of LIBOR Advances, Multicurrency
Loans and Term Loans during any Interest Period in which the LIBOR Option
has been selected may be prepaid, at Borrower's option, in whole, or from
time to time in part, in amounts aggregating $1,000,000 or any greater
integral multiple of $100,000, by paying the principal amount to be
prepaid, together with interest accrued and unpaid thereon to the date of
prepayment, and all compensation payments pursuant to Section 4.12 if such
prepayment is made on a date other than the last day of an Interest Period
applicable thereto. Each such optional prepayment shall be applied in
accordance with Section 4.6(c) below.
(b) Borrower shall give written notice (or telephonic notice
confirmed in writing) to the Agent of any intended prepayment of the
Revolving Loans or Term Loans (i) not less than one (1) Business Day prior
to any prepayment of Base Rate Advances or Term Loans for any Interest
Period during which the Base Rate Option is selected, (ii) not less than
three (3) Business Days prior to any prepayment of LIBOR Advances or Term
Loans for any Interest Period during which the LIBOR Option is selected,
and (iii) not less than three (3) Foreign Currency Business Days prior to
any prepayment of Multicurrency Loans. Such notice, once given, shall be
irrevocable. Upon receipt of such notice of prepayment pursuant to the
first sentence of this paragraph (b), the Agent shall promptly notify each
Lender of the contents of such notice, including the actual date on
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which such prepayment shall occur, and of such Lender's share of such
prepayment.
(c) Borrower, when providing notice of prepayment pursuant to
Section 4.6(b) may designate the Types of Advances and the specific
Borrowing or Borrowings or Term Loans which are to be prepaid, provided
that (i) if any prepayment of LIBOR Advances made pursuant to a single
Borrowing of the Revolving Loans or Term Loans during any Interest Period
in which the LIBOR Option has been selected, shall reduce the outstanding
Advances made pursuant to such Borrowing or the outstanding amount of such
Loan to an amount less than $2,000,000, such Borrowing shall immediately
be converted into Base Rate Advances or the balance of such Loan shall
immediately begin accruing interest at the rate per annum determined with
reference to the Base Rate, as the case may be; and (ii) each prepayment
made pursuant to a single Borrowing shall be applied pro rata among the
Loans comprising such Borrowing. All voluntary prepayments shall be
applied to the payment of any unpaid interest before application to
principal.
Section 4.7 Payments, etc.
(a) Except as otherwise specifically provided herein, all payments
under this Agreement and the other Credit Documents shall be made without
defense, set-off or counterclaim to the Agent, not later than 11:00 a.m.
(local time for the Agent) on the date when due and shall be made in
Dollars (except with respect to Multicurrency Loans) in immediately
available funds at the respective Payment Office. Payments with respect to
Multicurrency Loans shall be made in the currency in which such Loans were
made, in immediately available funds at the respective Payment Office.
(b) (i) All such payments shall be made free and clear of and
without deduction or withholding for any Taxes in respect of this
Agreement, the Notes or other Credit Documents, or any payments of
principal, interest, fees or other amounts payable hereunder or thereunder
(but excluding any Taxes imposed on the overall net income of the Lenders
pursuant to the laws of the jurisdiction in which the principal executive
office or appropriate Lending Office of such Lender is located). If any
Taxes are so levied or imposed, Borrower agrees (A) to pay the full amount
of such Taxes, and such additional amounts as may be necessary so that
every net payment of all amounts due hereunder and under the Notes and
other Credit Documents, after withholding or deduction for or on account
of any such
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Taxes (including additional sums payable under this Section 4.7), will not
be less than the full amount provided for herein had no such deduction or
withholding been required, (B) to make such withholding or deduction and
(C) to pay the full amount deducted to the relevant authority in
accordance with applicable law. Borrower will furnish to the Agent and
each Lender, within 30 days after the date the payment of any Taxes is due
pursuant to applicable law, certified copies of tax receipts evidencing
such payment by Borrower. Borrower will indemnify and hold harmless the
Agent and each Lender and reimburse the Agent and each Lender upon written
request for the amount of any Taxes so levied or imposed and paid by the
Agent or Lender and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such
Taxes were correctly or illegally asserted. A certificate as to the amount
of such payment by such Lender or the Agent, absent manifest error, shall
be final, conclusive and binding for all purposes.
(ii) Each Lender that is organized under the laws of any
jurisdiction other than the United States of America or any State thereof
(including the District of Columbia) agrees to furnish to, Borrower and
the Agent, prior to the time it becomes a Lender hereunder, two copies of
either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue
Service Form 1001 or any successor forms thereto (wherein such Lender
claims entitlement to complete exemption from or reduced rate of U.S.
Federal withholding tax on interest paid by Borrower hereunder) and to
provide to Borrower and the Agent a new Form 4224 or Form 1001 or any
successor forms thereto if any previously delivered form is found to be
incomplete or incorrect in any material respect or upon the obsolescence
of any previously delivered form; provided, however, that no Lender shall
be required to furnish a form under this paragraph (ii) if it is not
entitled to claim an exemption from or a reduced rate of withholding under
applicable law. A Lender that is not entitled to claim an exemption from
or a reduced rate of withholding under applicable law, promptly upon
written request of Borrower, shall so inform Borrower in writing.
(c) Subject to Section 4.4(b), whenever any payment to be made
hereunder or under any Note shall be stated to be due on a day which is
not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the applicable rate during such
extension.
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(d) All computations of interest and fees shall be made on the basis
of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such
interest or fees are payable (to the extent computed on the basis of days
elapsed), except in the case of the computation of interest on
Multicurrency Loans made in United Kingdom Pounds Sterling, in which case
interest shall be computed on the basis of a year containing 365 days for
the actual number of days (including the first day but excluding the last
day) occurring in the Interest Period for which such interest is payable.
Interest on Base Rate Advances and Term Loans for any Interest Period
during which the Base Rate Option has been selected shall be calculated
based on the Base Rate from and including the date of such Advance or Loan
to but excluding the date of the repayment or conversion thereof. Interest
on LIBOR Advances, Multicurrency Loans and Term Loans for any Interest
Period during which the LIBOR Option has been selected shall be calculated
as to each Interest Period from and including the first day thereof to but
excluding the last day thereof. Each determination by the Agent of an
interest rate or fee hereunder shall be made in good faith and, except for
manifest error, shall be final, conclusive and binding for all purposes.
(e) Payment by Borrower to the Agent in accordance with the terms of
this Agreement shall, as to Borrower, constitute payment to the Lenders
under this Agreement.
Section 4.8 Interest Rate Not Ascertainable, etc. In the event that the
Agent shall have determined (which determination shall be made in good faith
and, absent manifest error, shall be final, conclusive and binding upon all
parties) that on any date for determining LIBOR Rate or Foreign Currency Rate
for any Interest Period, by reason of any changes arising after the date of this
Agreement, adequate and fair means do not exist for ascertaining LIBOR Rate or
Foreign Currency Rate then, and in any such event, the Agent shall forthwith
give notice (by telephone confirmed in writing) to Borrower and to the Lenders
of such determination and a summary of the basis for such determination. Until
the Agent notifies Borrower that the circumstances giving rise to the suspension
described herein no longer exist, the obligations of the Lenders to make or
permit portions of the Revolving Loans to remain outstanding past the last day
of the then current Interest Periods as LIBOR Advances or Multicurrency Loans,
or to allow the Borrower to select the LIBOR Option for Term Loans after the
then current Interest Period, shall be suspended, and such affected Advances
and/or Loans shall bear interest at the rate determined by reference to the Base
Rate.
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Section 4.9 Illegality.
(a) In the event that any Lender shall have determined (which
determination shall be made in good faith and, absent manifest error,
shall be final, conclusive and binding upon all parties) at any time that
the making or continuance of any LIBOR Advance, Multicurrency Loan or the
LIBOR Option with respect to any Term Loan has become unlawful or
impractical by compliance by such Lender in good faith with any applicable
law, governmental rule, regulation, guideline or order (whether or not
having the force of law and whether or not failure to comply therewith
would be unlawful), then, in any such event, the Lender shall give prompt
notice (by telephone confirmed in writing) to Borrower and to the Agent of
such determination and a summary of the basis for such determination
(which notice the Agent shall promptly transmit to the other Lenders).
(b) Upon the giving of the notice to Borrower referred to in
subsection (a) above, (i) Borrower's right to request LIBOR Advances,
Multicurrency Loans or to select the LIBOR Option with respect to Term
Loans and such Lender's obligation to make LIBOR Advances, Multicurrency
Loans or to allow the LIBOR Option to be selected with respect to Term
Loans shall be immediately suspended, and such Lender shall make an
Advance as part of the requested Borrowing of LIBOR Advances or the
requested Multicurrency Loan as a Base Rate Advance, which Base Rate
Advance shall, for all other purposes, be considered part of such
Borrowing, or shall change the interest rate option applicable to such
Term Loan to the Base Rate Option, and (ii) if the affected LIBOR Advance
or Advances, Multicurrency Loan or Term Loan are then outstanding,
Borrower shall immediately, or if permitted by applicable law, no later
than the date permitted thereby, upon at least one (1) Business Day's
written notice to the Agent and the affected Lender, convert each such
Advance into an Advance or Advances of a different Type, or change the
interest rate option applicable to any such Term Loan to the Base Rate
Option, with an Interest Period ending on the date on which the Interest
Period applicable to the affected LIBOR Advances, Multicurrency Loan or
Term Loan expires, provided that if more than one Lender is affected at
any time, then all affected Lenders must be treated the same pursuant to
this Section 4.9(b).
(c) In the event that any Lender shall have determined (which
determination shall be made in good faith and, absent manifest error,
shall be final, conclusive and binding upon all parties) at any time
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<PAGE>
that the making of or continuance of or conversion to any Base Rate
Advance has become unlawful or impractical by compliance by such Lender in
good faith with any applicable law, governmental rule, regulation,
guideline or order (whether or not having the force of law and whether or
not failure to comply therewith would be unlawful), then, in any such
event, the Lender shall give prompt notice (by telephone confirmed in
writing) to Borrower and to the Agent of such determination and a summary
of the basis for such determination (which notice the Agent shall promptly
transmit to the other Lenders). The Borrower shall pay to the Agent for
the account of such Lender within thirty (30) Days after the date of such
notice and demand, a sufficient amount to repay all of such Lender's Base
Rate Advances or Loans or Advances subject to conversion to Base Rate
Advances.
Section 4.10 Increased Costs.
(a) If, by reason of (i) after the date hereof, the introduction of
or any change (including, without limitation, any change by way of
imposition or increase of reserve requirements) in, or in the
interpretation of, any law or regulation, or (ii) the compliance with any
guideline or request from any central bank or other governmental
authority or quasi-governmental authority exercising control over banks or
financial institutions generally (whether or not having the force of law):
(i) any Lender (or its applicable Lending Office) shall be
subject to any tax, duty or other charge with respect to its LIBOR
Advances, Base Rate Advances, Multicurrency Loans or Term Loans
bearing interest determined by reference to LIBOR or the Foreign
Currency Rate or its obligation to make LIBOR Advances, Base Rate
Advances or Multicurrency Loans or allow the selection of the LIBOR
Option with respect to Term Loans, or the basis of taxation of
payments to any Lender of the principal of or interest on its LIBOR
Advances, Base Rate Advances, Multicurrency Loans or Term Loans
bearing interest determined with reference to LIBOR or the Foreign
Currency Rate or its obligation to make LIBOR Advances, Base Rate
Advances Multicurrency Loans or allow the selection of the LIBOR
Option with respect to Term Loans shall have changed (except for
changes in the tax on the overall net income of such Lender or its
applicable Lending Office imposed by the jurisdiction in which
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such Lender's principal executive office or applicable Lending
Office is located); or
(ii) any reserve (including, without limitation, any imposed
by the Board of Governors of the Federal Reserve System), special
deposit or similar requirement against assets of, deposits with or
for the account of, or credit extended by, any Lender's applicable
Lending Office shall be imposed or deemed applicable or any other
condition affecting its LIBOR Advances, Base Rate Advances,
Multicurrency Loans or Term Loans bearing interest determined with
reference to LIBOR or the Foreign Currency Rate or its obligation to
make LIBOR Advances, Base Rate Advances, Multicurrency Loan or to
allow the selection of the LIBOR Option with respect to Term Loans
shall be imposed on any Lender or its applicable Lending Office or
the London interbank market or the United States secondary
certificate of deposit market;
and as a result thereof there shall be any increase in the cost to such
Lender of agreeing to make or making, funding or maintaining LIBOR
Advances, Base Rate Advances, Multicurrency Loans or allowing the
selection of the LIBOR Option with respect to Term Loans (except to the
extent already included in the determination of the applicable Base Rate
for Base Rate Advances, LIBOR rate for LIBOR Advances or Term Loans or the
applicable Foreign Currency Rate for Multicurrency Loans), or there shall
be a reduction in the amount received or receivable by such Lender or its
applicable Lending Office, then Borrower shall from time to time (subject,
in the case of certain Taxes, to the applicable provisions of Section
4.7(b)), upon written notice from and demand by such Lender on Borrower
(with a copy of such notice and demand to the Agent), pay to the Agent for
the account of such Lender within five (5) Business Days after the date of
such notice and demand, additional amounts sufficient to indemnify such
Lender against such increased cost. A certificate as to the amount of such
increased cost, submitted to Borrower and the Agent by such Lender in good
faith and accompanied by a statement prepared by such Lender describing in
reasonable detail the basis for and calculation of such increased cost,
shall, except for manifest error, be final, conclusive and binding for all
purposes.
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(b) If any Lender shall advise the Agent that at any time, because
of the circumstances described in clauses (i) or (ii) in subsection
4.10(a) above or any other circumstances beyond such Lender's control
arising after the date of this Agreement affecting such Lender or the
London interbank market or such Lender's position in such market, LIBOR or
the Foreign Currency Rate as determined by the Agent will not adequately
and fairly reflect the cost to such Lender of funding its LIBOR Advances
or Multicurrency Loans or carrying Term Loans bearing interest determined
with reference to LIBOR, then, and in any such event:
(i) the Agent shall forthwith give notice (by telephone
confirmed in writing) to Borrower and to the other Lenders of such
advice;
(ii) Borrower's right to request and such Lender's obligation
to make or permit portions of the Loans to remain outstanding past
the last day of the then current Interest Periods as LIBOR Advances,
Multicurrency Loans or Term Loans bearing interest determined with
reference to LIBOR, shall be immediately suspended; and
(iii) such Lender shall make a Loan as part of the requested
Borrowing of LIBOR Advances or the requested Multicurrency Loan as a
Base Rate Advance, which such Base Rate Advance shall, for all other
purposes, be considered part of such Borrowing or shall change the
interest rate option for any Term Loan to the Base Rate Option.
Section 4.11 Lending Offices.
(a) Each Lender agrees that, if requested by Borrower, it will use
reasonable efforts (subject to overall policy considerations of such
Lender) to designate an alternate Lending Office with respect to any of
its LIBOR Advances, Multicurrency Loans or Term Loans bearing interest
determined with reference to LIBOR affected by the matters or
circumstances described in Sections 4.7(b), 4.8, 4.9 or 4.10 to reduce the
liability of Borrower or avoid the results provided thereunder, so long as
such designation is not disadvantageous to such Lender as determined by
such Lender, which determination if made in good faith, shall be
conclusive and binding on all parties hereto. Nothing in this Section 4.11
shall affect or postpone
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any of the obligations of Borrower or any right of any Lender provided
hereunder.
(b) If any Lender that is organized under the laws of any
jurisdiction other than the United States of America or any State thereof
(including the District of Columbia) issues a public announcement with
respect to the closing of its lending offices in the United States such
that any withholdings or deductions and additional payments with respect
to Taxes may be required to be made by Borrower thereafter pursuant to
Section 4.7(b), such Lender shall use reasonable efforts to furnish
Borrower notice thereof as soon as practicable thereafter; provided,
however, that no delay or failure to furnish such notice shall in any
event release or discharge Borrower from its obligations to such Lender
pursuant to Section 4.7(b) or otherwise result in any liability of such
Lender.
Section 4.12 Funding Losses. Borrower shall compensate each Lender, upon
its written request to Borrower (which request shall set forth the basis for
requesting such amounts in reasonable detail and which request shall be made in
good faith and, absent manifest error, shall be final, conclusive and binding
upon all of the parties hereto), for all losses, expenses and liabilities
(including, without limitation, any interest paid by such Lender to lenders of
funds borrowed by it to make or carry its LIBOR Advances, Multicurrency Loans or
Term Loans bearing interest determined with reference to LIBOR, in either case
to the extent not recovered by such Lender in connection with the reemployment
of such funds and including loss of anticipated profits), which the Lender may
sustain: (i) if for any reason (other than a default by such Lender) a borrowing
of, or conversion to or continuation of, LIBOR Advances, Multicurrency Loans or
selection of the LIBOR Option with respect to any Term Loan does not occur on
the date specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation (whether or not withdrawn), (ii) if any repayment
(including mandatory prepayments and any conversions pursuant to Section 4.9(b)
of any LIBOR Advances, Multicurrency Loans or changes in the interest rate with
respect to any Term Loan occurs on a date which is not the last day of an
Interest Period applicable thereto, or (iii) if, for any reason, Borrower
defaults in its obligation to repay its LIBOR Advances, Multicurrency Loans or
Term Loans bearing interest determined by reference to LIBOR when required by
the terms of this Agreement.
Section 4.13 Assumptions Concerning Funding of LIBOR Advances and Term
Loans. Calculation of all amounts payable to a Lender under this Article IV
shall be made as though that Lender had actually funded its relevant LIBOR
Advances, Multicurrency Loans or Term Loans bearing interest at a rate
determined with
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reference to LIBOR through the purchase of deposits in the relevant market
bearing interest at the rate applicable to such LIBOR Advances, Multicurrency
Loans or Term Loans in an amount equal to the amount of the LIBOR Advances,
Multicurrency Loans or Term Loans and having a maturity comparable to the
relevant Interest Period and through the transfer of such LIBOR Advances,
Multicurrency Loans or Term Loans from an offshore office of that Lender to a
domestic office of that Lender in the United States of America; provided
however, that each Lender may fund each of its LIBOR Advances, Multicurrency
Loans or Term Loans bearing interest at a rate determined with reference to
LIBOR in any manner it sees fit and the foregoing assumption shall be used only
for calculation of amounts payable under this Article IV.
Section 4.14 Apportionment of Payments. Aggregate principal and interest
payments in respect of Loans and payments in respect of Commitment Fees, Up
Front Fees, Letter of Credit Fees and any other fees hereunder shall be
apportioned among all outstanding Commitments and Loans to which such payments
relate, proportionately to the Lenders' respective pro rata portions of such
Commitments and outstanding Loans. The Agent shall promptly distribute to each
Lender at its payment office set forth beside its name on the appropriate
signature page hereof or such other address as any Lender may request its share
of all such payments received by the Agent.
Section 4.15 Sharing of Payments. Etc. If any Lender shall obtain any
payment or reduction (including, without limitation, any amounts received as
adequate protection of a deposit treated as cash collateral under the Bankruptcy
Code) of the Obligations (whether voluntary, involuntary, through the exercise
of any right of set-off, or otherwise) in excess of its pro rata portion of
payments or reductions on account of such obligations obtained by all the
Lenders, such Lender shall forthwith (i) notify each of the other Lenders and
Agent of such receipt, and (ii) purchase from the other Lenders such
participations in the affected obligations as shall be necessary to cause such
purchasing Lender to share the excess payment or reduction, net of costs
incurred in connection therewith, ratably with each of them, provided that if
all or any portion of such excess payment or reduction is thereafter recovered
from such purchasing Lender or additional costs are incurred, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery or
such additional costs, but without interest unless the Lender obligated to
return such funds is required to pay interest on such funds. Borrower agrees
that any Lender so purchasing a participation from another Lender pursuant to
this Section 4.15 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation.
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Section 4.16 Capital Adequacy. Without limiting any other provision of
this Agreement, in the event that any Lender shall have determined that any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy not currently in effect or fully applicable as
of the Closing Date, or any change therein or in the interpretation or
application thereof after the Closing Date, or compliance by such Lender with
any request or directive regarding capital adequacy not currently in effect or
fully applicable as of the Closing Date (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful) from a central
bank or governmental authority or body having jurisdiction, does or shall have
the effect of reducing the rate of return on such Lender's capital as a
consequence of its obligations hereunder to a level below that which such Lender
could have achieved but for such law, treaty, rule, regulation, guideline or
order, or such change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then within ten (10) Business Days after written notice and demand
by such Lender (with copies thereof to the Agent), Borrower shall from time to
time pay to such Lender additional amounts sufficient to compensate such Lender
for such reduction (but, in the case of outstanding Base Rate Advances or Term
Loans accruing interest at the Base Rate, without duplication of any amounts
already recovered by such Lender by reason of an adjustment in the applicable
Base Rate). Each certificate as to the amount payable under this Section 4.16
(which certificate shall set forth the basis for requesting such amounts in
reasonable detail), submitted to Borrower by any Lender in good faith, shall,
absent manifest error, be final, conclusive and binding for all purposes.
Section 4.17 Benefits to Guarantors. In consideration for the execution
and delivery by the Guarantors of the Guaranty Agreement and the Contribution
Agreement, Borrower agrees to make the benefit of extensions of credit hereunder
available to the Guarantors.
Section 4.18 Limitations on Certain Payment Obligations.
(a) Each Lender or Agent shall make written demand on Borrower for
indemnification or compensation pursuant to Section 4.7 no later than 90
days after the earlier of (i) the date on which such Lender or Agent makes
payment of such Taxes, and (ii) the date on which the relevant taxing
authority or other governmental authority makes written demand upon such
Lender or Agent for payment of such Taxes.
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(b) Each Lender or Agent shall make written demand on Borrower for
indemnification or compensation pursuant to Sections 4.10 and 4.12 no
later than 90 days after the event giving rise to the claim for
indemnification or compensation occurs.
(c) Each Lender or Agent shall make written demand on Borrower for
indemnification or compensation pursuant to Sections 4.9 and 4.16 no later
than 90 days after such Lender or Agent receives actual notice or obtains
actual knowledge of the promulgation of a law, rule, order or
interpretation or occurrence of another event giving rise to a claim
pursuant to such sections.
(d) In the event that the Lenders or Agent fail to give Borrower
notice within the time limitations prescribed in (a) or (b) above,
Borrower shall not have any obligation to pay such claim for compensation
or indemnification. In the event that the Lender or Agent fail to give
Borrower notice within the time limitation prescribed in (c) above,
Borrower shall not have any obligation to pay any amount with respect to
claims accruing prior to the ninetieth (90th) day preceding such written
demand.
Section 4.19 Affected Lenders. Unless the Required Lenders seek
indemnification or reimbursement pursuant to Sections 4.7, 4.10, 4.12 or 4.16 or
invoke the provisions of Section 4.9 hereof, if the Borrower is obligated to pay
to any Lender any amount under Sections 4.7, 4.10, 4.12 or 4.16 or if the Lender
requests that its LIBOR Advances or Multicurrency Loans be converted into Base
Rate Advances or that the interest rate option applicable to its Term Loans be
changed from the LIBOR Option to the Base Rate Option pursuant to Section 4.9,
the Borrower may, so long as no Default or Event of Default then exists, replace
such Lender with another Lender acceptable to the Agent, and such Lender hereby
agrees to be so replaced subject to the following:
(a) The obligations of the Borrower hereunder to the Lender to be
replaced (including such increased or additional costs incurred from the
date of notice to the Borrower of such increase or additional costs
through the date such Lender is replaced hereunder) shall be paid in full
to such Lender concurrently with such replacement;
(b) The replacement Lender shall be a bank or other financial
institution that is not subject to the increased costs arising under such
Sections which may have effectuated the Borrower's election to replace any
Lender hereunder, and each such replacement Lender shall execute and
deliver to the Agent such
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documentation satisfactory to the Agent pursuant to which such replacement
Lender is to become a party hereto with a Commitment equal to that of the
Lender being replaced and shall make a Loan or Loans in the aggregate
principal amount equal to the aggregate outstanding principal amount of
the Loan or Loans of the Lender being replaced;
(c) Upon such execution of such documents referred to in clause (b)
and repayment of the amounts referred to in clause (a), the replacement
Lender shall be a "Lender" with a Commitment as specified hereinabove and
the Lender being replaced shall cease to be a "Lender" hereunder, except
with respect to indemnification provisions under this Agreement, which
shall survive as to such replaced Lender;
(d) The Agent shall reasonably cooperate in effectuating the
replacement of any Lender under this Section 4.19, but at no time shall
the Agent be obligated to initiate any such replacement; and
(e) Any Lender replaced under this Section 4.19 shall be replaced at
the Borrower's sole cost and expense and at no cost or expense to the
Agent. The replaced Lender shall not be obligated to pay any assignment or
processing fee required pursuant to Section 11.6(c) or otherwise.
Section 4.20 Return of Payments. If the Agent shall be required by any
court, trustee or debtor-in-possession or other person to return any amount
previously received by it in respect of the obligations under this Agreement,
upon receipt of notice from it, each Lender shall immediately pay over to it,
such Lender's Pro Rata Share of the amount to be returned.
ARTICLE V
CONDITIONS TO BORROWINGS
The obligations of each Lender to make Advances to Borrower hereunder is
subject to the satisfaction of the following conditions:
Section 5.1 Conditions Precedent to Initial Loans. At the time of the
making of the initial Loans hereunder on the Closing Date, all obligations of
Borrower hereunder incurred prior to the initial Loans (including, without
limitation, Borrower's obligations to reimburse the reasonable fees and expenses
of counsel to the Agent and any fees and expenses payable to the Agent and the
Lenders as previously agreed with
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Borrower), shall have been paid in full, and the Agent shall have received the
following, in form and substance reasonably satisfactory in all respects to the
Agent:
(a) the duly executed counterparts of this Agreement;
(b) the duly completed Revolving Credit Notes evidencing the
Revolving Loan Commitments and the duly executed Term Notes evidencing the
Term Loan Commitments;
(c) the duly executed Guaranty Documents;
(d) certificate of Borrower in substantially the form of Exhibit F
attached hereto and appropriately completed;
(e) certificates of the Secretary or Assistant Secretary of each of
the Credit Parties, attaching and certifying copies of the resolutions of
the boards of directors of the Credit Parties, authorizing as applicable
the execution, delivery and performance of the Credit Documents;
(f) certificates of the Secretary or an Assistant Secretary of each
of the Credit Parties certifying (i) the name, title and true signature of
each officer of such entities executing the Credit Documents, and (ii) the
bylaws or comparable governing documents of such entities;
(g) certified copies of the Certificate or Articles of Incorporation
of each credit party, certified by the Secretary of State or the Secretary
or Assistant Secretary of such Credit Party, together with certificates of
good standing or existence, as may be available from the Secretary of
State of the jurisdiction of incorporation or organization of such Credit
Party;
(h) copies of all documents and instruments, including all consents,
authorizations and filings, required or advisable under any Requirement of
Law or by any material Contractual Obligation of the Credit Parties, in
connection with the execution, delivery, performance, validity and
enforceability of the Credit Documents and the other documents to be
executed and delivered hereunder, and such consents, authorizations,
filings and orders shall be in full force and effect and all applicable
waiting periods shall have expired;
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(i) certified copies of indentures, credit agreements, capital
leases, instruments, and other documents evidencing or securing
Indebtedness of any Consolidated Company described on Schedule 6.13(a), in
any single case in an amount not less than $2,500,000;
(j) certificates, reports and other information as the Agent may
reasonably request from any Consolidated Company in order to satisfy the
Lenders as to the absence of any material liabilities or obligations
arising from matters relating to employees of the Consolidated Companies,
including employee relations, collective bargaining agreements, Plans, and
other compensation and employee benefit plans;
(k) certificates, reports, environmental audits and investigations,
and other information as the Agent may reasonably request from any
Consolidated Company in order to satisfy the Lenders as to the absence of
any material liabilities or obligations under Environmental Laws which
could reasonably be expected to have a Materially Adverse Effect;
(l) certificates, reports and other information as the Agent may
reasonably request from any Consolidated Company in order to satisfy the
Lenders as to the absence of any material liabilities or obligations
arising from litigation (including without limitation, products liability,
patent infringement and malpractice claims) pending or threatened against
the Consolidated Companies;
(m) a summary, set forth in format and detail reasonably acceptable
to the Agent, of the types and amounts of insurance (property and
liability) maintained by the Consolidated Companies;
(n) the favorable opinion of Gray, Harris & Robinson, P.A., counsel
to the Credit Parties, substantially in the form of Exhibit G attached
hereto, addressed to the Agent and each of the Lenders; and
(o) financial statements of Borrower and its Subsidiaries, on a
consolidated basis, for the most recently completed fiscal quarter.
In addition to the foregoing, the following conditions shall have been satisfied
or shall exist, all to the satisfaction of the Agent, as of the time the initial
Loans are made hereunder:
(p) payment in full and termination of all outstanding indebtedness
of the Borrower and its Material Subsidiaries and the release of any liens
securing the same; provided,
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however, the following indebtedness may remain outstanding: (i) all
Capitalized Lease Obligations described on Schedule 6.7 (ii) installment
notes and other Indebtedness described on Schedule 6.13(a); and (iii)
Intercompany Loans as described on Schedule 6.22
(q) the Loans to be made on the Closing Date and the use of proceeds
thereof shall not contravene, violate or conflict with, or involve the
Agent or any Lender in a violation of, any law, rule, injunction, or
regulation, or determination of any court of law or other governmental
authority;
(r) all corporate proceedings and all other legal matters in.
connection with the authorization, legality, validity and enforceability
of the Credit Documents shall be reasonably satisfactory in form and
substance to the Required Lenders;
(s) the status of all pending and threatened litigation (including
products liability, malpractice and patent claims) described on Schedule
6.5, including a description of any damages sought and the claims
constituting the basis therefor, shall have been reported in writing to
the Agent, the Agent shall have reported such matters to the Lenders, and
the Lenders shall be satisfied with such status;
Section 5.2 Conditions to All Loans. At the time of the making of all
Loans (before as well as after giving effect to such Loans and to the proposed
use of the proceeds thereof), the following conditions shall have been satisfied
or shall exist:
(a) there shall exist no Default or Event of Default;
(b) all representations and warranties by Borrower contained herein
shall be true and correct in all material respects with the same effect as
though such representations and warranties had been made on and as of the
date of such Loans;
(c) since the date of the most recent financial statements of the
Consolidated Companies described in Section 6.3, there shall have been no
change which has had or could reasonably be expected to have a Materially
Adverse Effect.
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(d) there shall be no action or proceeding instituted or pending
before any court or other governmental authority or, to the knowledge of
Borrower, threatened (i) which reasonably could be expected to have a
Materially Adverse Effect, or (ii) seeking to prohibit or restrict one or
more Credit Party's ownership or operation of any portion of its business
or assets, or to compel one or more Credit Party to dispose of or hold
separate all or any portion of its businesses or assets, where such
portion or portions of such business(es) or assets, as the case may be,
constitute a material portion of the total businesses or assets of the
Consolidated Companies;
(e) the Loans to be made and the use of proceeds thereof shall not
contravene, violate or conflict with, or involve the Agent or any Lender
in a violation of, any law, rule, injunction, or regulation, or
determination of any court of law or other governmental authority
applicable to Borrower; and
(f) the Agent shall have received such other documents, including,
but not limited to a properly completed Notice of Borrowing, or legal
opinions as the Agent or any Lender may reasonably request, all in form
and substance reasonably satisfactory to the Agent.
Each request for a Borrowing and the acceptance by Borrower of the proceeds
thereof shall constitute a representation and warranty by Borrower, as of the
date of the Loans comprising such Borrowing, that the applicable conditions
specified in Sections 5.1 and 5.2 have been satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and covenants to Lenders that:
Section 6.1 Organization and Qualification. Borrower is a corporation duly
organized and existing in good standing under the laws of the State of Delaware.
Each Subsidiary of Borrower is a corporation duly organized and existing under
the laws of the jurisdiction of its incorporation. Borrower and each of its
Subsidiaries are duly qualified to do business as a foreign corporation and are
in good standing in each jurisdiction in which the character of their properties
or the nature of their business makes such qualification necessary, except for
such jurisdictions in which a failure to qualify to do business would not have a
Materially Adverse Effect. Borrower and each of its Material Subsidiaries have
the corporate power to own their
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respective properties and to carry on their respective businesses as now being
conducted. The jurisdiction of incorporation or organization, and the ownership
of all issued and outstanding capital stock, for each Subsidiary as of the date
of this Agreement is accurately described on Schedule 6.1. Schedule 6.1 also
designates all Subsidiaries of the Borrower as of the Closing Date and specifies
whether each is a Material Subsidiary.
Section 6.2 Corporate Authority. The execution and delivery by Borrower
and the Guarantors of and the performance by Borrower and Guarantors of their
obligations under the Credit Documents have been duly authorized by all
requisite corporate action and all requisite shareholder action, if any, on the
part of Borrower and the Guarantors and do not and will not (i) violate any
provision of any law, rule or regulation, any judgment, order or ruling of any
court or governmental agency, the organizational papers or bylaws of Borrower or
the Guarantors, or any indenture, agreement or other instrument to which
Borrower or the Guarantors are a party or by which Borrower or the Guarantors or
any of their properties is bound, or (ii) be in conflict with, result in a
breach of, or constitute with notice or lapse of time or both a default under
any such indenture, agreement or other instrument.
Section 6.3 Financial Statements. Borrower has furnished Lenders with the
following financial statements, identified by the Chief Financial Officer of
Borrower: audited consolidated balance sheet of the Borrower and its
Subsidiaries as at December 29, 1996, and audited consolidated statement of
income and consolidated statement of stockholders' equity of Borrower and its
Subsidiaries for the fiscal year ended on such date certified by Price
Waterhouse, LLP, Certified Public Accountants and internally generated financial
statements of Borrower for the period ended June 29, 1997. Such financial
statements (including any related schedules and notes) are true and correct in
all material respects, have been prepared in accordance with GAAP consistently
applied throughout the period or periods in question and show, in the case of
audited statements, all liabilities, direct or contingent, of Borrower and its
Subsidiaries, required to be shown in accordance with GAAP consistently applied
throughout the period or periods in question and fairly present the consolidated
financial position and the consolidated results of operations of Borrower and
its Subsidiaries for the periods indicated therein. There has been no material
adverse change in the business, condition or operations, financial or otherwise,
of Borrower and its Subsidiaries since December 29, 1996.
Section 6.4 Tax Returns. Except as set forth on Schedule 6.4, each of
Borrower and its Material Subsidiaries has filed all federal, state and other
tax returns and reports which, to the best knowledge of the Executive Officers
of Borrower and its Subsidiaries, are required to be filed, and each has paid
all
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taxes as shown on said returns and all other taxes, assessments, fees and other
governmental charges upon Borrower or any of its Material Subsidiaries or upon
any of the properties, assets, incomes or franchises of Borrower or any of its
Material Subsidiaries, to the extent that such taxes, assessments, fees and
other governmental charges have become due or except such as are being contested
in good faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP. The Borrower and its Material Subsidiaries
have and will establish all necessary reserves and make all payments required of
them to be set aside or made in regard to all F.I.C.A., withholding, sales or
excise and all other similar federal, state and local taxes.
Section 6.5 Actions Pending. Except as disclosed on Schedule 6.5 hereto,
there is no action, suit, investigation or proceeding pending or, to the
knowledge of Borrower, threatened against or affecting Borrower or any of its
Material Subsidiaries or any of their properties or rights, by or before any
court, arbitrator or administrative or governmental body, which might result in
any Materially Adverse Effect.
Section 6.6 Representations; No Defaults. At the time of each Extension of
Credit there shall exist no Default or Event of Default, and each Extension of
Credit shall be deemed a renewal by Borrower of the representations and,
warranties contained in this Agreement and an affirmative statement by Borrower
that such representations and warranties are true and correct in all material
respects on and as of such time with the same effect as though such
representations and warranties had been made on and as of such time.
Section 6.7 Title to Properties; Capitalized Leases. Each of Borrower and
its Material Subsidiaries has (i) good and marketable fee simple title to its
respective real properties (other than real properties which it leases from
others), including such real properties reflected in the consolidated balance
sheet of Borrower and its Subsidiaries described in Section 6.3 above (other
than real properties disposed of in the ordinary course of business), subject to
no Lien of any kind except Liens permitted by Section 8.3. and (ii) good title
to all of its other respective properties and assets (other than properties and
assets which it leasee from others), including the other properties and assets
reflected in the consolidated balance sheet of Borrower and its Subsidiaries
described in Section 6.3 above (other than properties and assets disposed of in
the ordinary course of business), subject to no Lien of any kind except Liens
permitted by Section 8.1. Each of Borrower and its Material Subsidiaries enjoys
peaceful and undisturbed possession under all leases necessary in any material
respect for the operation of its respective properties and assets, none of which
contains any unusual or burdensome provisions which might
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materially affect or impair the operation of such properties and assets, and all
such leases are valid and subsisting and in full force and effect. There are no
Capitalized Lease Obligations except as disclosed on Schedule 6.7 hereto.
