<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1998
REGISTRATION NO. 333-51655
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- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PLANET HOLLYWOOD INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 5812 59-3283783
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>
------------------------
SCOTT E. JOHNSON
8669 COMMODITY CIRCLE
ORLANDO, FL 32819
TELEPHONE: (407) 345-5300
(Name, address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices and of agent for service)
------------------------
COPY TO:
KRIS F. HEINZELMAN, ESQ.
CRAVATH, SWAINE & MOORE
825 EIGHTH AVENUE
NEW YORK, NY 10019-7475
TELEPHONE: (212) 474-1000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC. As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ___________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ___________________
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1)(2) OFFERING PRICE(1)(2) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
12% Senior Subordinated Notes
due 2005..................... $250,000,000 100% $250,000,000 $73,750.00
</TABLE>
(1) Estimated solely for purposes of calculating the registraton fee.
(2) Exclusive of accrued interest, if any.
(3) Calculated pursuant to Rule 457. Previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 13, 1998
PROSPECTUS
$250,000,000
[LOGO]
OFFER TO EXCHANGE ITS 12% SENIOR SUBORDINATED NOTES DUE 2005, WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR UP TO $250,000,000
AGGREGATE PRINCIPAL AMOUNT OF ITS OUTSTANDING 12% SENIOR SUBORDINATED NOTES DUE
2005.
--------------------------
THE EXCHANGE OFFER (AS DEFINED HEREIN) WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME,
ON JUNE 15, 1998, UNLESS EXTENDED.
--------------------------
Planet Hollywood International, Inc., a company incorporated under the laws
of Delaware (the "Company"), hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange its
12% Senior Subordinated Notes due 2005 (the "New Notes"), which have been
registered under the Securities Act of 1933 (the "Securities Act") pursuant to a
Registration Statement (as defined herein) of which this Prospectus constitutes
a part, for up to $250,000,000 aggregate principal amount of its outstanding 12%
Senior Subordinated Notes due 2005 (the "Old Notes"), of which $250,000,000
aggregate principal amount is outstanding as of the date hereof.
The New Notes will evidence the same debt as the Old Notes and will be
issued under and be entitled to the same benefits under the Indenture (as
defined herein) as the Old Notes. In addition, the New Notes and the Old Notes
will be treated as one series of securities under the Indenture. The terms of
the New Notes are identical in all material respects to the terms of the Old
Notes, except for certain transfer restrictions, registration rights and terms
providing for an increase in the interest rate on the Old Notes under certain
circumstances relating to the registration of the New Notes. The New Notes and
the Old Notes are collectively referred to herein as the "Notes." See
"Description of the Notes."
The New Notes will mature on April 1, 2005. The New Notes may be redeemed at
the option of the Company, in whole or in part, at any time on or after April 1,
2003, at the redemption prices set forth herein plus accrued and unpaid
interest, if any, thereon (plus Liquidated Damages (as defined herein), if any)
to the redemption date. In addition, at any time or from time to time on or
prior to April 1, 2001, the Company may redeem up to 35% of the aggregate
principal amount of the New Notes originally issued at a redemption price of
112% of the principal amount thereof, plus accrued and unpaid interest, if any,
thereon (plus Liquidated Damages, if any) to the redemption date, with the net
cash proceeds of one or more Public Equity Offerings (as defined herein);
PROVIDED, HOWEVER, that at least $162.5 million aggregate principal amount of
the New Notes remains outstanding following any such redemption. Upon the
occurrence of a Change of Control (as defined herein), the Company will be
required to make an offer to purchase the New Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon (plus
Liquidated Damages, if any) to the date of purchase. See "Description of the
Notes."
The Notes represent general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined herein) of the Company. The Notes will rank PARI PASSU in right of
payment with all Senior Subordinated Indebtedness (as defined herein), whenever
incurred, of the Company and senior in right of payment to all Subordinated
Indebtedness (as defined herein), whenever incurred, of the Company. The Notes
will be effectively subordinated to all current and future Indebtedness (as
defined herein) and other liabilities of the Company's subsidiaries. As of
December 28, 1997, outstanding Indebtedness and other liabilities of the
Company's subsidiaries totaled approximately $33.1 million. See "Description of
the Notes."
(CONTINUED ON THE NEXT PAGE)
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF THE OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER AND THAT PROSPECTIVE INVESTORS IN THE NEW NOTES SHOULD CONSIDER IN
CONNECTION WITH SUCH INVESTMENT.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NEITHER THE NEVADA GAMING COMMISSION NOR THE NEVADA STATE GAMING CONTROL
BOARD HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED HEREBY.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
The date of this Prospectus is May , 1998.
<PAGE>
(CONTINUED FROM FRONT COVER)
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the Registration Rights Agreement dated as of
March 25, 1998 (the "Registration Rights Agreement") between the Company and
Bear, Stearns & Co. Inc., Salomon Brothers Inc, NationsBanc Montgomery
Securities LLC, Cowen & Company, SunTrust Equitable Securities Corporation and
Scotia Capital Markets, as the initial purchasers of the Old Notes (the "Initial
Purchasers").
The Company is making the Exchange Offer in reliance on the position of the
staff of the Securities and Exchange Commission (the "Commission") as set forth
in certain no-action letters addressed to other parties in other transactions.
However, the Company has not sought its own no-action letter, and there can be
no assurance that the staff of the Commission will make a similar determination
with respect to the Exchange Offer as in such other circumstances. Based upon
these interpretations by the staff of the Commission, the Company believes that
New Notes issued pursuant to this Exchange Offer in exchange for Old Notes may
be offered for resale, resold and otherwise transferred by a holder thereof
other than (i) a broker-dealer who purchased such Old Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an "affiliate" (as defined in Rule
405 of the Securities Act) of the Company without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of such New
Notes. Holders of Old Notes accepting the Exchange Offer will represent to the
Company in the Letter of Transmittal that such conditions have been met. Any
holder who participates in the Exchange Offer for the purpose of participating
in a distribution of the New Notes may not rely on the position of the staff of
the Commission set forth in these no-action letters and would have to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any secondary resale transaction. A secondary resale
transaction in the United States by a holder who is using the Exchange Offer to
participate in the distribution of New Notes must be covered by a registration
statement containing the selling securityholder information required by Item 507
of Regulation S-K of the Securities Act.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Old Notes as a result
of market-making activities or other trading activities and will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date (as defined herein), it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution." All broker-dealers must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. See "The Exchange Offer."
The New Notes are new securities for which there is currently no market. The
Company presently does not intend to apply for listing of the New Notes on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"). The Company has been
advised by the Initial Purchasers that, following completion of the Exchange
Offer, they presently intend to make a market in the New Notes; however, the
Initial Purchasers are not obligated to do so and any market-making activities
with respect to the New Notes may be discontinued at any time without notice.
There can be no assurance that an active public market for the New Notes will
develop.
ii
<PAGE>
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and preferences and will be
subject to the limitations applicable thereto under the Indenture. Following
consummation of the Exchange Offer, the holders of Old Notes will continue to be
subject to the existing restrictions upon transfer thereof and the Company will
have no further obligation to such holders (other than the Initial Purchasers)
to provide for the registration under the Securities Act of the Old Notes held
by them. To the extent that Old Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Old Notes could be adversely
affected. It is not expected that an active market for the Old Notes will
develop while they are subject to restrictions on transfer. The Company will
accept for exchange any and all Old Notes that are validly tendered and not
withdrawn on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be June 15, 1998 (the "Expiration Date"), unless the
Exchange Offer is extended by the Company in its sole discretion (but in no
event to a date later than June 19, 1998), in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended. Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date, unless previously accepted for
payment by the Company. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Notes being tendered for exchange. However, the Exchange
Offer is subject to certain conditions which may be waived by the Company and to
the terms and provisions of the Registration Rights Agreement. Old Notes may be
tendered only in denominations of $1,000 and integral multiples thereof. The
Company has agreed to pay the expenses of the Exchange Offer. See "The Exchange
Offer--Fees and Expenses."
This Prospectus, together with the Letter of Transmittal, are being sent to
all registered holders of Old Notes as of , 1998.
The Company will not receive any proceeds from the Exchange Offer. No
dealer-manager is being used in connection with the Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
No broker-dealer, salesperson or other individual has been authorized to
give any information or to make any representation in connection with the
Exchange Offer other than those contained in this Prospectus and Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company or the Guarantor. The
delivery of this Prospectus shall not, under any circumstances, create any
implication that the information herein is correct at any time subsequent to its
date.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT TENDERS
FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
iii
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Statements that use the words
"expects," "anticipates," "projects" or similar words indicating the Company's
beliefs with respect to future results are forward-looking statements. Although
management believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from the Company's or management's expectations are disclosed
in this Prospectus in conjunction with the forward-looking statements and
elsewhere under "Risk Factors." All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Risk Factors.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of
the Commission at Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York
10048. In addition, copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Company's common stock is quoted on The New York
Stock Exchange and, therefore, such reports, proxy statements and other
information concerning the Company can also be inspected at the offices of The
New York Stock Exchange, 20 Broad Street, New York, New York 10005. The Company
files such material with the Commission electronically. The Commission maintains
a web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of such site is: http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the New Notes offered hereby (the
"Registration Statement"). This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted from this
Prospectus in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the New Notes offered
hereby, reference is made to the Registration Statement, including the exhibits
and schedules filed therewith. Statements made in this Prospectus concerning the
contents of any document referred to herein are not necessarily complete. With
respect to each such document filed with the Commission as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Copies of the Registration
Statement and the exhibits and schedules thereto may be inspected, without
charge, at the offices of the Commission at the addresses set forth above.
iv
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
00-28230) are incorporated by reference in this Prospectus:
(a) The Company's Quarterly Report on Form 10-Q, for the quarterly
period ended March 29, 1998 (filed May 13, 1998);
(b) The Company's Definitive Proxy Statment on Schedule 14A, dated April
20, 1998 (filed April 14, 1998);
(c) The Company's Annual Report on Form 10-K, for the year ended
December 28, 1997 (filed March 23, 1998), as amended by Form 10K/A dated
April 30, 1998 (filed April 30, 1998);
(d) The Company's Current Reports on Form 8-K, dated March 9, 1998
(filed March 10, 1998), March 9, 1998 (filed March 10, 1998) and March 25,
1998 (filed March 26, 1998); and
(e) The Company's Registration Statement on Form S-1, as amended, dated
February 16, 1996 (Registration No. 333-01490).