Section 6.8 Enforceability of Agreement. This Agreement is the legal,
valid and binding Agreement of Borrower enforceable against Borrower in
accordance with its terms, and the Notes, and all other Credit Documents, when
executed and delivered, will be similarly legal, valid, binding and enforceable,
except as the enforceability of the Notes and other Credit Documents may be
limited by bankruptcy, insolvency, reorganization, moratorium and other laws
affecting creditor's rights and remedies in general and by general principles of
equity, whether considered in a proceeding at law or in equity.
Section 6.9 Consent. No consent, permission, authorization, order or
license of or filing with any governmental authority or Person which has not
been obtained or made is necessary in connection with the execution, delivery,
performance or enforcement of the Credit Documents by the Credit Parties, or in
order to constitute the indebtedness to be incurred hereunder and under the
Notes and the other Credit Documents as "Senior Debt" or any similar term
defined within each of the Subordinated Notes.
Section 6.10 Use of Proceeds; Federal Reserve Regulations. The proceeds of
the Notes will be used solely for the purposes specified in Section 2.1(g) and
Section 3.1(b) and none of such proceeds will be used, directly or indirectly,
for the purpose of purchasing or carrying any "margin security" or "margin
stock" or for the purpose of reducing or retiring any indebtedness that
originally was incurred to purchase or carry a "margin security" or "margin
stock" or for any other purpose that might constitute this transaction a
"purpose credit" within the meaning of the regulations of the Board of Governors
of the Federal Reserve System.
Section 6.11 ERISA.
(a) Identification of Certain Plans. Schedule 6.11 hereto sets forth
all Plans of Borrower and its Subsidiaries;
(b) Compliance. Each Plan is being maintained, by its terms and in
operation, in accordance with all applicable laws, except such
noncompliance (when taken as a whole) that will not have a Materially
Adverse Effect on the Borrower and its Subsidiaries taken as a whole, or
upon their financial condition, assets, business, operations, liabilities
or prospects;
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(c) Liabilities. Neither the Borrower nor any Subsidiary is
currently or will become subject to any liability (including withdrawal
liability), tax or penalty whatsoever to any person whomsoever with
respect to any Plan including, but not limited to, any tax, penalty or
liability arising under Title I or Title IV or ERISA or Chapter 43 of the
Code, except such liabilities (when taken as a whole) as will not have a
Materially Adverse Effect on the Borrower and its Subsidiaries taken as a
whole, or upon their financial condition, assets, business, operations,
liabilities or prospects; and
(d) Funding. The Borrower and each ERISA Affiliate has made full and
timely payment of all amounts (i) required to be contributed under the
terms of each Plan and applicable law and (ii) required to be paid as
expenses of each Plan, except where such non-payment would not have a
Materially Adverse Effect. No Plan has an "amount of unfunded benefit
liabilities" (as defined in Section 4001 (a) (18) of ERISA) except as
disclosed on Schedule 6.11. No Plan is subject to a waiver or extension of
the minimum funding requirements under ERISA or the Code, and no request
for such waiver or extension is pending.
Section 6.12 Subsidiaries. As of the Closing Date, the only Subsidiaries
of the Borrower are those listed on Schedule 6.1. All the outstanding shares of
stock of each Subsidiary have been validly issued and are fully paid and
nonassessable and all such outstanding shares, except as noted on such Schedule
6.1, are owned by Borrower or a Wholly Owned Subsidiary of Borrower free of any
Lien or claim.
Section 6.13 Outstanding Debt.
(a) Except as set forth on Schedule 6.13(a) and the Intercompany Loans set
forth on Schedule 6.22 as of the Closing Date and after giving effect to the
transactions contemplated by this Agreement, neither Borrower nor any of its
Subsidiaries has outstanding any Indebtedness; and
(b) There exists no default, and, after giving effect to the transactions
contemplated in this Agreement, there will exist no default under the provisions
of any instrument evidencing such Debt or of any Agreement relating thereto
except as noted on Schedule 6.13(b).
Section 6.14 Conflicting Agreements. Neither Borrower nor any of its
Subsidiaries is a party to any contract or agreement or subject to any charter,
bylaw or other corporate restriction
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which materially and adversely affects its business, property or assets, or
financial condition. Assuming the consummation of the transactions contemplated
by this Agreement, neither the execution or delivery of this Agreement or the
Credit Documents, nor fulfillment of or compliance with the terms and provisions
hereof and thereof, will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any of the properties
or assets of Borrower or any of its Subsidiaries pursuant to, the charter or
By-Laws of Borrower or any of its Subsidiaries, any award of any arbitrator or
any agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which Borrower or any of
its Subsidiaries is subject, and neither Borrower nor any of its Subsidiaries is
a party to, or otherwise subject to any provision contained in, any instrument
evidencing Debt of Borrower or any of its Subsidiaries, any agreement relating
thereto or any other contract or agreement (including its charter) which limits
the amount of, or otherwise imposes restrictions on the incurring of, Debt of
the type to be evidenced by the Notes or contains dividend or redemption
limitations on Common Stock of Borrower, except for this Agreement, Borrower's
Certificate of Incorporation and those matters listed on Schedule 6.14 attached
hereto.
Section 6.15 Environmental Matters.
(a) Except as set forth on Schedule 6.15(a), each of the Borrower and its
Subsidiaries has complied in all material respects (except for instances of
noncompliance that have been resolved prior to the Closing Date) with all
applicable Environmental Laws, including without limitation, compliance with
permits, licenses, standards, schedules and timetables issued pursuant to
Environmental Laws, and is not in violation of, and does not presently have
outstanding any liability under, has not been notified that it is or may be
liable under and does not have knowledge of any liability or potential liability
under any applicable Environmental Law, including without limitation, the
Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"),
the Federal Water Pollution Control Act, as amended ("FWPCA"), the Federal Clean
Air Act, as amended ("FCAA"), and the Toxic Substance Control Act ("TSCA"),
which violation, liability or potential liability could reasonably be expected
to have a Materially Adverse Effect.
(b) Except as set forth on Schedule 6.15(b), neither the Borrower nor any
of its Subsidiaries has received a written request for information under CERCLA
or any analogous state law, or written notice that any such entity has been
identified as a potential responsible party under CERCLA, or any analogous state
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law, nor has any such entity received any written notification that any
Hazardous Substance that it or any of its respective predecessors in interest
has generated, stored, treated, handled, transported, or disposed of, has been
released or is threatened to be released at any site at which any Person intends
to conduct or is conducting a remedial investigation or other action pursuant to
any applicable Environmental Law, or any other Environmental Laws.
(c) Except as set forth on Schedule 6.15(c), each of the Borrower and its
Subsidiaries has obtained all permits, licenses or other authorizations which
are material for the conduct of their respective operations under all applicable
Environmental Laws and with respect to which each such authorization is in full
force and effect.
(d) Except as set forth in Schedule 6.15(d), each of Borrower and its
Subsidiaries complies in all material respects with all laws and regulations
relating to equal employment opportunity and employee safety in all
jurisdictions in which it is presently doing business.
Section 6.16 Possession of Franchises, Licenses, Etc. Each of Borrower and
its Material Subsidiaries possesses all franchises, certificates, licenses,
permits and other authorizations from governmental political subdivisions or
regulatory authorities, free from burdensome restrictions, that are necessary in
any material respect for the ownership, maintenance and operation of its
properties and assets, and neither Borrower nor any of its Subsidiaries is in
violation of any thereof in any material respect.
Section 6.17 Patents, Trademarks, Etc. Except as set forth on Schedule
6.17, each of Borrower and its Material Subsidiaries owns or has the right to
use all patents, trademarks, service marks, trade names, copyrights, licenses,
franchises and other rights, which are necessary for the operation of its
business as presently conducted or proposed to be conducted without any known
conflict with the rights of others, and, in each case, subject to no mortgage,
pledge, lien, lease, encumbrance, charge, security interest, title retention
agreement or option. Each such asset or agreement is in full force and effect,
and the holder thereof has fulfilled and performed all of its obligations with
respect thereto. No event has occurred or exists which permits, or after notice
or lapse of time or both would permit, revocation or termination, or which
materially, adversely affects or in the future may (to the knowledge of any
Executive Officer) materially adversely affect the rights of such holder thereof
with respect thereto. No other license or franchise is known by any Executive
Officer to be necessary to the operations of the business of the Borrower and
its Material Subsidiaries as now conducted or proposed to be
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conducted. To the knowledge of any Executive Officer (i) no product, process,
method, substance, part, piece of equipment or other material presently
contemplated to be sold by or employed by Borrower or any of its Material
Subsidiaries in connection with its business may infringe any patent, trademark,
service mark, trade name, copyright, license or other right owned by any other
Person, (ii) there are no pending or threatened claims or litigation against or
affecting Borrower or any of its Subsidiaries contesting its right to sell or
use any such product, process, method, substance, part, piece of equipment or
other material or (iii) there is no, or there is no pending or proposed, patent,
invention, device, application or principle or any statute, law, rule,
regulation, standard or code which would prevent, inhibit or render obsolete the
production or sale of any products of, or substantially reduce the projected
revenues of, or otherwise materially adversely affect the Borrower or any of its
Material Subsidiaries.
Section 6.18 Governmental Consent. Neither the nature of Borrower or any
of its Subsidiaries nor any of their respective businesses or properties, nor
any relationship between Borrower and any other Person, nor any circumstance in
connection with the execution and delivery of the Credit Documents and the
consummation of the transactions contemplated thereby is such as to require on
behalf of Borrower or any of its Material Subsidiaries any consent, approval or
other action by or any notice to or filing with any court or administrative or
governmental body in connection with the execution and delivery of this
Agreement and the Credit Documents.
Section 6.19 Disclosure. Neither this Agreement nor the Credit Documents
nor any other document, certificate or written statement furnished to Lenders by
or on behalf of Borrower in connection herewith contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact peculiar
to Borrower which materially adversely affects or in the future may (so far as
Borrower can now foresee) materially adversely affect the business, property or
assets, financial condition of Borrower which has not been set forth in this
Agreement or in the Credit Documents, certificates and written statements
furnished to Lenders by or on behalf of Borrower prior to the date hereof in
connection with the transactions contemplated hereby.
Section 6.20 Insurance Coverage. Each property of Borrower or any of its
Subsidiaries is insured within terms acceptable to Lenders for the benefit of
Borrower or a Subsidiary of Borrower in amounts deemed adequate by Borrower's
management and no less than those amounts customary in the industry in which
Borrower and its Subsidiaries operate against risks usually insured against by
Persons operating businesses similar to those
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of Borrower or its Subsidiaries in the localities where such properties are
located.
Section 6.21 Labor Matters. Except as set forth on Schedule 6.21, the
Borrower and the Borrower's Subsidiaries have experienced no strikes, labor
disputes, slow downs or work stoppages due to labor disagreements which have
had, or would reasonably be expected to have, a Materially Adverse Effect, and,
to the best knowledge of Borrower's Executive Officers, there are no such
strikes, disputes, slow downs or work stoppages threatened against any Borrower
or any of Borrower's Subsidiaries. The hours worked and payment made to
employees of the Borrower and Borrower's Subsidiaries have not been in violation
in any material respect of the Fair Labor Standards Act or any other applicable
law dealing with such matters. All payments due from the Borrower and Borrower's
Subsidiaries, or for which any claim may be made against the Consolidated
Companies, on account of wages and employee health and welfare insurance and
other benefits have been paid or accrued as liabilities on the books of the
Borrower and Borrower's Subsidiaries where the failure to pay or accrue such
liabilities would reasonably be expected to have a Materially Adverse Effect.
Section 6.22 Intercompany Loans; Dividends. There are no Intercompany
Loans as of the Closing Date except those set forth on Schedule 6.22. There are
no restrictions on the power of any Consolidated Company to repay any
Intercompany Loan or, except as provided in Section 8.13, to pay dividends on
capital stock.
Section 6.23 Securities Acts. Neither Borrower nor any of its Subsidiaries
nor any agent acting on their behalf has, directly or indirectly, taken or will
take any action which would subject the issuance of the Notes to the provisions
of Section 5 of the Securities Act of 1933, as amended, or to the provisions of
any securities or Blue Sky Law of any applicable jurisdiction.
Section 6.24 Investment Company Act; Holding Company. Neither Borrower nor
any of its Subsidiaries is an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of 1940
or is a "holding company," or a subsidiary or affiliate of a "holding company,"
or a "public utility," within the meaning of the Public Utility Holding Company
Act of 1935, as amended or a "public utility" within the meaning of the Federal
Power Act, as amended.
Section 6.25 Regulation G, Etc. Neither Borrower nor any of its
Subsidiaries nor any agent acting on their behalf has taken or will take any
action which might cause this Agreement or the Notes to violate Regulation G, T,
or X or any other regulation of the Board of Governors of the Federal Reserve
System or to violate the Securities Exchange Act of 1934, and
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each case in effect now or as the same may hereafter be in effect.
Section 6.26 Changes in Financial Condition; Adverse Developments. From
the date of the annual statements described in Section 6.3 hereinabove, to the
date of this Agreement, there has been, and to the date of each Advance there
will be, no change in the properties, assets, liabilities, financial condition,
business operations, affairs or properties of the Borrower and its Subsidiaries
on an consolidated basis from that set forth or reflected in the year-end
financial statement described in Section 6.3, other than changes in the ordinary
course of business, including acquisitions, none of which either in any case or
in the aggregate will have a Materially Adverse Effect.
ARTICLE VII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as it may borrow under this
Agreement or so long as any indebtedness remains outstanding under the Notes
that it will:
Section 7.1 Corporate Existence, Etc. Preserve and maintain, and cause
each of its Subsidiaries to preserve and maintain, its corporate existence, its
material rights, franchises, and licenses, and its material patents and
copyrights (for the scheduled duration thereof), trademarks, trade names, and
service marks, necessary or desirable in the normal conduct of its business, and
its qualification to do business as a foreign corporation in all jurisdictions
where it conducts business or other activities making such qualification
necessary, where the failure to do so would reasonably be expected to have a
Materially Adverse Effect.
Section 7.2 Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply with all Requirements of Law (including, without
limitation, the Environmental Laws, subject to the exception set forth in
Section 7.7(f) where the penalties, claims, fines, and other liabilities
resulting from noncompliance with such Environmental Laws do not involve amounts
in excess of $100,000 in the aggregate) and Contractual Obligations applicable
to or binding on any of them.
Section 7.3 Payment of Taxes and Claims, Etc. Pay, and cause each of its
Subsidiaries to pay, (i) all taxes, assessments and governmental charges imposed
upon it or upon its property, and (ii) all claims (including, without
limitation, claims for labor, materials, supplies or services) which might, if
unpaid,
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become a Lien upon its property, unless, in each case, the validity or amount
thereof is being contested in good faith by appropriate proceedings and adequate
reserves are maintained with respect thereto.
Section 7.4 Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, containing complete and accurate
entries of all their respective financial and business transactions.
Section 7.5 Visitation, Inspection, Etc. Permit, and cause each of its
Subsidiaries to permit, any representative of the Agent or any Lender to visit
and inspect any of its property and to discuss its affairs, finances and
accounts with its officers, all at such reasonable times and as often as the
Agent or such Lender may reasonably request after reasonable prior notice to
Borrower; provided, however, that at any time following the occurrence and
during the continuance of a Default or an Event of Default, no prior notice to
Borrower shall be required and Borrower shall permit, and cause each of its
Subsidiaries to permit, any representative of the Agent or any Lender to also
examine its books and records and to make copies and take extracts therefrom,
and further, provided, that in the event any documents and records are subject
to any contractual confidentiality requirements with any Person, the right to
make copies or extracts therefrom shall be subject to the prior written consent
of the Borrower, which consent will not be unreasonably withheld.
Section 7.6 Insurance; Maintenance of Properties.
(a) Maintain or cause to be maintained with financially sound and
reputable insurers, insurance with respect to its properties and business,
and the properties and business of its Subsidiaries, against loss or
damage of the kinds customarily insured against by reputable companies in
the same or similar businesses, such insurance to be of such types and in
such amounts, including such self-insurance and deductible provisions, as
is customary for such companies under similar circumstances; provided,
however, that in any event Borrower shall use its best efforts to
maintain, or cause to be maintained, insurance in amounts and with
coverages not materially less favorable to any Consolidated Company as in
effect on the date of this Agreement, except where the costs of
maintaining such insurance would, in the judgment of both Borrower and the
Agent, be excessive.
(b) Cause, and cause each of the Consolidated Companies to cause,
all properties used or useful in the conduct of its business to be
maintained and kept
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in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, settlements and improvements thereof, all as in
the judgment of Borrower may be necessary so that the business carried on
in connection therewith may be properly and advantageously conducted at
all times; provided, however, that nothing in this subsection shall
prevent Borrower from discontinuing the operation or maintenance of any
such properties if such discontinuance is, in the judgment of Borrower,
desirable in the conduct of its business or the business of any
Consolidated Company.
Section 7.7 Reporting Covenants. Furnish to the Agent for distribution to
each Lender after the date that the conditions set forth in Section 5.1 are
satisfied or waived in accordance with Section 11.2:
(a) Annual Financial Statements. As soon as available and in any
event within 90 days after the end of each fiscal year of Borrower,
audited financial statements, consisting of balance sheets of the
Consolidated Companies as at the end of such year, presented on a
consolidated basis, and the related statements of income, shareholders'
equity, and cash flows of the Consolidated Companies for such fiscal year,
presented on a consolidated basis, setting forth in each case in
comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by a report thereon of Price Waterhouse,
LLP, or other independent public accountants of comparable recognized
national standing, which such report shall be unqualified as to going
concern and scope of audit and shall state that such financial statements
present fairly in all material respects the financial condition as at the
end of such fiscal year on a consolidated basis, and the results of
operations and statements of cash flows of the Consolidated Companies for
such fiscal year in accordance with GAAP and that the examination by such
accountants in connection with such consolidated financial statements has
been made in accordance with GAAP;
(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the end of each fiscal quarter of Borrower
(other than the fourth fiscal quarter), balance sheets of the Consolidated
Companies as at the end of such quarter presented on a consolidated basis
and the related statements of income, shareholders' equity, and cash flows
of the Consolidated Companies for such fiscal quarter and for the portion
of Borrower's fiscal year
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ended at the end of such quarter, presented on a consolidated basis
setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of Borrower's previous
fiscal year, all in reasonable detail and certified by the Chief Financial
Officer or other authorized financial officer of Borrower acceptable to
the Agent and the Required Lenders that such financial statements fairly
present in all material respects the financial condition of the
Consolidated Companies as at the end of such fiscal quarter on a
consolidated basis, and the results of operations and statements of cash
flows of the Consolidated Companies for such fiscal quarter and such
portion of Borrower's fiscal year, in accordance with GAAP consistently
applied (subject to normal year end audit adjustments and the absence of
certain footnotes);
(c) No Default/Compliance Certificate. Together with the financial
statements required pursuant to subsections (a) and (b) above, a
certificate of the Treasurer, Chief Financial Officer or other authorized
financial officer of Borrower acceptable to the Agent and the Required
Lenders (i) to the effect that, based upon a review of the activities of
the Consolidated Companies and such financial statements during the period
covered thereby, there exists no Event of Default and no Default under
this Agreement, or if there exists an Event of Default or a Default
hereunder, specifying the nature thereof and the proposed response
thereto, and (ii) demonstrating in reasonable detail compliance as at the
end of such fiscal year or such fiscal quarter with the covenants
contained in Section 7.8 and Sections 8.1 through 8.3;
(d) Notice of Default. Promptly after any Executive Officer of
Borrower has notice or knowledge of the occurrence of an Event of Default
or a Default, a certificate of the Chief Financial Officer or principal
accounting officer of Borrower specifying the nature thereof and the
proposed response thereto;
(e) Litigation. Promptly after (i) the occurrence thereof, notice of
the institution of or any adverse development in any action, suit or
proceeding or any governmental investigation or any arbitration, before
any court or arbitrator or any governmental or administrative body, agency
or official, against any Consolidated Company, or any material property
thereof which might have a Materially Adverse Effect, or (ii) actual
knowledge thereof, notice of the threat of any such action, suit,
proceeding, investigation or arbitration, together with any information
and
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documentation relating thereto, as may be requested; notwithstanding
anything to the contrary contained in this subsection, the Borrower shall
promptly advise the Lenders, in writing, of the threatened or actual
filing of any malpractice litigation against Borrower or any of its
Subsidiaries whether or not such litigation is expected to have a
Materially Adverse Effect;
(f) Environmental Notices. Promptly after receipt thereof, notice of
any actual or alleged violation, or notice of any action, claim or request
for information, either judicial or administrative, from any governmental
authority relating to any actual or alleged claim, notice of potential
responsibility under or violation of any Environmental Law, or any actual
or alleged spill, leak, disposal or other release of any waste, petroleum
product, or hazardous waste or Hazardous Substance by any Consolidated
Company which violation, action, claim, request, spill, leak, disposal, or
release could result in penalties, fines, claims or other liabilities to
any Consolidated Company in amounts in excess of $100,000 individually or
when aggregated with other then pending such matters;
(g) ERISA.
(i) Promptly after the occurrence thereof with respect to any
Plan of any Consolidated Company or any ERISA Affiliate thereof, or
any trust established thereunder, notice of (1) a "reportable event"
described in Section 4043 of ERISA and the regulations issued from
time to time thereunder (other than a "reportable event" not subject
to the provisions for 30 day notice to the PBGC under such
regulations), or (2) any other event which could subject any
Consolidated Company to any tax, penalty or liability under Title I
or Title IV of ERISA or Chapter 43 of the Tax Code, or any tax or
penalty resulting from a loss of deduction under Sections 162, 404
or 419 of the Tax Code, where any such taxes, penalties or
liabilities exceed or could exceed $250,000 in the aggregate;
(ii) Promptly after such notice must be provided to the PBGC,
or to a Plan participant, beneficiary or alternative payee, any
notice required under Section 101(d), 302(f)(4), 303, 307,
4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or
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under Section 401(a) (29) or 412 of the Tax Code with respect to any
Plan of any Consolidated Company or any ERISA Affiliate thereof;
(iii) Promptly after receipt, any notice received by any
Consolidated Company or any ERISA Affiliate thereof concerning the
intent of the PBGC or any other governmental authority to terminate
a Plan of such Company or ERISA Affiliate thereof which is subject
to Title IV of ERISA, to impose any liability on such Company or
ERISA Affiliate under Title IV of ERISA or Chapter 43 of the Tax
Code;
(iv) Upon the request of the Agent, promptly upon the filing
thereof with the Internal Revenue Service ("IRS") or the Department
of Labor ("DOL"), a copy of IRS Form 5500 or annual report for each
Plan of any Consolidated Company or ERISA Affiliate thereof which is
subject to Title IV of ERISA;
(v) Upon the request of the Agent, (A) true and complete
copies of any and all documents, government reports and IRS
determination or opinion letters or rulings for any Plan of any
Consolidated Company from the IRS, PBGC or DOL, (B) any reports
filed with the IRS, PBGC or DOL with respect to a Plan of the
Consolidated Companies or any ERISA Affiliate thereof, or (C) a
current statement of withdrawal liability for each Multiemployer
Plan of any Consolidated Company or any ERISA Affiliate thereof;
(h) Liens. Promptly upon any Consolidated Company becoming aware
thereof, notice of the filing of any federal. statutory Lien, tax or other
state or local government Lien or any other Lien affecting their
respective properties, other than those Liens expressly permitted by
Section 8.1;
(i) Public Filings. Etc. Promptly upon the filing thereof or
otherwise becoming available, copies of all financial statements, annual,
quarterly and special reports, proxy statements and notices sent or made
available generally by Borrower to its public security holders, of all
regular and periodic reports and all registration statements and
prospectuses, if any, filed by any of them with any securities exchange,
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and of all press releases and other statements made available generally to
the public containing material developments in the business or financial
condition of Borrower and the other Consolidated Companies;
(j) Special Audit. Promptly upon receipt thereof, copies of all
financial statements of independent public accountants to Borrower in
connection with any special audit of Borrower's consolidated financial
statements;
(k) Trademarks, Labor Disputes, Etc. Promptly upon the existence or
occurrence thereof, notice of the existence or occurrence of (i) failure
of any Consolidated Company to hold in full force and effect those
material trademarks, service marks, patents, trade names, copyrights,
licenses, franchises and similar rights necessary in the normal conduct of
its business, and (ii) any strike, labor dispute, slow down or work
stoppage as described in Section 6.21;
(l) New Subsidiaries. Quarterly furnish the Agent notice of the
formation or acquisition of any material Subsidiary or any other event
resulting in the creation of a new material Subsidiary, including a
description of the assets of such entity, the activities in which it will
be engaged, and such other information as the Agent may request, together
with the other documents required by Section 7.10;
(m) Intercompany Asset Transfers. Promptly upon the occurrence
thereof, notice of the transfer of any assets from Borrower or any
Guarantor to any other Consolidated Company that is not Borrower or a
Guarantor (in any transaction or series of related transactions),
excluding sales or other transfers of assets in the ordinary course of
business where the Asset Value of such assets is less than $1,000,000;
(n) Capitalized Lease Obligations. Promptly upon the occurrence
thereof, notice and a complete description of any Capitalized Lease
Obligations entered into by any Consolidated Company.
(o) Other Information. With reasonable promptness, such other
information about the Consolidated Companies as the Agent may reasonably
request from time to time.
Section 7.8 Financial Covenants.
(a) Fixed Charge Coverage. Maintain a minimum Fixed Charge Coverage
Ratio of at least 2.5:1.0 on the last day of
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each calendar quarter, calculated on a rolling four-quarter basis based on
the Borrower's financial statements for the immediately preceding four
quarters.
(b) Adjusted Funded Debt to Total Capital. Maintain as of the last
day of each fiscal quarter, a maximum ratio of Adjusted Funded Debt to
Total Capital, of 0.60:1.0.
(c) Consolidated Net Worth. Maintain at all times, Consolidated Net
Worth of at least $260,000,000.00 plus sixty percent (60%) of Consolidated
Net Income earned after December 29, 1996 and one hundred percent (100%)
of the net proceeds of any equity issuance since December 29, 1996, tested
quarterly.
Calculations determining Borrower's compliance with the covenants
set forth in Section 7.8(a) and Section 7.8(c) shall be done on a pro
forma basis.
Section 7.9 Notices Under Certain Other Indebtedness. Immediately upon its
receipt thereof, Borrower shall furnish the Agent a copy of any notice received
by it or any other Consolidated Company from the holder(s) of Indebtedness (or
from any trustee, agent, attorney, or other party acting on behalf of such
holder(s)) in an amount which, in the aggregate, exceeds $1,000,000, where such
notice states or claims (i) the existence or occurrence of any default or event
of default with respect to such Indebtedness under the terms of any indenture,
loan or credit Agreement, debenture, note, or other document evidencing or
governing such Indebtedness, or (ii) the existence or occurrence of any event or
condition which requires or permits holder(s) of any Indebtedness to exercise
rights under any Change in Control Provision. Borrower agrees to take such
actions as may be necessary to require the holder(s) of any Indebtedness (or any
trustee or agent acting on their behalf) incurred pursuant to documents executed
or amended and restated after the Closing Date, to furnish copies of all such
notices directly to the Agent simultaneously with the furnishing thereof to
Borrower, and that such requirement may not be altered or rescinded without the
prior written consent of the Agent.
Section 7.10 Additional Guarantors. Promptly after (i) the formation or
acquisition (provided that nothing in this Section shall be deemed to authorize
or prohibit the acquisition of any entity) of any Material Subsidiary not listed
on Schedule 6.1, (ii) the transfer of assets to any Consolidated Company if
notice thereof is required to be given pursuant to Section 7.7(m) and as a
result thereof the recipient of such assets becomes a Material Subsidiary, and
(iii) the occurrence of any other event creating a new Material Subsidiary, the
Borrower shall provide notice thereof to the Agent and, within thirty (30) days
thereafter, Borrower shall deliver to the Agent copies of the
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Articles of Incorporation and bylaws of each such Subsidiary and shall cause
such Subsidiary to execute and deliver (a) a joinder to this Agreement in the
form of Exhibit H attached hereto; (b) a Supplement to Subsidiary Guaranty
Agreement in the form of Exhibit I attached hereto; and (c) a Supplement to
Contribution Agreement in the form of Exhibit J attached hereto, all in the
prescribed form or such other form and substance as may be satisfactory to the
Agent and the Required Lenders. As used in this Section, Material Subsidiary
shall not include a Foreign Subsidiary.
Section 7.11 Fiscal Year. Borrower shall not change its fiscal year now
employed for accounting and reporting purposes without the prior written notice
to the Agent.
Section 7.12 Ownership of Guarantors. Borrower shall maintain at least
eighty percent (80%) ownership of all Guarantors, and shall not decrease its
ownership percentage in each Person which becomes a Guarantor after the date
hereof to less than eighty percent (80)%).
Section 7.13 Subordination of Intercompany Loans. All loans or fees owed
to any Guarantor or any other Consolidated Company, or any Affiliate of any
thereof, shall, at all times, be subordinate to the Loans and the Borrower shall
cause its Subsidiaries and/or Affiliates from time to time to execute and
deliver to the Agent and the Required Lenders subordination agreements in form
and content satisfactory to the Agent and the Required Lenders.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Commitment remains in effect hereunder or any Note shall
remain unpaid, Borrower will not and will not permit any Subsidiary to:
Section 8.1 Liens. Create, incur, assume or suffer to exist any Lien on
any of its property now owned or hereafter acquired to secure any Indebtedness
other than:
(a) Liens existing on the date hereof disclosed on Schedule 8.1;
(b) any Lien on any property securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the acquisition
cost of such property and any refinancing thereof, provided that such Lien
does not extend to any other property;
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and provided, further, that the aggregate amount of all such Liens
outstanding at any time shall not exceed ten percent (10%) of the value of
Borrower's total assets;
(c) Liens for taxes not yet due, and Liens for taxes or Liens
imposed by ERISA which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves are being
maintained;
(d) (i) Statutory Liens of landlords, (ii) existing contractual
Liens of landlords, (iii) future contractual Liens of landlords not to
exceed five percent (5%) of consolidated total assets and (iv) Liens of
carriers, warehousemen, mechanics, materialmen and other Liens imposed by
law created in the ordinary course of business for amounts not yet due or
which are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves are being maintained;
(e) Liens incurred or deposits made in the ordinary course of
business in connection with workers, compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(f) Liens resulting from zoning, easements, and restrictions on the
use of such real estate, or rights reserved or vested in governmental
authority, which do not materially impair the use of such real estate;
(f) Liens arising under ERISA;
(g) Liens consisting of a mortgage encumbering the Headquarters Real
Property and/or the Headquarters Facility to secure a loan extended by
another lender to Borrower or the domestic Subsidiary then owning the
Headquarters Real Property and/or the Headquarters Facility; provided,
however, that immediately thereafter the Term Loans are paid off;
(h) Liens arising in connection with the Lease in favor of the
Lenders; and
(i) Rights reserved or vested in a governmental authority which do
not materially impair the use of such property.
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Section 8.2 Mergers. Acquisitions. Sales. Etc. Merge or consolidate with
any other Person, other than Borrower or another Subsidiary, or sell, lease, or
otherwise dispose of its accounts, property or other assets (including capital
stock of Subsidiaries), or, except for the purchase of capital stock as an
investment in a Subsidiary as permitted by subsections (a) and (b) in Section
8.3, below, purchase, lease or otherwise acquire all or any substantial portion
of the property or assets (including capital stock) of any Person; provided,
however, that the foregoing restrictions on asset sales shall not be applicable
to (i) sales of equipment or other personal property being replaced by other
equipment or other personal property purchased as a capital expenditure item
having comparable values, (ii) sale, lease or transfer of assets of the Borrower
or any Subsidiary to the Borrower or to any other Subsidiary, (iii) sales of
inventory in the ordinary course of business, and (iv) other asset sales
(including the stock of Subsidiaries) where, on the date of execution of a
binding obligation to make such asset sale (provided that if the asset sale is
not consummated within six (6) months of such execution, then on the date of
consummation of such asset sale rather than on the date of execution of such
binding obligation), the Asset Value of asset sales occurring after the Closing
Date, taking into account the Asset Value of the proposed asset sale, would not
exceed ten percent (10%) of Borrower's assets, since the Closing Date; and,
provided further, that the foregoing restrictions on mergers shall not apply to
mergers involving Borrower and another entity, provided Borrower is the
surviving entity, and mergers between a Subsidiary of Borrower and Borrower or
between Subsidiaries of Borrower provided that, in either case, upon
consummation of such mergers, Borrower is in compliance with this Section 8.2;
provided, however, that no transaction pursuant to clauses (i), (ii), (iv) or
the second proviso above shall be permitted if any Default or Event of Default
otherwise exists at the time of such transaction or would otherwise exist as a
result of such transaction. Notwithstanding anything to the contrary set forth
in this Section 8.2, or in Section 8.3 below, or elsewhere in this Agreement,
the Borrower shall be required to obtain the prior written consent of the
Required Lenders, which consent shall not be unreasonably withheld and the
Lenders understand that time is of the essence, for any single acquisition of or
investment in any other Person (including joint ventures and other
non-consolidated entities) for cash consideration in excess of $25,000,000,
unless the Borrower uses its cash reserves to complete such acquisition or
investment and there is no outstanding balance due under the Syndicate Revolving
Loan after giving effect to such acquisition or investment.
Section 8.3 Investments, Loans, Etc. Make or permit to remain outstanding
any loan or advance to, or guarantee, endorse, or otherwise be or become
contingently liable, directly or indirectly in connection with obligations,
stock or dividends of
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any other Person, or hold any Investments in any Person, or otherwise acquire or
hold any Subsidiaries, other than:
(a) Investments in Subsidiaries that are Guarantors under this
Agreement, whether such Subsidiaries are Guarantors on the Closing Date or
become Guarantors in accordance with Section 7.10 after the Closing Date;
provided, however, nothing in this Section 8.3 shall be deemed to
authorize or prohibit an investment pursuant to this subsection (a) in any
entity that is not a Subsidiary and a Guarantor prior to such investment;
(b) Investments in Subsidiaries that are Guarantors under this
Agreement, whether such Subsidiaries are Guarantors on the Closing Date or
become Guarantors in accordance with Section 7.10 after the Closing Date,
for consideration of common stock of Borrower; provided, however, nothing
in this Section 8.3 shall be deemed to authorize or prohibit an investment
pursuant to this subsection (b) in any entity that is not a Subsidiary and
a Guarantor prior to such investment;
(c) Except as permitted in Section 8.2, investments in Subsidiaries
which are not Guarantors, joint ventures and other non-consolidated
entities existing as of the date of this Agreement and as described on
Schedule 8.3(c).
(d) Guarantee of the Lease and the notes to be issued in connection
therewith not to exceed eighty-seven percent (87%) of the amount financed
in connection with the acquisition, buildout and equipping of the New York
Restaurant;
(e) Advances or guaranties of advances to officers, employees and
celebrities in the ordinary course of business of less than $25,000,000 in
the aggregate, including those existing on the Closing Date;
(f) Guarantee of mortgage loan refinancing the Headquarters Real
Property and/or the Headquarters Facility by another lender to the
domestic Subsidiary of the Borrower owning the Headquarters Real Property;
(g) Other investments or loans of less than $1,000,000;
(h) Direct obligations of the United States or any agency thereof,
or obligations guaranteed by the United States or any agency thereof, in
each case
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supported by the full faith and credit of the United States and maturing
within one year from the date of creation thereof;
(i) Commercial paper, bankers acceptances or corporate obligations
maturing within one year from the date of creation thereof having a rating
at the time as of which any determination is made of P-1 (or higher)
according to Moody's or as A-1 (or higher) according to Standard & Poor's
corporation or the equivalent thereof if by another nationally recognized
credit rating agency;
(j) Time deposits maturing within one year from the date of creation
thereof, including certificates of deposit issued by any Lender and any
office located in the United States of any bank or trust company which is
organized under the laws of the United States or any state thereof and has
total assets aggregating at least $500,000,000, including without
limitation, any such deposits in Eurodollars issued by a foreign branch of
any such bank or trust company;
(k) Investments made by Plans; and
(l) Intercompany Loans.
Section 8.4 Sale and Leaseback Transactions. Sell or transfer any
property, real or personal, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which any Consolidated
Company intends to use for substantially the same purpose or purposes as the
property being sold or transferred.
Section 8.5 Transactions with Affiliates.
(a) Enter into any material transaction or series of related
transactions which in the aggregate would be material, whether or not in
the ordinary course of business, with any Affiliate of any Consolidated
Company (but excluding any Affiliate which is also a Consolidated
Company), other than on terms and conditions substantially as favorable to
such Consolidated Company as would be obtained by such Consolidated
Company at the time in a comparable arm's length transaction with a Person
other than an Affiliate.
(b) Convey or transfer to any other Person (including any other
Consolidated Company) any real property, buildings, or fixtures used in
the manufacturing or production operations of any Consolidated Company, or
convey or transfer to any other Consolidated Company any other
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assets (excluding conveyances or transfers in the ordinary course of
business) if at the time of such conveyance or transfer any Default or
Event of Default exists or would exist as a result of such conveyance or
transfer.
Section 8.6 Optional Prepayments. Directly or indirectly, prepay,
purchase, redeem, retire, defease or otherwise acquire, or make any optional
payment on account of any principal of, interest on, or premium payable in
connection with the optional prepayment, redemption or retirement of, any of its
Indebtedness, or give a notice of redemption with respect to any such
Indebtedness, or make any payment in violation of the subordination provisions
of any Subordinated Debt, except with respect to (i) the Obligations under this
Agreement and the Notes, (ii) prepayments of Indebtedness outstanding pursuant
to revolving credit, overdraft and line of credit facilities set forth in
Schedule 6.13(a), and (iii) trade payables incurred in the ordinary course of
business.
Section 8.7 Changes in Business. Enter into any business other than
entertainment and related industries, leisure industry, restaurant and related
industries, retail industry and similar industries and businesses.
Section 8.8 ERISA. Take or fail to take any action with respect to any
Plan of any Consolidated Company or, with respect to its ERISA Affiliates, any
Plans which are subject to Title IV of ERISA or to continuation health care
requirements for group health plans under the Tax Code, including without
limitation (i) establishing any such Plan, (ii) amending any such Plan (except
where required to comply with applicable law), (iii) terminating or withdrawing
from any such Plan, or (iv) incurring an amount of unfunded benefit liabilities,
as defined in Section 4001 (a)(18) of ERISA, or any withdrawal liability under
Title IV of ERISA with respect to any such Plan, without first obtaining the
written approval of the Agent and the Required Lenders, where such actions or
failures could result in a Materially Adverse Effect.
Section 8.9 Additional Negative Pledges. Create or otherwise cause or
suffer to exist or become effective, directly or indirectly, any prohibition or
restriction on the creation or existence of any Lien upon any asset of any
Consolidated Company, other than pursuant to (i) the terms of any agreement,
instrument or other document pursuant to which any Indebtedness incurred in
connection with the Liens permitted by Section 8.1(b) is incurred by any
Consolidated Company, so long as such prohibition or restriction applies only to
the property or asset being financed by such Indebtedness, and (ii) any
requirement of applicable law or any regulatory authority having jurisdiction
over any of the Consolidated Companies.
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Section 8.10 Limitation on Payment Restrictions Affecting Consolidated
Companies. Create or otherwise cause or suffer to exist or become effective, any
consensual encumbrance or restriction on the ability of any Consolidated Company
to (i) pay dividends or make any other distributions on such Consolidated
Company's stock, or (ii) pay any indebtedness owed to Borrower or any other
Consolidated Company, or (iii) transfer any of its property or assets to
Borrower or any other Consolidated Company, except any consensual encumbrance or
restriction existing under the Credit Documents.
Section 8.11 Use of Proceeds. Use the proceeds of the Loans for any
purpose except those set forth herein.
Section 8.12 Subsidiary Indebtedness. Except for Intercompany Loans,
Borrower shall not permit its Subsidiaries to incur any indebtedness in excess
of $15,000,000.00 in the aggregate outstanding at any one time without the prior
written consent of the Agent and the Required Lenders.
Section 8.13 Dividends. Borrower shall not, without the prior written
consent of the Agent and the Lenders, pay dividends in excess of thirty percent
(30%) of its taxable income in any fiscal year.
ARTICLE IX
EVENTS OF DEFAULT
Upon the occurrence and during the continuance of any of the following
specified events (each an "Event of Default"):
Section 9.1 Payments. Borrower shall fail to make promptly when due
(including, without limitation, by mandatory prepayment) any principal payment
with respect to the Loans, or Borrower shall fail to make (i) within three (3)
Business Days after the due date therefore or (ii) within one (1) Business Day
after notice of such failure by Agent, whichever is later, any payment of
interest, fee or other amount payable hereunder;
Section 9.2 Covenants Without Notice. Borrower shall fail to observe or
perform any covenant or Agreement contained in Sections 7.8, 8.1 (relating to
consensual liens), 8.2 through 8.13;
Section 9.3 Other Covenants. Borrower shall fail to observe or perform any
covenant or Agreement contained in this Agreement, other than those referred to
in Sections 9.1 and 9.2, and, if capable of being remedied, such failure shall
remain unremedied for 30 days after the earlier of (i) Borrower's
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obtaining knowledge thereof, or (ii) written notice thereof shall have been
given to Borrower by Agent or any Lender;
Section 9.4 Representations. Any representation or warranty made or deemed
to be made by Borrower or any other Credit Party or by any of its officers under
this Agreement or any other Credit Document (including the Schedules attached
thereto), or any certificate or other document submitted to the Agent or the
Lenders by any such Person pursuant to the terms of this Agreement or any other
Credit Document, shall be incorrect in any material respect when made or deemed
to be made or submitted;
Section 9.5 Non-Payments of Other Indebtedness. Any Consolidated Company
shall fail to make when due (whether at stated maturity, by acceleration, on
demand or otherwise, and after giving effect to any applicable grace period) any
payment of principal of or interest on any Indebtedness in excess of $5,000,000
(other than the Obligations);
Section 9.6 Defaults Under Other Agreements. Any Consolidated Company
shall fail to observe or perform within any applicable grace period any
covenants or agreements (other than those referenced in Section 9.5) contained
in any agreements or instruments relating to any of its Indebtedness exceeding
$5,000,000 in the aggregate, or any other event shall occur if the effect of
such failure or other event is to accelerate, or to permit the holder of such
Indebtedness or any other Person to accelerate, the maturity of such
Indebtedness; or any such Indebtedness shall be required to be prepaid (other
than by a regularly scheduled required prepayment) in whole or in part prior to
its stated maturity;
Section 9.7 Bankruptcy. Borrower or any other Consolidated Company shall
commence a voluntary case concerning itself under the Bankruptcy Code or an
involuntary case for bankruptcy is commenced against any Consolidated Company
and the petition is not dismissed within 60 days, after commencement of the
case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or any substantial part of the property of any Consolidated
Company; or any Consolidated Company commences proceedings of its own bankruptcy
or to be granted a suspension of payments or any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction, whether now or
hereafter in effect, relating to any Consolidated Company; or there is commenced
against any Consolidated Company any such proceeding which remains undismissed
for a Period of 60 days; or any Consolidated Company is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or any Consolidated Company suffers any appointment of
any custodian
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or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or any Consolidated Company
makes a general assignment for the benefit of creditors; or any Consolidated
Company shall fail to pay, or shall state that it is unable to pay, or shall be
unable to pay, its debts generally as they become due; or any Consolidated
Company shall call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or any Consolidated Company shall by any
act or failure to act indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate action is taken by any Consolidated
Company for the purpose of effecting any of the foregoing;
Section 9.8 ERISA. A Plan of a Consolidated Company or a Plan subject to
Title IV of ERISA of any of its ERISA Affiliates:
(a) shall fail to be funded in accordance with the minimum funding
standard required by applicable law, the terms of such Plan, Section 412
of the Tax Code or Section 302 of ERISA for any plan year or a waiver of
such standard is sought or granted with respect to such Plan under
applicable law, the terms of such Plan or Section 412 of the Tax Code or
Section 303 of ERISA; or
(b) is being, or has been, terminated or the subject of termination
proceedings under applicable law or the terms of such Plan; or
(c) shall require a Consolidated Company to provide security under
applicable law, the terms of such Plan, Section 401 or 412 of the Tax Code
or Section 306 or 307 of ERISA; or
(d) results in a liability to a Consolidated Company under
applicable law, the terms of such Plan, or Title IV of ERISA;
and there shall result from any such failure, waiver, termination or other event
a liability to the PBGC or a Plan that would have a Materially Adverse Effect;
Section 9.9 Money Judgment. A judgment or order for the payment of money
in excess of $5,000,000 or otherwise having a Materially Adverse Effect shall be
rendered against Borrower or any other Consolidated Company and such judgment or
order shall continue unsatisfied (in the case of a money judgment) and in effect
for a period of 30 days during which execution shall not be effectively stayed
or deferred (whether by action of a court, by Agreement or otherwise);
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Section 9.10 Ownership of Credit Parties. If Borrower shall at any time
fail to own and control the required percentage of the voting stock of any
Guarantor, either directly or indirectly through a wholly-owned Subsidiary of
Borrower;
Section 9.11 Change in Control of Borrower.
(a) Any "person" or "group" (within the meaning of Sections 13(d)
and 14(d)(2) of the Exchange Act) shall become the "beneficial owner(s)"
(as defined in said Rule 13d-3) of more than forty percent (40%) of the
shares of the outstanding common stock of Borrower entitled to vote for
members of Borrower's board of directors; or
(b) any event or condition shall occur or exist which, pursuant to
the terms of any change in control provision, requires or permits the
holder(s) of Indebtedness of any Consolidated Company to require that such
Indebtedness be redeemed, repurchased, defeased, prepaid or repaid, in
whole or in part, or the maturity of such Indebtedness to be accelerated
in any respect;
Section 9.12 Default Under Other Credit Documents. There shall exist or
occur any "Event of Default" as provided under the terms of any other Credit
Document, or any Credit Document ceases to be in full force and effect or the
validity or enforceability thereof is disaffirmed by or on behalf of Borrower or
any other Credit Party, or any Credit Party seeks to cancel or terminate any
Credit Documents or to limit its liability thereunder, or at any time it is or
becomes unlawful for Borrower or any other Credit Party to perform or comply
with its obligations under any Credit Document, or the obligations of Borrower
or any other Credit Party under any Credit Document are not or cease to be
legal, valid and binding on Borrower or any such Credit Party;
Section 9.13 Attachments. An attachment or similar action shall be made on
or taken against any of the assets of any Consolidated Company and is not
removed, suspended or enjoined within 30 days of the same being made or any
suspension or injunction being lifted;
Section 9.14 Default Under the Lease. Any default shall occur under the
Lease or the other documents executed in connection therewith and remain uncured
beyond any applicable grace period;
then, and in any such event, and at any time thereafter if any Event of Default
shall then be continuing, the Agent may, and upon the written or telex request
of the Required Lenders, shall, by written notice to Borrower, take any or all
of the following actions, without prejudice to the rights of the Agent, any
Lender
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or the holder of any Note to enforce its claims against Borrower or any other
Credit Party: (i) declare all Commitments terminated, whereupon the pro rata
Commitments of each Lender shall terminate immediately and any Commitment Fee
shall forthwith become due and payable without any other notice of any kind; and
(ii) declare the principal of and any accrued interest on the Loans, and all
other obligations owing hereunder, to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by Borrower; provided, that, if an
Event of Default specified in Section 9.7 shall occur, the result which would
occur upon the giving of written notice by the Agent to any Credit Party, as
specified in clauses (i) and (ii) above, shall occur automatically without the
giving of any such notice.
ARTICLE X
THE AGENT
Section 10.1 Appointment of Agent. Each Lender hereby designates SunTrust
Bank, Central Florida, National Association as Agent ("Agent") to administer all
matters concerning the Loans and to act as herein specified. Each Lender hereby
irrevocably authorizes, and each holder of any Note by the acceptance of a Note
shall be deemed irrevocably to authorize, the Agent to take such actions on its
behalf under the provisions of this Agreement, the other Credit Documents, and
all other instruments and agreements referred to herein or therein, and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The Agent
may perform any of its duties hereunder by or through their agents or employees.
The provisions of this Section 10.1 are solely for the benefit of the Agent, and
Borrower and the other Consolidated Companies shall not have any rights as third
party beneficiaries of any of the provisions hereof. In performing its functions
and duties under this Agreement, the Agent shall act solely as agent of the
Lenders and does not assume and shall not be deemed to have assumed any
obligations towards or relationship of agency or trust with or for the Borrower
and the other Consolidated Companies.
Section 10.2 Nature of Duties of Agent. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and the
other Credit Documents. Neither the Agent nor any of its respective officers,
directors, employees or agents shall be liable for any action taken or omitted
by it as such hereunder or in connection herewith, unless caused by its gross
negligence or willful misconduct. The duties of the Agent shall be ministerial
and administrative in nature;
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the Agent shall not have by reason of this Agreement a fiduciary relationship in
respect of any Lender; and nothing in this Agreement, express or implied, is
intended to or shall be so construed as to impose upon the Agent any
obligations, in respect of this Agreement or the other Credit Documents except
as expressly set forth herein.
Section 10.3 Lack of Reliance on the Agent.
(a) Independently and without reliance upon the Agent, each Lender,
to the extent it deems appropriate, has made and shall continue to make
(i) its own independent investigation of the financial condition and
affairs of the Credit Parties in connection with the taking or not taking
of any action in connection herewith, and (ii) its own appraisal of the
creditworthiness of the Credit Parties, and, except as expressly provided
in this Agreement, the Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its
possession before the making of the Loans or at any time or times
thereafter.
(b) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or
in any document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness, validity,
enforceability, collectability, priority or sufficiency of this Agreement,
the Notes, the Guaranty Agreements, or any other documents contemplated
hereby or thereby, or the financial condition of the Credit Parties, or be
required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this
Agreement, the Notes, the Guaranty Agreements, or the other documents
contemplated hereby or thereby, or the financial condition of the Credit
Parties, or the existence or possible existence of any Default or Event of
Default; provided, however, to the extent that the Agent has been advised
that a Lender has not received any information delivered to the Agent
pursuant to Section 7.7, the Agent shall deliver or cause to be delivered
such information to such Lender.
Section 10.4 Certain Rights of the Agent. If the Agent shall request
instructions from the Required Lenders with respect to any action or actions
(including the failure to act) in connection with this Agreement, the Agent
shall be entitled to refrain from such act or taking such act, unless and until
the
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Agent shall have received instructions from the Required Lenders; and the Agent
shall not incur liability in any Person by reason of so refraining. Without
limiting the foregoing, no Lender shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining from acting
hereunder in accordance with the instructions of the Required Lenders.
Section 10.5 Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cable gram,
radiogram, order or other documentary, teletransmission or telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person. The Agent may consult with legal counsel (including
counsel for any Credit Party), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
Section 10.6 Indemnification of Agent. To the extent the Agent is not
reimbursed and indemnified by the Credit Parties, each Lender will reimburse and
indemnify the Agent, ratably according to the respective amounts of the Loans
outstanding under all Facilities (or if no amounts are outstanding, ratably in
accordance with the Total Commitments), in either case, for and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent in performing its duties hereunder, in any way
relating to or arising out of this Agreement or the other Credit Documents;
provided that no Lender shall be liable to the Agent for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct.
Section 10.7 The Agent in its Individual Capacity. With respect to its
obligation to lend under this Agreement, the Loans made by it and the Notes
issued to it, the Agent shall have the same rights and powers hereunder as any
other Lender or holder of a Note and may exercise the same as though it were not
performing the duties specified herein; and the terms "Lenders", "Required
Lenders", "holders of Notes", or any similar terms shall, unless the context
clearly otherwise indicates, include the Agent in its individual capacity. The
Agent may accept deposits from, lend money to, and generally engage in any kind
of banking, trust, financial advisory or other business with the Consolidated
Companies or any affiliate of the Consolidated Companies as if it were not
performing the duties specified herein, and may accept fees and other
consideration from the Consolidated Companies for
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services in connection with this Agreement and otherwise without having to
account for the same to the Lenders.
Section 10.8 Holders of Notes. The Agent may deem and treat the payee of
any Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with the
Agent. Any request, authority or consent of any Person who, at the time of
making such request or giving such authority or consent, is the holder of any
Note shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
Section 10.9 Successor Agent.
(a) The Agent may resign at any time by giving written notice
thereof to the Lenders and Borrower and may be removed at any time with or
without cause by the Required Lenders; provided, however, the Agent may
not resign or be removed until a successor Agent has been appointed and
shall have accepted such appointment. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint a successor
Agent subject to Borrower's prior written approval, which approval will
not be unreasonably withheld. If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation or the Required Lenders' removal of the retiring Agent, then
the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent subject to Borrower's prior written approval, which approval will
not be unreasonably withheld, which successor Agent shall be a bank which
maintains an office in the United States, or a commercial bank organized
under the laws of the United States of America or any State thereof, or
any Affiliate of such bank, having a combined capital and surplus of at
least $100,000,000. If at any time SunTrust Bank, Central Florida,
National Association is removed as a Lender, SunTrust Bank, Central
Florida, National Association, shall simultaneously resign as Agent.
(b) Upon the acceptance of any appointment as the Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this
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Article K shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was an Agent under this Agreement.
ARTICLE XI
Miscellaneous
Section 11.1 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, telecopy or
similar teletransmission or writing) and shall be given to such party at its
address or applicable teletransmission number set forth on the signature pages
hereof, or such other address or applicable teletransmission number as such
party may hereafter specify by notice to the Agent and Borrower. Each such
notice, request or other communication shall be effective (i) if given by telex,
when such telex is transmitted to the telex number specified in this Section
11.1 and the appropriate answerback is received, (ii) if given by mail, 72 hours
after such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid, (iii) if given by telecopy, when such telecopy
is transmitted to the telecopy number specified in this Section and the
appropriate confirmation is received, or (iv) if given by any other means
(including, without limitation, by air courier), when delivered or received at
the address specified in this Section; Provided that notices to the Agent shall
not be effective until received.
Section 11.2 Amendments, Etc. No amendment or waiver of any provision of
this Agreement or the other Credit Documents, nor consent to any departure by
any Credit Party therefrom, shall in any event be effective unless the same
shall be in writing and signed by the Required Lenders, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided that no amendment, waiver or consent shall,
unless in writing and signed by all the Lenders, do any of the following: (i)
waive any of the conditions specified in Section 5.1 or Section 5.2, (ii)
increase the Commitments or other contractual obligations to Borrower under this
Agreement, (iii) reduce the principal of, or interest on, the Notes or any fees
hereunder, (iv) postpone any date fixed for the payment in respect of principal
of, or interest on, the Notes or any fees hereunder, (v) change the percentage
of the Commitments or of the aggregate unpaid principal amount of the Notes, or
the number or identity of Lenders which shall be required for the Lenders or any
of them to take any action hereunder, (vi) release any Guarantor from its
obligations under any Guaranty Agreements, (vii) modify the definition of
"Required Lenders," or (viii) modify this Section 11.2. Notwithstanding the
foregoing, no amendment, waiver or consent shall, unless in
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writing and signed by the Agent in addition to the Lenders required hereinabove
to take such action, affect the rights or duties of the Agent under this
Agreement or under any other Credit Document. Lenders agree to use all
reasonable efforts to respond to a request for a waiver or consent within the
time requested by the Agent.
Section 11.3 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Agent, any Lender or any holder of a Note in exercising any right or
remedy hereunder or under any other Credit Document, and no course of dealing
between any Credit Party and the Agent, any Lender or the holder of any Note
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right or remedy hereunder or under any other Credit Document preclude any
other or further exercise thereof or the exercise of any other right or remedy
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Agent, any
Lender or the holder of any Note would otherwise have. No notice to or demand on
any Credit Party not required hereunder or under any other Credit Document in
any case shall entitle any Credit Party to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the
Agent, the Lenders or the holder of any Note to any other or further action in
any circumstances without notice or demand.
Section 11.4 Payment of Expenses, Etc. Borrower shall:
(a) whether or not the transactions hereby contemplated are
consummated, pay all reasonable, out-of-pocket costs and expenses of the
Agent in the administration (both before and after the execution hereof
and including reasonable expenses actually incurred relating to advice of
counsel as to the rights and duties of the Agent and the Lenders with
respect thereto) of, and in connection with the preparation, execution and
delivery of, preservation of rights under, enforcement of, and, after a
Default or Event of Default, refinancing, renegotiation or restructuring
of, this Agreement and the other Credit Documents and the documents and
instruments referred to therein, and any amendment, waiver or consent
relating thereto (including, without limitation, the reasonable fees
actually incurred and disbursements of counsel for the Agent), and in the
case of enforcement of this Agreement or any Credit Document after an
Event of Default, all such reasonable, out-of-pocket costs and expenses
(including, without limitation, the reasonable fees actually incurred and
disbursements of counsel in the amount as provided in the Fee Letter,
including
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without limitation in-house attorneys' fees), for any of the Lenders;
(b) subject, in the case of certain Taxes, to the applicable
provisions of Section 4.7(b), pay and hold each of the Lenders harmless
from and against any and all present and future stamp, documentary, and
other similar Taxes with respect to this Agreement, the Notes and any
other Credit Documents, any collateral described therein, or any payments
due thereunder, and save each Lender harmless from and against any and all
liabilities with respect to or resulting from any delay or omission to pay
such Taxes; and
(c) indemnify the Agent and each Lender, and their respective
officers, directors, employees, representatives and agents from, and hold
each of them harmless against, any and all costs, losses, liabilities,
claims, damages or expenses incurred by any of them (whether or not any of
them is designated a party thereto) (an "Indemnitee") arising out of or by
reason of any investigation, litigation or other proceeding related to any
actual or proposed use of the proceeds of any of the Loans or any Credit
Party's entering into and performing of the Agreement, the Notes, or the
other Credit Documents, including, without limitation, the reasonable fees
actually incurred and disbursements of counsel (including foreign counsel)
incurred in connection with any such investigation, litigation or other
proceeding; provided, however, Borrower shall not be obligated to
indemnify any Indemnitee for any of the foregoing arising out of such
Indemnitee's gross negligence or willful misconduct;
(d) without limiting the indemnities set forth in subsection (c)
above, indemnify each Indemnitee for any and all expenses and costs
(including without limitation, remedial, removal, response, abatement,
cleanup, investigative, closure and monitoring costs), losses, claims
(including claims for contribution or indemnity and including the cost of
investigating or defending any claim and whether or not such claim is
ultimately defeated, and whether such claim arose before, during or after
any Credit Party's ownership, operation, possession or control of its
business, property or facilities or before, on or after the date hereof,
and including also any amounts paid incidental to any compromise or
settlement by the Indemnitee or Indemnitees to the holders of any such
claim), lawsuits, liabilities, obligations, actions, judgments, suits,
disbursements, encumbrances, liens, damages (including without limitation
damages for contamination
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or destruction of natural resources), penalties and fines of any kind or
nature whatsoever (including without limitation in all cases the
reasonable fees actually incurred, other charges and disbursements of
counsel in connection therewith) incurred, suffered or sustained by that
Indemnitee based upon, arising under or relating to Environmental Laws
based on, arising out of or relating to in whole or in part, the existence
or exercise of any rights or remedies by any Indemnitee under this
Agreement, any other Credit Document or any related documents (but
excluding those incurred, suffered or sustained by any Indemnitee as a
result of any action taken by or on behalf of the Lenders with respect to
any Subsidiary of Borrower (or the assets thereof) owned or controlled by
the Lenders); provided, however, Borrower shall not be obligated to
indemnify any Indemnitee for any of the foregoing arising out of such
Indemnitee's gross negligence or wilful misconduct.
If and to the extent that the obligations of Borrower under this Section 11.4
are unenforceable for any reason, Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.
Section 11.5 Right of Setoff. In addition to and not in limitation of all
rights of offset that any Lender or other holder of a Note may have under
applicable law, each Lender or other holder of a Note shall, upon the occurrence
of any Event of Default and whether or not such Lender or such holder has made
any demand or any Credit Party's obligations are matured, have the right to
appropriate and apply to the payment of any Credit Party's obligations hereunder
and under the other Credit Documents, all deposits of any Credit Party (general
or special, time or demand, provisional or final) then or thereafter held by and
other indebtedness or property then or thereafter owing by such Lender or other
holder to any Credit Party, whether or not related to this Agreement or any
transaction hereunder. Each Lender shall promptly notify Borrower of any offset
hereunder.
Section 11.6 Benefit of Agreement.
(a) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto, provided that Borrower may not assign or transfer any of its
interest hereunder without the prior written consent of all the Lenders.
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(b) Any Lender may make, carry or transfer Loans at, to or for the
account of, any of its branch offices or the office of an Affiliate of
such Lender.
(c) Each Lender may assign all or a portion of its interests, rights
and obligations under this Agreement (including all or a portion of any of
its Commitments and the Loans at the time owing to it and the Notes held
by it) to any Eligible Assignee; provided, however, that (i) the Agent and
Borrower must give their prior written consent to such assignment (which
consent shall not be unreasonably withheld or delayed) unless such
assignment is to an Affiliate of the assigning Lender, (ii) the amount of
the Commitments, in the case of the Revolving Loan Commitments and the
Term Loan Commitments, or Loans, in the case of assignment of Loans, of
the assigning Lender subject to each assignment (determined as of the date
the assignment and acceptance with respect to such assignment is delivered
to the Agent) shall not be less than $10,000,000, (iii) the parties to
each such assignment shall execute and deliver to the Agent an Assignment
and Acceptance, together with a Note or Notes subject to such assignment
and a processing and recordation fee of $3,500 payable by the Assignee.
Borrower shall not be responsible for such processing and recordation fee
or any costs or expenses incurred by any Lender or the Agent in connection
with such assignment. From and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least five (5)
Business Days after the execution thereof, the assignee thereunder shall
be a party hereto and to the extent of the interest assigned by such
Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement. Within five (5) Business Days after receipt of the
notice and the Assignment and Acceptance, Borrower, at its own expense,
shall execute and deliver to the Agent, in exchange for the surrendered
Note or Notes, a new Note or Notes to the order of such assignee in a
principal amount equal to the applicable Commitments or Loans assumed by
it pursuant to such Assignment and Acceptance and new Note or Notes to the
assigning Lender in the amount of its retained Commitment or Commitments
or amount of its retained Loans. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the date of the surrendered Note
or Notes which they replace, and shall otherwise be in substantially the
form attached hereto.
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(d) Each Lender may, without the consent of Borrower and the Agent,
sell participations to one or more banks or other entities in all or a
portion of its rights and obligations under this Agreement (including all
or a portion of its Commitments in the Loans owing to it and the Notes
held by it), provided, however, that (i) such Lender's obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) the participating bank or other entity shall not be
entitled to the benefit (except through its selling Lender) of the cost
protection provisions contained in Article IV of this Agreement, and (iv)
Borrower and the Agent and other Lenders shall continue to deal solely and
directly with each Lender in connection with such Lender's rights and
obligations under this Agreement and the other Credit Documents, and such
Lender shall retain the sole right to enforce the obligations of Borrower
relating to the Loans and to approve any amendment, modification or waiver
of any provisions of this Agreement. Any Lender selling a participation
hereunder shall provide prompt written notice to Borrower and Agent of the
name of such participant.
(e) Any Lender or participant may, in connection with the assignment
or participation or proposed assignment or participation, pursuant to this
Section, disclose to the assignee or participant or proposed assignee or
participant any information relating to Borrower or the other Consolidated
Companies furnished to such Lender by or on behalf of Borrower or any
other Consolidated Company. With respect to any disclosure of
confidential, non-public, proprietary information, such proposed assignee
or participant shall agree to use the information only for the purpose of
making any necessary credit judgments with respect to this credit facility
and not to use the information in any manner prohibited by any law,
including without limitation, the securities laws of the United States.
The proposed participant or assignee shall agree in writing, a copy of
which shall be furnished to Borrower, not to disclose any of such
information except (i) to directors, employees, auditors or counsel to
whom it is necessary to show such information, each of whom shall be
informed of the confidential nature of the information, (ii) in any
statement or testimony pursuant to a subpoena or order by any court,
governmental body or other agency asserting jurisdiction over such entity,
or as otherwise required by law (provided prior notice is given to
Borrower and the Agent unless otherwise prohibited by the subpoena, order
or law), and (iii) upon the request or demand of
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any regulatory agency or authority with proper jurisdiction. The proposed
participant or assignee shall further agree to return all documents or
other written material and copies thereof received from any Lender, the
Agent or Borrower relating to such confidential information unless
otherwise properly disposed of by such entity.
(f) Any Lender may at any time assign all or any portion of its
rights in this Agreement and the Notes issued to it to a Federal Reserve
Bank; provided that no such assignment shall release the Lender from any
of its obligations hereunder.
(g) If (i) any Taxes referred to in Section 4.7(b) have been levied
or imposed so as to require withholdings or deductions by Borrower and
payment by Borrower of additional amounts to any Lender as a result
thereof, (ii) any Lender shall make demand for payment of any material
additional amounts as compensation for increased costs pursuant to Section
4.10 or for its reduced rate of return pursuant to Section 4.16, or (iii)
any Lender shall decline to consent to a modification or waiver of the
terms of this Agreement or the other Credit Documents requested by
Borrower, then and in such event, upon request from Borrower delivered to
such Lender and the Agent, such Lender shall assign, in accordance with
the provisions of Section 11.6(c), all of its rights and obligations under
this Agreement and the other Credit Documents to another Lender or an
Eligible Assignee selected by Borrower, in consideration for the payment
by such assignee to the Lender of the principal of, and interest on, the
outstanding Loans accrued to the date of such assignment, and the
assumption of such Lender's Total Commitment hereunder, together with any
and all other amounts owing to such Lender under any provisions of this
Agreement or the other Credit Documents accrued to the date of such
assignment.
Section. 11.7 Governing Law; Submission to Jurisdiction: Waiver of Jury
Trial.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER AND UNDER THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF) OF THE STATE OF FLORIDA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT,
THE NOTES OR ANY OTHER CREDIT
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DOCUMENT MAY BE BROUGHT IN THE CIRCUIT COURT OF ORANGE COUNTY, FLORIDA, OR
ANY OTHER COURT OF THE STATE OF FLORIDA OR OF THE UNITED STATES OF AMERICA
FOR THE MIDDLE DISTRICT OF FLORIDA, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, BORROWER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY IN
RESPECT OF ANY DISPUTE ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT,
OR ANY OTHER CREDIT DOCUMENT OR ANY DOCUMENT RELATED THERETO.
(c) BORROWER AND GUARANTORS IRREVOCABLY CONSENT TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO BORROWER AND/OR EACH SUCH GUARANTOR AT ITS SAID
ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE
BORROWER AND THE GUARANTORS HEREBY IRREVOCABLY WAIVE ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION EITHER OF THEM MAY HAVE TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS IN RESPECT OF THIS AGREEMENT, ANY OTHER
CREDIT DOCUMENT OR ANY DOCUMENT RELATED THERETO.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, ANY LENDER,
ANY HOLDER OF A NOTE OR ANY CREDIT PARTY TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST BORROWER IN ANY OTHER JURISDICTION.
Section 11.8 Independent Nature of Lenders' Rights. The amounts payable at
any time hereunder to each Lender shall be a separate and independent debt, and
each Lender shall be entitled to protect and enforce its rights pursuant to this
Agreement and its Notes, and it shall not be necessary for any other Lender to
be joined as an additional party in any proceeding for such purpose.
Section 11.9 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and
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delivered shall be an original, but all of which shall together constitute one
and the same instrument.
Section 11.10 Effectiveness; Survival.
(a) This Agreement shall become effective on the date (the
"Effective Date") on which all of the parties hereto shall have signed a
counterpart hereof (whether the same or different counterparts) and shall
have delivered the same to the Agent pursuant to Section 5.1 or, in the
case of the Lenders, shall have given to the Agent written or telex notice
(actually received) that the same has been signed and mailed to them.
(b) The obligations of Borrower under Sections 4.7(b), 4.8, 4.10,
4.12, 4.16, and 11.4 hereof shall survive for one hundred twenty (120)
days after the payment in full of the Notes after the Final Maturity Date.
All representations and warranties made herein, in the certificates,
reports, notices, and other documents delivered pursuant to this Agreement
shall survive the execution and delivery of this Agreement, the other
Credit Documents, and such other agreements and documents, the making of
the Loans hereunder, and the execution and delivery of the Notes.
Section 11.11 Severability. In case any provision in or obligation under
this Agreement or the other Credit Documents shall be invalid, illegal or
unenforceable, in whole or in part, in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
Section 11.12 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitation of, another covenant, shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
Section 11.13 Change in Accounting Principles, Fiscal Year or Tax Laws. If
(i) any preparation of the financial statements referred to in Section 7.7
hereafter occasioned by the promulgation of rules, regulations, pronouncements
and opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accounts (or successors thereto or
agencies with similar functions) (other than changes mandated by FASB 106)
result in a material change in the method of calculation of financial covenants,
standards or terms found in this Agreement, (ii) there is any change in
Borrower's fiscal
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quarter or fiscal year as provided herein, or (iii) there is a material change
in federal tax laws which materially affects any of the Consolidated Companies'
ability to comply with the financial covenants, standards or terms found in this
Agreement, Borrower and the Required Lenders agree to enter into negotiations in
order to amend such provisions so as to equitably reflect such changes with the
desired result that the criteria for evaluating any of the Consolidated
Companies, financial condition shall be the same after such changes as if such
changes had not been made. Unless and until such provisions have been so
amended, the provisions of this Agreement shall govern.
Section 11.14 Headings Descriptive; Entire Agreement. The headings of the
several sections and subsections of this Agreement are inserted for convenience
only and shall not in any way affect the meaning or construction of any
provision of this Agreement. This Agreement, the other Credit Documents, and the
agreements and documents required to be delivered pursuant to the terms of this
Agreement constitute the entire Agreement among the parties hereto and thereto
regarding the subject matters hereof and thereof and supersede all prior
agreements, representations and understandings related to such subject matters.
Section 11.15 Time is of the Essence. Time is of the essence in
interpreting and performing this Agreement and all other Credit Documents.
Section 11.16 Usury. It is the intent of the parties hereto not to violate
any federal or state law, rule or regulation pertaining either to usury or to
the contracting for or charging or collecting of interest, and Borrower and
Lenders agree that, should any provision of this Agreement or of the Notes, or
any act performed hereunder or thereunder, violate any such law, rule or
regulation, then the excess of interest contracted for or charged or collected
over the maximum lawful rate of interest shall be applied to the outstanding
principal indebtedness due to Lenders by Borrower under this Agreement.
Section 11.17 Construction. Should any provision of this Agreement require
judicial interpretation, the parties hereto agree that the court interpreting or
construing the same shall not apply a presumption that the terms hereof shall be
more strictly construed against one party by reason of the rule of construction
that a document is to be more strictly construed against the party who itself or
through its agents prepared the same, it being agreed that Borrower, Agent,
Lenders and their respective agents have participated in the preparation hereof.
Section 11.18 European Monetary Union. It is hereby acknowledged that
during the term of this Agreement certain European nations may adopt a single
European currency as their lawful currency in place of certain currencies that
are available
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hereunder as part of the anticipated European Economic and Monetary Union. It is
hereby acknowledged and agreed that "Available Foreign Currency", as defined
herein, including United Kingdom Pounds Sterling, shall include any such
successor currency and that conversion into such successor currency shall be
made at the official rate of conversion, as determined by the Agent, on the date
on which any such Available Foreign Currency is so replaced, and that the
denomination of the original currency shall be retained hereunder for so long as
it is legally permissible. It is hereby further acknowledged and agreed that the
provisions of this Agreement relating to Multicurrency Loans shall remain in
full force and effect upon such conversion, and that neither the introduction of
a single European currency, the replacement of an Available Foreign Currency
thereby, the fixing of the official rate of conversion, nor any economic
consequences resulting therefrom shall give rise to any right to terminate,
contest, cancel, modify or renegotiate the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in Orlando, Florida, by their duly authorized
officers as of the day and year first above written.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
BORROWER:
ATTEST: PLANET HOLLYWOOD
INTERNATIONAL, INC.
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Vice President Executive Vice President
7380 Sand Lake Road, Suite 600
Orlando, Florida 32819
Telecopy No.: (407) 352-7310
Telephone No.: (407) 363-7827
In the case of Notices to the Borrower,
copies shall be sent to:
Byrd F. Marshall, Jr., Esq.
Gray, Harris & Robinson, P.A.
201 E. Pine Street
Suite 1200
Orlando, Florida 32801
Telecopy No.: (407) 244-5690
Telephone No.: (407) 843-8880
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JOINDER OF GUARANTORS
The undersigned, as Guarantors under the Revolving Credit and Term Loan
Agreement, hereby join in and consent to the Agreement and agree to be bound by
the terms thereof applicable to them.
Dated as of the 18th day of September, 1997.
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ATTEST: PLANET HOLLYWOOD (ASPEN),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (ATLANTIC
CITY), INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (BOSTON),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (CHEFS),
INC., f/k/a Planet Hollywood
(Nashville), Inc., a Florida
corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (CHICAGO),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
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ATTEST: PLANET HOLLYWOOD (HONOLULU),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (LONDON),
INC., a Florida corporation,
f/k/a Planet Hollywood
(Seattle), Inc.
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (LP), INC., a
Nevada corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANT HOLLYWOOD (MAIL ORDER),
INC., a Florida corporation,
f/k/a Planet Hollywood
(Denver), Inc.
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (MAUI), INC.,
a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
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ATTEST: PLANET HOLLYWOOD (NEW
ORLEANS), INC., a Florida
corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (NEW YORK
CITY), INC., a Florida
corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (ORLANDO),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (ORLANDO
DISTRIBUTION), INC., a Florida
corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (PARIS),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
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<PAGE>
ATTEST: PLANET HOLLYWOOD (PHOENIX),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (REGION I),
INC., a Florida corporation,
f/k/a Planet Hollywood
(Miami), Inc.
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (REGION II),
INC., a Florida corporation,
f/k/a Planet Hollywood
(Atlanta), Inc.
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (REGION III),
INC., a Florida corporation,
f/k/a Planet Hollywood
(Washington), Inc.