All documents and reports subsequently filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the termination of the Exchange
Offer shall be deemed to be incorporated herein by reference and to be a part
hereof from the date of filing of such documents. Any statement contained herein
or in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the documents described above that are incorporated by reference
herein other than exhibits to such documents which are not specifically
incorporated by reference in such documents. Written or telephone requests
should be directed to: General Counsel, Planet Hollywood International, Inc.,
8669 Commodity Circle, Orlando, Florida 32819, telephone number (407) 345-5300.
v
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS INCLUDING THE NOTES THERETO (THE "CONSOLIDATED FINANCIAL STATEMENTS")
INCLUDED ELSEWHERE IN THIS PROSPECTUS. AS USED IN THIS PROSPECTUS, THE "COMPANY"
REFERS TO PLANET HOLLYWOOD INTERNATIONAL, INC. AND, EXCEPT IN CONNECTION WITH
DESCRIPTIONS RELATING TO THE NOTES, ITS CONSOLIDATED SUBSIDIARIES FOR THE PERIOD
SUBSEQUENT TO JANUARY 1, 1995 AND TO PLANET HOLLYWOOD, INC., PLANET HOLLYWOOD,
LTD. AND COMBINED ENTITIES (COLLECTIVELY, THE "PREDECESSORS") FOR ALL PERIODS
PRIOR TO JANUARY 1, 1995. REFERENCES TO A FISCAL YEAR REFER IN EACH CASE TO THE
YEAR ENDING ON THE SUNDAY CLOSEST TO DECEMBER 31 OF EACH YEAR, EXCEPT THAT
REFERENCES TO FISCAL 1993 REFER TO THE FISCAL YEAR ENDED DECEMBER 31, 1993. AS
USED IN THIS PROSPECTUS, "EBITDA" MEANS EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION, AMORTIZATION AND $68.2 MILLION OF NONCASH CHARGES ASSOCIATED WITH
A $71.2 MILLION CHARGE IN FISCAL 1997. "PLANET HOLLYWOOD" AND "OFFICIAL ALL STAR
CAFE" ARE REGISTERED TRADEMARKS OF THE COMPANY.
THE COMPANY
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 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 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 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. Each unit prominently displays memorabilia associated with
its theme, including costumes and props from popular movies (in the case of
PLANET HOLLYWOOD units) and celebrity-owned uniforms and athletic equipment (in
the case of OFFICIAL ALL
1
<PAGE>
STAR CAFE units). Each unit's integrated retail store offers premium-quality
fashion merchandise, such as jackets, T-shirts, sweatshirts and hats, as well as
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 bags and equipment bags, all of which incorporate an OFFICIAL ALL STAR
CAFE "team" theme. Sales of merchandise yield higher operating margins than do
food and beverage sales and provide additional off-site promotion for the
Company's brands.
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 upon several strategic ventures in movie theaters, lodging,
gaming and consumer products. These ventures, which are being developed in
association with other companies that are leaders in their respective
industries, include the following:
- MOVIE THEATERS. The Company has formed a 50/50 joint venture with AMC
Entertainment, Inc. ("AMC"), one of the nation's leading motion picture
exhibitors, that 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
most 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.
- MUSIC CONCEPT HOTEL AND CASINO. 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 Las Vegas
Boulevard (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 a 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 was razed in April 1998 and 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. In addition to
participation in the Las Vegas Project's profits through its 50% equity
interest in the joint venture, the Company will receive license fees for
the use of the Music Concept name and logo and consulting fees for the
provision of certain services. The Las Vegas Project is subject to the
negotiation and execution of definitive documentation and the receipt of
necessary construction financing.
- OFFICIAL ALL STAR HOTEL. The Company has acquired a 20% equity interest in
a newly-formed joint venture with Vornado Realty Trust and an affiliate of
Mr. Ong Beng Seng, a director and principal shareholder of the Company. In
September 1997, the joint venture acquired the Hotel Pennsylvania, a
20-story, 1,700-room hotel (once known as the Statler Hotel) located
directly opposite the entrance to New York City's famed Madison Square
Garden. While continuing its normal operations, the hotel, which is New
York City's fourth largest, 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
2
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areas will feature theming that celebrates 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 remodeled hotel
(like its predecessor) will contain approximately 400,000 square feet of
rentable retail space. In addition to participation in the hotel's profits
through its 20% equity interest in the joint venture, the Company will
receive license fees for the use of the OFFICIAL ALL STAR name and logo.
In March 1998, Ong Beng Seng's affiliate announced that it had entered
into an agreement to sell its interest in the OFFICIAL ALL STAR HOTEL to
Vornado Realty Trust for a profit, which transaction is anticipated to
close in Spring 1998.
- PLANET HOLLYWOOD HOTEL. The Company has acquired a 20% equity interest in
a newly-formed joint venture with several prominent real estate developers
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. In addition to participation in the hotel's profits through its 20%
equity interest in the joint venture, the Company will receive license
fees for the use of the PLANET HOLLYWOOD name and logo.
- 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 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 in 1998 and the Company anticipates opening COOL
PLANET shops, mainly in California and Florida, by the end of 1998. Whoopi
Goldberg, one of the Company's principal celebrity stockholders, has
agreed to serve as spokesperson for COOL PLANET products and COOL PLANET
shops.
RECENT DEVELOPMENTS
On January 21, 1998, the Company announced that revenues and profits for the
fourth quarter of fiscal 1997 would fall significantly short of analysts'
estimates. The Company also stated that revenues on a "same unit" basis (which
includes only Company-owned theme restaurants that have been open for a full
fiscal period after an initial 18 months of operations) had declined
approximately 13% during the 1997 fourth quarter compared to the corresponding
period in fiscal 1996. The Company also said that it had recorded a $71.2
million charge ($44.5 million after-tax), $3.0 million of which represented a
cash charge, in the 1997 fourth quarter primarily related to the writedown of
underperforming assets and the write-off of certain development, franchising and
other costs as a result of the Company's scaling back the expansion of its
PLANET HOLLYWOOD and OFFICIAL ALL STAR CAFE units and redirecting its marketing
focus. The Company indicated that fourth quarter results were adversely affected
by a decline in customer traffic at its restaurants due to (i) an increase in
competition in the theme-dining sector, particularly in major tourist
destinations, and (ii) a diversion of management's focus from existing unit
operations to new unit openings and strategic initiatives. The 1997 fourth
quarter results also were affected by increased staffing and
infrastructure-related costs associated with the Company's rapid expansion in
1997 and by a shift of several planned franchised restaurant openings to the
first half of 1998. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition."
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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. 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".
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.
- 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
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<PAGE>
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
this fiscal year, 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.
The Company's principal executive offices are located at 8669 Commodity
Circle, Orlando, Florida 32819, telephone (407) 363-7827.
5
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer........ The Company is offering to exchange pursuant to the
Exchange Offer an aggregate principal amount of up to
$250,000,000 principal amount of the New Notes for a
like principal amount of the Old Notes. The Company
will issue the New Notes on or promptly after the
Exchange Date. As of the date of this Prospectus,
$250,000,000 aggregate principal amount of the Old
Notes is outstanding. The terms of the New Notes are
identical in all material respects to the terms of the
Old Notes for which they may be exchanged pursuant to
the Exchange Offer, except that the New Notes have
been registered under the Securities Act and are
issued free from any covenant regarding registration,
including terms providing for an increase in the
interest rate on the Old Notes upon a failure to file
or have declared effective an exchange offer
registration statement or to consummate the Exchange
Offer by certain dates. The New Notes will evidence
the same debt as the Old Notes and will be issued
under and be entitled to the same benefits under the
Indenture as the Old Notes. The Issuance of the New
Notes and the Exchange Offer are intended to satisfy
certain obligations of the Company under the
Registration Rights Agreement. See "The Exchange
Offer" and "Description of the Notes."
Interest Payments......... Interest on the New Notes will be payable semiannually
on April 1 and October 1 of each year, commencing
October 1, 1998. See "The Exchange Offer--Interest on
the New Notes."
Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New York
City time on June 15, 1998, unless extended by the
Company in its sole discretion (but in no event to a
date later than June 19, 1998). See "The Exchange
Offer--Expiration Date; Extensions; Amendments."
Exchange Date............. The date of acceptance for exchange of the Old Notes
and the consummation of the Exchange Offer will be the
first business day following the Expiration Date
unless extended. See "The Exchange Offer--Terms of the
Exchange."
Conditions of the Exchange
Offer................... The Company's obligation to consummate the Exchange
Offer will be subject to certain conditions. See "The
Exchange Offer-- Conditions to the Exchange Offer."
The Company reserves the right to terminate or amend
the Exchange Offer at any time prior to the Expiration
Date.
Withdrawal Rights......... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date;
otherwise, all tenders will be irrevocable. See "The
Exchange Offer--Withdrawal of Tenders."
Procedures for Tendering
Notes................... See "The Exchange Offer--Procedures for Tendering."
Federal Income Tax
Consequences............ The exchange of Old Notes for New Notes pursuant to
the Exchange Offer will not result in any income, gain
or loss to holders who participate in the Exchange
Offer or to the Company for federal income tax
purposes. See "Income Tax Considerations."
</TABLE>
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<PAGE>
Resale.................... The Company is making the Exchange Offer in reliance
on the position of the staff of the Commission as set
forth in certain no-action letters addressed to other
parties in other transactions. However, the Company
has not sought their own no-action letter and there
can be no assurance that the staff of the Commission
would make a similar determination with respect to the
Exchange Offer as in such other circumstances. Based
on these interpretations by the staff of the
Commission, the Company believes that New Notes issued
pursuant to this Exchange Offer in exchange for Old
Notes may be offered for resale, resold and otherwise
transferred by a holder thereof other than (i) a
broker-dealer who purchased such Old Notes directly
from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities Act
or (ii) a person that is an "affiliate" (as defined in
Rule 405 of the Securities Act) of the Company without
compliance with the registration and prospectus
delivery provisions of the Securities Act; PROVIDED
that such New Notes are acquired in the ordinary
course of such holder's business and that such holder
is not participating and has no arrangement or
understanding with any persons to participate, in the
distribution of such New Notes. Holders of Old Notes
accepting the Exchange Offer will represent to the
Company in the Letter of Transmittal that such
conditions have been met. Any holder who participates
in the Exchange Offer for the purpose of participating
in a distribution of the New Notes may not rely on the
position of the staff of the Commission as set forth
in these no-action letters and would have to comply
with the registration and prospectus delivery
requirements of the Securities Act in connection with
any secondary resale transaction. A secondary resale
transaction in the United States by a holder who is
using the Exchange Offer to participate in the
distribution of New Notes must be covered by a
registration statement containing the selling
securityholder information required by Item 507 of
Regulation S-K of the Securities Act. Each
broker-dealer (other than an "affiliate" of the
Company) that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that
it acquired the Old Notes as the result of
market-making activities or other trading activities
and will deliver a prospectus in connection with any
resale of such New Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning
of the Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New
Notes received in exchange for Old Notes where such
Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading
activities. The Company has agreed that, for a period
of 180 days after the date of this Prospectus, it will
make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan
of Distribution." Any broker-dealer who is an
affiliate of the Company may not rely on such
no-action letters and must comply with the
registration and prospectus delivery
7
<PAGE>
<TABLE>
<S> <C>
requirements of the Securities Act in connection with
any secondary resale transaction. See "The Exchange
Offer--Purpose of the Exchange Offer."
Remaining Old Notes....... Holders of Old Notes who do not tender their Old Notes
in the Exchange Offer or whose Old Notes are not
accepted for exchange will continue to hold such Old
Notes and will be entitled to all the rights and
preferences, and will be subject to the limitations,
applicable thereto under the Indenture. All untendered
and tendered but unaccepted Old Notes (collectively,
the "Remaining Old Notes") will continue to bear
legends restricting their transfer. In general, the
Old Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant
to an exemption from, or in a transaction not subject
to, the Securities Act and applicable state securities
laws. To the extent that the Exchange Offer is
effected, the trading market, if any, for Remaining
Old Notes could be adversely affected. See "Risk
Factors--Factors Relating to the Notes--Consequences
of Failure to Properly Tender Old Notes Pursuant to
the Exchange Offer" and "The Exchange Offer--Terms of
the Exchange."