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (REGION IV),
INC., a Minnesota corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
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Witnesses: PLANET HOLLYWOOD (REGION V),
INC., a Texas corporation
/s/ [ILLEGIBLE] By: /s/ Brian Hood
- ----------------------------------- ----------------------------------
(Signature of Witness) Brian Hood
President and Secretary
/s/ [ILLEGIBLE]
- -----------------------------------
(Print Names of Witness)
/s/ [ILLEGIBLE]
- -----------------------------------
(Signature of Witness)
/s/ [ILLEGIBLE]
- -----------------------------------
(Print Names of Witness)
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<PAGE>
ATTEST: PLANET HOLLYWOOD (REGION VI),
INC., a Nevada corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (REGION VII),
INC., a Florida corporation,
f/k/a Planet Hollywood (San
Diego), Inc. and successor by
merger to Planet Hollywood
(Beverly Hills), Inc.
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (TEL AVIV),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: PLANET HOLLYWOOD (WAREHOUSE),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: 1501 BROADWAY, INC., a Florida
corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
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ATTEST: ALL STAR CAFE INTERNATIONAL,
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: ALL STAR CAFE (LP), INC., a
Nevada corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: ALL STAR CAFE (NEW YORK),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: ALL STAR CAFE (REGION V)
INC., a Texas corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: ALL STAR CAFE (REGION VII),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
104
<PAGE>
ATTEST: ALL STAR CAFE (REGION VIII),
INC., a Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: AUTHENTIC ALL STAR, INC., a
Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: OFFICIAL ALL STAR CAFE, INC.,
a Nevada corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: COAST LICENSING, INC., a
Nevada corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: CORNER ENTERPRISES, INC., a
Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
105
<PAGE>
ATTEST: EBCO MANAGEMENT, INC., a
Florida corporation
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ----------------------------------- ----------------------------------
Scott E. Johnson Thomas Avallone
Secretary Executive Vice President
ATTEST: KARMALANNE, INC., a Nevada
corporation
/s/ Mark Helm By: /s/ Anne Vercheski
- ----------------------------------- ----------------------------------
Mark Helm Anne Vercheski
Secretary President
ATTEST: MEANT 2 BE, INC., a Nevada
corporation
/s/ Mark Helm By: /s/ Anne Vercheski
- ----------------------------------- ----------------------------------
Mark Helm Anne Vercheski
Secretary President
ATTEST: ROCKY PIT, INC., a Nevada
corporation
/s/ Mark Helm By: /s/ Anne Vercheski
- ----------------------------------- ----------------------------------
Mark Helm Anne Vercheski
Secretary President
ATTEST: TEN ALPS INC., a Nevada
corporation
/s/ Mark Helm By: /s/ Anne Vercheski
- ----------------------------------- ----------------------------------
Mark Helm Anne Vercheski
Secretary President
106
<PAGE>
[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
Signed, sealed and delivered SUNTRUST BANK, CENTRAL
in the presence of: FLORIDA, NATIONAL ASSOCIATION,
individually and as Agent
/s/ [ILLEGIBLE] By: /s/ Vipul H. Patel
- ----------------------------------- ----------------------------------
Print Name: [ILLEGIBLE] Vipul H. Patel,
------------------------ First Vice President
/s/ [ILLEGIBLE]
- -----------------------------------
Print Name: [ILLEGIBLE]
------------------------
Address for Notices:
200 S. Orange Avenue
6th Floor - SOAB
Orlando, Florida 32801
Attention: Mr. Vipul H. Patel,
First Vice President
Telecopy No. (407) 237-4076
Telephone No. (407) 237-5352
Payment Office:
200 S. Orange Avenue
6th Floor - SOAB
- --------------------------------------------------------------------------------
Revolving Loan Commitment: $16,129,033.00
Pro Rata Share of Revolving Loan Commitment: 16.13%
Term Loan Commitment: $3,225,806.00
Pro Rata Share of Term Loan Commitment: 16.13%
107
<PAGE>
[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC. ]
Signed, sealed and delivered AMSOUTH BANK
in the presence of:
/s/ [ILLEGIBLE] By: /s/ Anthony L. Stiffler
- ----------------------------------- ----------------------------------
Print Name: [ILLEGIBLE] Anthony L. Stiffler,
------------------------ Vice President
/s/ Aileen W. Leach
- -----------------------------------
Print Name: Aileen W. Leach
-----------------------
Address for Notices:
65 North Orange Avenue
Post Office Box 588001
Orlando, Florida 32858
Attn: Mr. Anthony L. Stiffler
Vice President - Commercial Banking
Telecopy No. (407) 649-8441
Telephone No. (407) 246-8946
Payment Office:
65 North Orange Avenue
Orlando, Florida 32801
- --------------------------------------------------------------------------------
Revolving Loan Commitment: $9,677,419.00
Pro Rata Share of Revolving Loan Commitment: 9.68%
Term Loan Commitment: $1,935,484.00
Pro Rata Share of Term Loan Commitment: 9.68%
108
<PAGE>
[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
Signed, sealed and delivered THE BANK OF NOVA SCOTIA
in the presence of:
/s/ Melanie Brown By: /s/ William J. G. Brown
- ----------------------------------- ----------------------------------
Print Name: Melanie Brown William J. G. Brown,
Vice President
/s/ Denise B. Quick
- -----------------------------------
Print Name: Denise B. Quick
-----------------------
Address for Notices:
Atlanta Agency, Suite 2700
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attn: Mr. Frank Sandler
Telecopy No. (404) 888-8998
Telephone No. (404) 877-1505
Payment Office:
Atlanta Agency, Suite 2700
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attn: Ms. Dorothy Legista,
Loan Administration
- --------------------------------------------------------------------------------
Revolving Loan Commitment: $16,129,033.00
Pro Rata Share of Revolving Loan Commitment: 16.13%
Term Loan Commitment: $3,225,806.00
Pro Rata Share of Term Loan Commitment: 16.13%
109
<PAGE>
[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
Signed, sealed and delivered BANQUE PARIBAS
in the presence of:
By: /s/ Duane Helkowski
- ----------------------------------- ----------------------------------
Print Name: Name: DUANE HELKOWSKI
------------------------ Title: VICE PRESIDENT
By: /s/ Robert G. Carino
- ----------------------------------- ----------------------------------
Print Name: Name: Robert G. Carino
------------------------ Title: Vice President
Address for Notices:
787 7th Avenue
New York, NY 10018
Attn: Mr. Duane Halkowski
Telecopy No. (212) 841-2940
Telephone No. (212) 841-2333
Payment Office:
787 7th Avenue
New York, NY 10018
- --------------------------------------------------------------------------------
Revolving Loan Commitment: $9,677,419.00
Pro Rata Share of Revolving Loan Commitment: 9.68%
Term Loan Commitment: $1,935,484.00
Pro Rata Share of Term Loan Commitment: 9.68%
110
<PAGE>
[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
Signed, sealed and delivered DAI-ICHI KANGYO BANK, LIMITED,
in the presence of: ATLANTA AGENCY
By: /s/ Takao Mochizuki
- ----------------------------------- ----------------------------------
Print Name: Name: Takao Mochizuki
------------------------ Title: General Manager
- -----------------------------------
Print Name:
------------------------
Address for Notices: For Administrative Matters --
drawdowns, payments, etc.,
Marquis Two Tower, contact:
Suite 2400
285 Peachtree Center Ave., N.E.
Atlanta, Georgia 30303 Mr. Percy Lee (Primary)
Assistant Vice President
Attn: Mr. Guenter Kittel, or
Vice President Ms. Mary Kay Manion (Alt.)
(for Credit Matters) Administrative Assistant
Telecopy No. (404) 581-9657 Telecopy No. (404) 222-9556
Telephone No. (404) 581-0200 Telephone No. (404) 581-0200
Payment Office:
Marquis Two Tower,
Suite 2400
285 Peachtree Center Ave., N.E.
Atlanta, Georgia 30303
- --------------------------------------------------------------------------------
Revolving Loan Commitment: $6,451,613.00
Pro Rata Share of Revolving Loan Commitment: 6.45%
Term Loan Commitment: $1,290,323.00
Pro Rata Share of Term Loan Commitment: 6.45%
111
<PAGE>
[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
Signed, sealed and delivered THE FUJI BANK AND TRUST
in the presence of: COMPANY
By: /s/ Toshiaki Yakura
- ----------------------------------- ----------------------------------
Print Name: Name: Toshiaki Yakura,
------------------------ Title: Executive Vice President
- -----------------------------------
Print Name:
------------------------
Address for Notices: with a copy to:
The Fuji Bank & Trust Company Fuji Bank Limited
New York Branch First Union Financial Center
Two World Trade Center 200 South Biscayne Blvd.
79th Floor Suite 3440
New York, New York 10048 Miami, Florida 33131
Attn: Mr. Raymond Ventura Attn: Mr. Stephen Hanas
Vice President and Vice President
Manager
Telecopy No. (305) 381-8338
Telecopy No. (212) 912-0516 Telephone No. (305) 374-2226
Telephone No. (212) 898-2062
Payment Office:
Two World Trade Center
79th Floor
New York, New York 10048
- --------------------------------------------------------------------------------
Revolving Loan Commitment: $9,677,419.00
Pro Rata Share of Revolving Loan Commitment: 9.68%
Term Loan Commitment: $1,935,484.00
Pro Rata Share of Term Loan Commitment: 9.68%
112
<PAGE>
[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
Signed, sealed and delivered LLOYDS BANK PLC
in the presence of:
By: /s/ [ILLEGIBLE]
- ----------------------------------- ----------------------------------
Print Name: Name: [ILLEGIBLE]
------------------------ Title: [ILLEGIBLE]
By: /s/ [ILLEGIBLE]
- ----------------------------------- ----------------------------------
Print Name: Name: [ILLEGIBLE]
------------------------ Title: [ILLEGIBLE]
Address for Notices: Contact for Borrowings,
payments, interest, fees,
575 5th Avenue etc.:
18th Floor
New York, NY 10017 Patricia Kilian
Primary Contact:
Mr. Windsor R. Davies, Telecopy No. (212) 607-5098
Vice President and Manager Telephone No. (212) 930-8914
Telecopy No. (212) 930-5098
Telephone No. (212) 930-8909
Alternate Contact: Legal Counsel:
David Rodway, Kevin McKendry,
Assistant Vice President Senior Counsel
Telecopy No. (212) 930-5098 Telecopy No. (212) 930-5098
Telephone No. (212) 930-8901 Telephone No. (212) 930-8920
Payment Office:
One Biscayne Tower
Suite 3200
2 S. Biscayne Blvd.
Miami, FL 33131
- --------------------------------------------------------------------------------
Revolving Loan Commitment: $12,903,226.00
Pro Rata Share of Revolving Loan Commitment: 12.90%
Term Loan Commitment: $2,580,645.00
Pro Rata Share of Term Loan Commitment: 12.90%
113
<PAGE>
[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
Signed, sealed and delivered NATIONAL WESTMINSTER BANK PLC
in the presence of:
/s/ Lesley Jones By: /s/ Peter M. Anscomb
- ----------------------------------- ----------------------------------
Print Name: Lesley Jones Name: Peter M. Anscomb
------------------------ Title: Senior Corporate Manager
- -----------------------------------
Print Name:
------------------------
Address for Notices: With respect to notices of
any sort with respect to Loans
Oxford Circus Corporate bearing interest at the Base
Banking Centre Rate, send to: (with copy to
Argyll House payment office)
246 Regent Street
London W1R 6PB, England National Westminster Bank Plc
New York Branch
Attn: Corporate Manager Commercial Loans Department
175 Water Street, 19th Floor
Telecopy No. 0171 432 4101/2 New York, New York 10038
Telephone No. 0171 432 4115/33
Telecopy No. (212) 602-4118
Telephone No. (212) 602-4180
Payment Office:
Commercial Loans Department
NatWest Treasury Settlements
Global Financial Markets
Kings Cross House
200 Pentonville Road
London N1 9HL, England
Telecopy No. 0171 239 8257
Telephone No. 0171 239 8042
- --------------------------------------------------------------------------------
Revolving Loan Commitment: $9,677,419.00
Pro Rata Share of Revolving Loan Commitment: 9.68%
Term Loan Commitment: $1,935,484.00
Pro Rata Share of Term Loan Commitment: 9.68%
114
<PAGE>
[SIGNATURE PAGE TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
Signed, sealed and delivered THE SAKURA BANK, LIMITED
in the presence of:
By: /s/ Hiroyasu Imanishi
- ----------------------------------- ----------------------------------
Print Name: Hiroyasu Imanishi
------------------------ Vice President and Senior
Manager
- -----------------------------------
Print Name:
------------------------
Address for Notices:
245 Peachtree Center Avenue, N.E.
Suite 2703
Atlanta, Georgia 30303
Attn: Ric Spencer,
Assistant Vice President
Telecopy No. (404) 521-1133
Telephone No. (404) 521-3111
Payment Office:
245 Peachtree Center Avenue, N.E.
Suite 2703
Atlanta, Georgia 30303
Attn: Christy Joel
- --------------------------------------------------------------------------------
Revolving Loan Commitment: $9,677,419.00
Pro Rata Share of Revolving Loan Commitment: 9.68%
Term Loan Commitment: $1,935,484.00
Pro Rata Share of Term Loan Commitment: 9.68%
115
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC.
Exhibit 4.4
First Amendment to
Revolving Credit and Term Loan Agreement
dated as of October 1, 1997
among the Registrant, SunTrust Bank and
certain other banks
<PAGE>
FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BY AND AMONG
PLANET HOLLYWOOD INTERNATIONAL, INC.,
CERTAIN CORPORATIONS LISTED AS GUARANTORS THEREON,
THE BANKS SIGNATORY THERETO,
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION, AS AGENT, AND
THE BANK OF NOVA SCOTIA, AS DOCUMENTATION AGENT
DATED AS OF OCTOBER 1, 1997
CLOSING DOCUMENTS
<PAGE>
FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT,
CONSENT AND WAIVER
THIS FIRST AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT, CONSENT
AND WAIVER (the "First Amendment") dated as of October 1, 1997, by and among
PLANET HOLLYWOOD INTERNATIONAL, INC., a Delaware corporation (the "Borrower"),
the corporations listed on the Joinder to the Credit Agreement hereinafter
described (the "Guarantors"), the Lenders signatories to the Credit Agreement
(the "Lenders"), SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION, a
national banking association, as Agent (the "Agent") and THE BANK OF NOVA
SCOTIA, a Canadian chartered bank, as Documentation Agent (the "Documentation
Agent").
WITNESSETH:
WHEREAS, the Borrower, the Guarantors, the Lenders, the Agent and the
Documentation Agent have entered into that certain Revolving Credit and Term
Loan Agreement dated as of September 18, 1997 (the "Credit Agreement"); and
WHEREAS, the Borrower and the Guarantors have requested the Lenders to
increase the Maximum Letter of Credit Amount available for issuance of Letters
of Credit under the Credit Agreement, to consent to certain actions of the
Borrower and/or its Subsidiaries and to waive certain provisions of the Credit
Agreement; and
WHEREAS, the Lenders, the Agent and the Documentation Agent have agreed to
amend the Credit Agreement to provide for the foregoing, subject to the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Amendment to Credit Agreement. The Credit Agreement is hereby amended by the
deletion of the definition of the term "Maximum Letter of Credit Amount"
contained in Section 1.1 of the Credit Agreement and substituting in lieu
thereof the following:
"'Maximum Letter of Credit Amount' shall mean $10,000,000.00."
2. Consent and Waiver of Certain Provisions of the Credit Agreement. The Agent
and the Lenders hereby:
<PAGE>
a. Consent to the pledge by Planet Hospitality Holdings, Inc., a
Subsidiary of the Borrower, of its sole asset, being its limited and general
partnership and member's interests (the "Partnership Interests") in 401 Hotel,
L.P., 401 Hotel General Partner, L.L.C., 401 Commercial, L.P. and 401 General
Partner, L.L.C., which entities own and/or operate the Hotel Pennsylvania, to
Salomon Brothers Realty Corp. pursuant to two Pledge Agreements and Limited
Recourse Guaranties, copies of which have been provided to the Agent and the
Lenders, in connection with financing extended by Salomon Brothers Realty Corp.;
b. Consent to the Borrower entering into a joint venture with Aladdin
Gaming L.L.C. to build a music casino and hotel in Las Vegas, Nevada and
investing up to $41,250,000.00 in such joint venture substantially in accordance
with the executive summary furnished to the Lenders by the Borrower (the "Las
Vegas Venture");
c. Waive the terms and provisions of Section 8.1 of the Credit Agreement
which limit or prohibit the pledge of the Partnership Interests; and
d. Waive the terms and provisions of Sections 8.2 and 8.3 of the Credit
Agreement which limit or prohibit the ability of the Borrower to invest in the
Las Vegas Venture.
It is the mutual understanding of the Borrower, the Guarantors, the Agent and
the Lenders that the waivers and consents contained in this paragraph relate and
shall apply solely to the specific items and events described herein, for the
purposes set forth herein, and do not apply to any other provisions of the
Credit Agreement or any other Credit Document nor to any future events or
circumstances which may violate or constitute or create a default under the
Credit Agreement or any of the other Credit Documents, whether or not of a
similar nature.
3. Counterparts. This First Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and permitted assigns.
4. Capitalized Terms. All capitalized terms contained herein shall have the
meanings assigned to them in the Credit Agreement unless the context herein
otherwise dictates or unless different meanings are specifically assigned to
such terms herein.
5. Representations and Warranties. The Borrower and the Guarantors hereby
reaffirm all of the representations and warranties contained in the Credit
Agreement as though made and given in connection with the execution and delivery
of this First Amendment and further certify that all such representations and
warranties are true and correct on and as of the date hereof.
2
<PAGE>
6. Ratification of Credit Documents; Miscellaneous. Except for any modification
of and/or amendment to the Credit Agreement as herein provided, no other term,
condition or provision of the Credit Agreement shall be considered to be altered
or amended, and this First Amendment shall not be deemed a novation. The Credit
Agreement as amended hereby, and all other Credit Documents shall remain in full
force and effect. Each and every reference to the Credit Agreement in any other
Credit Document shall be deemed to refer to the Credit Agreement as amended by
this First Amendment. The Borrower and the Guarantors hereby acknowledge and
agree that the Credit Documents are, as of the date hereof, valid and
enforceable in accordance with their respective terms and that all amounts
extended by the Lenders to the Borrower pursuant thereto are absolutely and
unconditionally due and owing to the Lenders, and are not subject to any
defenses, counterclaims or rights of set-off whatsoever.
7. Governing Law. THIS FIRST AMENDMENT SHALL BE EFFECTIVE UPON EXECUTION BY ALL
LENDERS AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF FLORIDA WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
the day and year first above written.
BORROWER:
ATTEST: PLANET HOLLYWOOD INTERNATIONAL, INC.
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ------------------------------ ------------------------------------
Scott E. Johnson, Thomas Avallone,
Secretary Executive Vice President
3
<PAGE>
JOINDER BY GUARANTORS
Each of the undersigned, being a Guarantor of the Loans, hereby consents
to and joins in the foregoing First Amendment to Revolving Credit and Term Loan
Agreement, Consent and Waiver (the "First Amendment") and hereby (a) ratifies
and affirms its duties and obligations under the Credit Agreement as amended by
the First Amendment, (b) states, confirms and agrees that the Subsidiary
Guaranty Agreement executed by each of them is valid and binding without any
claim, counterclaim, defense or other right of offset whatsoever and (c)
reaffirms its absolute and unconditional guarantee of all obligations of the
Borrower to the Lenders under the Credit Agreement and each of the other Credit
Documents.
AS OFFICERS, DIRECTORS AND/OR
AUTHORIZED SIGNATORIES OF EACH OF
THE MATERIAL SUBSIDIARIES SHOWN ON
ANNEX "A" HERETO
ATTEST:
/s/ Scott E. Johnson By: /s/ Thomas Avallone
- ------------------------------ ------------------------------------
Scott E. Johnson, Thomas Avallone,
Secretary Executive Vice President
AS OFFICERS, DIRECTORS AND/OR
AUTHORIZED SIGNATORIES OF EACH OF
THE MATERIAL SUBSIDIARIES SHOWN ON
ANNEX "B" HERETO
ATTEST:
/s/ Mark Helm By: /s/ Anne Vercheski
- ------------------------------ ------------------------------------
Mark Helm, Anne Vercheski,
Secretary President
Signed, sealed and delivered PLANET HOLLYWOOD (REGION V), INC.
in the presence of:
By:
- ------------------------------ ------------------------------------
Print Name: Brian Hood,
------------------- President and Secretary
- ------------------------------
Print Name:
-------------------
4
<PAGE>
JOINDER BY GUARANTORS
Each of the undersigned, being a Guarantor of the Loans, hereby consents
to and joins in the foregoing First Amendment to Revolving Credit and Term Loan
Agreement, Consent and Waiver (the "First Amendment") and hereby (a) ratifies
and affirms its duties and obligations under the Credit Agreement as amended by
the First Amendment, (b) states, confirms and agrees that the Subsidiary
Guaranty Agreement executed by each of them is valid and binding without any
claim, counterclaim, defense or other right of offset whatsoever and (c)
reaffirms its absolute and unconditional guarantee of all obligations of the
Borrower to the Lenders under the Credit Agreement and each of the other Credit
Documents.
AS OFFICERS, DIRECTORS AND/OR
AUTHORIZED SIGNATORIES OF EACH OF
THE MATERIAL SUBSIDIARIES SHOWN ON
ANNEX "A" HERETO
ATTEST:
- ------------------------------ ------------------------------------
Scott E. Johnson, Thomas Avallone,
Secretary Executive Vice President
AS OFFICERS, DIRECTORS AND/OR
AUTHORIZED SIGNATORIES OF EACH OF
THE MATERIAL SUBSIDIARIES SHOWN ON
ANNEX "B" HERETO
ATTEST:
- ------------------------------ ------------------------------------
Mark Helm, Anne Vercheski,
Secretary President
Signed, sealed and delivered PLANET HOLLYWOOD (REGION V), INC.
in the presence of:
/s/ Amy Haddox By: /s/ Brian Hood
- ------------------------------ ------------------------------------
Print Name: Amy Haddox Brian Hood,
------------------- President and Secretary
/s/ Rosemary Johnston
- ------------------------------
Print Name: Rosemary Johnston
-------------------
4
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION, as a Lender,
and as Agent
By: /s/ Vipul H. Patel
---------------------------------
Vipul H. Patel,
First Vice President
5
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
AMSOUTH BANK, a Lender
By: /s/ Anthony L. Stiffler
---------------------------------
Anthony L. Stiffler,
Vice President
6
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
THE BANK OF NOVA SCOTIA, as a
Lender and as Documentation
Agent
By: /s/ William J. G. Brown
---------------------------------
William J. G. Brown,
Vice President
7
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
BANQUE PARIBAS, a Lender
By: /s/ Duane P. Helkowski
---------------------------------
Name: DUANE HELKOWSKI
----------------------------
Title: VICE PRESIDENT
---------------------------
By: /s/ Mary T. Finnegan
---------------------------------
Name: Mary T. Finnegan
----------------------------
Title: Director
---------------------------
8
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
DAI-ICHI KANGYO BANK, LIMITED,
ATLANTA AGENCY, a Lender
By: /s/ Tatsuji Noguchi
---------------------------------
Name: Tatsuji Noguchi
----------------------------
Title: Joint General Manager
---------------------------
9
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
THE FUJI BANK AND TRUST
COMPANY, a Lender
By: /s/ Toshiaki Yakura
---------------------------------
Toshiaki Yakura,
Executive Vice President
10
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
LLOYDS BANK PLC, a Lender
By: /s/ Windsor R. Davies
-------------------------------------
Windsor R. Davies
Vice President and Manager
By: /s/ David C. Rodway
-------------------------------------
Name: David C. Rodway
--------------------------------
Title: Assistant Vice President R156
-------------------------------
11
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
NATIONAL WESTMINSTER BANK PLC, a Lender
By: /s/ Peter M. Anscomb
-----------------------------------
Peter M. Anscomb
Senior Corporate Manager
12
<PAGE>
[SIGNATURE PAGE TO FIRST AMENDMENT TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
BETWEEN SUNTRUST, AS AGENT,
AND PLANET HOLLYWOOD INTERNATIONAL, INC.]
THE SAKURA BANK, LIMITED, a Lender
By: /s/ Hiroyasu Imanishi
----------------------------------
Hiroyasu Imanishi,
Vice President and Senior
Manager
13
<PAGE>
ANNEX "A"
Planet Hollywood (Aspen), Inc.
Planet Hollywood (Atlantic City), Inc.
Planet Hollywood (Boston), Inc.
Planet Hollywood (Chefs), Inc. [f/k/a Planet Hollywood (Nashville), Inc.]
Planet Hollywood (Chicago), Inc.
Planet Hollywood (Honolulu), Inc.
Planet Hollywood (London), Inc. [f/k/a Planet Hollywood (Seattle), Inc.]
Planet Hollywood (LP), Inc.
Planet Hollywood (Mail Order), Inc. [f/k/a Planet Hollywood (Denver), Inc.]
Planet Hollywood (Maui), Inc.
Planet Hollywood (New Orleans), Inc.
Planet Hollywood (New York City), Inc.
Planet Hollywood (Orlando), Inc.
Planet Hollywood (Orlando Distribution), Inc.
Planet Hollywood (Paris), Inc.
Planet Hollywood (Phoenix), Inc.
Planet Hollywood (Region I), Inc. [f/k/a Planet Hollywood (Miami), Inc.]
Planet Hollywood (Region II), Inc. [f/k/a Planet Hollywood (Atlanta), Inc.]
Planet Hollywood (Region III), Inc. [f/k/a Planet Hollywood (Washington), Inc.]
Planet Hollywood (Region IV), Inc.
Planet Hollywood (Region VI), Inc.
Planet Hollywood (Region VII), Inc. [f/k/a Planet Hollywood (San Diego), Inc.;
successor by merger to Planet Hollywood (Beverly Hills), Inc.]
Planet Hollywood (Tel Aviv), Inc.
Planet Hollywood (Warehouse), Inc.
1501 Broadway, Inc.
All Star Cafe International, Inc.
All Star Cafe (LP), Inc.
All Star Cafe (New York), Inc.
All Star Cafe (Region V), Inc.
All Star Cafe (Region VII), Inc.
All Star Cafe (Region VIII), Inc.
Authentic All Star, Inc.
Official All Star Cafe, Inc.
Coast Licensing, Inc.
Corner Enterprises, Inc.
EBCO Management, Inc.
14
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ANNEX "B"
Karmalanne, Inc.
Meant 2 Be, Inc.
Rocky Pit, Inc.
Ten Alps, Inc.
15
<PAGE>
Exhibit 10.19
LIMITED PARTNERSHIP AGREEMENT
of
PLANET MOVIES COMPANY, L.P.
Dated October 17, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SECTION ONE
FORMATION, NAME, PRINCIPAL OFFICE, TERM,
PURPOSE, TITLE TO PROPERTY, QUALIFICATION
..........................................................................1
1.1 Formation....................................................1
1.2 Name and Mailing Address.....................................1
1.3 Principal and Other Offices; Registered Office...............1
1.4 Term.........................................................2
1.5 Agent for Service of Process.................................2
1.6 Purposes of the Partnership..................................2
1.7 Partners.....................................................2
1.8 Qualification in Other Jurisdictions. .......................3
1.9 Title to Property............................................3
SECTION TWO
DEFINITIONS
.........................................................................3
SECTION THREE
CAPITAL CONTRIBUTIONS AND LOANS
.........................................................................10
3.1 Initial Capital Contributions...............................10
3.2 Additional Capital Contributions. ..........................10
3.3 Election to Make Contribution Loan Upon Default in Making of
Additional Capital Contributions.....................................11
3.4 Election to Receive Additional Units Upon Default in Making of
Additional Capital Contributions.....................................12
3.5 Effect of Change in Proportionate Unit Holdings.............12
3.6 Other Matters Relating to Capital Contributions.............12
3.7 Loans.......................................................13
SECTION FOUR
CAPITAL ACCOUNTS; RETURN OF CAPITAL
..........................................................................13
4.1 Capital Accounts...........................................13
4.2 Return of Capital..........................................13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SECTION FIVE
ALLOCATIONS OF PROFITS AND LOSSES
..........................................................................14
5.1 Profits...................................................14
5.2 Losses....................................................14
5.3 Special Allocations.......................................15
5.4 Curative Allocations......................................16
5.5 Other Allocation and Accounting Rules.....................17
5.6 Tax Allocations...........................................17
SECTION SIX
DISTRIBUTIONS
..........................................................................18
6.1 Distributions of Cash.....................................18
6.2 Distributions in Kind.....................................18
6.3 Distribution in Cash Only. ...............................18
6.4 Good Faith Distribution by General Partner................18
SECTION SEVEN
RIGHTS, POWERS AND OBLIGATIONS OF THE GENERAL PARTNER
..........................................................................19
7.1 Powers of the General Partner..............................19
7.2 Dealing with Partnership by General Partner................21
7.3 Authority of General Partner...............................22
7.4 Duties of the General Partner..............................22
7.5 Removal of the General Partner.............................23
7.6 Liability and Indemnification of the General Partner.......23
7.7 Transferability of General Partner's Interest..............24
SECTION EIGHT
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
..........................................................................24
8.1 Liability of Limited Partners..............................24
8.2 Management of Business.....................................24
8.3 Duty to Account for Profits................................24
8.4 Rights of Limited Partners.................................24
SECTION NINE
TRANSFER OF PARTNERSHIP INTERESTS
..........................................................................25
9.1 Transfer of Interests......................................25
9.2 Limitation Upon Transfer of Partnership Interests Therein..25
9.3 Holders Who are not Limited Partners.......................26
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
9.4 Treatment of Transferor....................................26
9.5 General Conditions on Disposition..........................27
9.6 Survival of Liabilities....................................27
9.7 Withdrawal.................................................27
SECTION TEN
...........................................................................27
10.1 Dissolution................................................27
10.2 Wind-Up....................................................28
10.3 Compliance With Regulations................................28
10.4 No Obligation to Restore Deficit Capital Account Balance...28
10.5 Temporary Retention of Liquidation Proceeds................29
10.6 Distributions In Kind......................................29
10.7 Control of Dissolution and Winding-up......................29
10.8 Deemed Distribution and Recontribution.....................30
10.9 Rights of Partners.........................................30
10.10 Division of Venture Units. ................................30
SECTION ELEVEN
OTHER BUSINESS
..........................................................................31
SECTION TWELVE
POWER OF ATTORNEY
..........................................................................31
12.1 Granting General Partner Power of Attorney.................31
12.2 Power of Attorney..........................................32
SECTION THIRTEEN
BOOKS OF ACCOUNT AND PARTNERSHIP RECORDS
..........................................................................32
13.1 Books of Account. .........................................32
13.2 Inspection.................................................32
13.3 Bank Accounts. ............................................33
13.4 Reports....................................................33
SECTION FOURTEEN
AMENDMENTS
..........................................................................33
14.1 General Rule...............................................33
14.2 Unanimous Consent Requirement..............................34
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
SECTION FIFTEEN
GENERAL PROVISIONS
..........................................................................34
15.1 Relationship...............................................34
15.2 Meetings of Partners.......................................34
15.3 Entire Agreement. .........................................34
15.4 Binding Effect; No Assignment..............................34
15.5 No Waiver. ................................................35
15.6 Notices....................................................35
15.7 Counterparts...............................................35
15.8 Headings...................................................35
15.9 Governing Law..............................................35
15.10 Further Assurances................................36
15.11 Litigation........................................36
15.12 Litigation Among Partners.........................36
15.13 Remedies..........................................36
15.14 Representations and Warranties....................36
15.15 Arbitration.......................................37
15.16 Saving Clause.....................................37
</TABLE>
iv
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
OF
PLANET MOVIES COMPANY, L.P.
THIS LIMITED PARTNERSHIP AGREEMENT ("Agreement") is made and entered into
as of the 17th day of October, 1997, by and among PMC MANAGEMENT, INC., a
Georgia close corporation, as general partner (the "General Partner"); PLANET
HOLLYWOOD (THEATRES), INC., a Florida corporation ("PHT"); and AMCPH HOLDINGS,
INC., a Missouri corporation ("AMCPH") (PHT and AMCPH collectively referred to
herein as the "Limited Partners," and the General Partner and the Limited
Partners collectively referred to herein as the "Partners").
SECTION ONE
FORMATION, NAME, PRINCIPAL OFFICE, TERM,
PURPOSE, TITLE TO PROPERTY, QUALIFICATION
1.1 Formation. The Partnership will be organized as a Delaware limited
partnership by the filing, in accordance with the Act, of a Certificate of
Limited Partnership with the Office of the Delaware Secretary of State (the
"Certificate") on or before October 20, 1997. The Partners hereby agree to
continue the Partnership as a limited partnership under and pursuant to the Act
and agree that the rights, duties and liabilities of the Partners shall be as
provided in the Act, except as otherwise provided herein.
1.2 Name and Mailing Address. The name of the Partnership shall be as set
forth from time to time in the Certificate. The Partnership may from time to
time adopt one or more trade names for use in the Partnership's business as
shall be selected by the General Partner. The mailing address of the Partnership
shall be initially at 7380 Sand Lake Road, Orlando, Florida 32819, and
subsequently at such other place as the General Partner may determine from time
to time.
1.3 Principal and Other Offices; Registered Office. The Partnership shall
have such offices, as shall be designated by the General Partner from time to
time. The registered office of the Partnership in Delaware shall be c/o
Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805, or
such other locations as may hereafter be designated by the General Partner from
time to time in the manner provided by applicable law. All of the records
required to be maintained pursuant to the Act shall be kept at the principal
office. The Partnership may have such other offices as may be determined by the
General Partner from time to time.
<PAGE>
1.4 Term. The Partnership commenced on the date the Certificate was filed
with the Office of the Delaware Secretary of State and shall continue in
existence until it is terminated in accordance with the provisions of Section 10
of this Agreement.
1.5 Agent for Service of Process. The name and address of the agent for
service of process shall be Corporation Service Company, 1013 Centre Road,
Wilmington, Delaware 19805 or such other agent at such other location as may
hereafter be designated by the General Partner from time to time in the manner
provided by applicable law.
1.6 Purposes of the Partnership.
(a) Ownership of Venture Units. The Partnership is formed to establish from
time to time, alone or with others, additional limited partnerships and other
business entities that, among other things, directly or indirectly own and
operate certain theatres now under development by AMC (such theatres being
"Day 2 Venture Units") and proprietary branded theatre-restaurant-retail
facilities (such facilities being "Day 3 Venture Units").
(b) The Partnership is formed to acquire licenses to use trade names,
trademarks, service marks, and other intellectual property, including in
particular intellectual property owned by Planet Hollywood or its Affiliates and
intellectual property owned by AMC or its Affiliates, and to own trade names,
trademarks, service marks, logos and other intellectual property that the
Partnership itself creates or otherwise acquires (all of such intellectual
property referred to herein as the "Partnership Intellectual Property"). The
Partnership is also formed to license or sublicense the use of the Partnership
Intellectual Property to others, including in particular Affiliates of AMC with
respect to certain theatres now owned and operated by AMC (such theatres being
"Day 1 Venture Units"), and also including in particular the Day 2 Venture Units
and the Day 3 Venture Units.
(c) The Day 1 Venture Units, Day 2 Venture Units, and Day 3 Venture Units
are collectively referred to herein as the "Venture Units". More detailed
agreements of the Partners regarding the Venture Units are set forth in a
Shareholders' Agreement dated the date hereof between the shareholders of the
General Partner.
(d) The Partnership is further formed to engage in any other lawful act or
activity that is related to the foregoing purposes or that is related to the use
by the Partnership of the Partnership Intellectual Property, as determined by
the General Partner.
1.7 Partners. The names and addresses of the General Partner and the
Limited Partners are as follows:
2
<PAGE>
General Partner: PMC MANAGEMENT, INC., a Georgia close corporation,
initially at 7380 Sand Lake Road, Suite 600, Orlando,
Florida 32819, and subsequently at such other place as
the General Partner may notify the Limited Partners
in writing from time to time.
Limited Partners: PLANET HOLLYWOOD (THEATRES), INC., a Florida
corporation, 7380 Sand Lake Road, Suite 600, Orlando,
Florida 32819, or such other place as such Limited
Partner may notify the General Partner in writing
from time to time.
AMCPH HOLDINGS, INC., a Missouri corporation, 106
West 14th Street, Post Office Box 419615, Kansas City,
Missouri 64141-6615, or such other place as such
Limited Partner may notify the General Partner in
writing from time to time.
1.8 Qualification in Other Jurisdictions. The General Partner shall cause
the Partnership to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Partnership transacts business in which such qualification, formation, or
registration is required or desirable. The General Partner shall execute,
deliver and file, or cause the execution, delivery or filing of, any
certificates (and any amendments or restatements thereof) necessary for the
Partnership to qualify to do business in a jurisdiction in which the Partnership
may wish to conduct business.
1.9 Title to Property. Legal title to the Partnership's property, whether
real, personal or mixed, shall be held in the name of the Partnership or in
whatever other manner the General Partner shall determine to be in the best
interests of the Partnership; provided, that if title is not held in the
Partnership's name, the General Partner shall provide the Limited Partners with
notice of the name in which title is held. Without limiting the generality of
the foregoing, the General Partner may arrange to have title to Partnership
property taken and held in the name of any trustee or nominee for and on behalf
of the Partnership. Each partner's interest in the Partnership shall be personal
property for all purposes.
SECTION TWO
DEFINITIONS
When used in this Agreement, the following terms have the following
respective meanings (unless otherwise specifically provided). Also in this
Agreement the singular shall include the plural, the masculine gender shall
include the feminine and neuter, and vice versa, as the context requires. Any
terms not specifically defined herein shall be
3
<PAGE>
construed in accordance with the meaning and understanding given such terms in
the trade or business of the Partnership.
Act: The Revised Uniform Limited Partnership Act of the State of Delaware,
as amended from time to time.
Adjusted Capital Account Deficit: With respect to any Limited Partner, the
deficit balance, if any, in such Limited Partner's Capital Account as of the end
of the relevant Fiscal Year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such Limited
Partner is deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Regulations.
This definition of Adjusted Capital Account Deficit is intended to comply with
the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
Affiliates: When used with respect to any Person, any Person which
controls, is controlled by, or is under common control with, the Person; a
Person which controls an Affiliate under the foregoing shall also be deemed to
be an Affiliate of such entity. For purposes of this definition, the term
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of an entity, or
the power to veto major policy decisions of any such entity, whether through the
ownership of voting securities, by contract, or otherwise. Notwithstanding the
foregoing, the Partnership, the General Partner and any entities formed to own
the Venture Units as contemplated by the Shareholders' Agreement shall not be
deemed to be an Affiliate of either AMCPH or PHT for purposes of this Agreement.
AMC: American Multi-Cinema, Inc., a Missouri corporation.
Capital Account: With respect to any Partner, the Capital Account
maintained for such Partner in accordance with the following provisions:
(i) To each Person's Capital Account there shall be credited the
amount of cash and the Gross Asset Value of property contributed to the
Partnership, such Person's distributive share of Profits and any items in the
nature of income or gain which are specially allocated pursuant to Section 5.3
or Section 5.4 hereof, and the amount of
4
<PAGE>
any Debt assumed by such Person or which is secured by any property distributed
to such Person.
(ii) To each Person's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property distributed to such
Person pursuant to any provision of this Agreement, such Person's distributive
share of Losses and any items in the nature of expenses or losses which are
specially allocated pursuant to Section 5.3 or Section 5.4 hereof, and the
amount of any Debt of such Person assumed by the Company or which is secured by
any property contributed by such Person to the Company.
(iii) In the event all or a portion of a Partnership Interest is
Transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
Transferred Interest.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. If the General Partner determines that it is
prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto (including, without limitation, debits or credits relating to
Debt which is secured by contributed or distributed property or which is assumed
by the Partnership or a Partner), are computed in order to comply with such
Regulations, the General Partner may make such modification, provided that it is
not likely to have a material effect on the amounts distributed to any Person
pursuant to Section 10.2 upon the dissolution of the Company. The General
Partner also shall: (i) make any adjustments that are necessary or appropriate
to maintain equality between the Capital Accounts of the Partners and the amount
of Company capital reflected on the Company's balance sheet, as computed for
book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q); and
(ii) make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
Code: The Internal Revenue Code of 1986, as amended.
Debt: Any indebtedness for borrowed money or deferred purchase price of
property evidenced by a note, bonds, or other instruments, any obligations as
lessee under capital leases, any obligations secured by any mortgage, pledge,
security interest, encumbrance, lien or charge of any kind existing on any
Partnership property whether or not the Partnership has assumed or become liable
for the obligations secured thereby, and obligations under direct or indirect
guarantees of (including obligations (contingent or otherwise) to assure a
creditor against loss in respect of) indebtedness or obligations of the kinds
referred to in this Section, provided that Debt shall not include obligations in
respect of any accounts payable that are incurred in the ordinary course of the
Partnership's
5
<PAGE>
business and are not delinquent or are being contested in good faith by
appropriate proceedings. As appropriate in determining the amount of Debt
hereunder, Code Section 752(c) and any other applicable provisions of the Code
shall be taken into account.
Depreciation: For each Fiscal Year, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable with respect to an
asset for such Fiscal Year under the Code, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
General Partner.
Event of Dissolution: Any of the events that result in a dissolution of the
Partnership as set forth in Section 10.1 hereof.
Fiscal Year: The fiscal period ended on the Sunday nearest to December 31,
1997, each 52/53 week period ending on the Sunday nearest to December 31
thereafter, and each fiscal period that is defined as a Fiscal Year in any other
provision of this Agreement.
General Partner: PMC Management, Inc., a Georgia close corporation, so long
as it is General Partner of the Partnership, and all predecessor or additional
or successor General Partners of the Partnership. Unless the context clearly
requires otherwise, any reference in this Agreement to the "General Partner"
shall be deemed to apply to all General Partners collectively at all times
during which there is more than one General Partner.
Gross Asset Value: With respect to any asset, the asset's adjusted basis
for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such asset at
the time of the contribution, as determined by the contributing Partner and the
Partnership;
(ii) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined by
the General Partner, as of the following times: (a) the acquisition of an
additional interest in the Partnership by any new or existing Partner in
exchange for more than a de minimis capital contribution; (b) the distribution
by the Partnership to a Partner of more than a de minimis amount of property as
consideration for an interest in the Partnership; and (c) the
6
<PAGE>
liquidation of the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(a) and (b) above shall be made only if the General Partner reasonably
determines that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership;
(iii) The Gross Asset Value of any Partnership asset distributed to
any Partner shall be adjusted to equal the gross fair market value of such asset
on the date of distribution as determined by the distributee and the General
Partner; and
(iv) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulation Section 1.704-1(b)(2)(iv)(m), clause (vi) of the
definition of "Profits" and "Losses" below in this Section, and Section 5.3(g);
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this clause (iv) to the extent the General Partner determines that an adjustment
pursuant to clause (ii) hereof is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this clause
(iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
clauses (i), (ii), or (iv) hereof, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
Limited Partners: The parties who are admitted as Limited Partners during
the period in which they own Partnership Interests. Unless the context clearly
requires otherwise, any reference in this Agreement to a "Limited Partner" shall
be deemed to apply to all Limited Partners collectively at all times during
which there may be more than one Limited Partner.
Nonrecourse Deductions: Deductions described in Section 1.704-2(b)(1) of
the Regulations. The amount of Nonrecourse Deductions for a Fiscal Year
generally equals the net increase, if any, in the amount of Partnership Minimum
Gain during that Fiscal Year, and specifically shall be an amount determined in
accordance with the provisions of Section 1.704-2(c) of the Regulations.
Nonrecourse Liability: Liability described in Section 1.704-2(b)(3) of the
Regulations.
Partner Nonrecourse Debt: A nonrecourse Debt of the Partnership described
in Section 1.704-2(b)(4) of the Regulations.
7
<PAGE>
Partner Nonrecourse Debt Minimum Gain: An amount, with respect to each
Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would
result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the Regulations.
Partner Nonrecourse Deductions: The items of loss, deduction and
expenditure described in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the
Regulations.
Partnership: The Limited Partnership created by the filing of the
Certificate and the Partnership continuing the business of this Partnership in
the event of dissolution as provided in Section 10.
Partnership Assets (or Property): All real and personal property acquired
by the Partnership and any improvements thereto, and shall include both tangible
and intangible property.
Partnership Interest or Interests: When referring to a General Partner's, a
Limited Partner's, or an assignee, its interest in the Partnership's capital,
profits, losses, and distributions, its rights (if any) in specific Partnership
property, and its right (if any) to participate in Partnership management, all
as provided in this Agreement, the Act, and other law.
Partnership Minimum Gain: As of any date, the amount determined under
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
Planet Hollywood: Planet Hollywood International, Inc., a Delaware
corporation.
Person: Any individual, partnership, corporation, trust or other entity.
Profits and Losses: For each Fiscal Year, an amount equal to the
Partnership's taxable income or loss for such Fiscal Year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in
8
<PAGE>
computing Profits or Losses pursuant to this definition shall be subtracted from
such taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership asset
is adjusted pursuant to the definition of Gross Asset Value above in this
Section, the amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing Profits or
Losses;
(iv) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year, computed in
accordance with the definition of Depreciation above in this Section;
(vi) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) to be taken into
account in determining Capital Accounts as a result of a distribution other than
in complete liquidation of a Partner's Partnership Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases the basis of the asset)
from the disposition of the asset and shall be taken into account for purposes
of computing Profits or Losses; and
(vii) Notwithstanding any other provision of this definition, any
items which are specially allocated pursuant to Section 5.3 or Section 5.4
hereof shall not be taken into account in computing Profits or Losses.
The amounts of the items of Partnership income, gain, loss or deduction
available to be specially allocated pursuant to Sections 5.3 and 5.4 hereof
shall be determined by applying rules analogous to those set forth in clauses
(i) through (vi) above.
Regulations: The Income Tax Regulations, including Temporary Regulations,
promulgated under the Code, as such Regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
Shareholders' Agreement: Shareholders' Agreement dated this date by and
between Planet Hollywood, PHT, AMC Entertainment Inc., AMCPH and PMC Management,
Inc.
9
<PAGE>
Tax Matters Partner: PMC Management, Inc., a Georgia close corporation.
Unit: A quantitative portion of all Partnership Interests initially equal
to .001 percent (1/100,000) of all Partnership Interests; provided, the
quantitative portion of all Partnership Interests that is represented by a Unit
may be changed from time to time by the General Partner in accordance with the
provisions of Section 3.2.
SECTION THREE
CAPITAL CONTRIBUTIONS AND LOANS
3.1 Initial Capital Contributions.
(a) General Partner. Contemporaneously herewith PMC Management, Inc. shall
contribute Two Hundred Thousand Dollars ($200,000) in cash to the Partnership,
and PMC Management, Inc. hereby agrees to expose its assets to the Partnership's
liabilities to the extent provided by law and to undertake all of the
obligations of the Partnership's General Partner. In consideration of and in
exchange for such capital contribution and agreements, PMC Management, Inc.
hereby receives 1,000 Units.
(b) Limited Partners. Contemporaneously with the execution of this
Agreement, the Limited Partners shall make capital contributions to the
Partnership of the following:
(i) PHT shall contribute: (A) a royalty-free license to use the
intellectual property more particularly described in, and pursuant to that
certain Master License Agreement (PH) dated this date between the Partnership
and an affiliate of PHT; and (B) Eight Million Nine Hundred Thousand Dollars
($8,900,000) in cash. In consideration of and in exchange for such capital
contribution, PHT hereby receives 49,500 Units.
(ii) AMCPH shall contribute: (A) a royalty-free license to use the
intellectual property more particularly described in, and pursuant to that
certain Master License Agreement (AMC) dated this date between the Partnership
and an affiliate of AMCPH; (B) Eight Million Nine Hundred Thousand Dollars
($8,900,000) in cash. In consideration of and in exchange for such capital
contribution, AMCPH hereby receives 49,500 Units.
3.2 Additional Capital Contributions.
(a) General. If the General Partner from time to time determines in its
sole and absolute discretion that the Partnership should obtain additional
capital contributions from the Partners, then the General Partner shall give a
written notice to the Partners that sets forth the total amount of capital
contributions that the General Partner has determined is
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then needed by the Partnership, the portion of such total that is to be
contributed by each Partner (which shall be based on the proportion of the Units
held by the Partner at the time the notice is given), and the date on which
these capital contributions should be paid to the Partnership. Each Partner
shall, within 10 days of the due date specified in such a notice from the
General Partner, contribute cash to the Partnership in the amount required of
such Partner by such notice.
(b) Issuance of Additional Units. Each time that the General Partner
requires the making of additional capital contributions pursuant to paragraph
3.2(a) the General Partner shall, at the same time: determine the number of
Units that should be issued by the Partnership to the Partners in exchange for
such contributions, taking into account the value of the then outstanding Units;
change the quantitative portion of all Partnership Interests that is represented
by one Unit to reflect the issuance of such new Units; and inform the Partners
of such determination and change in the written notice regarding the making of
such contributions that is given pursuant to paragraph 3.2(a). Upon receipt by
the Partnership from a Partner of an additional capital contribution required of
such Partner pursuant to paragraph 3.2(a), such Partner shall receive a portion
of the new Units then proposed to be issued by the Partnership (based on the
proportion of the Units held by the Partner at the time the written notice
requiring such contribution is given), and such new Units shall be fully paid
and nonassessable.
(c) No Third Party Rights. The right of the General Partner to require any
additional capital contributions under the terms of this Agreement shall not be
construed as conferring any rights or benefits to or upon any Person not a party
to this Agreement.
3.3 Election to Make Contribution Loan Upon Default in Making of Additional
Capital Contributions.
(a) Procedure. In the event a Partner fails to make any additional capital
contribution within the time specified, the General Partner shall give prompt
notice of such failure to the non-defaulting Partners, who shall have the right
(but are not required) to advance directly to the Partnership, in proportion to
their ownership of Units unless otherwise agreed by them, all or any part of the
non-contributing Partner's additional capital contribution that is in default.
Each amount so advanced shall constitute for all purposes: (i) a loan by the
contributing party to the noncontributing Partner (a "Contribution Loan"); and
(ii) an additional capital contribution of that sum to the Partnership by the
noncontributing Partner pursuant to the applicable provisions of this Agreement.
Each Contribution Loan shall bear interest at a rate equal to the lesser of: (i)
a rate equal to three percentage points above the prime rate in effect from time
to time as published in the Midwest Edition of the Wall Street Journal; or (ii)
the maximum rate of interest then permitted by law. To the extent not previously
paid by the non-contributing Partner, each Contribution Loan shall be repaid out
of the first subsequent distributions of cash made pursuant to this Agreement
(applied to all Contribution Loans in proportion
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to their respective outstanding balances) to which the non-contributing Partner
would otherwise be entitled, which cash shall be paid directly by the
Partnership to the lending Partners and shall be applied first to interest and
then to principal until the Contribution Loans are paid in full.
(b) Additional Remedies. In the event any Contribution Loan has not been
paid in full within 30 days after it is made, then the lending Partner may at
any time and from time to time elect to pursue any remedy available to it at law
or in equity including, without limitation, bringing an action to collect the
Contribution Loan and all accrued interest thereon without further notice to or
demand upon the non-contributing Partner.
3.4 Election to Receive Additional Units Upon Default in Making of
Additional Capital Contributions. In the event a Partner fails to make any
additional capital contribution within the time specified, the General Partner
shall give prompt notice of such failure to the non-defaulting Partners, who
shall have the right (but are not required): to advance directly to the
Partnership cash in an amount equal to all or any part of the non- contributing
Partner's additional capital contribution that is in default; and upon making
such advance, to receive the Units that the non-contributing Partner would have
received upon contributing such amount to the Partnership. A non-defaulting
Partner may exercise the rights granted to it pursuant to this Section 3.4 by
giving notice of such exercise to the Partnership, accompanied by the amount of
cash to be advanced to the Partnership pursuant to such exercise, within 30 days
after the non-contributing Partner's additional capital contribution was due.
Upon such exercise the Partnership shall treat the amount so advanced to it as a
capital contribution by the contributing Partner and shall issue the appropriate
number of Units to such Partner.
3.5 Effect of Change in Proportionate Unit Holdings. If from time to time
as a result of the exercise of rights provided for in paragraphs 3.3, 3.4, or
3.5 there is a change in the proportionate Unit holdings of the Partners, then
the fiscal period from the end of the immediately preceding Fiscal Year to the
day before such change shall be a Fiscal Year of the Partnership for purposes of
determining and allocating the Partnership's Profits or Losses for such Fiscal
Year.
3.6 Other Matters Relating to Capital Contributions.
(a) Loans by any Partner to the Partnership shall not be considered capital
contributions.
(b) Except as may be expressly provided herein, no Partner shall be
entitled to withdraw or to the return of any part of the capital contribution of
such Partner or to receive property or assets other than cash from the
Partnership for any reason whatsoever.
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(c) No Partner shall be entitled to priority over any other Partner with
respect to return of its capital contribution, except to the extent expressly
provided in this Agreement.
(d) No interest shall be paid by the Partnership on capital contributions
(or on any Partner's Capital Account balance), except to the extent expressly
provided in this Agreement.
(e) The General Partner shall not have any personal liability for the
repayment of any capital contribution of any Limited Partner.
3.7 Loans. In the event the General Partner shall determine that funds are
reasonably necessary for maintaining and protecting the assets of the
Partnership or conducting its business, the General Partner shall be authorized
to borrow funds on behalf of the Partnership on commercially reasonable terms
from a commercial lending institution or from one or more of the Partners or
their Affiliates without notification to any of the other Partners and all or
any portion of the Partnership Assets may be pledged or conveyed as security for
such indebtedness. In the event that any Partner or any Affiliate of a Partner
shall loan money to the Partnership, the principal and interest with respect to
such loan shall be fully paid prior to any distribution of cash to the Partners
under the terms of this Agreement unless such loan agreement or promissory note
contains a specific provision to the contrary. No Partner shall be required to
make any such loan. No such loan shall increase any Partner's Partnership
Interest. The exercise and performance of the rights and obligations created by
each loan made hereunder are intended to be and shall be deemed to be
transactions between the Partnership and one who is not a Partner.
SECTION FOUR
CAPITAL ACCOUNTS; RETURN OF CAPITAL
4.1 Capital Accounts. A separate Capital Account shall be maintained on the
accounting books and records of the Partnership for each Partner. Such Capital
Accounts shall be determined and maintained in strict accordance with the
definition of Capital Account set forth in Section Two.
4.2 Return of Capital. If any return of capital in money or property shall
have been deemed to have been made to a Partner prior to or subsequent to the
termination of the Partnership, and if, at the time of such return of capital in
money or property, there shall have been any unpaid debts, taxes, liabilities or
obligations which the Partnership shall not have sufficient assets to meet,
then, if and only if required by the Act, each Partner (including former
Partners who may have received distributions or have transferred their
Partnership Interests) shall be obligated to repay any such return of capital
distributed to such Partner (such repayments to be made in the same proportions
as such
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returns of capital had been made to all Partners), to the extent necessary to
discharge the liabilities of the Partnership to all creditors who extended
credit or whose claims arose before such return of capital. All repayments of
returns of capital made pursuant to this Section 4.2 by Partners shall be made
within ten (10) days after the General Partner shall have repaid the share
apportioned to the General Partner. Failure of any Partner or former Partner to
make repayment required under this Section 4.2 shall subject the defaulting
Partner to payment of interest on the amount due from such payment, at a rate
equal to the lesser of: (i) a rate equal to three percentage points above the
prime rate in effect from time to time as published in the Midwest Edition of
the Wall Street Journal; or (ii) the maximum rate of interest then permitted by
law, plus the costs and expenses, including reasonable attorneys' fees, of
collection of such amounts.
SECTION FIVE
ALLOCATIONS OF PROFITS AND LOSSES
5.1 Profits. After giving effect to the special allocations set forth in
Sections 5.3 and 5.4, the Partnership's Profits for each Fiscal Year shall be
allocated to and among the Partners for accounting purposes (including in
particular for purposes of maintaining the Partners' Capital Accounts) as
follows:
(a) First, Profits shall be allocated to the General Partner so as and to
the extent necessary to offset Losses previously allocated pursuant to Section
5.2(b), to the extent of Losses not previously offset hereunder.
(b) Second, Profits shall be allocated to the Partners so as and to the
extent necessary to offset Losses previously allocated pursuant to Section
5.2(a), to the extent of, and in proportion to, Losses not previously offset
hereunder.
(c) Third, all remaining Profits shall be allocated to and among the
Partners in proportion to the number of Units held by each of them on the last
day of such Fiscal Year.
5.2 Losses.
(a) General Rule. After giving effect to the special allocations set forth
in Sections 5.3 and 5.4, the Partnership's Losses for each Fiscal Year shall for
accounting purposes (including in particular for purposes of maintaining the
Partners' Capital Accounts) be allocated to and among the Partners in proportion
to the number of Units held by each of them on the last day of such Fiscal Year.
(b) Special Limitation. Notwithstanding the general rule set forth in
Section 5.2(a), no Losses shall be allocated to any Limited Partner to the
extent that such allocation would create or enlarge an Adjusted Capital Account
Deficit. Any Losses
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which would be allocated to such Limited Partner but for the preceding sentence
shall instead be allocated to the General Partner.
5.3 Special Allocations. The following special allocations shall be made in
the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Section 5.3, if there is a net decrease in Partnership Minimum Gain during any
Fiscal Year, each Partner shall be specially allocated items of Partnership
income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain determined in accordance with Regulations Section
1.704-2(g). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section
5.3(a) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-2(f) of the Regulations and shall be interpreted consistently
therewith.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
this Section 5.3, if there is a net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to a Partner Nonrecourse Debt during any Fiscal Year, each
Person who has a share of the Partner Nonrecourse Debt Minimum Gain attributable
to such Partner Nonrecourse Debt, determined in accordance with Section
1.704-2(i)(5) of the Regulations, shall be specially allocated items of
Partnership income and gain for such Fiscal Year (and, if necessary, subsequent
Fiscal Years) in an amount equal to such Person's share of the net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Sections
1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section 5.3(b) is
intended to comply with the minimum gain chargeback requirement in Section
1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
(c) Qualified Income Offset. If any Limited Partner unexpectedly receives
any adjustments, allocations, or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), Section 1.704-1(b)(2)(ii)(d)(5) or Section
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Partnership income and gain
shall be specially allocated to each such Limited Partner in an amount and
manner sufficient to eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of such Limited Partner as quickly as possible,
provided that an allocation pursuant to this Section 5.3(c) shall be made only
if and to the
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extent that such Limited Partner would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Section 5.3 have been
tentatively made as if this Section 5.3(c) were not in the Agreement.
(d) Gross Income Allocation. If any Limited Partner has a deficit Capital
Account at the end of any Fiscal Year which is in excess of the sum of the
amount such Limited Partner is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
each such Limited Partner shall be specially allocated items of Partnership
income and gain in the amount of such excess as quickly as possible, provided
that an allocation pursuant to this Section 5.3(d) shall be made only if and to
the extent that such Limited Partner would have a deficit Capital Account in
excess of such sum after all other allocations provided for in this Section 5
have been made as if Section 5.3(c) hereof and this Section 5.3(d) were not in
the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
shall be allocated in the same manner as Losses are allocated pursuant to
Section 5.2(a).
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for
any Fiscal Year shall be specially allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).
(g) 754 Adjustments. To the extent an adjustment to the adjusted tax basis
of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b)
is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as the result of a distribution to a Partner in
complete liquidation of his interest in the Partnership, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Partners in accordance with their interests in the Partnership in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Partner to whom
such distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
5.4 Curative Allocations. The allocations set forth in Sections 5.3(a)
through 5.3(g) (the "Regulatory Allocations") are intended to comply with
certain requirements of the Regulations. It is the intent of the Partners that,
to the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss, or deduction pursuant to this Section 5.4.
Therefore, notwithstanding any other provision of this Section 5 (other than the
Regulatory Allocations), the Partnership shall make such offsetting special
allocations of Partnership income, gain, loss or deduction in whatever manner
determined
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by the General Partner to be appropriate so that, after such offsetting
allocations are made, each Partner's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Partner would have had if
the Regulatory Allocations were not part of the Agreement and all Partnership
items were allocated pursuant to Sections 5.1 and 5.2. In exercising its
discretion under this Section 5.4, the General Partner shall take into account
future Regulatory Allocations under Sections 5.3(a) and 5.3(b) that, although
not yet made, are likely to offset other Regulatory Allocations previously made
under Sections 5.3(e) and 5.3(f).
5.5 Other Allocation and Accounting Rules.
(a) For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner using any permissible method under Code Section 706 and the Regulations
thereunder.
(b) To the extent permitted by Section 1.704-2(h)(3) of the Regulations,
the General Partner shall endeavor to treat distributions of cash from the
Partnership as having been made from the proceeds of a Nonrecourse Liability or
a Partner Nonrecourse Debt only to the extent that such distributions would
cause or increase an Adjusted Capital Account Deficit for any Partner.
5.6 Tax Allocations.
(a) For federal income tax purposes, the Partners' distributive shares of
each item of Partnership income, gain, loss, deduction, and credit shall be
determined in a manner that is consistent with the allocations of Profits,
Losses, and other items under Sections 5.1 through 5.5. The Partners are aware
of the income tax consequences of the allocations made by this Section 5, and
all Partners shall be bound by the provisions of this Section 5 in reporting
their shares of Partnership income and loss for federal income tax purposes.
(b) In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss, and deduction with respect to any property contributed to
the capital of the Partnership shall, solely for tax purposes, be allocated
among the Partners so as to take account of any variation between the adjusted
basis of such property to the Partnership for federal income tax purposes and
its initial Gross Asset Value. In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to the definition of Gross Asset Value in
Section Two, subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Gross Asset Value in
the same manner as under Code Section 704(c) and the Regulations thereunder. Any
elections or other decisions relating to such allocations shall be made by the
General
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Partner in any manner that reasonably reflects the purpose and intention of this
Agreement. Allocations pursuant to this Section 5.6(b) are solely for purposes
of federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Person's Capital Account or share of Profits,
Losses, other items, or distributions pursuant to any provision of this
Agreement.
SECTION SIX
DISTRIBUTIONS
6.1 Distributions of Cash. It is anticipated that the Partnership will not
make regular distributions of cash to the Partners. However, the General Partner
may from time to time decide that cash should be distributed to the Partners. In
such event, and subject to the limitations imposed by the Act on the aggregate
amount which may be distributed by the Partnership at any given time, the
Partnership shall distribute the amount of cash determined by the General
Partner at the time or times determined by the General Partner. Each cash
distribution made by the Partnership shall be made to the Partners in proportion
to the number of Units held by each of them on the date of the distribution.
6.2 Distributions in Kind. It is anticipated that the Partnership will not
make distributions of property to the Partners. However, the General Partner may
from time to time decide that specific Partnership property other than cash
should be distributed to the Partners. In such event, and subject to the
limitations imposed by the Act on the aggregate amount which may be distributed
by the Partnership at any given time, such property shall be valued and
distributed, based on value, to the Partners to whom, and in the same
proportions as, cash in an amount equal to the value of such property would be
distributed on the date such property is distributed, and the manner in which
each such distribution is made shall be determined by the General Partner.
6.3 Distribution in Cash Only. Except as provided in Section 10.2, no
Partner in its capacity as a Partner shall have the right to demand or receive
property other than cash from the Partnership for any reason whatsoever and no
Partner shall have the right to sue for partition of the Partnership or of the
Partnership's assets.
6.4 Good Faith Distribution by General Partner. Upon the good faith
determination to distribute funds in accordance with this Section 6, the General
Partner shall incur no liability on account of such distribution, even though
such distribution may have resulted in the Partnership retaining insufficient
funds for the operation of its business, which insufficiency resulted in loss to
the Partnership or necessitated the borrowing of funds by the Partnership.
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SECTION SEVEN
RIGHTS, POWERS AND OBLIGATIONS OF THE GENERAL PARTNER
7.1 Powers of the General Partner. In addition to the powers granted to any
General Partner under the Act and other provisions of this Agreement, the
General Partner shall have the exclusive right and power to manage the business
and the affairs of the Partnership with all powers necessary, advisable, or
convenient to manage, control, administer and operate the business and affairs
of the Partnership for purposes herein stated, to make all decisions affecting
such business and affairs, and to do all things which are necessary or desirable
in the conduct of the business and affairs of the Partnership. The rights and
powers of the General Partner shall include, without limitation, for Partnership
purposes, the powers to:
(a) Represent the Partnership in all administrative and judicial
proceedings involving federal income tax matters as the "Tax Matters Partner."
In connection therewith, the powers of the General Partner shall include, but
are not limited to, the power to:
(i) appoint an attorney-in-fact to represent the Partnership in
such proceeding;
(ii) engage in any activities enumerated in subchapter C of chapter
63 of the Internal Revenue Code;
(iii) employ attorneys, accountants, appraisers, consultants, and
such other persons as deemed appropriate;
(iv) make any and all elections for federal, state, and local tax
purposes, including, without limitation, any election if permitted by applicable
law: (a) to adjust the basis of Partnership Assets pursuant to Code Sections
754, 734(b) and 743(b), or comparable provisions of state or local law; and (b)
to extend the statute of limitations for assessment of tax deficiencies against
Partners with respect to adjustments to the Partnership's federal, state or
local tax returns; and
(v) represent the Partnership and Partners before taxing
authorities or courts of competent jurisdiction in tax matters affecting the
Partnership and Partners in their capacity as Partners, and to execute any
agreements or other documents relating to or affecting such tax matters
including agreements or other documents that bind the Partners with respect to
such tax matters or otherwise affect the rights of the Partnership or Partners.
The Tax Matters Partner shall provide all Partners affected by an Internal
Revenue Service Partnership level proceeding with such notice of the proceeding
as is required by
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the Code. The preceding sentence shall be deemed to be satisfied by mailing such
notice to each such Partner's last known address.
The Tax Matters Partner is entitled to reimbursement for all expenses
relating to its representation of the Partnership, which may include, but are
not limited to, expenses of persons employed by the Partnership in connection
with an examination, audit, administrative or judicial proceeding relating to
federal income tax matters;
(b) Employ, retain or otherwise secure or enter into contracts with
consultants, agents or firms to assist in the business of the Partnership, all
on such terms for such consideration as the General Partner deems advisable,
such consideration to be a normal operating expense;
(c) Pay all operating costs and expenses associated with the ownership of
Partnership Assets including without limitation, insurance, ad valorem taxes,
maintenance costs, accounting and legal fees, and principal and interest due on
any indebtedness encumbering the assets of the Partnership;
(d) Acquire, contract to acquire or enter into an option to acquire, sell,
exchange, or convey title to, and to license, contract to sell or grant an
option for the sale of all or any portion of the Partnership Assets, and any
mortgage or leasehold interest or other property which may be acquired by the
Partnership upon a transfer of the Partnership Assets;
(e) Borrow money and, if security is required therefor, to mortgage or
subject to any other security device any portion of the Partnership Assets, to
obtain replacements of any mortgage, security deed or other security device, and
to prepay, in whole or in part, refinance, increase, modify, consolidate, or
extend any mortgage, security deed or other device, all of the foregoing at such
terms and in such amount as it deems in its absolute discretion, to be in the
best interest of the Partnership;
(f) Sell additional Partnership Interests to additional limited partners
for such price(s) as may be determined by the General Partner, in its sole
discretion;
(g) Enter into joint venture agreements, trust agreements or other
fiduciary agreements or arrangements for the purpose of holding legal or
equitable title to the Partnership Assets and to lease all or any portion of any
real property owned by the Partnership without limit as to the term thereof,
whether or not such term (including renewal terms) will extend beyond the date
of termination of the Partnership, and whether any property so leased is to be
occupied by the lessee or, in turn, subleased in whole or in part to others;
provided that prior to acquiring more than a de minimis interest in any property
which is subject to an allowance for depreciation or is otherwise amortizable,
or otherwise allows the Partners to claim such deductions, the General Partner
will consult
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with tax counsel for the Partnership to determine whether the Partnership
Agreement needs to be amended;
(h) Form other partnerships (designating the Partnership as a general or
limited partner thereof), limited liability companies, and other entities,
including the entities which will own the Day 2 Venture Units and Day 3 Venture
Units, and contribute any and all Partnership Assets thereto;
(i) Acquire and enter into any contract of insurance which the General
Partner deems necessary and proper for the protection of the Partnership, for
the conservation of its assets, or for any purpose beneficial to the
Partnership;
(j) Invest in short-term government obligations, certificates of deposit or
tax-exempt obligations such funds of the Partnership as are temporarily not
required in its opinion for use in conducting the business of the Partnership;
(k) Execute any guaranty or accommodation endorsement reasonably incident
to the conduct of the business of the Partnership;
(l) Open and maintain bank accounts for the deposit of Partnership funds,
with withdrawals to be made upon such signature or signatures as the General
Partner may designate;
(m) Obtain licenses to use the Partnership Intellectual Property that is
not owned by the Partnership and license the Venture Units to use the
Partnership Intellectual Property;
(n) Execute, acknowledge and deliver any and all instruments, documents, or
agreements to effectuate the foregoing; and
(o) By way of extension of the foregoing and not by way of limitation
thereof, the General Partner shall possess all of the powers and rights of
partners in a partnership without limited partners under the Act as amended.
7.2 Dealing with Partnership by General Partner. The fact that the General
Partner is directly or indirectly interested in or connected with any person,
firm or corporation employed by the Partnership to render or perform a service
or from or to which or whom the Partnership may buy or sell merchandise,
services, materials or other property, shall not prohibit the General Partner,
on behalf of the Partnership, from employing such person, firm or corporation
(including the General Partner) or from otherwise dealing with them. Each
Limited Partner consents to the payment of fees, remuneration, or other payments
paid for services in accordance with the Shareholders' Agreement. All
transactions made pursuant to this Section 7.2 between the Partnership and
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either a Partner or an Affiliate of a Partner are intended to be and shall be
deemed to be transactions between the Partnership and one who is not a Partner.
Nothing contained in this Section 7.2 shall restrict the right of the General
Partner or any other Person to receive the income or distributions to which they
would otherwise be entitled to hereunder as a Partner.
7.3 Authority of General Partner. No person dealing with the General
Partner shall be required to determine the General Partner's authority to make
any commitment or undertaking on behalf of the Partnership nor to determine any
fact or circumstance bearing upon the existence of its authority. No purchaser
of any property or interest owned by the Partnership shall be required to
determine the right to sell and the authority of the General Partner or its
designee to sign and deliver on behalf of the Partnership any such instrument of
transfer, or to see to the application or distribution of revenues or proceeds
paid or credited in connection therewith.
7.4 Duties of the General Partner. The General Partner's obligations shall
include the following:
(a) Manage the Partnership affairs;
(b) Have fiduciary responsibility for the safekeeping and use of all funds
of the Partnership;
(c) Render complete annual reports to the Limited Partners and any required
governmental agency;
(d) Furnish Limited Partners with the reports and information specified in
Section 13.4 hereof;
(e) Maintain complete records of Partnership assets, including information
and reports of architects, appraisers, engineers, attorneys, accountants or
other professionals;
(f) Maintain complete books of account regarding Partnership operations and
business affairs;
(g) Keep all records of the Partnership available for inspection and audit
by any Limited Partner or its representative, at the expense of the Limited
Partner, upon reasonable notice during business hours at the principal place of
business of the Partnership; and
(h) Perform all other actions necessary to ensure that the Partnership
complies with the provisions of the Act and other applicable law.
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7.5 Removal of the General Partner. The General Partner may be removed, and
a new General Partner may be appointed, only by a unanimous vote of all of the
Partners. The General Partner may not be removed without its consent. The
Partnership shall hold the removed General Partner harmless from any and all
liabilities, including attorney's fees, arising from and after the effective
date of its termination of its interest, which liabilities are not attributable
to fraud, gross negligence or willful misconduct of the General Partner prior to
or on such effective date. A General Partner that is removed hereby shall be
entitled, at its sole and absolute discretion, to either (i) convert its
Partnership Interest to that of a special Limited Partner, having the same
rights to allocations of Profits, Losses, distributions and the capital of the
Partnership as prior to such conversion (with such conversion occurring
automatically upon the making of such election), or (ii) receive payment for its
Partnership Interest, in complete termination thereof, in an amount equal to its
fair market value, with payment due upon termination.
7.6 Liability and Indemnification of the General Partner.
(a) Liability Generally. The General Partner shall not be liable to the
Limited Partners because any taxing authorities disallow or adjust any
deductions or credits in the Partnership or a Limited Partner's income tax
returns, nor shall the General Partner have any personal liability for the
repayment of capital contributions of the Limited Partners except as provided in
this Agreement. In addition, the General Partner shall not be liable,
responsible or accountable in damages or otherwise to any of the Limited
Partners or to the Partnership for any act or omission performed or omitted by
it in good faith, and in the reasonable belief that such act or omission was
within the scope and authority granted to it by this Agreement.
(b) No Liability. Neither the General Partner nor its agents shall be
liable to the Limited Partners for any actions taken by or on behalf of the
General Partner, including the execution of a settlement agreement with the
Internal Revenue Service so long as the General Partner acts in good faith in
representing the interest of the Partnership and Limited Partners. The preceding
sentence does not, however, excuse the General Partner from the notice
requirements stated at Section 7.1(a).
(c) Indemnification. The Partnership shall and does hereby indemnify and
save harmless the General Partner and its successors and assigns from and
against loss, damage, or expenses incurred by them on behalf of or in connection
with any act or omission described in the preceding paragraph, including
reasonable costs and expenses of litigation and appeal (including reasonable
fees and expenses of attorneys engaged by the General Partner and all applicable
sales or use taxes imposed on such fees and costs), in defense of such act or
omission, without relieving the General Partner of liability for fraud, bad
faith, gross negligence or malfeasance, or failure to comply in any material
respect with any representation, warranty, covenant, condition or other
agreement herein contained of the General Partner. The satisfaction of any
indemnification and any saving harmless shall
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be from and limited to Partnership Assets and no Partners shall have any
personal liability on account thereof.