Exchange Agent............ The exchange agent with respect to the Exchange Offer
is United States Trust Company of New York (the
"Exchange Agent"). The address and telephone number of
the Exchange Agent are set forth in "The Exchange
Offer--Exchange Agent."
Use of Proceeds........... There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer. See "Use of
Proceeds."
</TABLE>
8
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<TABLE>
<S> <C>
THE NEW NOTES
Securities Offered........ $250,000,000 aggregate principal amount of 12% Senior
Subordinated Notes due 2005 (the "New Notes").
Maturity Date............. April 1, 2005.
Interest Payment Dates.... April 1 and October 1, commencing October 1, 1998.
Optional Redemption....... The New Notes may be redeemed at the option of the
Company, in whole or in part, at any time on or after
April 1, 2003, at the redemption prices set forth
herein plus accrued and unpaid interest, if any,
thereon (plus Liquidated Damages, if any) to the
redemption date. In addition, at any time or from time
to time on or prior to April 1, 2001, the Company may
redeem up to 35% of the aggregate principal amount of
the New Notes originally issued at a redemption price
of 112% of the principal amount thereof, plus accrued
and unpaid interest, if any, thereon (plus Liquidated
Damages, if any) to the redemption date, with the net
cash proceeds of one or more Public Equity Offerings;
PROVIDED, HOWEVER, that at least $162.5 million
aggregate principal amount of the New Notes remains
outstanding following any such redemption. See
"Description of the Notes--Optional Redemption."
Gaming Redemption......... The New Notes will be subject to mandatory disposition
and redemption requirements in the event of certain
determinations by the Nevada Gaming Authorities (as
defined). See "Description of the Notes--Gaming
Redemption."
Change of Control Offer... Upon the occurrence of a Change of Control, the
Company will be required to make an offer to purchase
the New Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest, if any, thereon (plus Liquidated Damages, if
any) to the date of purchase.
Ranking................... The New Notes will be general unsecured obligations of
the Company, subordinated in right of payment to all
existing and future Senior Indebtedness of the
Company. The New Notes will rank PARI PASSU in right
of payment with all Senior Subordinated Indebtedness,
whenever incurred, of the Company and senior in right
of payment to all Subordinated Indebtedness, whenever
incurred, of the Company. The New Notes will be
effectively subordinated to all current and future
Indebtedness and other liabilities of the Company's
subsidiaries. As of December 28, 1997, outstanding
Indebtedness and other liabilities of such
subsidiaries was approximately $33.1 million. See
"Risk Factors" and "Description of the
Notes--Subordination."
Certain Covenants......... The Indenture under which the New Notes will be issued
(the "Indenture") will contain covenants that, among
other things, limit (i) the issuance of additional
debt and redeemable stock by the Company, (ii) the
issuance of debt and preferred stock by the Company's
subsidiaries, (iii) the payment of dividends on
capital stock of the Company and its subsidiaries and
the redemption of capital stock of the Company, (iv)
the sale of assets and subsidiary
</TABLE>
9
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<TABLE>
<S> <C>
stock, (v) transactions with affiliates, (vi) the
incurrence of liens and (vii) consolidations, mergers
and transfers of all or substantially all the
Company's assets. The Indenture also will prohibit
certain restrictions on distributions from the
Company's subsidiaries. All these limitations and
prohibitions, however, are subject to a number of
important qualifications. See "Description of the
Notes--Certain Covenants."
</TABLE>
RISK FACTORS
For a discussion of certain factors that holders of Old Notes should
consider in connection with the Exchange Offer and that prospective investors in
the New Notes should consider in connection with such an investment, see "Risk
Factors."
10
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR(A)
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997
--------- ---------- ---------- ---------- ----------
STATEMENTS OF OPERATIONS DATA:
Total revenues(b)..................................... $ 30,677 $ 125,932 $ 270,606 $ 373,364 $ 475,125
Costs and expenses(b)(c).............................. 36,103 130,847 235,506 298,045 470,140
Income (loss) from operations(c)...................... (5,426) (4,915) 35,100 75,319 4,985
Interest income (expense), net........................ 142 (4,054) (11,229) (2,874) 1,327
Equity in loss (income) of unconsolidated
affiliates(b)(c).................................... 198 -- (848) (4,308) (6,900)
Minority interests.................................... 223 (299) (3,728) (1,037) --
Provision for income taxes............................ -- -- 875 27,636 4,954
Net income (loss)(c).................................. ($ 5,259) ($ 9,268) $ 20,727 $ 37,659 $ 8,258
Dividends per share................................... -- -- -- -- --
OTHER DATA:
Net cash (used in) provided by operating activities... $ (9,560) $ (3,146) $ 33,370 $ 48,830 $ 35,766
Net cash used in investing activities................. (32,503) (52,490) (75,599) (73,870) (156,445)
Net cash provided by financing activities............. 41,395 49,816 52,128 59,948 81,153
EBITDA(d)............................................. (2,198) 11,609 55,611 108,006 120,247
EBITDA margin(e)...................................... NM 9.2% 20.6% 28.9% 25.3%
Depreciation and amortization......................... 2,818 16,231 22,182 27,295 38,825
Capital expenditures(f)............................... 29,345 52,131 80,291 81,675 124,526
Ratio of earnings to fixed charges(g)................. -- -- 2.0x 5.0x 1.2x
Units open at fiscal year end(h):
Company-owned(i).................................... 4 15 23 37 53
Franchised.......................................... 3 3 6 21 34
--------- ---------- ---------- ---------- ----------
Total........................................... 7 18 29 58 87
--------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ----------
PRO FORMA DATA:
Interest expense(j)................................... $ 27,600
Ratio of EBITDA to interest expense(j)................ 4.4x
Ratio of long-term debt to EBITDA(k).................. 2.1x
Ratio of earnings to fixed charges(g)(l).............. 1.1x
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 28, 1997
----------------------
<S> <C> <C> <C> <C>
AS
ACTUAL ADJUSTED(K)
--------- -----------
BALANCE SHEET DATA:
Cash............................................................ $ 9,089 $ 189,614
Working capital................................................. 30,431 210,956
Total assets.................................................... 505,559 693,271
Long-term debt.................................................. 70,491 258,491
Stockholders' equity............................................ 338,541 338,254
</TABLE>
- ------------------------
(FOOTNOTES APPEAR ON FOLLOWING PAGE)
11
<PAGE>
(FOOTNOTES FOR PRECEDING PAGE)
(a) At the beginning of fiscal 1994, the Company changed its accounting period
from a calendar year ending December 31 to a 52-53 week fiscal year ending
on the Sunday nearest December 31 of each year.
(b) At December 31, 1993, the Company owned a 47.5% equity interest in PH
London. Prior to fiscal 1994, the Company's investment was accounted for
under the equity method of accounting. Effective January 1, 1994, the
Company increased its equity interest in PH London to over 50%. As a result,
the operations of PH London are consolidated in the Company's results
commencing in fiscal 1994.
(c) Data for fiscal 1997 reflect a charge of $71.2 million. See "--Recent
Developments."
(d) EBITDA means earnings before interest, taxes, depreciation, amortization and
the $68.2 million of noncash charges associated with the charge of $71.2
million in fiscal 1997. See "--Recent Developments." EBITDA including the
noncash charges was $52.0 million in fiscal 1997. EBITDA is presented
because it provides useful information regarding a company's ability to
service and/or incur debt. EBITDA should not be considered in isolation from
or as a substitute for net income, cash flows from operating activities and
other consolidated income or cash flow statement data prepared in accordance
with generally accepted accounting principles or as a measure of
profitability or liquidity. The Company's definition of EBITDA (including in
the Indenture) may not be consistent with similarly titled measures used by
other companies.
(e) EBITDA as a percentage of total revenues.
(f) Excludes pre-opening expenses. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(g) For purposes of computing the ratio of earnings to fixed charges, fixed
charges consist of interest on debt (including capitalized interest),
amortization of debt discount and expense and one-third of rent expense,
which management believes is representative of the interest component of
rent expense. Earnings consist of income from continuing operations before
income taxes and equity in earnings of unconsolidated affiliates, plus fixed
charges (other than capitalized interest, but excluding the amortization
thereof). Earnings were insufficient to cover fixed charges by $5.5 million
and $10.3 million in fiscal 1993 and 1994, respectively.
(h) Company-owned units are those operated by entities that are wholly-owned or
majority-owned by the Company. The operating results of those entities are
consolidated in the Company's results. Franchised units are those operated
by independent franchisees or by joint ventures that are accounted for under
the equity method of accounting.
(i) Excludes the one MARVEL MANIA unit.
(j) Includes interest expense on the Notes, net of interest on outstanding
indebtedness to be repaid with the proceeds from the sale of the Old Notes,
assuming the Old Notes had been issued at the beginning of fiscal 1997.
Excludes amortization of debt discount and issuance costs.
(k) Gives effect to the sale of the Old Notes and the application of the
proceeds therefrom, assuming the sale of the Old Notes had been consummated
on December 28, 1997.
(l) Assumes the proceeds from the sale of the Old Notes had been used to repay
$62.0 million of indebtedness outstanding during fiscal 1997.
12
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RISK FACTORS
AN INVESTMENT IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. HOLDERS OF OLD
NOTES, IN CONNECTION WITH THEIR PARTICIPATION IN THE EXCHANGE OFFER, AS WELL AS
PROSPECTIVE INVESTORS IN THE NEW NOTES SHOULD CAREFULLY REVIEW THE INFORMATION
SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION APPEARING IN THIS PROSPECTUS,
PRIOR TO PARTICIPATING IN THE EXCHANGE OFFER OR MAKING AN INVESTMENT IN THE NEW
NOTES.
CONSEQUENCES OF FAILURE TO PROPERLY TENDER OLD NOTES PURSUANT TO THE EXCHANGE
OFFER
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the following
restrictions on transfer with respect to their Old Notes: (i) the Remaining Old
Notes may be resold only if registered pursuant to the Securities Act, if any
exemption from registration is available thereunder, or if neither such
registration nor such exemption is required by law, and (ii) the Remaining Old
Notes will bear a legend restricting transfer in the absence of registration or
an exemption therefrom. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act. To the extent that Old Notes
are tendered and accepted in connection with the Exchange Offer, any trading
market for remaining Old Notes could be adversely affected.
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for New Notes should allow sufficient time to
ensure timely delivery. The Company is under no duty to give notification of
defects or irregularities with respect to tenders of Old Notes for exchange. Old
Notes that are not tendered or that are tendered but not accepted by the Company
for exchange, will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof under the Securities
Act and, upon consummation of the Exchange Offer, certain registration rights
under the Registration Rights Agreement will terminate.