7.7 Transferability of General Partner's Interest. Except as otherwise
provided in this Agreement and in addition to any other restrictions set forth
herein on the transfer of the General Partner's Partnership Interest, the
General Partner shall not, without the consent of the Limited Partners holding
at least fifty-one percent (51%) of the Units, sell, assign, transfer, or
otherwise dispose of, in whole or in part, its Partnership Interest or admit an
additional General Partner, and any attempt by the General Partner to do so in
violation of this Agreement shall be null and void ab initio. If all or any part
of the General Partner's Partnership Interest is transferred in violation of
this Agreement, the transferee shall be a mere assignee, and not a substituted
Partner, with respect to the interest that is transferred.
SECTION EIGHT
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
8.1 Liability of Limited Partners. Except as provided in the Act, none of
the Limited Partners shall have any personal liability with respect to the
liabilities or the obligations of the Partnership.
8.2 Management of Business. The Limited Partners, as such, shall not take
part in the management of the business of the Partnership, transact any business
for the Partnership or have the power to sign for or to bind the Partnership to
any agreement or document, said powers being vested solely and exclusively in
the General Partner. No action taken or attempted to be taken by one or more of
the Limited Partners under the provisions of Sections 7, 10 or 14 or this
Section 8 shall be effective or binding upon the Partnership (i) if a court of
competent jurisdiction in the State of Delaware has held that the taking of such
action would result in the loss of limited liability of the Limited Partners, or
(ii) if the Partnership receives an opinion of counsel (obtained by any
Partner), satisfactory to all of the Limited Partners, to the effect that the
taking of such action would result in the loss of limited liability of the
Limited Partners.
8.3 Duty to Account for Profits. Each Limited Partner shall be a trustee
for the Partnership with respect to any profit derived by it without the consent
of the General Partner or the Limited Partners from any transaction connected
with the formation, conduct or liquidation of the Partnership or from any use of
Partnership Assets.
8.4 Rights of Limited Partners. Each Limited Partner shall be entitled to:
(a) The rights accorded to limited partners by the Act, to the extent that
such rights cannot be eliminated by agreement of the Partners;
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(b) All rights and powers of Limited Partners as are set forth elsewhere in
this Agreement;
(c) Be indemnified in respect to payments made and personal liabilities
reasonably incurred by it for the preservation of the Partnership business or
property;
(d) Vote its Units as to any amendments to this Agreement (other than
amendments to admit additional limited partners to the extent such amendments do
not affect the Limited Partner's interest in allocations and distributions under
Sections 5 and 10) or on any other matter which the General Partner may put to a
vote of the Limited Partners;
(e) Have the Partnership books kept at the principal office of the
Partnership, and at all reasonable times to have access to and the right to
inspect and copy any of them; and
(f) Have, upon reasonable notice, true and full information regarding all
things affecting the Partnership.
SECTION NINE
TRANSFER OF PARTNERSHIP INTERESTS
9.1 Transfer of Interests. Partnership Interests are transferable only on
the books of the Partnership. Each Limited Partner agrees that no transferee of
a Limited Partner shall have the right to be substituted as a Limited Partner in
the place of his transferor except with the written consent of the General
Partner, which consent may be withheld for any reason if such transfer was an
involuntary transfer and may not be withheld if such transfer was a voluntary
transfer in compliance with the Shareholders' Agreement. A transferee admitted
as Limited Partner is referred to herein as a "Substituted Limited Partner." No
such substitution or attempted substitution shall be valid and enforceable,
whether or not the Limited Partner's Partnership Interests are transferred or
are attempted to be transferred in connection therewith, unless the General
Partner has given such written consent. Subject to the provisions of this
Agreement or the Act, the death, withdrawal, insanity, bankruptcy, or
substitution of any Limited Partner shall not interrupt the continuity of or
cause the termination or dissolution of the Partnership.
9.2 Limitation Upon Transfer of Partnership Interests Therein.
(a) Securities Laws. Partnership Interests shall be nontransferable and
nonassignable unless the registration provisions of the Securities Act of 1933
(the "1933 Act") have been complied with through registration, or an exemption
therefrom, and unless made in compliance with the registration provisions of the
securities laws of the
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states where interests are offered or sold, or exemptions therefrom.
Furthermore, as a condition precedent to any assignment or other transfer of any
interest in the Partnership, the General Partner may require an opinion of
counsel satisfactory to the General Partner that such assignment or transfer
will be made in compliance with the registration pro visions of the 1933 Act, or
an exemption therefrom, and the securities laws of the states where interests
are offered or sold, or exemptions therefrom. The assignor or transferor will be
responsible for paying the legal fees for any opinion required by this Section.
Any transfer, pledge or other disposition of Partnership Interests in
contravention of these restrictions is void. Each Limited Partner agrees to
accept the foregoing restrictions on the transferability of Partnership
Interests and assignment of interests therein and abide by the provisions
thereof, and agrees that the following legend shall be placed on each
certificate of interest evidencing a Partnership Interest, if any:
THE PARTNERSHIP INTERESTS EVIDENCED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR THE LAWS OF ANY
STATE AND WERE SOLD PURSUANT TO EXEMPTIONS FROM
REGISTRATION UNDER THE ACT AND SUCH STATE LAWS. THE
PARTNERSHIP INTERESTS MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE PARTNERSHIP INTERESTS UNDER THE
ACT AND SUCH STATE LAWS AS MAY BE APPLICABLE, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE PARTNERSHIP
THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Tax Rules. No transfer, assignment or encumbrance of Partnership Inter
ests shall be made if such transfer or other event would, in the opinion of
counsel for the Partnership, result in the Partnership being considered to have
been terminated under the provisions of the Code. In addition, the General
Partner has the right to refuse to recog nize any transfer of Partnership
Interests in a secondary market or substantial equivalent thereof.
(c) Shareholders' Agreement. No transfer or assignment of Partnership
Interests shall be made except in accordance with the Shareholders' Agreement.
9.3 Holders Who are not Limited Partners. A person who has possession of a
Partnership Interest that has been transferred but who has not been admitted as
a Substituted Limited Partner as provided in Section 9.1 shall be entitled
solely (a) to allocations of Profits and Losses and distributions as provided in
Section 5, Section 6, and Section 10.
9.4 Treatment of Transferor. A person who transfers or attempts to transfer
all or any part of a Partnership Interest shall, with respect to any interest
that is effectively
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transferred, cease to have any right, title, or interest to or in the
Partnership and, with respect to any such interest that is not effectively
transferred, shall cease to be a Partner and shall be a mere assignee.
9.5 General Conditions on Disposition.
(a) All costs and expenses incurred by the Partnership in connection with
any disposition of any Limited Partner's Partnership Interest pursuant to this
Section and/or in connection with another person becoming a transferee or
Substituted Limited Partner in the Partnership in respect of such interest
including any filing, recording, and publishing costs and the fees and
disbursements of counsel shall be paid by and be the responsibility of the
Limited Partner disposing of such interest.
(b) If the Partnership Interest of a Limited Partner is effectively
transferred, the Partnership's Profits, Losses, and other items shall for
accounting and tax purposes be allocated between the transferring Limited
Partner and the transferee using any reasonable method of allocation selected by
the General Partner. A transferee of, or Substituted Limited Partner with
respect to, a Limited Partner's Partnership Interest shall be entitled to
receive distributions from the Partnership with respect to such interest only
after the effective date of such assignment. The transfer by a Limited Partner
of any interest shall become effective on the first day of the month following
satisfaction of the requirements set forth in this Section 9.5.
9.6 Survival of Liabilities. No substitution of an assignee as a Limited
Partner shall operate to relieve the assignor of any liabilities arising under
the Act.
9.7 Withdrawal. No Partner may withdraw from the Partnership. Any Partner
that withdraws from the Partnership in breach of this Agreement shall be liable
to the Partnership for all of the direct and indirect damages caused by such
withdrawal.
SECTION TEN
DISSOLUTION, TERMINATION
10.1 Dissolution. It is the intention of the Partners that the business of
the Partnership be continued by the Partners pursuant to the provisions of this
Agreement until such time as the occurrence of an "Event of Dissolution" (as
hereinafter defined), at which time the Partnership shall dissolve. The
occurrence of any of the following shall be deemed an "Event of Dissolution":
(a) The sale of all or substantially all of the assets of the Partnership;
(b) The decision by all of the Partners that the Partnership should be
dissolved;
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(c) The date on which the Partnership or the General Partner shall suffer a
bankruptcy;
(d) December 31, 2097;
(e) The dissolution, removal, or withdrawal of the General Partner, unless
there is a remaining General Partner that shall elect to continue the business
of the Partnership (with such right to continue being expressly granted hereby)
or, if there is no remaining General Partner, unless all remaining Partners
consent in writing to the admission of a new General Partner not later than
ninety (90) days after the occurrence of such event; provided, in the event the
Partnership is continued under this Section 10.1(e), the previous General
Partner's Partnership Interest shall, at such time, be converted to a special
class of Limited Partner having the same rights to allocations of Profits,
Losses, distributions and the capital of the Partnership as prior to such
conversion (with such conversion occurring automatically upon the making of such
election and upon such holder executing an agreement to join in this Agreement);
(f) The occurrence of a cause of dissolution as set forth in the Act, and
limited by Sections 10.1(a) through (e) hereof.
10.2 Wind-Up. Upon the dissolution of the Partnership, the General Partner
shall make a final accounting of the business and affairs of the Partnership and
shall proceed with reasonable promptness to liquidate the business, property and
assets of the Partnership and to distribute the proceeds in the following order
of priority:
(a) To the payment of expenses of any sale, disposition or transfer of the
Partnership Assets of the dissolution and liquidation of the Partnership.
(b) To the payment of just debts and liabilities of the Partnership
(including any to Partners), in the order of priority provided by law.
(c) To the Partners in an amount equal to their Capital Accounts, after
giving effect to all contributions, distributions and allocations for all
periods.
10.3 Compliance With Regulations. In the event the Partnership is
"liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),
then distributions shall be made pursuant to this Section 10 to the Partners who
have positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2).
10.4 No Obligation to Restore Deficit Capital Account Balance. In the event
a Limited Partner's Capital Account has a deficit balance (after giving effect
to all contributions, distributions and allocations for all taxable years,
including the year during which the dissolution occurs), notwithstanding any
custom or rule of law to the contrary,
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such Limited Partner shall have no obligation to make any contribution to the
Partnership and the negative balance of such Limited Partner's Capital Account
shall not be considered an asset of the Partnership nor a debt owed by such
Limited Partner to the Partnership or to any other Person for any purpose
whatsoever.
10.5 Temporary Retention of Liquidation Proceeds. In the discretion of the
General Partner, a pro rata portion of the distributions that would otherwise be
made to the Partners pursuant to this Section may be:
(i) distributed to a trust established for the benefit of the
Partners for the purposes of liquidating Partnership Assets and collecting
amounts owed to the Partnership or the Partners arising out of or in connection
with the Partnership. The assets of any such trust shall be distributed to the
Partners from time to time, in the discretion of the trustee of such trust, in
the same proportions as the amount distributed to such trust by the Partnership
would otherwise have been distributed to the Partners pursuant to this
Agreement; or
(ii) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
amounts shall be distrib uted to the Partners from time to time in the
discretion of the General Partner as such liabilities are paid or settled.
10.6 Distributions In Kind. Notwithstanding anything to the contrary in
Section 10.2, if the Partnership at the time of its dissolution owns any
Intellectual Property that utilizes the words "Planet Hollywood" or any similar
words or any logos or marks that are substantially similar to logos or marks
owned by PHT or its Affiliates, then such Intellectual Property shall upon the
winding up of the Partnership be distributed in kind to PHT. Similarly, and
notwithstanding anything to the contrary in Section 10.2, if the Partnership at
the time of its dissolution owns any Intellectual Property that utilizes the
words "American Multi-Cinema" or "AMC" or any similar words or any logos or
marks that are substantially similar to logos or marks owned by AMCPH or its
Affiliates, then such Intellectual Property shall upon the winding up of the
Partnership be distributed in kind to AMCPH. If Intellectual Property is
distributed in kind to both PHT and AMCPH pursuant to this Section 10.6, then
the property distributed to each shall be deemed to be equal in value.
10.7 Control of Dissolution and Winding-up. The wind-up of the affairs of
the Partnership shall be conducted by the General Partner. In the event there is
no General Partner, then the wind-up of the affairs of the Partnership shall be
conducted by the Partner so nominated by Partners who then own a majority of the
Units (the "Liquidating Partner"). In liquidating the assets of the Partnership,
all tangible assets of a saleable value shall be sold at such price and terms as
the General Partner (or the Liquidating
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Partner) determines to be fair and equitable. Any Partner may purchase such
assets at such sale. A reasonable time shall be allowed for the orderly
liquidation of the assets of the Partnership and the discharge of liabilities to
creditors to minimize the losses that might otherwise occur upon liquidation.
Upon the conclusion of the wind-up of the affairs of the Partnership, the
Partnership shall terminate.
10.8 Deemed Distribution and Recontribution. Notwithstanding any other
provisions of this Section 10, in the event the Partnership is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Event of
Dissolution has occurred, the Partnership Assets shall not be liquidated, the
Partnership's liabilities shall not be paid or discharged, and the Partnership's
affairs shall not be wound up. Instead, solely for federal income tax purposes,
the Partnership shall be deemed to have distributed the Partnership Assets in
kind to the Partners, who shall be deemed to have assumed and taken subject to
all Partnership's liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the Partners shall be deemed to have
recontributed the Partnership Assets in kind to the Partnership, which shall be
deemed to have assumed and taken subject to all such liabilities.
10.9 Rights of Partners. Except as otherwise provided in this Agreement,
each Partner shall look solely to the assets of the Partnership for the return
of his Capital Contributions and shall have no right or power to demand or
receive property other than the distributions described herein. No Partner shall
have priority over any other Partner as to the return of his Capital
Contributions, distributions, or allocations unless otherwise provided in this
Agreement.
10.10 Division of Venture Units. Unless otherwise agreed by the Partners,
this Section 10.10 shall govern the division of the Venture Units of the
Partnership upon dissolution:
(a) The Partnership shall distribute to AMCPH all of the Partnership's
interests in AMC Consolidated Entities and to PHT all of the Partnership's
interests in the PH Consolidated Entities.
(b) The Management Agreements shall terminate and in their place shall be
new management agreements in the then current form generally used by each
Limited Partner or its Affiliates with respect to management services of the
type being provided pursuant to the respective Management Agreement; provided,
that such new management agreements shall be on commercially reasonable terms
for similar facilities and services.
(c) The Master License Agreements shall be amended to reflect (i) AMCPH as
the licensee for purposes of the operation of the Venture Units distributed to
AMCPH, (ii) PHT as the licensee for purposes of the operation of the Venture
Units distributed to PHT, (iii) that no additional facilities utilizing the
intellectual property rights licensed by the
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Master License Agreements may be developed or operated by AMCPH, PHT or their
Affiliates pursuant to the Master License Agreements, and (iv) that the
exclusive nature of the license granted by the terms of the Master License
Agreements shall terminate.
(d) The Sublicense Agreements shall terminate; provided, that, with respect
to the Day 1 Venture Units, the operator thereof shall enter into a license
agreement with PHT or its Affiliates similar to the Day 1 Venture Unit
Sublicense Agreement, except that such agreement shall provide for a royalty
equal to one-half the royalty provided for in the Day 1 Venture Unit Sublicense
Agreement.
SECTION ELEVEN
OTHER BUSINESS
No Partner shall be required to devote its entire time or attention to the
business of the Partnership or, in any event, more time or attention than shall
be reasonably required to carry out its obligations under this Agreement.
SECTION TWELVE
POWER OF ATTORNEY
12.1 Granting General Partner Power of Attorney. Each Limited Partner, by
executing this Agreement or a counterpart thereof, irrevocably constitutes and
appoints the General Partner as its true and lawful attorney-in-fact and agent
with full power and authority to act in such Limited Partner's name, place, and
stead to effect the purposes of the Partnership, including the execution,
acknowledgment, delivery, filing and recording of all certificates, documents,
deeds, bills of sale, assignments and other instruments of conveyance, leases,
contracts, loan documents and all other documents which the General Partner
deems necessary or reasonably appropriate to achieve the following:
(a) To qualify the Partnership as a Limited Partnership under the Act; and
(b) To effect a modification of the Partnership or an amendment of this
Agreement without the consent of the Limited Partners:
(i) to ensure the continuation of Partnership tax status, provided
however that, in the opinion of counsel to the Partnership, such amendment does
not adversely affect in any way the rights or interests of any of the Limited
Partners;
(ii) to cure any ambiguity and to correct or supplement any
inconsistent provision in this Agreement; or
(iii) when such modification or amendment is permitted or required
under the terms of this Agreement; or
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12.2 Power of Attorney.
(a) The power of attorney granted herein:
(i) is a special power of attorney and shall be deemed to be
coupled with an interest, shall be irrevocable, and shall survive death,
incompetency, or legal disability of a Limited Partner;
(ii) may be exercised by the General Partner for each Limited
Partner by listing any or all of the Limited Partners required to execute any
such instrument with a signature of said General Partner acting as
attorney-in-fact for any or all of the Limited Partners; and
(iii) shall survive the delivery of an assignment by a Limited
Partner of the whole or a portion of its Partnership Interest.
(b) Each of the agreements, certificates, or other documents made pursuant
to the power of attorney granted herein shall be in such form as counsel for the
General Partner shall deem appropriate. The powers herein conferred to make
agreements, certificates, and other documents shall be deemed to include the
powers to sign, execute, acknowledge, swear to, verify, deliver, file, record
and publish the same. The General Partner shall notify the Limited Partners
after every time it utilizes this power of attorney.
SECTION THIRTEEN
BOOKS OF ACCOUNT AND PARTNERSHIP RECORDS
13.1 Books of Account. The General Partner shall keep and maintain, or
cause to be maintained, complete and accurate books, records and accounts of the
Partnership. Such books shall be kept on the basis of a calendar year using the
accrual method of accounting and shall be closed and balanced at the end of each
year. An accounting of all types of receipts, income, profits, costs, expenses
and losses arising out of or resulting from the business of the Partnership
shall be made by the General Partner annually as of the end of each Fiscal Year,
and also upon termination of this Agreement. The expense of maintaining the
books of account shall be an expense of the Partnership. All decisions as to
accounting and tax matters (including elections which the Partnership is
permitted to make under the Code) shall be made by the General Partner.
13.2 Inspection. The books, records and accounts of the Partnership,
together with executed copies of this Agreement and of the Certificate and any
amendments to either document, shall be kept at all times at the principal
office of the Partnership. All Partners and their duly authorized
representatives shall have the right to examine such
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books, records and accounts at any and all reasonable times and to make copies
thereof or extracts therefrom.
13.3 Bank Accounts. The General Partner shall be responsible for seeing
that one or more accounts are maintained in a bank which is a member of the
Federal Deposit Insurance Corporation, which accounts shall be used for the
payment of the disbursements properly chargeable to the Partnership, and in
which shall be deposited the revenues received from the operation of the
Partnership. In addition, there shall be deposited in said accounts all amounts
borrowed from third parties. All such revenues and amounts required by this
Section to be deposited in said accounts, shall be and remain the property of
the Partnership, and shall be received, held and disbursed by the General
Partner to be applied only for Partnership purposes. The General Partner shall
designate the authorized signatories for all such accounts.
13.4 Reports.
(a) Tax Information. Within seventy-five (75) days after the end of the
Partnership's fiscal year, the General Partner will use its best efforts to
furnish each Partner with all information necessary for the preparation of each
of the Limited Partner's Federal and state income tax returns.
(b) Financial Statements. Within ninety (90) days after the end of each
fiscal year, the General Partner shall provide the Limited Partners with a
balance sheet and related statement of profit and loss for such year.
SECTION FOURTEEN
AMENDMENTS
14.1 General Rule. Except for amendments permitted by Section 11, this
Agreement may be amended only with the written consent of the General Partner
and those Limited Partners holding a majority of the Units held by the Limited
Partners. The General Partner may, and at the request of any Limited Partner
shall, submit to the Limited Partners, in writing by registered or certified
mail, the text of any proposed amendment to this Agreement and a statement by
the proposer of the purpose of any such amendment. The General Partner shall
include in any submission its views as to the proposed amendment. Any such
amendment shall be adopted if, within ninety (90) days after the mailing of such
amendment to all Partners, the General Partner has consented to such amendment
and has further received written approval (including a telegraph or facsimile
message) thereof from Limited Partners that hold a majority of the Units held by
the Limited Partners. A written approval may not be withdrawn or voided once it
is filed with the General Partner. A Limited Partner filing a written objection
may thereafter file a valid written approval. The date of adoption of an
amendment pursuant to this Section 14 shall be the date set forth in the
amendment for the adoption, or if there is no
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such date, the date on which the General Partner shall have received the
requisite written approvals. Any proposed amendment which is not adopted may be
resubmitted. In the event any proposed amendment is not adopted, any written
approval received with respect thereto shall be void and shall not be effective
with respect to any resubmission of the proposed amendment.
14.2 Unanimous Consent Requirement. Notwithstanding the foregoing
provisions of this Section 14, no amendment, without the prior written approval
of all Partners, may (a) enlarge the obligations of any Partner under this
Agreement without said Partner's written consent, (b) enlarge the liability of
the General Partner to the Limited Partners without the General Partner's
written consent, (c) amend this Section 14, (d) amend any provision relating to
the removal of the General Partner, (e) except with regard to the admission of
additional limited partners as provided in Section 7.1, amend any provisions
concerning cash distributions or allocation of Profits and Losses (except pur
suant to the authority granted to the General Partner under Section 4, with
regard to Capital Accounts), or (f) alter the Partnership in such manner as will
result in the Partnership no longer being classified as a partnership for
Federal income tax purposes.
SECTION FIFTEEN
GENERAL PROVISIONS
15.1 Relationship. Nothing contained in this Agreement shall be deemed or
con strued to constitute any Partner as a general partner, employee or agent of
any other Partner, other than in connection with activities included within the
purpose and scope of the Partnership as set forth herein and subject to
limitations upon same, as set forth herein.
15.2 Meetings of Partners. Any Partner may cast his vote on any matter
which may be put to a vote of the Partners by personally casting said vote, by
written proxy or by written consent granted in writing. Meetings of all Partners
may be called by the General Partner in its discretion, after ten (10) days
written notice to all Partners.
15.3 Entire Agreement. This Agreement sets forth all the promises,
covenants, agreements, conditions and understandings between the parties hereto
relating to the subject matter hereof. However, the parties are
contemporaneously herewith entering into other contracts relating to the Venture
Units and related matters, and this Agreement does not supersede such other
contracts or any future contracts dealing with similar subject matter.
15.4 Binding Effect; No Assignment. This Agreement shall be binding upon
the parties hereto, their heirs, administrators, transferees, successors and
assigns. No party may assign or transfer its interests herein, or delegate its
duties hereunder, except as expressly provided herein; provided, however, that
each Partner may assign its Partnership
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Interest to any other party in which it owns a majority of the equity interest
as long as such entity shall agree to be bound by the terms of this Agreement.
15.5 No Waiver. No waiver of any provision of this Agreement shall be effec
tive unless it is in writing and signed by the party against whom it is
asserted, and any such written waiver shall only be applicable to the specific
instance to which it relates and shall not be deemed to be a continuing or
future waiver.
15.6 Notices. Any notice, consent, or other communication required or
permitted by this Agreement shall be sufficient if made in writing, signed by
the communicator, and delivered to a Partner personally or by mailing the same
postage prepaid by registered or certified mail, return receipt requested, to a
Partner at its address as set out in the Partnership's records. Each such
communication shall be deemed to have been received by a person when: delivered
to such person; sent by telecopy to such person at a telecopy number provided by
such person to the Partnership for notice purposes; on the fifth day after
deposit in the United States mail, postage prepaid and certified (return receipt
requested), addressed to such person at an address provided by such person to
the Partnership for notice purposes; or on the first day after proper and timely
deposit, freight prepaid or with arrangements for payment made in advance, with
a nationally recognized next-day delivery service providing next-day service to
the location of the recipient, addressed to such person at an address provided
by such person to the Partnership for notice purposes. Any person may change its
address or telecopy number or both by notice to the Partnership.
(a) Partnership distributions of cash or property, if any, shall be made in
the manner determined by the General Partner, but it shall be sufficient if they
are made by mailing the same to the Partners at their addresses as set out in
the Partnership's records.
15.7 Counterparts. This agreement and any amendments may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together will constitute one and the same instrument.
15.8 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of the Agreement.
15.9 Governing Law. This Agreement is governed by and shall be construed in
accordance with the laws of the State of Delaware, excluding any
conflict-of-laws rule or principle that might refer the governance of the
construction of this Agreement to the law of another jurisdiction.
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15.10 Further Assurances. The parties hereto agree that they will execute
and deliver such further instruments and do such further acts and things as may
be reasonably required to carry out the intent and purposes of this Agreement.
15.11 Litigation. The General Partner shall defend and prosecute such legal
or equitable actions as it deems necessary to enforce or protect the interests
of the Partnership, and the expense of doing so shall be an operating cost of
the Partnership.
15.12 Litigation Among Partners. If any party hereby is required to engage
in litigation against any other party hereto, either as plaintiff or as
defendant, in order to enforce or defend any of its or his rights under this
Agreement, and such litigation results in a final judgment in favor of such
party ("Prevailing Party"), then the party or parties against whom said final
judgment is obtained shall reimburse the Prevailing Party for all direct,
indirect or incidental expenses incurred by the Prevailing Party in so enforcing
or defending its or his rights hereunder, including, but not limited to, all
reasonable attor neys' fees and court costs and other expenses incurred
throughout all negotiations, trials or appeals undertaken in order to enforce
the Prevailing Party's rights hereunder.
15.13 Remedies. Each party hereto recognizes and agrees that the violation
of any term, provision or condition of this Agreement may cause irreparable
damage to the other parties which may be difficult to ascertain, and that the
award of any sum of damages may not be adequate relief to such parties. Each
party, therefore, agrees that, in addition to the remedies available in the
event of a breach of this Agreement, any other party shall have a right to
equitable relief including, but not limited to, the remedy of specific
performance.
15.14 Representations and Warranties. Each Partner hereby represents to the
other Partners as follows:
(a) Such Partner is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation and has
the power and authority to own its property and carry on its business as owned
and carried on at the date hereof and as contemplated hereby. Such Partner is
duly licensed or qualified to do business and in good standing in each of the
jurisdictions in which the failure to be so licensed or qualified would have a
material adverse effect on its ability to perform its obligations hereunder.
Neither the execution, delivery nor performance of this Agreement by the Partner
will conflict with the provisions of the Partner's Articles of Incorporation,
Bylaws, or other organizational instruments, violate any order, writ, injunction
or decree of any court, administrative agency or governmental body, or
constitute or result in a violation or breach of any term or provision, or
constitute a default under, any contract, mortgage, lease or other agreement by
which the Partner or its assets are bound.
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(b) Such Partner has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder, and the execution, delivery,
and performance of this Agreement have been duly authorized by all necessary
corporate action. This Agreement constitutes the legal, valid, and binding
obligation of such Partner. The Partner has the ability to perform its
obligations hereunder (or will have the ability to do so when such performance
is called for herein).
(c) The representations and warranties made by the Partners in this
Agreement shall survive the execution hereof.
15.15 Arbitration. Any claim, dispute or other matter in question between
the parties hereto arising out of or relating to this Agreement, or the breach
thereof, shall be decided by arbitration in accordance with the rules of the
American Arbitration Association in effect on the date hereof before three (3)
arbitrators; one designated by each party and the third in accordance with the
Rules of the American Arbitration Association. Any such arbitration shall be
conducted in New York, New York, unless the parties mutually agree to another
location. The arbitrators shall be qualified by education, training or
experience as may be appropriate according to the nature of the claim, dispute
or other matter in question. The foregoing agreement to arbitrate and any other
agreement to arbitrate shall be specifically enforceable under the prevailing
arbitration law. The award rendered by the arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any court
having jurisdiction thereof. To the extent permitted by law, by agreeing to
engage in the arbitration provided for in this Section, the parties waive their
right to appeal any decision made by the arbitrators. The demand for arbitration
shall be made within a reasonable time after the claim, dispute or other matter
in question has arisen; and in no event shall it be made after the date when
institution of legal or equitable proceedings based on such claim, dispute or
other matter in question would be barred by the applicable statute of
limitations. All costs and expenses (including reasonable attorneys' fees and
costs) in connection with any such arbitration shall be borne in the manner
which the arbitrators making the determination shall direct. Notwithstanding the
provisions of this Section, either party may seek appropriate injunctive relief
for any threatened breach.
15.16 Saving Clause. Any requirements imposed under applicable law,
including but not limited to, the provisions of the Act, as in effect from time
to time, shall, where inconsistent with any provision of this Agreement, be
controlling and shall govern the rights among the parties hereto, but such
inconsistent provisions of law are hereby waived to the maximum extent permitted
by such law. Any such provisions under applicable law or regulation which
supersede or invalidate any provision hereof shall not affect the validity of
this Agreement, and the remaining provisions shall be enforced as if the invalid
provision or provisions were deleted.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION
THAT IS BINDING UPON THE PARTIES
GENERAL PARTNER:
PMC MANAGEMENT, INC., a Georgia close
corporation
By:
------------------------------------
Name:
---------------------------------
Its:
---------------------------------
LIMITED PARTNERS:
PLANET HOLLYWOOD (THEATRES), INC.,
a Florida corporation
By:
------------------------------------
Name:
---------------------------------
Its:
---------------------------------
AMCPH HOLDINGS, INC.
a Missouri corporation
By:
------------------------------------
Name:
---------------------------------
Its:
---------------------------------
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Exhibit 10.20
MASTER AGREEMENT
AGREEMENT, dated as of December 2, 1997, between TIMES SQUARE PARTNERS
LLC, a New York limited liability company having an office at c/o Property
Markets Group, 300 East 42nd Street, New York, New York 10017 (the
"Company"), INTELL TIMES SQUARE, LLC, a New York limited liability company
having an office at c/o Property Markets Group, 300 East 42nd Street, New
York, New York 10017 ("Intell"), MADISON BROADWAY ASSOCIATES LLC, a New York
limited liability company having an office at 875 Third Avenue, New York, New
York 10022 ("Madison"), and PLANET HOSPITALITY HOLDINGS, INC., a Florida
corporation, having an office at 7380 Sand Lake Road, Orlando, FL 32819
("Planet Hollywood").
W I T N E S S E T H:
WHEREAS, Intell Real Estate Management and Investment Company ("Assignor
Intell") and Madison formed a limited liability company pursuant to the New
York Limited Liability Company Act, et seq., as amended from time to time, by
filing on March 19, 1997, Articles of Organization of the Company with the
office of the Secretary of State of the State of New York;
WHEREAS, Assignor Intell assigned all of its right, title and interest
in and to the Company to Intell; and
WHEREAS, Intell owns a ninety percent (90%) membership interest in the
Company and Madison owns a ten percent (10%) membership interest in the
Company; and
WHEREAS, the Company is the contract vendee under (a) a contract to
purchase that certain real property located at 1567 Broadway, New York, New
York and (b) a contract to purchase certain zoning and development rights
appurtenant to certain property located at 205 West 46th Street, New York,
New York; and
WHEREAS, Planet Hollywood desires to be admitted as a member in the
Company and receive a membership interest in the Company, upon the terms and
conditions set forth in this Agreement; and
WHEREAS, Intell and Madison desire to admit Planet Hollywood as a member
in the Company and permit Planet Hollywood to receive a membership interest
in the Company, upon the terms and conditions set forth in this Agreement; and
WHEREAS, the Company intends to demolish the existing structure located
on the Property and construct a mixed use hotel, retail and sign tower
building thereon
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(the "Project"), the retail portion of which will be operated by Planet
Hollywood as a Planet Hollywood theme restaurant; and
WHEREAS, at the closing for the acquisition of the Property pursuant to
the Property Agreement, the Company intends to cause Brel to convey the
Property in two (2) parcels as follows: (a) one parcel to be conveyed to
Planet Hollywood, Atlantic or PH-III and consist of the volume of space below
a horizontal plane at a height approximately equivalent to the height of the
roof of the third floor of the proposed new building, and (b) one parcel to
be conveyed to the Company and consist of the volume of space at and above
such horizontal plane; and
WHEREAS, upon the completion of the Project, the Project shall be
submitted to a condominium form of ownership pursuant to Article 9-B of the
Real Property Law of the State of New York, with the parties exchanging
confirmatory deeds with respect to the units in the condominium which
generally correspond to the respective volumes of space, subject to changes
reflecting the as-built condition of the Project and the terms and provisions
of the Reciprocal Easement (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereby agree as follows:
ARTICLE 1.
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings indicated:
"Affiliate" means any Person that directly or indirectly controls,
is controlled by or is under common control with the Person in question. As
used in this definition, the term "control" means the ownership, control, or
power to vote more than fifty (50%) percent of the voting securities of a
Person and (ii) and the power to direct or cause the direction of the
management and policies of a Person.
"Assignment Transaction" has the meaning set forth in Section 8.1(d).
"Atlantic" has the meaning set forth in Section 15.4.
"Brel" means Brel Associates XV, L.P.
"Broker" has the meaning set forth in Section 11.1.
"Capital Contribution" has the meaning set forth in Section 3.1.
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"Cash Balance" has the meaning set forth in Section 3.1(b).
"Closing" has the meaning set forth in Section 4.1 hereof.
"Closing Date" has the meaning set forth in Section 4.1 hereof.
"Closing Payment" has the meaning set forth in Section 3.1 hereof.
"Company Parties" means, collectively, the Company, Intell and
Madison. "Company Party" means any one of the Company Parties.
"Company's Percentage" means seventy-five percent (75%).
"Development Rights" means the zoning and development rights and
other rights to be sold by Lunt pursuant to the Development Rights
Agreement.
"Development Rights Agreement" means that certain Development
Rights Purchase Agreement, dated June 16, 1997, between Lunt, as seller,
and the Company, as purchaser, as the same may be hereafter amended,
modified, supplemented or extended.
"Development Rights Agreement Closing" means the closing of the
sale and purchase of the Development Rights pursuant to the Development
Rights Agreement.
"Development Rights Agreement Closing Documents" means the
documents and instruments to be delivered by Lunt to the Company at the
Development Rights Agreement Closing pursuant to the Development Rights
Agreement.
"Deposit" has the meaning set forth in Section 3.1(a).
"Directed Documents Transaction" has the meaning set forth in
Section 8.1(d).
"Escrow Agent" means Fried Frank Harris Shriver & Jacobson.
"First Improvements Escrow Payment" has the meaning set forth in
Section 3.1(a).
"Guarantor" means Planet Hollywood International, Inc.
"Hotel Unit" has the meaning set forth in the Reciprocal
Easement.
"Hotel Parcel" has the meaning set forth in the Reciprocal
Easement.
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"Improvements Agreement" means the Improvements Agreement in the
form of Exhibit C annexed hereto, as the same may be amended, modified or
supplemented after the Closing Date.
"Improvements Escrow Account" has the meaning set forth in
Section 3.1(a).
"Intention to Terminate Notice" has the meaning set forth in
Section 8.1(d).
"Land" means that certain parcel of land more particularly
described on Exhibit F annexed hereto and made a part hereof.
"Last Termination Date" has the meaning set forth in Section
8.1(d).
"License Agreement" means that certain License Agreement in the
form of Exhibit E annexed hereto, as the same may be amended, modified or
supplemented after the Closing Date.
"Lunt" means Lunt Theatre Company.
"Member" has the meaning set forth in the Operating Agreement.
"Membership Interest" has the meaning set forth in the Operating
Agreement.
"Operating Agreement" means the Amended and Restated Limited
Liability Company Agreement of the Company in the form of Exhibit A annexed
hereto, as the same may be amended, modified or supplemented after the
Closing Date.
"Outside Date" has the meaning set forth in Section 8.1(a).
"Person" means an individual or a corporation, limited liability
company, partnership, trust, unincorporated organization, association or
other entity.
"PH-III" means Planet Hollywood (Region III), Inc.
"PH Indemnity" has the meaning set forth in Section 8.1(d).
"Planet Hollywood's Percentage" means twenty-five percent (25%).
"Planet Hollywood Interest" has the meaning given in Section 2.1
hereof.
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"Project" has the meaning set forth in the recitals hereof.
"Property" means the Land and the improvements to be conveyed by
the seller under the Property Agreement.
"Property Agreement" means that certain Purchase and Sale
Agreement between Brel, as seller, and the Company, as purchaser, dated as
of April 7, 1997, for the purchase and sale of the Property, as the same
may be hereafter amended, modified, supplemented or extended.
"Property Agreement Closing" means the closing of the sale and
purchase of the Property pursuant to the Property Agreement.
"Property Agreement Closing Documents" means the documents and
instruments to be delivered by Brel to the Company at the Property
Agreement Closing pursuant to the Property Agreement.
"Reciprocal Easement" means the Declaration of Easements in the
form of Exhibit B annexed hereto, as the same may be amended, modified or
supplemented after the Closing Date.
"Request for Assignment Notice" has the meaning set forth in
Section 8.1(d).
"Retail Parcel" has the meaning set forth in the Reciprocal
Easement.
"Retail Unit" has the meaning set forth in the Reciprocal
Easement.
"Retail Unit Contribution" has the meaning set forth in Section
3.1.
"Second Improvements Escrow Payment" has the meaning set forth in
Section 3.1(b).
"Suntrust" has the meaning set forth in Section 15.4.