RANKING
The Company's obligations with respect to the Notes will be subordinate to
all of its Senior Indebtedness and will be effectively subordinated to all
current and future Indebtedness and other liabilities of the Company's
subsidiaries. As of December 28, 1997, the outstanding Indebtedness and other
liabilities of the Company's subsidiaries was $33.1 million. The Indenture will
permit the Company to incur additional Senior Indebtedness. By reason of the
subordination provisions of the Indenture, in the event of insolvency,
liquidation, reorganization, dissolution or other winding up of the Company,
holders of Senior Indebtedness of the Company will have to be paid in full
before the Company makes payments in respect of the Notes. Accordingly, there
may be insufficient assets remaining after such payments to pay amounts due on
the Notes. See "Description of the Notes."
PARTICIPATION IN JOINT VENTURES
The Company has begun, and intends to continue, investing a substantial
portion of the proceeds from the sale of the Old Notes in, and will have
continuing obligations to, entities that are not wholly owned or controlled by
the Company, including the joint venture vehicles for PLANET MOVIES BY AMC, the
Las Vegas Project, the OFFICIAL ALL STAR HOTEL and the PLANET HOLLYWOOD HOTEL.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." In addition, the Company may incur
obligations to third parties under guarantees of indebtedness and other
obligations of various joint venture entities. The Indenture does not prohibit
these entities from incurring indebtedness. Certain of these entities have
incurred, and in the future, may incur indebtedness that contains terms limiting
or prohibiting the payment of dividends or distributions to the equity investors
in such entities (including the Company). In addition, because the Company does
not control distributions by
13
<PAGE>
these entities, there can be no assurance that, even if funds were available for
distribution by these entities, the Company will receive any distributions from
these entities. See "Business."
ABILITY TO MANAGE GROWTH
The Company has experienced substantial growth in a relatively short period
of time, including an increase in the number of Company-owned and franchised
units and an expansion of direct merchandise sales. This rapid rate of growth
has imposed, and the Company's new Music Concept and strategic ventures may
continue to impose, significant strains on the Company's management. Failure of
the Company to adequately manage its growth, or unexpected difficulties
encountered during expansion of its activities, could have a material adverse
impact on the Company's results of operations and financial condition.
LEVERAGE; ABILITY TO SERVICE DEBT
As of December 28, 1997, after giving pro forma effect to the sale of the
Old Notes and the application of the proceeds therefrom, the Company's
Indebtedness would have been approximately $258.5 million. At that date the
Company's shareholders' equity was approximately $338.5 million. Subject to the
restrictions in the Indenture, the Company may incur additional Indebtedness
from time to time.
As a consequence of the indebtedness represented by the Notes and
indebtedness incurred pursuant to the Credit Agreement (as defined herein) (if
any): (i) a substantial portion of the Company's cash flow from operations must
be dedicated to debt service and will not be available for other purposes; (ii)
the Company's ability to obtain additional debt financing in the future for
working capital, capital expenditures or acquisitions may be limited; and (iii)
the Company's flexibility to react to changes in the industry and changing
business and economic conditions may be limited.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which may be
affected by prevailing economic conditions and financial, business and other
factors, many of which are beyond its control. The Company anticipates that its
operating cash flow will be sufficient to meet its operating expenses and to
service its debt obligations as they become due. If the Company is unable to
service its Indebtedness, it will be forced to adopt one or more other
strategies that may include actions such as reducing or delaying capital
expenditures, selling assets, restructuring or refinancing its Indebtedness or
seeking additional equity capital. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DECLINES IN "SAME UNIT" REVENUES
As noted under "Summary--Recent Developments," revenues of Company-owned
units declined on a "same unit" basis approximately 13% during the fourth
quarter of fiscal 1997 compared to the corresponding period in fiscal 1996 and
the Company anticipates an approximately comparable decline in "same unit"
revenues in the first quarter of fiscal 1998 to that of the fourth quarter of
fiscal 1997. Revenues on a "same unit" basis declined approximately 11% during
fiscal 1997 compared to fiscal 1996. See "Management's Discussion and Analysis
of Results of Operations and Financial Condition." Although the Company is
undertaking several initiatives to improve its performance, there can be no
assurance that these initiatives will be successful and that "same unit"
revenues will not continue to decline. The Company operates in an increasingly
competitive environment with numerous competing themed restaurants entering many
of its existing markets and, as it continues to expand into smaller markets, the
Company has experienced, expects to experience in fiscal 1998 and could continue
thereafter to experience declines in "same unit" revenues. In addition, during
the initial six to twelve months following its opening, a new unit typically
realizes higher revenues than in subsequent periods of operation. The first six
months of a unit's operations are not included in the "same unit" analysis. In
fiscal 1997, 18 of the 53 Company-
14
<PAGE>
owned units were included in the "same unit" analysis and the Company expects 27
units to be included in fiscal 1998. There can be no assurance that the
Company's franchised units, only two of which have been open for a sufficient
period to be included in a similar "same unit" analysis for franchised units,
will not experience similar declines in "same unit" revenues.
INDUSTRY CONDITIONS AND 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.
The hotel/casino industry in Las Vegas is highly competitive. Hotels located
on or near the Strip, including the planned Las Vegas Project, compete with
other hotels located on the Strip and with other major hotels in downtown Las
Vegas. Direct competitors of the Las Vegas Project, which will include such
theme-oriented resorts as Caesar's Palace Hotel, The Mirage, Treasure Island
Hotel and Casino, MGM Grand Hotel and Casino and Hard Rock Hotel and Casino, may
have greater financial and other resources than the Las Vegas Project.
Additional competition will come from the recently announced construction of
several new major resort projects and expansion of several existing resorts,
which are expected to add approximately 20,000 hotel rooms to the Las Vegas
inventory by 1999. The future operating results of the Las Vegas Project could
be materially adversely affected by such competitors and excess hotel and gaming
capacity generally.
The hotel/casino operations of the Las Vegas Project will also compete, to
some extent, with other hotel/casino facilities in Nevada, other states which
authorize gaming and elsewhere in the world. In light of the recent legalization
in several states of casino gaming in specified areas and the passage of the
Indian Gaming Regulatory Act in 1998, the Company expects many competitors to
enter the hotel/casino industry, some of which may have greater financial and
other resources than the Las Vegas Project. Such proliferation of gaming
activities could materially adversely affect the business of the Las Vegas
Project.
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 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 competition with other exhibitors in obtaining films, attracting
patrons and securing new theater sites. In addition, the joint venture's
theaters will face competition from a number of non-theatrical motion picture
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.
15
<PAGE>
RISK OF NEW VENTURES
The Company's new Music Concept theme restaurants and its various new
strategic ventures are unproven. There can be no assurance that the Music
Concept or any new strategic venture pursued by the Company will be successful
or that any such strategic venture will contribute to the Company's revenues and
cash flow. The Company's OFFICIAL ALL STAR CAFE theme concept is in a relatively
early stage of its development and has not yet met the Company's original
expectations. The Company has undertaken certain measures in connection with the
OFFICIAL ALL STAR CAFE concept. See "Summary--Recent Transactions." In addition,
the definitive documentation relating to the Las Vegas Project has not yet been
completed and there can be no assurance that such documentation will be executed
and that the Las Vegas Project will be pursued.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
In fiscal 1997, revenues from foreign units constituted approximately $140.2
million (or 29%) of the Company's total revenues. Revenues from Company-owned
units outside the United States, which are located primarily in Western Europe
and Canada, accounted for 25% of total revenues. Royalties and initial franchise
fees from foreign franchised units accounted for 4% of total revenues. The
Company also realizes income from foreign units in which it owns a minority
interest. Foreign operations present risks that are different than those
encountered in North America, including potential political, social and economic
instability (such as the recent turmoil in Asia where ten of the Company's
franchised units are located). Uncertain economic conditions in certain foreign
markets also may adversely affect the operating results of franchised units in
those markets as well as the collectibility of receivables from those units. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." In addition, the Company's international operations expose it to
fluctuations between the U.S. dollar, which is the reporting currency in the
Company's financial statements, and the local currencies in which units outside
the United States transact business and on which royalties from franchises
located outside the United States are based. The Company has not historically
engaged in any significant hedging activities with respect to its non-U.S.
dollar operations. There can be no assurance that the Company will not
experience adverse results in its foreign operations or that significant
currency fluctuations will not adversely affect the Company's reported results.
DEPENDENCE ON KEY EXECUTIVES
The Company's success depends to a significant extent upon the contributions
of its two senior executives, Keith Barish, Chairman of the Board, and Robert
Earl, Chief Executive Officer, who are also the founding and principal
stockholders of the Company. There can be no assurance that the Company would be
able to attract or retain a suitable successor in the event of the loss of the
services of either Mr. Barish or Mr. Earl, which loss could have a material
adverse effect upon the Company. In addition, pursuant to certain of the
Company's key contractual arrangements, including the lease for the PLANET
HOLLYWOOD unit in Orlando, Florida, upon the death, physical or mental
incapacitation or retirement of Mr. Earl, the Company may lose certain of the
substantial benefits that have contributed to the Company's success or that are
expected to contribute to any future growth of the Company. The Company has
obtained a $25 million key man life insurance policy covering Mr. Earl, but
there can be no assurance that the coverage provided by such policy will be
sufficient to compensate the Company for the loss of Mr. Earl's services. The
Company's future success will depend, in part, on its continuing ability to
attract, retain and motivate qualified personnel. The Company is party to
employment agreements with Mr. Barish and Mr. Earl that expire in January 2002
and in December 2001, respectively. See "Management."
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS; SEASONALITY
As the Company enters new markets and develops new concepts, quarterly
results may fluctuate more significantly. Moreover, as a result of the
substantial revenues associated with each new Company-owned
16
<PAGE>
unit and the recognition of franchise fees, the timing of new unit openings may
result in significant fluctuations in quarterly results. For example, as noted
under "Summary--Recent Developments," fiscal 1997 fourth quarter results were
affected by, among other factors, the shift of several planned franchised
restaurant openings to the first half of 1998. In addition, 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 seasons. Although
units in certain locations are affected by different seasonal influences, the
Company has historically experienced its strongest operating results from June
through August. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
FLUCTUATIONS IN DIRECT MERCHANDISE SALES
During the past two fiscal years, the Company has sold various items of its
branded merchandise directly to specialty and other retailers with a worldwide
distribution and marketing presence in order to increase the exposure of its
brands to consumers. Direct sales of merchandise have generally been made on an
opportunistic basis and there can be no assurance that such direct sales will
continue at historical levels.
CONTROL BY PRINCIPAL STOCKHOLDERS
Keith Barish, Robert Earl and Leisure Ventures Pte., Ltd. (a private
Singapore company, f/k/a/ Planet Hollywood Holdings Pte., Ltd., controlled by
Mr. Ong Beng Seng indirectly and Hotel Properties Limited, a public Singapore
company of which Mr. Ong is the largest stockholder) collectively beneficially
own approximately 69% of the outstanding Class A Common Stock ("Class A Common
Stock") of the Company. In addition, Mr. Earl and a trust for the benefit of his
children own an aggregate of 6,862,644 shares of non-voting Class B Common Stock
of the Company which, after a period of time, will be convertible into shares of
Class A Common Stock on a one-for-one basis. As a result, until there is a
substantial decrease in the percentage of the outstanding shares of Class A
Common Stock held by such stockholders, they will continue to have significant
influence over the affairs of the Company and, if they choose to act together,
will be able to elect all the members of the Board of Directors of the Company
and influence significantly the approval of important corporate transactions and
other matters requiring stockholder approval without the approval of minority
stockholders.