ARTICLE 2.
MEMBERSHIP INTEREST; PURCHASE OF RETAIL UNIT
Section 2.1. Membership Interest. At the Closing, the Company agrees
to admit Planet Hollywood as a Member of the Company and permit Planet
Hollywood to receive a twenty percent (20%) Membership Interest in the
Company (such Membership Interest being referred to herein as the "Planet
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Hollywood Interest"), and Planet Hollywood agrees to be admitted as a
Member of the Company and receive the Planet Hollywood Interest, subject to
and in accordance with the terms and conditions of this Agreement.
Section 2.2. Retail Parcel and Hotel Parcel. At the Closing, the
Company agrees to direct Brel to convey the Property to the Company and
Planet Hollywood or Atlantic in two (2) parcels as follows: (a) the Retail
Parcel shall be conveyed to Planet Hollywood, Atlantic or PH-III and (b)
the Hotel Parcel shall be conveyed to the Company. Planet Hollywood agrees
to accept such portion of the Property comprising the Retail Parcel at the
Closing in accordance with the terms and conditions of this Agreement and
the Reciprocal Easement.
ARTICLE 3.
CAPITAL CONTRIBUTION; RETAIL UNIT CONTRIBUTION
Section 3.1. Payment of Capital Contribution and Retail Unit
Contribution. The capital contribution (the "Capital Contribution") to be
made by Planet Hollywood for the Planet Hollywood Interest is Seven Million
and 00/100 ($7,000,000) Dollars. The contribution (the "Retail Unit
Contribution") to be made by Planet Hollywood for the Retail Parcel is
Thirty-Three Million and 00/100 ($33,000,000) Dollars. The Retail Unit
Contribution consists of Eighteen Million and 00/100 ($18,000,000) Dollars
for the purchase price of the Retail Parcel and Fifteen Million and 00/100
($15,000,000) Dollars for the construction of the base-building portion of
the Retail Unit as further described in the Improvements Agreement. The
Capital Contribution and Retail Unit Contribution, being in the aggregate
amount of Forty Million and 00/100 ($40,000,000) Dollars, is collectively
referred to as the "Closing Payment", which Closing Payment is payable by
Planet Hollywood as follows:
(a) Thirty Three Million ($33,000,000) Dollars on the date hereof,
by wire transfer of immediately available federal funds to an account of
Escrow Agent designated by the Company which sum shall consist of (i) Eight
Million Five Hundred Thousand ($8,500,000) Dollars (such amount, together
with the interest earned thereon, being referred to herein as the
"Deposit"), which Deposit shall be held and disbursed by Escrow Agent in
accordance with the provisions set forth in Section 3.2 below; (ii) Sixteen
Million Five Hundred Thousand ($16,500,000) Dollars (the "Cash Balance"),
which Cash Balance shall be disbursed by Escrow Agent at the Closing to an
account designated by the Company; and (iii) Eight Million ($8,000,000)
Dollars (the "First Improvements Escrow Payment"), which First Improvements
Escrow Payment shall be transferred by the Escrow Agent at the Closing to
an account (the "Improvements Escrow Account") of Escrow Agent (or, if
required by the lender providing construction financing
for the Project, another third-party independent custodial escrow agent
such as a title insurance company or institutional bank designated by such
lender providing construction financing
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for the Project and reasonably acceptable to the Company), in accordance
with the terms and conditions set forth in the Improvements Agreement; and
(b) Five Million ($5,000,000) Dollars on or before the tenth (10th)
day after the Closing (the "Second Improvements Escrow Payment"), to be
paid by Planet Hollywood by wire transfer of immediately available federal
funds to the Improvements Escrow Account (or, if required by the lender
providing construction financing for the Project, another third-party
independent custodial escrow agent such as a title insurance company or
institutional bank designated by such lender providing construction
financing for the Project and reasonably acceptable to the Company), which
sum shall be held and disbursed in accordance with the terms and conditions
set forth in the Improvements Agreement; provided, however, that if Planet
Hollywood shall fail to make the Second Improvements Escrow Payment on or
before the tenth (10th) day after the Closing, interest shall accrue
thereon at the rate of fifteen percent (15%) per annum, compounded daily,
until fully paid; and
(c) (i) Two Million ($2,000,000) Dollars, to be paid by Planet
Hollywood in accordance with the terms and conditions set forth in the
Improvements Agreement.
(ii) Notwithstanding anything to the contrary contained in this
Section 3.1, in the event the Closing does not occur on or before December
5, 1997, Escrow Agent is hereby irrevocably authorized and directed to
promptly return the sum of Twenty Four Million Five Hundred Thousand
($24,500,000) Dollars, representing the Cash Balance and the First
Improvements Escrow Payment, together with interest thereon, by wire
transfer of immediately available federal funds to an account as designated
by Planet Hollywood; provided, however, that in the event the Closing
occurs on a date that is after December 5, 1997 and the Cash Balance and
the First Improvements Escrow Payment was returned to Planet Hollywood in
accordance with the immediately preceding clause in this
Section 3.1(c)(ii), then, in such event, Planet Hollywood shall pay the
Cash Balance ($16,500,000), the First Improvements Escrow Payment
($8,000,000), the Second Improvements Escrow Payment ($5,000,000), and the
remaining unpaid portion of the Closing Payment ($2,000,000) as follows:
(A) Sixteen Million Five Hundred Thousand ($16,500,000) Dollars
representing the Cash Balance, to be paid at the Closing by wire transfer
of immediately available federal funds to an account as designated by the
Company;
(B) Eight Million ($8,000,000) Dollars, representing the First
Improvements Escrow Payment, to be paid at the Closing by wire transfer of
immediately available federal funds to the Improvements Escrow Account (or,
if required by the lender providing construction financing for the Project,
another third-party independent custodial
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escrow agent such as a title insurance company or institutional bank
designated by such lender providing construction financing for the Project
and reasonably acceptable to the Company), which sum shall be held and
disbursed in accordance with the terms and conditions set forth in the
Improvements Agreement;
(C) Five Million ($5,000,000) Dollars, representing the Second
Improvements Escrow Payment, shall be paid pursuant to, and in accordance
with, Section 3.1(b) hereof; and
(D) Two Million ($2,000,000) Dollars, representing the remaining
balance of the Closing Payment, shall be paid pursuant to, and in
accordance with, Section 3.1(c)(i) hereof.
Section 3.2. Escrow of Deposit.
(a) The Deposit shall be delivered to Escrow Agent in accordance with
the provisions of Section 3.1 hereof, and shall be held by Escrow Agent
until the Closing or sooner termination of this Agreement. Escrow Agent
shall pay over or apply the Deposit in accordance with the terms of this
Section 3.2. Any interest earned on the Deposit or any portion thereof
shall be paid to the same party entitled to the Deposit or any portion
thereof hereunder (as and when such party is entitled to the Deposit or
such portion thereof), and the party receiving such interest shall pay any
income taxes thereon. For purposes thereof, the tax identification numbers
of the parties hereto are as follows: 13-3955711 (the Company); and
59-3468493 (Planet Hollywood).
(b) At the Closing, the Deposit shall be paid by Escrow Agent to or
as directed by the Company. Interest earned on the Deposit shall be
credited against the Cash Balance.
(c) If for any reason the Closing does not occur, then Escrow Agent
shall continue to hold the Deposit until otherwise directed by joint
written instructions from the Company and Planet Hollywood or a final
judgment of a court having jurisdiction. Escrow Agent, however, shall have
the right at any time to deposit the Deposit with the clerk of any federal
or state court sitting in the State of New York or a court having
jurisdiction in the county in which the Property is located. Escrow Agent
shall give written notice of such deposit to the Company and Planet
Hollywood. Upon such deposit, Escrow Agent shall be relieved and
discharged of all further obligations and responsibilities hereunder.
(d) The parties acknowledge that Escrow Agent (i) is acting solely
as a stakeholder at their request and for their convenience, (ii) shall not
be deemed to be the agent of either of the parties and (iii) shall not be
liable to either of the parties for any act or omission on its part unless
taken or suffered in bad faith, willful disregard of this
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Agreement or involving gross negligence. The Company and Planet Hollywood
shall jointly and severally indemnify and hold Escrow Agent harmless from
and against all costs, claims and expenses, including reasonable attorneys'
fees, incurred in connection with the performance of Escrow Agent's duties
hereunder, except with respect to actions or omissions taken or suffered by
Escrow Agent in bad faith, willful disregard of this Agreement or involving
gross negligence on the part of Escrow Agent.
(e) Escrow Agent shall invest the Deposit in an interest bearing
account at Citibank, N.A. Escrow Agent shall not be liable for any losses
suffered in connection with any such investment and shall have no
obligation to obtain the best, or otherwise seek to maximize, the rate of
interest earned on any such investment. Any fees or charges in connection
with such investment shall be paid out of the amounts held in escrow before
any other payments shall be required to be made from such amounts.
(f) Upon any delivery of the amount remaining in escrow as provided
in Sections 3.2(b) or 3.2(c) above, Escrow Agent shall be relieved of all
liability, responsibility or obligation with respect to or arising out of
the escrow or under this Agreement. Escrow Agent shall not be bound by any
modification to this Section 3.2 unless Escrow Agent shall have agreed to
such modification in writing.
(g) Escrow Agent shall be entitled to rely or act upon any notice,
instrument or document believed by Escrow Agent to be genuine and to be
executed and delivered by the proper person, and shall have no obligation
to verify any statements contained in any notice, instrument or document or
the accuracy or due authorization of the execution of any notice,
instrument or document.
(h) Escrow Agent shall be entitled to retain attorneys of its
choice, including itself, in connection with this escrow and Escrow Agent
may continue to represent the Company and Intell in connection with this
Agreement, or any dispute which may arise hereunder or otherwise.
(i) Escrow Agent has acknowledged agreement to the foregoing
provisions of this Section 3.2 by signing in the place indicated on the
signature page of this Agreement.
ARTICLE 4.
CLOSING
Section 4.1. Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") shall be held at such
offices in the City of New York as shall be designated by the Company, and
shall occur at the same time and on the same date as the Property Agreement
Closing (such date being the "Closing Date"). TIME
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SHALL BE OF THE ESSENCE with respect to the Company Parties' and Planet
Hollywood's obligation to close on the Closing Date. As of the date hereof
and pursuant to the exercise of rights set forth in the Property Agreement,
the Property Agreement Closing is scheduled to occur on December 3, 1997.
Within one (1) business day after giving to or receiving from Brel any
notice changing the scheduled date of the Property Agreement Closing, the
Company shall give notice of such change to Planet Hollywood.
Section 4.2. Order of Closing. The Company Parties and Planet
Hollywood acknowledge and agree that the transactions constituting the
Closing under this Agreement and the transactions constituting the Property
Agreement Closing and Development Rights Agreement Closing shall occur
substantially contemporaneously; provided, however, the Company Parties and
Planet Hollywood agree that the Closing under this Agreement shall occur
immediately prior to the Property Agreement Closing and Development Rights
Agreement Closing so that a portion of the proceeds of the Closing Payment
may be used to satisfy the obligations of the purchaser under the Property
Agreement and Development Rights Agreement.
ARTICLE 5.
CLOSING DELIVERIES
Section 5.1. Documents and Payments to be Delivered at the Closing.
At the Closing, the Company Parties and/or Planet Hollywood, as the case
may be, shall make, or cause to be made, the following payments and
deliveries:
(a) Planet Hollywood shall pay, or direct the Escrow Agent to pay,
the Cash Balance and the First Improvements Escrow Payment, and Planet
Hollywood shall pay any other amounts payable by Planet Hollywood to or as
directed by the Company, at the Closing, pursuant to this Agreement.
(b) Intell, Madison and Planet Hollywood, and such other Persons as
Intell shall designate to be members of the Company, shall each execute,
acknowledge and deliver the Operating Agreement.
(c) The Company shall execute, acknowledge and deliver the
Improvements Agreement, and Planet Hollywood shall cause each of Atlantic
and PH-III to execute, acknowledge and deliver the Improvements Agreement.
(d) The Company shall execute, acknowledge and deliver the
Reciprocal Easement, and Planet Hollywood shall cause Atlantic and PH-III
to execute, acknowledge and deliver the Reciprocal Easement.
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(e) The Company shall execute, acknowledge and deliver the License
Agreement, and Planet Hollywood shall cause each of Guarantor, PH-III and
Planet Hollywood (Region IV), Inc. to execute, acknowledge and deliver the
License Agreement.
(f) The Company Parties shall execute and/or deliver such other
instruments or documents which by the terms of this Agreement are to be
delivered by the Company Parties at Closing, and Planet Hollywood shall
execute and/or deliver such other instruments or documents which by the
terms of this Agreement are to be delivered by Planet Hollywood at Closing.
(g) Planet Hollywood shall deliver to the Company Parties (i) a copy
of the certificate of incorporation of Planet Hollywood, certified as true
and correct by an officer of Planet Hollywood and (ii) a certified copy of
such corporate documents of Planet Hollywood as are reasonably necessary to
demonstrate that the transactions contemplated hereby have been authorized
by all necessary corporate action of Planet Hollywood.
(h) The Company shall deliver to Planet Hollywood a copy of the
Articles of Organization of the Company, certified as having been filed
with the State of New York Department of State.
(i) Intell shall deliver to Planet Hollywood (i) a copy of the
Articles of Organization of Intell, certified as having been filed with the
State of New York Department of State and (ii) a certified copy of such
documents of Intell as are reasonably necessary to demonstrate that the
transactions contemplated hereby have been authorized by all necessary
company action of Intell.
(j) Madison shall deliver to Planet Hollywood (i) a copy of the
Articles of Organization of Madison, certified as having been filed with
the State of New York Department of State and (ii) a certified copy of such
documents of Madison as are reasonably necessary to demonstrate that the
transactions contemplated hereby have been authorized by all necessary
company action of Madison.
(k) The Company shall deliver to Planet Hollywood a copy of the
closing documents delivered by Brel to the Company at the Property
Agreement Closing pursuant to the Property Agreement, including, without
limitation, the original deed conveying the Retail Parcel to Planet
Hollywood, and a copy of the title insurance commitment insuring fee title
to the Retail Parcel in Planet Hollywood.
(l) The Company shall deliver to Planet Hollywood a copy of the
closing documents delivered by Lunt to the Company at the Development
Rights Agreement Closing pursuant to the Development Rights Agreement.
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(m) Planet Hollywood shall cause Atlantic and/or PH-III to execute,
acknowledge and deliver such Development Rights Agreement Closing Documents
and Property Agreement Closing Documents as are required to be executed by
the owner of fee title to the Retail Parcel, including, without limitation,
the zoning lot declaration, zoning lot development agreement, and all New
York City and New York State transfer tax forms.
ARTICLE 6.
CONDITIONS TO CLOSING
Section 6.1. Conditions to Planet Hollywood's Obligation to Close.
Planet Hollywood's obligation to pay the Capital Contribution and Retail
Unit Contribution is subject to the satisfaction of the condition precedent
(which may be waived by Planet Hollywood) that (i) this Agreement shall be
in full force and effect and there shall not then exist any event which
would allow Planet Hollywood to terminate this Agreement pursuant to the
terms of this Agreement and (ii) subject to the provisions of Section 4.2
hereof, the Development Rights Agreement Closing shall occur substantially
contemporaneously with the Closing.
Section 6.2. Conditions to the Company Parties' Obligation to Close.
The Company Parties' obligation to admit Planet Hollywood as a Member in
the Company and permit Planet Hollywood to receive the Planet Hollywood
Interest and purchase the Retail Parcel is subject to the satisfaction of
the condition precedent (which may be waived by the Company) that this
Agreement shall be in full force and effect and there shall not then exist
any event which would allow the Company to terminate this Agreement
pursuant to the terms of this Agreement.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES
Section 7.1. Representations and Warranties as to the Company. The
Company represents and warrants to Planet Hollywood that, as of the date
hereof:
(a) Organization. The Company is a limited liability company duly
organized, validly existing and in good standing under the laws of the
state of New York. The Company has limited liability company powers
adequate for the making and performing of this Agreement, has taken all
limited liability company action required to execute, deliver and perform
this Agreement and to make the provisions of this Agreement binding upon
the Company the valid and enforceable obligations of the Company they
purport to be and has caused this Agreement to be executed by a duly
authorized member or members of the Company.
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(b) Conflict with Existing Laws or Contracts. The execution and
delivery of this Agreement and all related documents and the performance of
its obligations hereunder and thereunder by the Company does not conflict
with any provision of the operating agreement of the Company or any law or
regulation to which the Company is subject, conflict with or result in a
breach of or constitute a default under any of the terms, conditions or
provisions of any agreement or instrument to which the Company is a party
or by which the Company is bound or any order or decree applicable to the
Company or result in the creation or imposition of any lien on any of its
assets or property, which would materially and adversely affect the ability
of the Company to perform its obligations under this Agreement; and the
Company has obtained all consents, approvals, authorizations or orders of
any court or governmental agency or body, if any, required for the
execution, delivery and performance by the Company of this Agreement.
(c) Legal Action Against The Company. There is no action, suit or
proceeding pending against the Company in any court or by or before any
other governmental agency or instrumentality which (a) would adversely
affect the ability of the Company to perform its obligations under this
Agreement or (b) has, or is likely to have, a material adverse effect on
the financial condition, operations or business prospects of the Company.
(d) Bankruptcy of The Company. The Company has not filed any
petition seeking or acquiescing in any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
any law relating to bankruptcy or insolvency, nor has any such petition
been filed against the Company. The Company is not insolvent and the
consummation of the transactions contemplated by this Agreement shall not
render the Company insolvent.
(e) Property Agreement. The Property Agreement is in full force and
effect and the Company has no knowledge of any default by either party to
the Property Agreement nor has the Company given or received written notice
of any default under the Property Agreement.
(f) Development Rights Agreement. The Development Rights Agreement
is in full force and effect and the Company has no knowledge of any default
by either party to the Development Rights Agreement nor has the Company
given or received written notice of any default under the Development
Rights Agreement.
(g) Sign Agreement. At the request of the Company, Brel has sent a
notice to terminate the Sign Agreement (as defined in the Property
Agreement).
(h) Financial Statement. The financial statements of the Company
attached hereto as Exhibit D have been prepared from the books and records
of the Company on an accrual basis for Federal income tax purposes
consistently applied and
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maintained throughout the periods indicated, and fairly present the
financial condition of the Company as at their respective dates for the
periods covered thereby.
(i) Feasibility Studies. The Company has made available to Planet
Hollywood all written feasibility reports commissioned by the Company
regarding the Project, which feasibility reports are, to the Company's
knowledge, true, accurate and complete copies of the reports provided by
the applicable third parties to the Company.
(j) Zoning. Based upon the due diligence performed by or on behalf
of the Company, which due diligence includes the retention of Frank
Williams and Associates to examine applicable zoning statutes, the zoning
regulations presently applicable to the Property permit restaurant and
hotel use and, assuming the acquisition of the Development Rights pursuant
to the Development Rights Agreement, the construction of an approximately
400 room hotel.
(k) Demolition. The Company has filed an ACP-7, and has received an
interior demolition and sidewalk bridge permit in connection with the
demolition of the existing building on the Land.
(l) Nomura Loan Documents. The documents evidencing and/or securing
that certain loan contemplated by the loan commitment (the "Commitment"),
dated November 7, 1997 from Nomura Asset Capital Corp. ("Nomura") to Gary
Barnett and Strategic Investment Property Fund, Inc. (the "Nomura Loan
Documents") shall (i) provide that a copy of all notices given by Nomura to
the Company shall be given to Planet Hollywood, (ii) not prohibit the
operation of the dilution provisions set forth in Sections 4.9 and 4.10 of
the Operating Agreement, (iii) provide that Nomura consents to the
operation of Section 12.5 of the Operating Agreement, subject to Planet
Hollywood or its designee satisfying such single purpose entity, bankruptcy
remote and customary legal opinion requirements of Nomura and (iv) require
the delivery of the completion guaranties and contractor payment and
performance bond substantially in the manner required by the Commitment.
Section 7.2. Representations and Warranties as to Planet Hollywood.
Planet Hollywood represents and warrants to the Company Parties that, as of
the date hereof:
(a) Authority; Binding on Planet Hollywood; Enforceability. Planet
Hollywood is a corporation duly organized, validly existing and in good
standing under the laws of the state of Florida. Planet Hollywood has
corporate powers adequate for the making and performing of this Agreement,
has taken all corporate action required to execute, deliver and perform
this Agreement and to make the provisions of this Agreement binding upon
Planet Hollywood the valid and enforceable obligations of Planet Hollywood
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they purport to be and has caused this Agreement to be executed by a duly
authorized officer or officers of Planet Hollywood.
(b) Conflict with Existing Laws or Contracts. The execution and
delivery of this Agreement and all related documents and the performance of
its obligations hereunder and thereunder by Planet Hollywood does not
conflict with any provision of the certificate of incorporation of Planet
Hollywood or any law or regulation to which Planet Hollywood is subject,
conflict with or result in a breach of or constitute a default under any of
the terms, conditions or provisions of any agreement or instrument to which
Planet Hollywood is a party or by which Planet Hollywood is bound or any
order or decree applicable to Planet Hollywood or result in the creation or
imposition of any lien on any of its assets or property, which would
materially and adversely affect the ability of Planet Hollywood to perform
its obligations under this Agreement; and Planet Hollywood has obtained all
consents, approvals, authorizations or orders of any court or governmental
agency or body, if any, required for the execution, delivery and
performance by Planet Hollywood of this Agreement.
(c) Legal Action Against Planet Hollywood. Except as set forth on
Schedule A annexed hereto, there is no action, suit or proceeding pending
against Planet Hollywood in any court or by or before any other
governmental agency or instrumentality which would adversely affect the
ability of Planet Hollywood to perform its obligations under this
Agreement.
(d) Bankruptcy of Planet Hollywood. Planet Hollywood has not filed
any petition seeking or acquiescing in any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under
any law relating to bankruptcy or insolvency, nor has any such petition
been filed against Planet Hollywood. Planet Hollywood is not insolvent and
the consummation of the transactions contemplated by this Agreement shall
not render Planet Hollywood insolvent.
Section 7.3. Representations and Warranties as to Intell. Intell
represents and warrants to Planet Hollywood that, as of the date hereof:
(a) Organization. Intell is a limited liability company duly
organized, validly existing and in good standing under the laws of the
state of New York. Intell has limited liability company powers adequate
for the making and performing of this Agreement, has taken all limited
liability company action required to execute, deliver and perform this
Agreement and to make the provisions of this Agreement binding upon Intell
the valid and enforceable obligations of Intell they purport to be and has
caused this Agreement to be executed by a duly authorized member or members
of Intell.
(b) Conflict with Existing Laws or Contracts. The execution and
delivery of this Agreement and all related documents and the performance of
its
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obligations hereunder and thereunder by Intell does not conflict with any
provision of the operating agreement of Intell or any law or regulation to
which Intell is subject, conflict with or result in a breach of or
constitute a default under any of the terms, conditions or provisions of
any agreement or instrument to which Intell is a party or by which Intell
is bound or any order or decree applicable to Intell or result in the
creation or imposition of any lien on any of its assets or property, which
would materially and adversely affect the ability of Intell to perform its
obligations under this Agreement; and Intell has obtained all consents,
approvals, authorizations or orders of any court or governmental agency or
body, if any, required for the execution, delivery and performance by
Intell of this Agreement.
(c) Legal Action Against Intell. There is no action, suit or
proceeding pending against Intell in any court or by or before any other
governmental agency or instrumentality which would adversely affect the
ability of Intell to perform its obligations under this Agreement.
(d) Bankruptcy of Intell. Intell has not filed any petition seeking
or acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any law
relating to bankruptcy or insolvency, nor has any such petition been filed
against Intell. Intell is not insolvent and the consummation of the
transactions contemplated by this Agreement shall not render Intell
insolvent.
Section 7.4. Representations and Warranties as to Madison. Madison
represents and warrants to Planet Hollywood that, as of the date hereof:
(a) Organization. Madison is a limited liability company duly
organized, validly existing and in good standing under the laws of the
state of New York. Madison has limited liability company powers adequate
for the making and performing of this Agreement, has taken all limited
liability company action required to execute, deliver and perform this
Agreement and to make the provisions of this Agreement binding upon Madison
the valid and enforceable obligations of Madison they purport to be and has
caused this Agreement to be executed by a duly authorized member or members
of Madison.
(b) Conflict with Existing Laws or Contracts. The execution and
delivery of this Agreement and all related documents and the performance of
its obligations hereunder and thereunder by Madison does not conflict with
any provision of the operating agreement of Madison or any law or
regulation to which Madison is subject, conflict with or result in a breach
of or constitute a default under any of the terms, conditions or provisions
of any agreement or instrument to which Madison is a party or by which
Madison is bound or any order or decree applicable to Madison or result in
the creation or imposition of any lien on any of its assets or property,
which would materially and adversely affect the ability of Madison to
perform its obligations under this
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Agreement; and Madison has obtained all consents, approvals, authorizations
or orders of any court or governmental agency or body, if any, required for
the execution, delivery and performance by Madison of this Agreement.
(c) Legal Action Against Madison. There is no action, suit or
proceeding pending against Madison in any court or by or before any other
governmental agency or instrumentality which would adversely affect the
ability of Madison to perform its obligations under this Agreement.
(d) Bankruptcy of Madison. Madison has not filed any petition
seeking or acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any law
relating to bankruptcy or insolvency, nor has any such petition been filed
against Madison. Madison is not insolvent and the consummation of the
transactions contemplated by this Agreement shall not render Madison
insolvent.
Section 7.5. Restatement of Representations and Warranties; Survival.
Each representation and warranty made in this Article VII shall be
effective as of the Closing Date, and shall survive the Closing for a
period of nine (9) months.
ARTICLE 8.
COVENANTS
Section 8.1. Amendment of Property Agreement; Development Rights
Agreement.
(a) The Company shall have the right, from time to time and without
Planet Hollywood's consent, to terminate (subject to the provisions of
Section 8.1(d) below), amend, modify, supplement, extend or waive any of
the terms and provisions of the Property Agreement and/or Development
Rights Agreement (including, without limitation, any condition precedent to
the obligation of the Company to consummate the Property Agreement Closing
or Development Rights Agreement Closing), and, except as expressly set
forth in this Agreement, nothing contained in this Agreement shall give
Planet Hollywood any rights, as a third-party beneficiary or otherwise, in
and to the Property Agreement, Development Rights Agreement or any of the
rights of the Company thereunder. Notwithstanding the preceding sentence
to the contrary, the Company shall be required to obtain Planet Hollywood's
prior written consent to an amendment, modification, supplement, extension
or waiver of the Property Agreement (including, without limitation, any
condition precedent to the obligation of the Company to consummate the
Property Agreement Closing) to the extent that such amendment,
modification, supplement, extension or waiver of the Property Agreement
(i), subject to the provisions of Section 8.1(c) below, extends the
Property Agreement Closing to a date
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after December 31, 1997 (the "Outside Date"), if such extension is
requested by the Company (it being understood that an extension of the
Property Agreement Closing by Brel pursuant to its rights under the
Property Agreement, at law or in equity shall not be an amendment,
modification, supplement, extension or waiver of the Property Agreement for
purposes of this Section 8.1) or (ii) would materially and adversely affect
the ability of (A) Planet Hollywood to use the Retail Unit as a Planet
Hollywood theme restaurant or (B) the Company to operate the Hotel Unit as
a Planet Hollywood theme hotel. If Planet Hollywood's consent is required
to any amendment, modification, supplement, extension or waiver of the
Property Agreement pursuant to the preceding sentence, then such consent
shall be deemed granted if not denied by written notice given to the
Company within five (5) business days after the request for consent is
given.
(b) Planet Hollywood agrees that (i) no Company Party shall have any
obligation, and shall not be obligated to cause any other Company Party, to
expend any sums of money, incur any liability, commence any litigation or
proceeding or take any other action to (A) cause Brel to perform or
otherwise comply with its obligations under the Property Agreement, (B)
cause Lunt to perform or otherwise comply with its obligations under the
Development Rights Agreement, (C) cause Brel to satisfy any condition
precedent to the obligation of the Company to purchase the Property
pursuant to the Property Agreement (and the Company shall have the right to
elect and exercise, in the Company's sole and absolute discretion, any and
all rights and remedies of the Company under the Property Agreement), or
(D) cause Lunt to satisfy any condition precedent to the obligation of the
Company to purchase the Development Rights pursuant to the Development
Rights Agreement (and the Company shall have the right to elect and
exercise, in the Company's sole and absolute discretion, any and all rights
and remedies of the Company under the Development Rights Agreement), (ii)
no Company Party shall have any liability to Planet Hollywood, and shall
not be in default under this Agreement, if (A) Brel shall fail to perform
or otherwise comply with its obligations under the Property Agreement, (B)
Lunt shall fail to perform or otherwise comply with its obligations under
the Development Rights Agreement, (C) Brel shall fail to satisfy any
condition precedent to the obligation of the Company to purchase the
Property pursuant to the Property Agreement or (D) Lunt shall fail to
satisfy any condition precedent to the obligation of the Company to
purchase the Development Rights pursuant to the Development Rights
Agreement and (iii) no Company Party shall have any obligation or liability
to Planet Hollywood, and shall not be in default under this Agreement, if
the Company is unable to perform any of its covenants, agreements or
obligations under the Property Agreement and/or Development Rights
Agreement for any reason.
(c) Notwithstanding the foregoing provisions of Sections 8.1(a) and
8.1(b) to the contrary, if (i)the Company alleges that Brel has failed to
perform or otherwise comply with its obligations under the Property
Agreement, and the Company elects to enforce its rights and remedies
against Brel pursuant to the Property Agreement,
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or (ii) Brel alleges that the Company has failed to perform or otherwise
comply with its obligations under the Property Agreement, and Brel elects
to enforce its rights and remedies against the Company pursuant to the
Property Agreement and, in either such case, the Retail Unit has not been
conveyed to Planet Hollywood on or before December 31, 1997, then Planet
Hollywood shall have the right, as its sole and exclusive remedy, to
terminate this Agreement by notice given to the Company on or before
January 9, 1998. If Planet Hollywood shall so elect to terminate this
Agreement, then the Deposit shall be returned to Planet Hollywood, the
Company shall reimburse Planet Hollywood for the actual and reasonable
out-of-pocket expenses incurred by Planet Hollywood in connection with the
transaction contemplated by this Agreement, including reasonable attorneys
fees, and neither party shall have any further rights or obligations under
this Agreement, except those which expressly survive the termination of
this Agreement.
(d) (i) If (A) Brel shall fail to perform or otherwise comply with
its obligations under the Property Agreement or shall fail to satisfy any
condition precedent to the obligation of the Company to purchase the
Property pursuant to the Property Agreement, (B) such failure shall give
the Company the right to terminate the Property Agreement and receive a
return of the deposit monies paid by the Company pursuant to the Property
Agreement, (C) as a result of such failure, the Company, in the exercise of
its sole and absolute discretion, shall intend to terminate the Property
Agreement and Development Rights Agreement, the Company shall give notice
(the "Intention to Terminate Notice") of such intention to Planet
Hollywood. The Company shall give the Intention to Terminate Notice as
promptly as practicable after the occurrence of the events described in the
preceding subclauses (A), (B) and (C). If the Company shall send an
Intention to Terminate Notice, Planet Hollywood shall have the right to
elect either to (1) cause the Company to request that Brel consent to an
assignment of the Property Agreement to Planet Hollywood pursuant the
provisions of Section 21.01 thereof and Lunt consent to an assignment of
the Development Rights Agreement to Planet Hollywood pursuant to Section 10
thereof (the "Assignment Transaction") or (2) cause the Company to request
that Brel deliver the Property Agreement Closing Documents directly to
Planet Hollywood and that Lunt deliver the Development Rights Agreement
Closing Documents directly to Planet Hollywood (the "Directed Documents
Transaction"); provided, however, that in each such event (x) Planet
Hollywood shall not be in breach of any of its covenants, agreements or
representations under this Agreement and (y) such election shall be
exercised by notice (the "Request for Assignment Notice") received by the
Company from Planet Hollywood on or before the earlier of (I) the date
which is five (5) business days after the giving of the Intention to
Terminate Notice and (II) the date which is eleven (11) business days prior
to the last day by which the Company may exercise its right to terminate
the Property Agreement as a result of such failure of Brel (such last day
being referred to herein as the "Last Termination Date"), which notice
shall specify whether Planet Hollywood desires to effectuate the Assignment
Transaction or Directed
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Documents Transaction and (z) Planet Hollywood shall make such other
deliveries and payments as and when required pursuant to, and otherwise
comply with the provisions of, this Section 8.1(d).
(ii) If Planet Hollywood timely shall deliver the Request for
Assignment Notice in accordance with Section 8.1(d)(i) above, then, the
Company shall either (A) request that Brel and Lunt consent to an
assignment of the Property Agreement to Planet Hollywood and Lunt consent
to an assignment of the Development Rights Agreement to Planet Hollywood,
in the case where Planet Hollywood requested the Assignment Transaction in
the Request for Assignment Notice or (B) request that Brel deliver the
Property Agreement Closing Documents directly to Planet Hollywood and that
Lunt deliver the Development Rights Agreement Closing Documents directly to
Planet Hollywood, in the case where Planet Hollywood requested the Directed
Documents Transaction in the Request for Assignment Notice.
(iii) In the case where Planet Hollywood timely delivered a
Request for Assignment Notice to consummate the Assignment Transaction, if,
at least one (1) business day prior to the Last Termination Date, (A) Brel
shall deliver to the Company its written consent to an assignment of the
Property Agreement to Planet Hollywood, together with (1) an irrevocable
and unconditional release of the Company from all of the covenants,
agreements and obligations of the "Purchaser" under the Property Agreement
and (2) the original Letter of Credit, if any, delivered on behalf of the
Company to Brel pursuant to Section 5.02 of the Property Agreement, (B)
Planet Hollywood shall deliver to Intell, by wire transfer of immediately
available funds to an account designated by Intell, an amount equal to the
sum of (1) the Downpayment (as defined in the Property Agreement), together
with the interest accrued thereon, (2) the Deposit (as defined in the
Development Rights Agreement), together with the interest accrued thereon,
(3) the amount, if any, deposited by the Company with Brel pursuant to
Section 5.02 of the Property Agreement in lieu of the Letter of Credit, (4)
all other sums which Brel would have been obligated to pay and/or return to
the Company had the Company elected to so terminate the Property Agreement,
(5) all other sums which Lunt would have been obligated to pay and/or
return to the Company had the Company elected to so terminate the
Development Rights Agreement and (6) an amount, not to exceed Two Million
Dollars ($2,000,000), equal to all costs and expenses theretofore incurred
by the Company (but not Planet Hollywood) in connection with the Project,
(C) Planet Hollywood shall deliver to the Company an irrevocable and
unconditional assumption of all of the Company's obligations under the
Property Agreement and Development Rights Agreement and (D) Lunt shall
deliver to the Company its written consent to an assignment of the
Development Rights Agreement to Planet Hollywood, together with an
irrevocable and unconditional release of the Company from all of the
covenants, agreements and obligations of the "Buyer" under the Development
Rights Agreement, then the Company shall not exercise such right of
termination and shall assign, without representation,
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warranty or recourse, the Company's rights and obligations as the
"Purchaser" under the Property Agreement, and the "Buyer" under the
Development Rights Agreement, to Planet Hollywood. If the Property
Agreement and Development Rights Agreement shall be so assigned to Planet
Hollywood, and Planet Hollywood shall have complied with all of the
covenants, agreements and obligations, and shall not be in breach of any
representation or warranty, of Planet Hollywood under this Agreement, then,
upon such assignment, (I) this Agreement shall automatically and without
further act of the parties, terminate and be of no further force or effect,
(II) the Deposit shall be returned to Planet Hollywood and (III) neither
party shall have any further rights or obligations under this Agreement,
except those which expressly survive the termination of this Agreement.
(iv) In the case where Planet Hollywood timely delivered a
Request for Assignment Notice to consummate the Directed Documents
Transaction, if, at least one (1) business day prior to the Last
Termination Date, Planet Hollywood shall deliver to Intell, (A) by wire
transfer of immediately available funds to an account designated by Intell,
an amount equal to the sum of (1) the Downpayment (as defined in the
Property Agreement), together with the interest accrued thereon, (2) the
Deposit (as defined in the Development Rights Agreement), together with the
interest accrued thereon, (3) the amount, if any, deposited by the Company
with Brel pursuant to Section 5.02 of the Property Agreement in lieu of the
Letter of Credit or, if the Letter of Credit was deposited by the Company
with Brel, an amount equal to the face amount of such Letter of Credit, (4)
all other sums which Brel would have been obligated to pay and/or return to
the Company had the Company elected to so terminate the Property Agreement,
(5) all other sums which Lunt would have been obligated to pay and/or
return to the Company had the Company elected to so terminate the
Development Rights Agreement and (6) an amount, not to exceed Two Million
Dollars ($2,000,000), equal to all costs and expenses theretofore incurred
by the Company (but not Planet Hollywood) in connection with the Project,
and (B) an irrevocable and unconditional assumption of all of the Company's
obligations under the Property Agreement and Development Rights Agreement,
then the Company shall not exercise such right of termination, and the
Company shall request that Brel deliver the Property Agreement Closing
Documents directly to Planet Hollywood and that Lunt deliver the
Development Rights Agreement Closing Documents directly to Planet
Hollywood. At the Property Agreement Closing, Planet Hollywood shall
comply with and fulfill all of the Company's obligations as the "Purchaser"
under the Property Agreement, and the "Buyer" under the Development Rights
Agreement, including, without limitation, the obligation to pay all sums
due to Brel and Lunt under the Property Agreement and Development Rights
Agreement, respectively. In the event that Planet Hollywood shall deliver
the Request For Assignment Notice requesting the Directed Documents
Transaction, the delivery of such notice shall automatically constitute the
agreement of Planet Hollywood and Guarantor, jointly and severally, to
indemnify, defend and hold the Company and the Company Parties free and
harmless from and against any and all judgments, claims, liabilities,
damages, costs, expenses and losses (including
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reasonable attorneys' fees and expenses) incurred by any of the Company
Parties and arising from or in connection with the Property Agreement,
Development Rights Agreement and Property (the "PH Indemnity"). The PH
Indemnity shall survive the Closing or termination of this Agreement. If
the Property Agreement Closing and Development Rights Agreement Closing
occurs, the Property Agreement Closing Documents and Development Rights
Agreement Closing Documents are delivered to Planet Hollywood in
consummation of a Directed Documents Transaction, Planet Hollywood shall
have complied with all of the covenants, agreements and obligations, and
shall not be in breach of any representation or warranty, of Planet
Hollywood under this Agreement, then, upon the occurrence of all such
events, (I) this Agreement shall automatically and without further act of
the parties, terminate and be of no further force or effect, (II) the
Deposit shall be returned to Planet Hollywood and (III) neither party shall
have any further rights or obligations under this Agreement, except those
which expressly survive the termination of this Agreement.
(v) Notwithstanding any provision of this Agreement to the
contrary, in no event shall the Company have any express or implied
obligation to assign, transfer or convey, or cause the assignment, transfer
or conveyance of, any interest of the Company in the Property Agreement or
Development Rights Agreement to Planet Hollywood, except as expressly set
forth in this Section 8.1(d), and Planet Hollywood acknowledges and agrees
that this Section 8.1(d) has no applicability unless and until the Company
voluntary elects not to proceed with the acquisition of the Property and
Development Rights under the circumstances more particularly described in
Section 8.1(d)(i) above.
(e) If the Property Agreement shall terminate and be of no further
force or effect, then this Agreement shall automatically and without
further act of the parties, terminate and be of no further force or effect.
If the Property Agreement shall so terminate and Planet Hollywood shall
have complied with all of the covenants, agreements and obligations, and
shall not be in breach of any representation or warranty, of Planet
Hollywood under this Agreement, then, upon such termination of this
Agreement, (I) the Deposit shall be returned to Planet Hollywood and (II)
neither party shall have any further rights or obligations under this
Agreement, except those which expressly survive the termination of this
Agreement.
ARTICLE 9.
CONDITION OF PROPERTY
Section 9.1. Condition of Interests; Property. Planet Hollywood is a
sophisticated investor and its valuation of, and decision to be admitted as
a Member of the Company, pay the Closing Payment and receive the Planet
Hollywood Interest and
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purchase the Retail Parcel is based upon its own independent expert
evaluations of such facts and materials deemed relevant by Planet Hollywood
and its agents. Planet Hollywood acknowledges that no employee, agent,
consultant, advisor or representative of any Company Party has been
authorized to make, and that Planet Hollywood has not relied upon, any
statements or representations other than those specifically contained in
this Agreement. Without limiting the generality of the foregoing, Planet
Hollywood acknowledges and agrees that, except as expressly set forth in
Article VII hereof, Planet Hollywood is receiving the Planet Hollywood
Interest and Retail Parcel "as is" and "where is" on the Closing Date, and,
except as expressly set forth in Article VII hereof, no Company Party is
making any representation or warranty, express or implied, and Planet
Hollywood has not relied on any representation or warranty, express or
implied, regarding the Planet Hollywood Interest, Retail Parcel, the
Company or Property. No Company Party is liable or bound in any manner by
any verbal or written statements, representations, real estate brokers'
"set-ups", offering memorandum or information pertaining to the Planet
Hollywood Interest, Retail Unit, the Company or Property furnished by any
real estate broker, advisor, consultant, agent, employee, representative or
other person.
ARTICLE 10.
TRANSACTION COSTS
Section 10.1. The Company's Transaction Costs. The Company, and not
Planet Hollywood, shall be responsible for the cost of the Company's legal
counsel, advisors and the other professionals employed by it in connection
with the transactions contemplated hereby. The Company shall also be
responsible for (a) the policy premiums in respect of any title insurance
obtained by the Company for the purchase of the Hotel Parcel and any
mortgage title insurance required by the Company's lender (if any), (b) the
Company's Percentage of all survey and departmental search costs and
updates related to the purchase of the entire Property and (c) the
Company's Percentage of all real estate taxes and assessments payable with
respect to the Property from and after the Closing Date.
Section 10.2. Planet Hollywood's Transaction Costs. Planet Hollywood
shall be responsible for all costs and expenses associated with (a) Planet
Hollywood's legal counsel, advisors, engineers, consultants and the other
professionals employed by it in connection with Planet Hollywood's due
diligence and the transactions contemplated hereby, (b) the policy premiums
in respect of any title insurance obtained by Planet Hollywood for the
purchase of the Retail Parcel and any mortgage title insurance required by
Planet Hollywood's lender (if any), (c) Planet Hollywood's Percentage of
all survey and departmental search costs and updates related to the
purchase of the entire Property
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and (d) Planet Hollywood's Percentage of all real estate taxes and
assessments payable with respect to the Property from and after the Closing
Date.
Section 10.3. Property Agreement Adjustments. Upon the calculation of
the adjustments to be made between the Company and Brel pursuant to the
provisions of Section 14.01 of the Property Agreement, an amount equal to
Planet Hollywood's Percentage of the net amount of such adjustments shall
be added to (if such net amount is in Brel's favor) or deducted from (if
such net amount is in the Company's favor) the Cash Balance of the Closing
Payment payable by Planet Hollywood at the Closing pursuant to this
Agreement.
Section 10.4. Survival. The provisions of this Article 10 shall
survive the Closing.
ARTICLE 11.
BROKERAGE
Section 11.1 The Company's Representation and Indemnification. The
Company represents and warrants to Planet Hollywood that neither it nor its
representatives have engaged or dealt with any broker or other person who
may be entitled to any finder's fee, brokerage commission or other like
payment in respect of the negotiation, execution, or performance of this
Agreement other than Insignia/Edward S. Gordon Co. Inc. (the "Broker").
The Company agrees to pay any commission or other compensation due to
Broker pursuant to a separate written agreement, and that it will indemnify
and hold harmless Planet Hollywood against all claims, damages, expenses
and losses (including reasonable attorneys' fees and expenses) which may be
asserted against Planet Hollywood by any person as a result of dealings,
arrangements or agreements by the Company or its representatives with any
broker other than Broker. Planet Hollywood shall not, by virtue of the
Planet Hollywood Interest being acquired pursuant to this Agreement, be
directly liable for the payment of any portion of the commission due the
Broker or the transaction costs to be paid by the Company pursuant to
Section 10.1 hereof, but such commission and costs shall be proper expenses
of the Company for purposes of calculating the amount of any distributions
which may be due to Planet Hollywood as Member of the Company after the
Closing. The indemnifications set forth in this Section 11.1 shall survive
the Closing or termination of this Agreement.
Section 11.2. Planet Hollywood's Representation and Indemnification.
Planet Hollywood represents and warrants to the Company Parties that
neither it nor its representatives have engaged or dealt with any broker or
other person who may be entitled to any finder's fee, brokerage commission
or other like payment in respect of the negotiation, execution, or
performance of this Agreement other than Broker, and that it will indemnify
and hold harmless the Company Parties against all claims, damages,
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<PAGE>
expenses and losses (including reasonable attorneys' fees and expenses)
which may be asserted against the Company Parties by any person as a result
of dealings, arrangements or agreements by Planet Hollywood or its
representatives with any broker other than Broker. Planet Hollywood agrees
to indemnify the Company Parties from all claims, damages, expenses and
losses (including reasonable attorneys' fees and expenses) which may be
asserted against the Company Parties by any person as a result of dealings,
arrangement or agreements by Planet Hollywood with any broker other than
Broker. The indemnifications set forth in this Section 11.2 shall survive
the Closing or termination of this Agreement.
ARTICLE 12.
DEFAULT; REMEDIES; SURVIVAL
Section 12.1. Planet Hollywood's Default On or Before Closing.
(a) If,(i) on or prior to the Closing Date, (x) Planet Hollywood
defaults in any of the material covenants, agreements or obligations to be
performed by Planet Hollywood under this Agreement on or as of the Closing
Date (or at the Closing) or (y) any of the Company Parties shall become
aware of an inaccuracy in any representation or warranty made by Planet
Hollywood pursuant to Section 7.2 hereof which has a material adverse
effect on any of the Company Parties and such material inaccuracy is not
cured by the earlier of (A) the Closing Date or (B) the date which is ten
(10) days after notice of such inaccuracy from the Company to Planet
Hollywood and (ii) the conditions to Planet Hollywood's obligation to make
the Capital Contribution and Retail Unit Contribution as set forth in
Section 6.1 hereof have been satisfied and (iii) the Company Parties are
ready, willing and able to proceed with the Closing, then, and in any of
such events, the Company Parties shall have the right to terminate this
Agreement by written notice to Planet Hollywood, and make a claim against
Planet Hollywood for damages incurred by the Company as a result of such
default and/or material inaccuracy. The provisions of this Section 12.1(a)
shall survive the termination of this Agreement only in the event of a
termination pursuant to the terms of this Section 12.1(a).
(b) If the Company Parties, with knowledge of (i) a default in any
of the covenants, agreements or obligations to be performed by Planet
Hollywood under this Agreement or (ii) a material inaccuracy in any
representation or warranty of Planet Hollywood made in this Agreement
elects to proceed to Closing, then, upon the consummation of the Closing,
the Company Parties shall be deemed to have waived any such default, and
shall have no claim against Planet Hollywood on account thereof.
Section 12.2. Company Parties' Default On or Before Closing.
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<PAGE>
(a) If,(i) on or prior to the Closing Date, (x) the Company Parties
default in any of the material covenants, agreements or obligations to be
performed by the Company Parties under this Agreement on or as of the
Closing Date (or at the Closing), (y) Planet Hollywood shall become aware
of an inaccuracy in any representation or warranty made by the Company
pursuant to Sections 7.1, 7.3, or 7.4 hereof which has a material adverse
effect on Planet Hollywood or (z) the Company Parties otherwise materially
default hereunder and, in the case of the preceding subclauses (y) or (z),
such inaccuracy or other material default is not cured by the earlier of
(A) the Closing Date or (B) the date which is ten (10) days after notice of
such default from Planet Hollywood to the Company Parties and (ii) the
conditions to the Company's obligation to admit Planet Hollywood as a
Member in the Company and permit Planet Hollywood to receive the Planet
Hollywood Interest, and purchase the Retail Parcel as set forth in Section
6.2 hereof have been satisfied and (iii) Planet Hollywood is ready, willing
and able to proceed with the Closing, then, and in any of such events,
Planet Hollywood, as its sole remedy therefor, may either (1) seek specific
performance of the Company Parties' obligations hereunder, without
abatement, credit against or reduction of the Closing Payment or
(2) terminate this Agreement by written notice to the Company Parties,
whereupon the Deposit shall be refunded to Planet Hollywood, and Planet
Hollywood shall have the right to make a claim against the Company for
damages incurred by Planet Hollywood as a result of such default and/or
material inaccuracy. The provisions of this Section 12.2(a) shall survive
the termination of this Agreement only in the event of a termination
pursuant to the terms of this Section 12.2(a).
(b) If Planet Hollywood, with knowledge of (i) a default in any of
the covenants, agreements or obligations to be performed by the Company
Parties under this Agreement or (ii) a material inaccuracy in any
representation or warranty of any Company Party made in this Agreement
elects to proceed to Closing, then, upon the consummation of the Closing,
Planet Hollywood shall be deemed to have waived any such default or
material inaccuracy and shall have no claim against any of the Company
Parties on account thereof.
Section 12.3. Survival.
(a) Except as otherwise expressly provided in this Agreement to
survive the Closing, no provision of this Agreement (i.e., no
representation, warranty, covenant, agreement or other obligation set forth
in any provision of this Agreement) shall survive the Closing (and,
accordingly, no claim arising out of the same may be commenced after the
Closing), and the delivery and acceptance of the Retail Parcel and the
Planet Hollywood Interest shall be deemed to be full performance and
discharge of each such representation, warranty, covenant, agreement or
other obligation.
-26-
<PAGE>
(b) If, after the Closing, the Company shall first learn of (i) an
inaccuracy in any representation or warranty of Planet Hollywood made
pursuant to Section 7.2 hereof which, in any case, has a material adverse
effect on any Company Party and expressly survives the Closing pursuant to
this Agreement or (ii) a default in any of the covenants, agreements or
obligations to be performed by Planet Hollywood under this Agreement which
expressly survives the Closing, then the Company Parties shall have a claim
for damages on account thereof, provided that any such claim shall be
brought within the survival period applicable to such representation,
warranty covenant, agreement or obligation as set forth in this Agreement,
and any claim not brought within such survival period shall be deemed
waived.
(c) If, after the Closing, Planet Hollywood shall first learn of (i)
an inaccuracy in any representation or warranty of a Company Party made
pursuant to Section 7.1, 7.3 or 7.4 hereof which, in any case, has a
material adverse effect on Planet Hollywood and expressly survives the
Closing pursuant to this Agreement or (ii) a default in any of the
covenants, agreements or obligations to be performed by any Company Party
under this Agreement which expressly survives the Closing, then Planet
Hollywood shall have a claim against such Company Party for damages on
account thereof, provided that any such claim shall be brought within the
survival period applicable to such representation, warranty covenant,
agreement or obligation as set forth in this Agreement, and any claim not
brought within such survival period shall be deemed waived.
ARTICLE 13.
NOTICES
Section 13.1. Notices. All notices, demands, requests and other
communications required hereunder shall be in writing and shall be deemed
to have been given: (a) upon delivery, if personally delivered; (b) three
(3) days after deposit in the United States Mail when delivered, postage
prepaid, by certified or registered mail, return receipt requested; or (c)
one (1) Business Day after deposit with a nationally recognized overnight
delivery service marked for delivery on the next Business Day, addressed to
the party for whom it is intended at its address hereinafter set forth:
To the Company Parties:
Intell Times Square, LLC
c/o Property Markets Group
300 East 42nd Street
New York, New York 10017
Attention: Ned White
with a copy to:
-27-
<PAGE>
Madison Broadway Associates LLC
c/o Madison Equities
875 Third Avenue
New York, New York 10022
Att: Robert Gladstone
with a copy to:
Fried Frank Harris Shriver & Jacobson
One New York Plaza
New York, New York 10004
Att: Robert J. Sorin, Esq.
To Planet Hollywood:
Planet Hospitality Holdings, Inc.
7380 Sand Lake Road
Orlando, Florida 32819
Att: General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Att: Alan Lascher, Esq.
or at such other address in the United States of America as may be
designated by either of the parties in a written notice given in accordance
with the provisions of this Section. The attorney for any party may send
notices on that party's behalf.
ARTICLE 14.
Intentionally Omitted
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<PAGE>
ARTICLE 15.
MISCELLANEOUS
Section 15.1. Governing Law; Jurisdiction and Venue.
(a) This Agreement shall be governed by, and construed in accordance
with, the substantive laws of the State of New York, without regard to
conflict of law principles.
(b) For the purposes of any suit, action or proceeding involving this
Agreement, Planet Hollywood, the Company, Intell and Madison hereby
expressly submit to the jurisdiction of all federal and state courts
sitting in the State of New York and consent that any order, process,
notice of motion or other application to or by any such court or a judge
thereof may be served within or without such court's jurisdiction by
registered mail or by personal service, provided that a reasonable time for
appearance is allowed, and Planet Hollywood, the Company, Intell and
Madison agree that such courts shall have the exclusive jurisdiction over
any such suit, action or proceeding commenced by any of said parties. In
furtherance of such agreement, Planet Hollywood agrees upon the request of
the Company to discontinue (or agree to the discontinuance of) any such
suit, action or proceeding pending in any other jurisdiction.
(c) Planet Hollywood, the Company, Intell and Madison hereby
irrevocably waive any objection that they may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any federal or state court sitting in
the State of New York and hereby further irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.
Section 15.2. Further Assurances. In addition to the obligations
required to be performed hereunder by the Company Parties and Planet
Hollywood at or prior to the Closing, each party, from and after the
Closing, shall execute, acknowledge and/or deliver such other instruments,
as may reasonably be requested in order to effectuate the purposes of this
Agreement; provided, however, that the foregoing provisions of this Section
15.2 shall not obligate either party to execute, acknowledge or deliver any
instrument which would or might impose upon such party any additional
liability or obligation (beyond that imposed upon on it under the documents
delivered by such party at the Closing and the other provisions of this
Agreement which survive the Closing).
Section 15.3. Successors. All of the provisions of this Agreement and
of any of the documents and instruments executed in connection herewith
shall apply to and be binding upon, and inure to the benefit of the Company
Parties and Planet Hollywood, their successors and permitted assigns.
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<PAGE>
Section 15.4. Assignment.
(a) Except as otherwise expressly permitted in this Section 15.4,
neither this Agreement nor any of the rights of Planet Hollywood hereunder
(nor the benefits of such rights) may be assigned, transferred or
encumbered without the Company's prior written consent and any purported
assignment, transfer or encumbrance without the Company's prior written
consent shall be void.
(b) Notwithstanding the foregoing provisions of Section 15.4(a),
Planet Hollywood shall have the right to assign this Agreement to an
Affiliate of Planet Hollywood International, Inc.; provided that, as a
condition to the effectiveness of such assignment, (i) Planet Hollywood
shall give to the Company prior written notice of such assignment and (ii)
such Affiliate assignee shall agree in writing for the benefit of the
Company to assume and be bound by all of the terms, covenants and
provisions of this Agreement and deliver an original counterpart of such
executed assumption to the Company. In no event shall any permitted
assignment of this Agreement relieve the assignor of its obligations under
this Agreement.
(c) Notwithstanding the foregoing provisions of Section 15.4(a),
Planet Hollywood shall have the right to assign this Agreement or its
rights to the Retail Parcel under this Agreement to Atlantic Financial
Group, Ltd. ("Atlantic"), or an Affiliate of SunTrust Bank, Central
Florida, National Association ("Suntrust"); provided that, as a condition
to the effectiveness of such assignment (i) Suntrust shall be financing
Planet Hollywood's acquisition of the Retail Parcel pursuant to a synthetic
leasing and/or mortgage transaction and, concurrently with such assignment,
entering into, among other agreements, a lease with PH-III, as lessee, for
the Retail Unit and (ii) Planet Hollywood grants to Atlantic or an
affiliate of Suntrust all licenses, patents, trademarks and other rights
necessary to operate a Planet Hollywood themed restaurant, which grant
shall unconditionally and irrevocably continue in the event of termination
of the synthetic lease. In no event shall any permitted assignment of this
Agreement relieve the assignor of its obligations under this Agreement.
(d) Without limiting the Company's ability to freely assign this
Agreement, the Company shall have the right to collaterally assign this
Agreement to Nomura Asset Capital Corporation or an Affiliate of Nomura
Asset Capital Corporation.
Section 15.5. No Third Party Beneficiary. This Agreement and each of
the provisions hereof are solely for the benefit of Planet Hollywood and
the Company Parties and their permitted assigns. No provisions of this
Agreement, or of any of the documents and instruments executed in
connection herewith, shall be construed as creating in any person or entity
other than Planet Hollywood and the Company Parties and their permitted
assigns any rights of any nature whatsoever.
-30-
<PAGE>
Section 15.6. Entire Agreement. This Agreement, together with the
documents and instruments executed and delivered in connection herewith,
sets forth the entire agreement between Planet Hollywood and the Company
Parties relating to the transactions contemplated hereby and all other
prior or contemporaneous agreements, understandings, representations or
statements, oral or written, relating to the Membership Interests, the
Retail Parcel and the Property are superseded hereby.
Section 15.7. Severability. If any provision in this Agreement is found
by a court of competent jurisdiction to be in violation of any applicable
law, and if such court should declare such provision of this Agreement to
be unlawful, void, illegal or unenforceable in any respect, the remainder
of this Agreement shall be construed as if such unlawful, void, illegal or
unenforceable provision were not contained herein, and the rights,
obligations and interests of the parties hereto under the remainder of this
Agreement shall continue in full force and effect undisturbed and
unmodified in any way.
Section 15.8. Modification. This Agreement and the terms hereof may not
be changed, waived, modified, supplemented, canceled, discharged or
terminated orally, but only by an instrument or instruments in writing
executed and delivered by Planet Hollywood and the Company Parties.
Section 15.9. Waiver of Trial by Jury. EACH PARTY HEREBY WAIVES,
IRREVOCABLY AND UNCONDITIONALLY, TRIAL BY JURY IN ANY ACTION BROUGHT ON,
UNDER OR BY VIRTUE OF OR RELATING IN ANY WAY TO THIS AGREEMENT OR ANY OF
THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH, THE PROPERTIES, OR ANY
CLAIMS, DEFENSES, RIGHTS OF SET-OFF OR OTHER ACTIONS PERTAINING HERETO OR
TO ANY OF THE FOREGOING.
Section 15.10. No Recording. Neither this Agreement nor any memorandum
hereof shall be recorded. Each party hereby agrees to indemnify and hold
harmless the others for all liabilities, losses, damages, liens, suits,
claims, costs and expenses (including reasonable attorneys' fees) incurred
by the other by reason of a breach of the foregoing covenant.
Section 15.11. Captions; Interpretation.
(a) The captions in this Agreement are inserted for convenience of
reference only and in no way define, describe or limit the scope or intent
of this Agreement or any of the provisions hereof. All references to
"Articles" and "Sections" without reference to a document other than this
Agreement, are intended to designate articles and sections of this
Agreement, and the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article or Section, unless specifically designated otherwise.
-31-
<PAGE>
(b) As used in this Agreement, the masculine shall include the
feminine and neuter, the singular shall include the plural and the plural
shall include the singular, as the context may require.
(c) The use of the term "including" shall mean in all cases "including
but not limited to" unless specifically designated otherwise.
(d) No rules of construction against the drafter of this Agreement
shall apply in any interpretation or enforcement of this Agreement, any
documents or certificates executed pursuant hereto, or any provisions of
any of the foregoing.
Section 15.12. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one
and the same original, and the execution of separate counterparts by Planet
Hollywood and the Company Parties shall bind Planet Hollywood and the
Company Parties as if they had each executed the same counterpart.
Section 15.13. No Waiver. Neither the failure of either party to
exercise any power given such party hereunder or to insist upon strict
compliance by the other party with its obligations hereunder, nor any
custom or practice of the parties at variance with the terms hereof shall
constitute a waiver of either party's right to demand exact compliance with
the terms hereof.
Section 15.14. Time of Essence. Time shall be of the essence with
respect to this Agreement and the covenants and obligations of the parties
hereunder.
Section 15.15. Attorney's Fees. In the event that either party hereto
shall commence litigation against the other in connection herewith, the
losing party in such action shall reimburse the attorneys' fees and
disbursements of the prevailing party in such action.
-32-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed the date and year first above written.
TIMES SQUARE PARTNERS LLC, a New
York limited liability company
By: SPE Times Square, Inc., a New York
corporation, its Managing Member
By:
--------------------------------
Name:
Title:
MADISON BROADWAY ASSOCIATES
LLC, a New York limited liability company
By:
------------------------------------
Name:
Title:
INTELL TIMES SQUARE, LLC, a New York
limited liability company
By:
------------------------------------
Name:
Title:
PLANET HOSPITALITY HOLDINGS, INC., a
Florida corporation
By:
------------------------------------
Name:
Title:
-33-
<PAGE>
AGREEMENT OF :
The undersigned hereby acknowledges receipt of $33,000,000, and agrees to
hold such sum in escrow pursuant to the provisions of Sections 3.1 and 3.2
of this Agreement.
FRIED FRANK HARRIS SHRIVER & JACOBSON
By:
------------------------------------
Name:
Title:
-34-
<PAGE>
EXHIBIT A
Form of Operating Agreement
-35-
<PAGE>
EXHIBIT B
Form of Declaration of Easements
-36-
<PAGE>
EXHIBIT C
Form of Improvements Agreement
-37-
<PAGE>
EXHIBIT D
Financial Statements
-38-
<PAGE>
EXHIBIT E
Form of License Agreement
-39-
<PAGE>
EXHIBIT F
Land
-40-
<PAGE>
Schedule A
Litigation
Planet Hollywood (Region IV), Inc. et al v. Hollywood Casino Corporation, et al
-41-
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC.
Exhibit 10.7A
Second Amendment to the License Agreement
dated as of October 1, 1995, by and between
the Registrant and Planet Hollywood (Asia) Pte. Ltd.
<PAGE>
SECOND AMENDMENT TO THE
LICENSE AGREEMENT
THIS SECOND AMENDMENT TO THE LICENSE AGREEMENT (the "Amended Agreement"),
is made and entered into as of the 1st day of October, 1995, by and between
PLANET HOLLYWOOD INTERNATIONAL, INC., a corporation organized under the laws of
the State of Delaware, 7380 Sand Lake Road, Suite 600, Orlando, Florida 32819
(hereinafter referred to as "LICENSOR") and PLANET HOLLYWOOD (ASIA) PTE, LTD.,
50 Cuscaden Road, #08-01, HPL House, Singapore 1024, a corporation organized
under the laws of the country of Singapore (hereinafter referred to as
"LICENSEE").
W I T N E S S E T H:
WHEREAS, LICENSEE entered into a License Agreement dated as of December 4,
1992 with Planet Hollywood, Inc., a Delaware corporation and LICENSOR's
predecessor-in-interest by way of statutory merger ("PHI"), pursuant to which
PHI accorded LICENSEE the right to use, sublicense or franchise the PLANET
HOLLYWOOD name and INTELLECTUAL PROPERTY RIGHTS to develop Planet Hollywood
restaurants in certain territories (the "License Agreement");
WHEREAS, LICENSOR succeeded to PHI's rights, duties and obligations under
the License Agreement pursuant to a reorganization which occurred effective as
of January 1, 1995;
WHEREAS, in connection with an agreement between LICENSOR, LICENSEE and
PLANET HOLLYWOOD HOLDINGS PTE. LTD. dated of even date
<PAGE>
herewith, LICENSOR and LICENSEE mutually desire to amend said License Agreement
effective as of the date hereof;
NOW, THEREFORE, for and in consideration of the premises and of the mutual
promises and conditions herein contained, and for other valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties do
hereby agree as follows:
1. All terms not herein defined shall have the meanings ascribed to them
in the License Agreement.
2. Section 2(b) of the License Agreement, regarding the Territories
licensed to LICENSEE, shall be amended and restated by deleting the existing
paragraph in full and replacing it with the following:
"(b) The "Territories" shall mean the following countries or cities:
Thailand; Malaysia; The Philippines; Korea; Singapore; Taiwan; South
Africa; Hong Kong; Indonesia; China; Australia; India; United Arab
Emirates; Egypt; Saudi Arabia; Vietnam; Guam and Aukland, New Zealand."
3. This Amended Agreement shall supersede and control over the License
Agreement to the extent of any conflict therewith. Except as otherwise set forth
in this Amended Agreement, all of the remaining provisions of the License
Agreement shall remain in full force and effect and are hereby ratified and
approved.
IN WITNESS WHEREOF, the parties have executed this Amended Agreement as of
the day and year first above written.
2
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL,
INC., a Delaware corporation
By:
------------------------------
Name:
------------------------------
Its:
------------------------------
PLANET HOLLYWOOD (ASIA) PTE, LTD, a
Singapore corporation
By:
------------------------------
Name:
------------------------------
Its:
------------------------------
3
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC.
Exhibit 10.7B
Third Amendment to the License Agreement
dated as of November 6, 1998, by and between
the Registrant and Planet Hollywood (Asia) Pte. Ltd.
<PAGE>
THIRD AMENDMENT TO
LICENSE AGREEMENT
THIS THIRD AMENDMENT TO LICENSE AGREEMENT (the "Amended Agreement"), is
made and entered into as of the 6th day of November, 1996, by and between PLANET
HOLLYWOOD INTERNATIONAL, INC., a corporation organized under the laws of the
State of Delaware, 7380 Sand Lake Road, Suite 600, Orlando, Florida 32819
(hereinafter referred to as "LICENSOR") and PLANET HOLLYWOOD (ASIA) PTE, LTD.,
50 Cuscaden Road, #08-01, HPL House, Singapore 1024, a corporation organized
under the laws of the country of Singapore (hereinafter referred to as
"LICENSEE").
W I T N E S S E T H:
WHEREAS, LICENSEE entered into a License Agreement dated as of December 4,
1992 with Planet Hollywood, Inc., a Delaware corporation and LICENSOR's
predecessor-in-interest by way of statutory merger ("PHI"), pursuant to which
PHI accorded LICENSEE the right to use, sublicense or franchise the PLANET
HOLLYWOOD name and intellectual property rights to develop Planet Hollywood
restaurants in certain territories (the "License Agreement");
WHEREAS, LICENSOR succeeded to PHI's rights, duties and obligations under
the License Agreement pursuant to a reorganization which occurred effective as
of January 1, 1995;
<PAGE>
WHEREAS, the License Agreement has previously been amended on two
occasions. The First Amendment to License Agreement was dated as of July 1, 1995
(the "First Amendment"), and the Second Amendment to License Agreement was dated
as of October 1, 1995 (the "Second Amendment").
WHEREAS, LICENSOR and LICENSEE mutually desire to amend said License
Agreement again, effective as of the date hereof;
NOW, THEREFORE, for and in consideration of the premises and of the mutual
promises and conditions herein contained, and for other valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties do
hereby agree as follows:
1. Definitions. All terms not herein defined shall have the meanings set
forth in the License Agreement.
2. Amendment to Section 2(b). Section 2(b) of the License Agreement,
regarding the Territories licensed to LICENSEE, shall hereby be amended and
restated by deleting the existing paragraph in full and replacing it with the
following:
"(b) The "Territories" shall mean the following countries or cities:
Thailand; Malaysia; The Philippines; Korea; Singapore; Taiwan; South
Africa; Hong Kong; Indonesia; China; Australia; India; Egypt; Saudi
Arabia; Vietnam; Guam; Auckland, New Zealand; and Hiroshima, Japan;
provided, however, that neither LICENSEE nor its permitted assigns shall
open a Planet Hollywood restaurant in Hiroshima, Japan until the earlier
to occur of (i) the day following the date LICENSOR opens a Planet
Hollywood restaurant in Tokyo, Japan, and (ii) November 6, 1998."
3. Amendment to Section 2(c). Section 2(c) of the License Agreement,
regarding the payment of consideration, shall hereby be amended and restated by
deleting the existing paragraph in full and replacing it with the following:
2
<PAGE>
"(c) LICENSEE agrees to pay LICENSOR, as consideration for the use
of the INTELLECTUAL PROPERTY RIGHTS, and as consideration for other
services rendered or provided by LICENSOR to LICENSEE in order to permit
LICENSEE to perform its obligations under applicable franchise and license
agreements, the sum of One Hundred Dollars ($100), plus the amounts of all
initial franchise or license fees (for this purpose, initial franchise or
license fees shall mean the fees paid by the franchisee or licensee for
the franchise other than continuing fees payable based upon the
franchisee's or licensee's sales or receipts) paid to LICENSEE for
franchises or licenses granted by LICENSEE with respect to operations in
the Territories except for the following countries or cities: Singapore;
India; Australia; Egypt; Saudi Arabia; Vietnam; Guam; Auckland, New
Zealand; and Hiroshima, Japan (LICENSEE shall be entitled to one hundred
percent (100%) of the initial franchise or license fees payable with
respect to operations such countries). LICENSEE agrees to cause all
franchisees or licensees to pay any initial franchise or license fees due
to LICENSOR pursuant to this Section 2(c) directly to LICENSOR.
4. Effect. This Amended Agreement shall supersede and control over the
License Agreement to the extent of any conflict therewith. Except as otherwise
set forth in this Amended Agreement, all of the remaining provisions of the
License Agreement, as amended by the First Amendment and the Second Amendment,
shall remain in full force and effect and are hereby ratified and approved.
IN WITNESS WHEREOF, the parties have executed this Amended Agreement as of
the day and year first above written.
PLANET HOLLYWOOD INTERNATIONAL, INC.,
a Delaware corporation
By:
------------------------------
Name:
------------------------------
Its:
------------------------------
3
<PAGE>
PLANET HOLLYWOOD (ASIA) PTE, LTD,
a Singapore corporation
By:
------------------------------
Name:
------------------------------
Its:
------------------------------
4
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC.
Exhibit 21.1
Subsidiaries
------------
================================================================================
Jurisdiction of
Name and Address Organization
- --------------------------------------------------------------------------------
308 Aviation, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
1501 Broadway, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
All Star Cafe International, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
All Star Cafe (LP), Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
All Star Cafe (New York), Florida
Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
All Star Cafe (Region V), Inc. Texas
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
All Star Cafe (Region VII), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
All Star Cafe (Region VIII), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Authentic All Star, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Official All Star Cafe, Nevada
Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Coast Licensing, Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Official All Star Cafe (U.K.), U.K.
Ltd.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
Jurisdiction of
Name and Address Organization
- --------------------------------------------------------------------------------
EBCO Management, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Karmalanne, Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Meant 2 Be, Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Silver Bracelets, Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
PH Amsterdam B.V. Netherlands
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Aspen), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Atlantic City), Florida
Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Boston), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood Canada, Inc. Canada
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Chefs), Florida
Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Ten Alps Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Chicago), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Costa Mesa), Florida
Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
Jurisdiction of
Name and Address Organization
- --------------------------------------------------------------------------------
Planet Hollywood Czech, A.S. Czech
8669 Commodity Circle Republic
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood United Kingdom
(Europe), Limited
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Cool Planet, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Cool Planet I, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Cool Planet II, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Gaming), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Honolulu), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (London), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (LP), Inc. Nevada
8669 Commodity Circle,
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Mail Order), Florida
Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Maui), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (New Florida
Orleans), Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (New York City), Florida
Inc.
8669 Commodity Circle,
Orlando, FL 32819
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
Jurisdiction of
Name and Address Organization
- --------------------------------------------------------------------------------
Planet Hollywood (Orlando), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Orlando Florida
Distribution), Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Paris), Florida
Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Phoenix), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Region I), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Region II), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Region III), Florida
Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Region Minnesota
IV), Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Region Texas
V), Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Region Nevada
VI), Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Region VII), Florida
Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood Restaurant OY Finland
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
<PAGE>
================================================================================
Jurisdiction of
Name and Address Organization
- --------------------------------------------------------------------------------
Planet Hollywood (Swiss Centre U.K.
London) Ltd.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Tel Aviv), Inc. Florida
8669 Commodity Circle,
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Theatres), Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood Transportation, Florida
Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood Florida
(Warehouse), Inc.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hospitality Holdings, Inc. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
RM 46 Restaurant Germany
Vermogensverwaltungs GmbH
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Movie Restaurant Verwaltungs, GmbH Germany
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Rocky Pit, Inc. Nevada
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Movie Restaurant GmbH Germany
& Co., K.G.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Washington), Delaware
L.P.
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Maui), L.P. Delaware
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood New York, Ltd. Florida
8669 Commodity Circle
Orlando, FL 32819
================================================================================
<PAGE>
================================================================================
Jurisdiction of
Name and Address Organization
- --------------------------------------------------------------------------------
Planet Hollywood (Trocadero), L.C. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (France), L.C. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Israel), L.C. Florida
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
Planet Hollywood (Texas), Ltd. Texas
8669 Commodity Circle
Orlando, FL 32819
- --------------------------------------------------------------------------------
PMC Management, Inc.
8669 Commodity Circle
Orlando, FL 32819 Georgia
================================================================================
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-31683 and No. 333-31685) of Planet Hollywood
International, Inc. of our report dated March 3, 1998 which is included in this
Annual Report on Form 10-K.
Price Waterhouse LLP
Orlando, Florida
March 20, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PLANET HOLLYWOOD INTERNATIONAL, INC. FOR THE FISCAL YEAR
ENDED DECEMBER 28, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> DEC-28-1997
<CASH> 9,089
<SECURITIES> 0
<RECEIVABLES> 26,584
<ALLOWANCES> (1,500)
<INVENTORY> 42,612
<CURRENT-ASSETS> 101,010
<PP&E> 360,616
<DEPRECIATION> (37,667)
<TOTAL-ASSETS> 505,559
<CURRENT-LIABILITIES> 70,579
<BONDS> 70,491
0
0
<COMMON> 1,090
<OTHER-SE> 337,451
<TOTAL-LIABILITY-AND-EQUITY> 505,559
<SALES> 447,310
<TOTAL-REVENUES> 475,125
<CGS> 124,808
<TOTAL-COSTS> 470,140
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,212
<INCOME-TAX> 4,954
<INCOME-CONTINUING> 8,258
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,258
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