YEAR 2000 COMPLIANCE
Year 2000 compliance is the ability of computer hardware and software to
respond to the problems posed by the fact that computer programs have
traditionally been written using two digits rather than four to define the
applicable year. As a consequence, unless modified, computer systems will not be
able to differentiate between the year 2000 and 1900. Failure to address this
problem could result in system failures and the generation of erroneous data. In
1997, the Company assessed its own year 2000 compliance and, based on such
assessment, expects to upgrade its critical computer systems to make them year
2000 compliant by the end of fiscal 1998 without material expenditures. However,
the Company may be adversely affected to the extent that other entities that do
business with the Company, particularly credit card processors, are unable to
achieve year 2000 compliance by the end of 1999.
GOVERNMENT REGULATION
The restaurant industry and, to a lesser extent, the retail merchandising
industry, are subject to numerous Federal, foreign, state and local government
regulations, including those relating to the preparation and sale of food, the
sale of alcoholic beverages, sanitation and building and zoning requirements.
The Company is subject to regulation by Federal, foreign, state and local
environmental protection agencies and to laws and regulations governing its
relationship with employees, including minimum wage requirements, unemployment,
overtime, workers' compensation, working and safety conditions and citizenship
requirements. An increase in the minimum wage, employee benefit costs, workers'
compensation insurance rates or other costs associated with employees could
substantially
17
<PAGE>
increase the Company's labor costs. Additionally, the Company may be subject in
certain states to "dram-shop" statutes, which generally provide a person who is
injured by an intoxicated person the right to recover damages from an
establishment that wrongfully served alcoholic beverages to the intoxicated
person.
In addition, the gaming facilities which will form a part of the Las Vegas
Project and the ownership of securities of the Company will be subject to
extensive regulation by the state and local regulatory authorities of the State
of Nevada. The Nevada State Gaming Control Board and the Nevada Gaming
Commission and other local, county and state regulatory agencies (collectively,
"Nevada Gaming Authorities") may, in compliance with certain statutory and
regulatory procedures, limit, condition, suspend or revoke a license or approval
to own the stock of the Company for any cause deemed reasonable by such
licensing agency. Each holder of the Notes shall be deemed to have agreed (to
the extent permitted by law) that if the Nevada Gaming Authorities determine
that a holder or beneficial owner of the Notes must be found suitable (whether
as a result of a foreclosure of the Casino or for any other reason), and if such
holder or beneficial owner either refuses to file an application or is found
unsuitable, such holder shall, upon request of the Company, dispose of such
holder's Notes within 30 days after receipt of such request or such earlier date
as may be ordered by the Nevada Gaming Authorities. The Company will also have
the right to redeem Notes held by any holder at any time to prevent the loss or
impairment of a gaming license or an application for a gaming license, at a
redemption price equal to the lesser of the price at which such holder or
beneficial owner acquired such Notes and the principal amount thereof, together
with, in either case, accrued and unpaid interest and Liquidated Damages, if
any, thereon to the earlier of the date of redemption and the date of the
finding of unsuitability.
Substantial fines for violations of gaming laws or regulations may be levied
against the Company and persons involved. In addition, the Company could be
subject to fines for each violation of the gaming laws. Furthermore, a
supervisor could be appointed by a state court at the request of the Nevada
Commission to operate any nonrestricted gaming establishment operated by the
Company if the licenses held by the Company are revoked, suspended or otherwise
lapse. In such extraordinary circumstances, earnings generated by gaming
operations during a supervisor's appointment (except for reasonable rental
value) could be forfeited to the State of Nevada. No assurances can be given
that the Company or the Las Vegas Project will obtain any of the required
licenses, registrations, findings of suitability, approvals and permits
(collectively, "Gaming Licenses") or that such Gaming Licenses will be obtained
on a timely basis. See "Business--Governmental Regulation."
PURCHASE OF NOTES UPON CHANGE OF CONTROL
A Default (as defined herein) will occur if a Change of Control occurs and
the Company does not cure such event by making an offer to purchase all
outstanding Notes at 101% of the principal amount thereof, plus accrued and
unpaid interest, if any (plus Liquidated Damages, if any), to the date of
purchase and by purchasing all Notes properly tendered pursuant to such offer.
The source of funds for any such purchase would be the Company's available cash
or cash generated from other sources. However, there can be no assurance that
sufficient funds would be available at the time of any Change of Control to make
any required purchases of Notes tendered. See "Description of the Notes--Change
of Control."
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
The New Notes are a new issue of securities, have no established trading
market and may not be widely distributed. There can be no assurance as to the
liquidity of any markets that may develop for the New Notes, the ability of
holders of the New Notes to sell their New Notes or the price at which holders
would be able to sell their New Notes. Future trading prices of the New Notes
will depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
The Initial Purchasers have advised the Company that they currently intend to
make a market in the New Notes. However, the Initial Purchasers are not
obligated to do so and any market
18
<PAGE>
making may be discontinued at any time without notice. The Company does not
intend to apply for listing of the New Notes offered hereby on any securities
exchange or for quotation through NASDAQ. If a market for the New Notes does
develop, the price of the New Notes may fluctuate and liquidity may be limited.
If a market for the New Notes does not develop, holders may be unable to resell
such securities for an extended period of time, if at all. If the market were to
exist, the New Notes could trade at prices lower than the initial offering price
of the Old Notes depending on many factors, including those described above.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will not
be subject to similar disruptions. Any such disruption may have an adverse
effect on holders of the New Notes.
19
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes as described in
this Prospectus, the Company will receive in exchange Old Notes in like
principal amount, the terms of which are identical in all material respects to
those of the New Notes, except that the New Notes have been registered under the
Securities Act and are issued free of any covenant regarding registration,
including the payment of additional interest upon a failure to file or have
declared effective an exchange offer registration statement or to consummate the
Exchange Offer by certain dates. The Old Notes surrendered in exchange for the
New Notes will be retired and canceled and cannot be reissued. Accordingly, the
issuance of the New Notes will not result in any change in the indebtedness of
the Company.
The net proceeds from the sale of the Old Notes, after deducting discounts
and estimated fees and expenses, were approximately $242.5 million. The Company
has begun, and intends to continue, using the net proceeds from the sale of the
Old Notes as follows: (i) capital expenditures associated with the construction
of additional Company-owned theme restaurants, including Music Concept units,
(ii) capital expenditures associated with the Company's strategic ventures,
including PLANET MOVIES BY AMC, the Las Vegas Project, the OFFICIAL ALL STAR
HOTEL, the PLANET HOLLYWOOD HOTEL and COOL PLANET shops, (iii) repayment of
approximately $102.2 million of outstanding bank borrowings and (iv) general
corporate purposes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources." Prior to
the application of the net proceeds from the sale of the Old Notes as described
above, such funds are being invested in short-term, investment-grade securities.
For a description of the Company's bank borrowings, see "Description of Credit
Agreement."
CAPITALIZATION
The following table sets forth the cash position and consolidated
capitalization of the Company as of December 28, 1997 and as adjusted to give
effect to the sale of the Old Notes and the application of the net proceeds
therefrom, assuming the sale of the Old Notes had been consummated on December
28, 1997.
<TABLE>
<CAPTION>
DECEMBER 28, 1997
----------------------
AS
ACTUAL ADJUSTED
---------- ----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Cash and cash equivalents....................................................... $ 9,089 $ 189,614
---------- ----------
---------- ----------
Long-term debt, excluding current portion:
Credit Agreement................................................................ $ 62,000 $ --
12% Senior Subordinated Notes due 2005........................................ -- 250,000
Capital leases and other...................................................... 8,491 8,491
Total long-term debt, excluding current portion............................. 70,491 258,491
---------- ----------
Stockholders' equity(a)......................................................... 338,541 338,254
---------- ----------
Total capitalization............................................................ $ 409,032 $ 596,745
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(a) Upon the repayment of the outstanding bank borrowings, the Company will
write off approximately $287,000 of debt issue costs, net of taxes.
20
<PAGE>
SELECTED HISTORICAL AND PRO FORMA OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth summary historical consolidated financial
data with respect to the Company. The summary historical consolidated financial
data for fiscal 1993, 1994, 1995, 1996 and 1997 have been derived directly from
the Consolidated Financial Statements, including the consolidated balance sheets
at December 29, 1996 and December 28, 1997 and the related consolidated
statements of operations and cash flows for the three years ended December 28,
1997 and notes thereto appearing elsewhere herein. This information should be
read in conjunction with the Consolidated Financial Statements included
elsewhere in this Prospectus.
The following table also sets forth certain unaudited historical and pro
forma operating data of the Company for the periods indicated. The Company
believes the presentation of this information is useful to an understanding of
the trends in the Company's results of operations and financial performance.
<TABLE>
<CAPTION>
FISCAL YEAR(A)
------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues(b):
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 and other....................... 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(b):
Food and beverage cost of sales........... 4,372 19,891 38,537 50,190 61,930
Merchandise cost of sales(c).............. 3,590 15,401 37,925 43,236 62,878
Operating expenses(c)..................... 13,120 59,683 116,805 156,893 208,484
General and administrative expenses(c).... 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 operating 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
Gain on sale of subsidiary interests...... -- -- 611 -- --
Equity in income (loss) of unconsolidated
affiliates.............................. (198) -- 848 4,308 6,900
Minority interests........................ 223 (299) (3,728) (1,037) --
Provision for income taxes................ -- -- (875) (27,636) (4,954)
--------- --------- --------- --------- ----------
Income 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
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Net income per share(d):
Basic..................................... $ 0.26 $ 0.37 $ 0.08
--------- --------- ----------
Diluted................................... $ 0.25 $ 0.37 $ 0.08
--------- --------- ----------
Dividends per share......................... -- -- -- -- --
BALANCE SHEET DATA (END OF YEAR):
Cash and cash equivalents................... $ 13,343 $ 5,024 $ 14,923 $ 49,831 $ 9,089
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
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR(A)
------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Net cash (used in) provided by
operating activities...................... $ (9,560) $ (3,146) $ 33,370 $ 48,830 $ 35,766
Net cash used in investing activities....... (32,503) (52,490) (75,599) (73,870) (156,445)
Net cash provided by financing
activities................................ 41,395 49,816 52,128 59,948 81,153
EBITDA(e)................................... 2,198 11,609 55,611 108,006 120,247
EBITDA margin(f)............................ NM 9.2% 20.6% 28.9% 25.3%
Depreciation and amortization............... 2,818 16,231 22,182 27,295 38,825
Capital expenditures(g)..................... 29,345 52,131 80,291 81,675 124,526
Ratio of earnings to fixed charges(h) -- -- 2.0x 5.0x 1.2x
Units open at fiscal year end(i):
Company-owned(j).......................... 4 15 23 37 53
Franchised................................ 3 3 6 21 34
--------- --------- --------- --------- ----------
Total................................. 7 18 29 58 87
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
PRO FORMA DATA:
Interest expense(k)......................... $ 27,600
Ratio of EBITDA to interest expense(k)...... 4.4x
Ratio of long term debt to EBITDA(l)........ 2.1x
Ratio of earnings to fixed charges(h)(m).... 1.1x
</TABLE>
- ------------------------
(a) At the beginning of fiscal 1994, the Company changed its accounting period
from a calendar year ending December 31 to a 52-53 week fiscal year ending
on the Sunday nearest December 31 of each year.
(b) At December 31, 1993, the Company owned a 47.5% equity interest in PH
London. Prior to fiscal 1994, the Company's investment was accounted for
under the equity method of accounting. Effective January 1, 1994, the
Company increased its ownership equity interest in PH London to over 50%. As
a result, the operations of PH London are consolidated in the Company's
results commencing in fiscal 1994.
(c) In fiscal 1997, cost of sales and general and administrative expenses
reflect a charge of $3.0 million and $19.0 million, respectively. See
"Summary--Recent Developments."
(d) Prior to fiscal 1995, the Company's operations were conducted by a limited
partnership. Accordingly, no earnings per share data is included for periods
prior to fiscal 1995.
(e) EBITDA means earnings before interest, taxes, depreciation, amortization and
the $68.2 million of noncash charges associated with the charge of $71.2
million in fiscal 1997. See "Summary--Recent Developments." EBITDA including
the non-cash charges was $52.0 million in fiscal 1997. EBIDTA is presented
because it provides useful information regarding a company's ability to
service and/or incur debt. EBITDA should not be considered in isolation from
or as a substitute for net income, cash flows from operating activities and
other consolidated income or cash flow statement data prepared in accordance
with generally accepted accounting principles or as a measure of
profitability or liquidity. The Company's definition of EBITDA (also used in
the Indenture) may not be consistent with EBITDA as used and defined by
other companies.
(f) EBITDA as a percentage of total revenues.
(g) Excludes pre-opening expenses. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(h) For purposes of computing the ratio of earnings to fixed charges, fixed
charges consist of interest on debt (including capitalized interest),
amortization of debt discount and expense and one-third of rent expense,
which management believes is representative of the interest component of
rent expense. Earnings consist of income from continuing operations before
income taxes and equity in earnings of unconsolidated affiliates, plus fixed
charges (other than capitalized interest, but excluding the amortization
thereof). Earnings were insufficient to cover fixed charges by $5.5 million
and $10.3 million in fiscal 1993 and 1994, respectively.
(i) Company-owned units are those operated by entities that are wholly owned or
majority-owned by the Company. The operating results of those entities are
consolidated in the Company's results. Franchised units are those operated
by independent franchisees or by joint ventures that are accounted for under
the equity method of accounting.
(j) Excludes the one MARVEL MANIA unit.
22
<PAGE>
(k) Includes interest expense on the Notes, net of interest on outstanding
indebtedness to be repaid with the proceeds from the sale of the Old Notes,
assuming the Old Notes had been issued at the beginning of fiscal 1997.
Excludes amortization of debt discount and issuance costs.
(l) Gives effect to the sale of the Old Notes and the application of the
proceeds therefrom, assuming the sale of the Old Notes had been consummated
on December 28, 1997.
(m) Assumes the proceeds from the sale of the Old Notes had been used to repay
$62.0 million of indebtedness outstanding during fiscal 1997.
23
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Company entered into the
Registration Rights Agreement with the Initial Purchasers, pursuant to which the
Company agreed to use its best efforts to file with the Commission a
registration statement with respect to the exchange of the Old Notes for a
series of registered debt securities with terms identical in all material
respects to the terms of the Old Notes, except that the New Notes have been
registered under the Securities Act and are issued free of any covenant
regarding registration, including the payment of additional interest upon a
failure to file or have declared effective an exchange offer registration
statement or to consummate the Exchange Offer by certain dates.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in Exxon Capital Holdings Corp., SEC
No-Action Letter (April 13, 1989), Morgan, Stanley & Co. Inc., SEC No-Action
Letter (June 5, 1991) and Shearman & Sterling, SEC No-Action Letter (July 2,
1993). However, the Company has not sought its own no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
Based upon these interpretations by the staff of the Commission, the Company
believes that New Notes issued pursuant to this Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by a
holder thereof other than (i) a broker-dealer who purchased such Old Notes
directly from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an "affiliate" (as
defined in Rule 405 of the Securities Act) of the Company without compliance
with the registration and prospectus deliver provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in the distribution
of such New Notes. Holders of Old Notes accepting the Exchange Offer will
represent to the Company in the Letter of Transmittal that such conditions have
been met. Any holder who participates in the Exchange Offer for the purpose of
participating in a distribution of the New Notes may not rely on the position of
the staff of the Commission as set forth in these no-action letters and would
have to comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction. A secondary
resale transaction in the United States by a holder who is using the Exchange
Offer to participate in the distribution of New Notes must be covered by a
registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K of the Securities Act.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Old Notes as a result
of market-making activities or other trading activities and will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Letter of
Transmittal states that by acknowledging and delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The Company has agreed that for a period of 180
days after the Expiration Date, it will make this Prospectus available to
broker-dealers for use in connection with any such resale. See "Plan of
Distribution."
Except as aforesaid, this Prospectus may not be used for an offer to resell,
resale or other retransfer of New Notes.
The Exchange Offer is not being made to, nor will the Company accept tenders
for exchange from, holders of Old Notes in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
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<PAGE>
TERMS OF THE EXCHANGE
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will, unless such Old Notes are withdrawn in accordance with the
withdrawal rights specified in "Withdrawal of Tenders" below, accept any and all
Old Notes validly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date. The date of acceptance for exchange of the Old Notes, and
consummation of the Exchange Offer, is the Exchange Date, which will be the
first business day following the Expiration Date (unless extended as described
herein). The Company will issue, on or promptly after the Exchange Date, an
aggregate principal amount of up to $250,000,000 of New Notes in exchange for a
like principal amount of outstanding Old Notes tendered and accepted in
connection with the Exchange Offer. The New Notes issued in connection with the
Exchange Offer will be delivered on the earliest practicable date following the
Exchange Date. Holders may tender some or all of their Old Notes in connection
with the Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000.
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except that the New Notes have been registered under the
Securities Act and are issued free from any covenant regarding registration,
including the payment of additional interest upon a failure to file or have
declared effective an exchange offer registration statement or to consummate the
Exchange Offer by certain dates. The New Notes will evidence the same debt as
the Old Notes and will be issued under and be entitled to the same benefits
under the Indenture as the Old Notes. As of the date of this Prospectus,
$250,000,000 aggregate principal amount of the Old Notes is outstanding.
In connection with the issuance of the Old Notes, the Company arranged for
the Old Notes originally purchased by qualified institutional buyers to be
issued in the form of global notes (the "Initial Global Notes") and transferable
in book-entry form through the facilities of The Depository Trust Company
("DTC"), acting as depositary. Except as described under "Book-Entry, Delivery
and Form," the New Notes will be issued in the form of a global note registered
in the name of DTC or its nominee and each holder's interest therein will be
transferable in book-entry form through DTC. See "Book-Entry, Delivery and
Form".
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Old Notes which are not tendered for
exchange or are tendered but not accepted in connection with the Exchange Offer
will remain outstanding and be entitled to the benefits of the Indenture, but
will not be entitled to any registration rights under the Registration Rights
Agreement.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purposes of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in connection with the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes in connection with the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses".
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on June
15, 1998, unless extended by the Company in its sole discretion (but in no event
to a date later than June 19, 1998), in
25
<PAGE>
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended.
The Company reserves the right, in its sole discretion (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer and to refuse to accept Old Notes not previously accepted, if any
of the conditions set forth below under "Conditions to the Exchange Offer" shall
not have been satisfied and shall not have been waived by the Company (if
permitted to be waived by the Company) and (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Old Notes,
and the Company will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period. In no event, however, shall
the Exchange Date be later than the first business day following June 19, 1998.
If the Company determines to make a public announcement of any delay,
extension, amendment or termination of the Exchange Offer, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement, other than by making a timely release to an appropriate
news agency.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at the rate of 12% per annum and will be
payable semiannually in arrears on April 1 and October 1 of each year,
commencing October 1, 1998. Interest on the New Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive interest on such Old Notes for any period subsequent to the last
interest payment date to occur prior to the issue date of the New Notes, and
will be deemed to have waived the right to receive any interest payment on the
Old Notes accrued from and after such interest payment date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or to exchange, any Old Notes for any New
Notes, and may terminate or amend the Exchange Offer before the acceptance of
any Old Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the Company's reasonable good faith judgment, would be expected to
impair the ability of the Company to proceed with the Exchange Offer, or
(b) any law, statute, rule or regulation is adopted or enacted, or any
existing law, statute, rule or regulation is interpreted by the Commission
or its staff, which, in the Company's reasonable good faith judgment, would
be expected to impair the ability of the Company to proceed with the
Exchange Offer.
If the Company determines in its reasonable good faith judgment that any of
the foregoing conditions exist, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders who tendered such
Old Notes to withdraw their tendered Old Notes which have not been withdrawn. If
such waiver constitutes a material change to
26
<PAGE>
the Exchange Offer, the Company will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered holders, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the waiver and the manner of disclosure
to the registered holders, if the Exchange Offer would otherwise expire during
such five to ten business days. In no event, however, shall the Exchange Date be
a date later than the first business day following June 19, 1998.
PROCEDURES FOR TENDERING
To tender in connection with the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal and mail
or otherwise deliver such Letter of Transmittal or such facsimile, together with
the Old Notes (unless such tender is being effected pursuant to the procedure
for book-entry transfer described below) and any other required documents, to
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the Old Notes by causing DTC to
transfer such Old Notes into the Exchange Agent's account in accordance with
DTC's procedure for such transfer. Although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's Account at DTC,
the Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received or confirmed by the Exchange Agent at its addresses set forth
under the caption "Exchange Agent", below, prior to 5:00 p.m., New York City
time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH
ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure delivery to the Exchange Agent before the Expiration Date. No
Letter of Transmittal or Old Notes should be sent to the Company. Holders may
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect the tenders for such holders.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on such owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal and delivery of such owner's
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
A signature on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Payment Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal, or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17 Ad-15 under the Exchange Act (an "Eligible Institution").
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<PAGE>
If the Letter Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed by such
registered holder or accompanied by a properly completed bond power, in each
case signed or endorsed in blank by such registered holder as such registered
holder's name appears on such Old Notes.
In the Letter of Transmittal or any Old Notes or bond powers are signed or
endorsed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes whose acceptance by the Company would, in
the opinion of U.S. counsel for the Company, be unlawful. The Company also
reserve the right to waive any defects, irregularities or conditions of tender
as to any particular Old Notes either before or after the Expiration Date. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. Although the Company intends to request the Exchange
Agent to notify holders of defects or irregularities with respect to tenders of
Old Notes, neither the Company, the Exchange Agent nor any other person shall
have any duty or incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration date.
In addition, the Company reserves the right, as set forth above under the
caption "Conditions to the Exchange Offer", to terminate the Exchange Offer.
By tendering, each holder represents to the Company that, among other
things, the New Notes acquired in connection with the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, that neither the holder nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes and that neither the holder
nor any such other person is an "affiliate" (as defined in Rule 405 under the
Securities Act) of the Company. If the holder is a broker-dealer which will
receive New Notes for its own account in exchange of Old Notes, it will
acknowledge that it acquired such Old Notes as the result of market making
activities or other trading activities and it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent, or cannot
complete the procedure for book-entry transfer, prior to the Expiration Date,
may effect a tender of their Old Notes if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent received from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such
28
<PAGE>
Old Notes and the principal amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within five business
days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof) together with the certificate(s) representing the Old Notes to be
tendered in proper form for transfer (or confirmation of a book-entry
transfer into the Exchange Agent's account at DTC of Old Notes delivered
electronically) and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such properly completed and executed Letter of Transmittal (of
facsimile thereof) as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or confirmation of a book-entry
transfer into the Exchange Agent's account at DTC of Old Notes delivered
electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five business days
after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in connection with the Exchange Offer, a
written facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person who deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii) be
signed by the Depositor in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the trustee register the transfer of such Old Notes into the
name of the person withdrawing the tender, and (iv) specify the name in which
any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless Old
Notes so withdrawn are validly re-tendered. Any Old Notes which have been
tendered but which are not accepted for exchange or which are withdrawn will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be rendered by following one of the
procedures described above under the caption "Procedures for Tendering" at any
time prior to the Expiration Date.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
in connection with the Exchange Offer. Questions and requests for assistance,
requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent, at its offices at 770
Broadway, 13th Floor, New York, NY 10003. The Exchange Agent's telephone number
is (800) 548-6565 and facsimile number is (212) 420-6152.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company will pay certain other
expenses to be incurred in connection with the Exchange Offer, including the
fees and expenses of the Trustee, accounting and certain legal fees.
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith. If, however, New Notes are to be
delivered to, or are to be issued in the name of,
29
<PAGE>
any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes in connection with the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendered holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the consummation of the Exchange Offer. Any expenses of the
Exchange Offer that are paid by the Company will be amortized by the Company
over the term of the New Notes in accordance with generally accepted principles.
CONSEQUENCES OF FAILURES TO PROPERLY TENDER OLD NOTES IN THE EXCHANGE
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for New Notes should allow sufficient time to
ensure timely delivery. The Company is under no duty to give notification of
defects or irregularities with respect to tenders of Old Notes for exchange. Old
Notes that are not tendered or that are tendered but not accepted by the Company
for exchange, will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof under the Securities
Act and, upon consummation of the Exchange Offer, certain registration rights
under the Registration Rights Agreement will terminate.
In the event the Exchange Offer is consummated, the Company will not be
required to register the remaining Old Notes. Remaining Old Notes will continue
to be subject to the following restrictions on transfer: (i) the remaining Old
Notes may be resold only if registered pursuant to the Securities Act, if any
exemption from registration is available thereunder, or if neither such
registration nor such exemption is required by law, and (ii) the remaining Old
Notes will bear a legend restricting transfer in the absence of registration or
an exemption therefrom. The Company does not currently anticipate that they will
register the remaining Old Notes under the Securities Act. To the extent that
Old Notes are tendered and accepted in connection with the Exchange Offer, any
trading market for remaining Old Notes could be adversely affected.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS PROSPECTUS.
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 upfront 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 was adopted in April 1998 by the American Institute of Certified Public
Accountants, which is effective for fiscal 1999 and will 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 sixth month 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.
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
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<PAGE>
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. In the future, the Company expects to report its financial
results in line with the new divisional structure.
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
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
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.
32
<PAGE>
FISCAL 1997 COMPARED TO FISCAL 1996
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 to the write-off of
obsolete merchandise inventories. In response to these lower than expected
results, and as discussed above under "Summary--Recent Developments," the
Company has begun to undertake various measures to improve its performance.
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 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
33
<PAGE>
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 million 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.
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
34
<PAGE>
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.
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.
35
<PAGE>
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
--------------------------------
1995 1996 1997
--------- --------- ----------
<S> <C> <C> <C>
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.
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
36
<PAGE>
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.
On March 25, 1998, the Company amended and restated its existing $155.0
million multi-currency, long-term credit agreement (the "Old Credit
Agreement") with SunTrust Bank, Central Florida, N.A. and a consortium of
lenders. The Credit Agreement now provides for a $65.0 million revolving
credit facility and a $35.0 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 Old Credit Agreement was 6.96%. The revolving credit facility matures on
March 25, 2000, provided, however, that the Company may extend the maturity
date to March 25, 2001 if it meets the financial test specified in the
Credit Agreement. 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 portion of the Old Credit Agreement. The Credit Agreement also
provides for the issuance of up to $10.0 million of letters of credit and
for the availibility of up to $25.0 million for multicurrency advances. At
year end, the Company had outstanding letters of credit totaling $5.8
million under the Old Credit Agreement. See "Description of Credit
Agreement."
Under the terms of the Old Credit Agreement, the Company was 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.
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 expects that cash generated from operations, together with
proceeds from the sale of the Old Notes in excess of the amount used to
retire indebtedness and available borrowings under the 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
37
<PAGE>
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 in fiscal 1998. 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 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.
In April 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants adopted a 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 new SOP requires the Company to expense all such preopening
costs as incurred. The SOP is effective for fiscal 1999 and all costs
capitalized at the date the SOP is adopted by the Company will be charged to
income as a cumulative effect of a change in accounting principle.
Restatement of previously issued financial statements is not permitted
under the SOP. However, had the SOP been adopted at the beginning of fiscal
1997, income before cumulative effect of the accounting change would have
been approximately $9.8 million while the cumulative effect of the change in
accounting would have been approximately ($6.6) million. Total deferred
pre-opening costs at December 28, 1997 were approximately $8.0 million.
The Company is currently evaluating the timing of the adoption of the
SOP.
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. See "Risk Factors--Year 2000
Compliance."
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.
38
<PAGE>
BUSINESS
GENERAL
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 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.
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. As with the Company's two existing theme concepts, the
Music Concept will have substantial celebrity
39
<PAGE>
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.
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 tourist 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.
The Company also operates 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 outerwear for fall. Although new
items are being added, it is the Company's long-range goal to reduce its total
SKUs 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 and for the
creation and development of other entertainment ventures.
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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 150,000 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 of
the sale of the Notes 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 build-out of its units,
such indebtedness may limit or prohibit the payment of dividends or
distributions to the Company and AMC. See "Risk Factors--Participation in Joint
Ventures."
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 and similar ventures that may be pursued in the future.
LAS VEGAS PROJECT. The Company and a subsidiary of Aladdin intend to form a
50/50 joint venture to construct, own and operate the Las Vegas Project on 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 was razed in April 1998 and 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.
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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 will use a portion
of the proceeds of the sale of the Notes 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 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 theming that celebrates 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 will
use a portion of the proceeds of the sale of the Notes 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
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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. In March 1998,
Ong Beng Seng's affiliate announced that it had entered into an agreement to
sell its interest in the OFFICIAL ALL STAR HOTEL to Vornado Realty Trust for a
profit, which transaction is anticipated to close in Spring 1998.
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 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 venture partners 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.
The joint venture has entered into agreements with Nomura Asset Capital
Corporation for loans up to a maximum principal amount of $85.0 million to
finance the construction of the hotel. In connection with these loans, the joint
venture granted the lender a security interest in substantially all the assets
of the joint venture and an assignment of its interests in rents, leases and
other agreements relating to the hotel.
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., 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
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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 in
1998 and the Company anticipates opening 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 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 or 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
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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.
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 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.
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. In addition, ECE has recently acquired the rights to
develop PLANET HOLLYWOOD units in Madrid, Spain and three other locations in
Spain.
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
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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. In addition, in March 1998, Kingdom entered into a joint venture
agreement with the Company for the development and operation of a PLANET
HOLLYWOOD unit in Tokyo, Japan.
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. The following tables provide information
about the Company-owned and franchised units that were operating on December 28,
1997. 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>
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<PAGE>
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>
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, 1996 Johannesburg, South 1997
Argentina(a)(b)......................... Africa(a).................................
Los Cabos, Mexico(b)...................... 1996 Melbourne, Australia...................... 1997
Puerto Vallarta, 1996 Manila, Philippines(a).................... 1997
Mexico(b)...............................
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 Paulo, 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 1996 Brussels, Belgium(a)...................... 1997
Emirates(a).............................
</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 Paulo
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.
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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 shares of
any such entity, the transfer of a controlling interest in any such 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.
INTELLECTUAL PROPERTY
The Company, either directly or through other companies with whom it has
exclusive license agreements, 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.
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
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
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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 histories than the Company will compete with the Company in
the markets where the Company will 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.
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
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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 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.
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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 in respect of the Notes and the Exchange Notes, and any
agreements not to encumber the equity securities of the Gaming Subsidiary in
respect of the Notes and the Exchange Notes, will require the approval of the
Nevada Commission in order to remain effective. No assurances can be given that
such approvals will be obtained.
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 beneficial ownership of 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
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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 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 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.
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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 will qualify as a public offering. The Company
filed 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. On May 13, 1998, The Nevada Board Chairman issued a written ruling
(the "Ruling") that it is not necessary to submit an application for approval of
the Exchange Offer. The Ruling relates solely to the terms of the Exchange
Offer. The Ruling does not constitute a finding that the Company, the Gaming
Subsidiary or the Las Vegas Project has been or will be found qualified to be
involved in gaming activities in Nevada for which a separate Nevada Commission
approval will be required. The Ruling also does not involve a finding by the
Nevada Board or the Nevada Commission as to the accuracy or adequacy of this
document. In addition, restrictions on the transfer of an equity security issued
by a corporate licensee, such as the Gaming Subsidiary, upon its licensing, and
agreements not to encumber any such equity security (collectively "Stock
Restrictions"), are ineffective without the approval of the Nevada Commission.
Therefore, the Stock Restrictions in respect of the equity securities of the
Gaming Subsidiary imposed by the Indenture governing the Notes will require
approval of the Nevada Commission in order to remain effective at such time as
the Gaming Subsidiary is licensed. The Company will request such approval in
connection with its application.
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 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.
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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.
LITIGATION
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.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows (ages as
of December 31, 1997):
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Keith Barish........................ 53 Chairman of the Board and Director
Robert Earl......................... 46 President, Chief Executive Officer and Director
Thomas Avallone..................... 39 Executive Vice President, Chief Financial Officer and Director
Scott E. Johnson.................... 41 Senior Vice President, General Counsel and Secretary
Nathaniel J. Lipman................. 33 Executive Vice President, Strategic Planning
Claudio Gonzalez.................... 63 Director
Robert Krasnow...................... 61 Director
Mark McCormack...................... 67 Director
Ong Beng Seng....................... 51 Director
Isadore Sharp....................... 66 Director
Michael Tarnopol.................... 61 Director
</TABLE>
KEITH BARISH is a co-founder of the Company and was instrumental in securing
the support of the Company's celebrity stockholders. Mr. Barish is a renowned
movie producer who continues to provide a crucial link between the entertainment
world and the Company. Since 1979, Mr. Barish has been the producer or the
executive producer of 18 motion pictures, including "The Fugitive," "Ironweed,"
"The Running Man," "Sophie's Choice" and "9 1/2 Weeks". In 1987, Mr. Barish was
honored as Producer of the Year by the National Association of Theater Owners.
Mr. Barish has been Chairman of the Company since inception and has been a
director of the Company since its organization.
ROBERT EARL co-founded the Company with Mr. Barish in 1991 and has over 23
years of experience in the restaurant industry. In 1977, Mr. Earl founded
President Entertainment, a company that developed theme restaurants. Under Mr.
Earl's leadership, over the next ten years, President Entertainment grew to a
$120 million enterprise. In 1988, Mr. Earl sold President Entertainment to
Pleasurama plc ("Pleasurama") and joined the Pleasurama management team, where
he assumed responsibility for the management of another theme restaurant, Hard
Rock Cafe International plc ("Hard Rock Cafe"). During his five years in charge
of Hard Rock Cafe, Mr. Earl pioneered its expansion from seven to 22 units,
while substantially increasing its profitability. In 1993, Mr. Earl resigned
from Hard Rock Cafe to concentrate full-time on running the Company. He has been
President and Chief Executive Officer of the Company since its inception, and a
director of the Company since its organization.
THOMAS AVALLONE, Executive Vice President, Chief Financial Officer and
Director of the Company, has been involved in the entertainment theme restaurant
industry for over 15 years. From July 1987 until joining the Company in
September 1994, Mr. Avallone served as Chief Financial Officer of Hard Rock Cafe
and Rank Leisure USA. He has been a Director of the Company since February 1996.
Prior to serving in those positions, Mr. Avallone, a Certified Public
Accountant, was a Senior Manager at Laventhol and Horwath CPAs, a public
accounting firm, specializing in that firm's leisure industry practice. Mr.
Avallone is a member of the American Institute of Certified Public Accountants
and the New York State Society of Certified Public Accountants.
SCOTT E. JOHNSON, Senior Vice President, General Counsel and Secretary of
the Company since 1996, had been Vice President, General Counsel and Secretary
since joining the Company in March 1994. From January 1992 to March 1994, Mr.
Johnson was engaged in the private practice of law. From May 1990 through
January 1992, Mr. Johnson was Senior Vice President and General Counsel of
Financial Benefit Life Insurance Company, having previously served as Deputy
General Counsel of Independence Blue Cross (formerly, Blue Cross of Greater
Philadelphia).
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NATHANIEL J. LIPMAN, Executive Vice President, Strategic Planning, joined
the Company in 1996 after having served as a senior executive and general
counsel for HOB Entertainment, Inc. ("House of Blues"), and Senior Corporate
Counsel at The Walt Disney Company. Prior to joining Disney, Mr. Lipman was a
corporate associate with Skadden, Arps, Slate, Meagher & Flom in Los Angeles.
Mr. Lipman oversees and develops the Company's long-term strategic direction
emphasizing mergers and acquisitions, including joint ventures, licensing and
new business opportunities.
CLAUDIO GONZALEZ has been a director of the Company since June 1996. Mr.
Gonzalez has been the Chairman and Chief Executive Officer of Kimberly Clark de
Mexico since 1973. Mr. Gonzalez is also currently a member of the Board of
Directors of Kimberly Clark Corporation, General Electric Company, Kellogg
Company, Banco Nacional de Mexico, Grupo Televisa, Grupo Carso, Grupo Industrial
Alfa, Impulsora del Fondo Mexico, Telefonos de Mexico and Grupo Modelo and of
J.P. Morgan International Advisory Board. Mr. Gonzalez is also a principal
stockholder in ECE, a publicly-traded Mexican company in which the Company is a
20% stockholder and which has entered into a master franchise agreement with the
Company with respect to Mexico and South America. See "Business--Franchising."
ROBERT KRASNOW has been a director of the Company since February 1996. Mr.
Krasnow has worked in the music and entertainment industry for over 35 years.
Mr. Krasnow is the President of Krasnow Entertainment, which he founded in 1994.
From 1983 to 1994, Mr. Krasnow was Chairman and Chief Executive Officer of
Elektra Records, an affiliate of Time Warner Corporation.
MARK MCCORMACK has been a director of the Company since June 1996. Mr.
McCormack is the Chairman and Chief Executive Officer of the Cleveland-based
sports and entertainment conglomerate known as International Management Group,
which he founded in 1965. Mr. McCormack has also authored a number of best-
selling business and management books.
ONG BENG SENG has been a director of the Company since February 1996. He is
a co-founder and has been a Managing Director since 1980 of Hotel Properties
Limited, a Singapore publicly-listed company. HPL has diversified interests in
the hotel, leisure and retail industries spanning Asia, Europe and North
America. Mr. Ong also has personal diversified interests ranging from the oil,
stockbrokering and automotive industries to art and concert promotion.
ISADORE SHARP has been a director of the Company since February 1996. In
1961, Mr. Sharp founded Four Seasons Hotels, Inc., and is currently its Chairman
and Chief Executive Officer. Mr. Sharp has also been a director of the Bank of
Nova Scotia since 1990.
MICHAEL TARNOPOL has been a director of the Company since June 1996. Mr.
Tarnopol has been a Senior Managing Director and Chairman of the Investment
Banking Division of Bear, Stearns & Co. Inc. ("Bear Stearns") since 1985. Mr.
Tarnopol joined Bear Stearns in 1975 and headed the firm's International
Department from 1975 until 1985, at which time he was appointed head of the
Mergers & Acquisitions Department of Bear Stearns. He is Vice Chairman of the
Board of Directors of Bear Stearns and Chairman of Bear Stearns International,
Ltd. Mr. Tarnopol is currently a director of Avis International, Inc. and NRT,
Inc. He is a Trustee of the University of Pennsylvania and a member of the Board
of Overseers of the Wharton School of Business.
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OTHER KEY PERSONNEL
Other key personnel of the Company are as follows (ages as of December 31,
1997):
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Michael Baker....................... 42 Vice President of Worldwide Marketing
John Caparella, Jr.................. 40 Vice President of Lodging
Jeffrey Carpenter................... 53 President, COOL PLANET ICE CREAM
Patricia Caruso..................... 39 Vice President of National Public Relations
Alexander Chesterman................ 27 Senior Vice President of Worldwide Franchising
Patricia Endre...................... 42 Senior Vice President of Merchandising
Ian Hamilton........................ 41 President, OFFICIAL ALL STAR CAFE
Daniel Harf......................... 39 Senior Vice President of Operations, OFFICIAL ALL STAR CAFE
William Lombardo.................... 44 Vice President Food and Beverage Operations
Lisa Havey Long..................... 37 Executive Vice President of Marketing, PLANET HOLLYWOOD
Thomas Mandula...................... 37 Vice President of Finance
Jim Stanley......................... 46 Senior Vice President of Operations, PLANET HOLLYWOOD
Michelle Steinberg.................. 29 Senior Vice President of Corporate Communications and Special
Projects
David P. Terry...................... 40 Vice President of Business Development
Brian Woods......................... 37 President--Entertainment, PLANET HOLLYWOOD
</TABLE>
MICHAEL BAKER, Vice President of Worldwide Marketing, joined the Company in
1997. He has nineteen years of experience marketing and building consumer brands
including the direction of global marketing initiatives for The Coca-Cola
Company along with the introduction and development of the Blockbuster Video
brand, now part of Viacom International, Inc.
JOHN CAPARELLA, JR., Vice President of Lodging, has been involved with the
lodging and food service industries throughout his entire career. John joined
the Company in 1997 to manage the Company's diversification of its brands and
trademarks into the lodging and resort businesses. Previously, Mr. Caparella was
an executive with ITT Sheraton Hotels and Resorts for over 16 years
progressively managing larger properties for the chain. He was responsible for
successfully developing from start-up many Sheraton properties in North America.
JEFFREY CARPENTER, President, COOL PLANET ICE CREAM, has extensive
experience in the food service and specialty retail industries. Mr. Carpenter is
responsible for Cool Planet Ice Cream's introduction into the wholesale and
retail distribution marketplace as well as managing the Company's expansion of
its Cool Planet retail ice cream shops. Prior to joining the Company in 1997, he
was Director, Haagen-Dazs Shops, North America for The Pillsbury Company,
responsible for the development and franchising of retail frozen dessert
products from 1994 through 1997. Mr. Carpenter was also involved in retail
frozen dessert products with TCBY, Inc., as well as executive experience in
marketing, sales and research and development with other branded food service
and retail products.
PATRICIA CARUSO, Vice President of National Public Relations, has been with
the Company since 1995. Ms. Caruso is responsible for negotiating and acquiring
national media coverage on all of the Company's concepts. A twenty year veteran
in the entertainment industry, she previously held the position of Director of
Publicity at Paramount Pictures.
ALEXANDER CHESTERMAN, Senior Vice President of Worldwide Franchising, has
been involved with themed-dining and entertainment industries his entire career.
His duties include development, negotiation and implementation of franchise
arrangements for all of the Company's concepts as well as licensing of its
brands and trademarks. Since 1991, Mr. Chesterman has served as a member of the
Company's management and operational teams through the formative and
expansionary stages of the Company's growth, with
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particular emphasis in international markets. Prior to joining the Company, he
worked with Hard Rock Cafe involved in unit operations.
PATRICIA ENDRE, Senior Vice President of Merchandising, joined the Company
in 1996. Ms. Endre comes to PLANET HOLLYWOOD with nearly 20 years of retail
experience, including senior buying and merchandising responsibilities with Walt
Disney Attractions as Director of the adult apparel business and Macy's
Department Stores.
IAN HAMILTON, President, OFFICIAL ALL STAR CAFE, joined the Company in 1997.
Previously, he was Global Director of Tennis Sports Marketing with Nike, Inc.,
where he helped develop Nike's annual worldwide tennis business by signing such
famous pros as Andre Agassi, Monica Seles, John McEnroe, Pete Sampras and Jim
Courier. Mr. Hamilton managed Nike's tennis sports marketing for 13 years,
including advertising, product and athlete marketing.
DANIEL HARF, is Senior Vice President of Operations, OFFICIAL ALL STAR CAFE.
Mr. Harf was Vice President of Operations for PLANET HOLLYWOOD from its
inception through 1997, and has over ten years' experience in the
theme-restaurant industry. From 1981 to 1985, Mr. Harf held various management
positions with Cask 'N Cleaver in California. He owned and operated theme
restaurants and nightclubs in California from 1985 to 1989. In January 1989, he
joined Hard Rock Cafe, where he was Vice President, Human Resources and a
regional director until April 1991, when he joined the Company.
WILLIAM LOMBARDO, Vice President Food and Beverage Operations, has been
actively involved in the restaurant business for over 15 years. In 1985, Mr.
Lombardo joined Darden Restaurants Inc., a full-service restaurant chain
company, where he began as Vice President of Marketing. He became Senior Vice
President and Division General Manager for Darden in April 1993 and then served
as its Vice President for Food and Beverage from January 1995 until he joined
the Company in his present capacity in November 1995.
LISA HAVEY LONG, Executive Vice President of Marketing, PLANET HOLLYWOOD,
has extensive experience in the promotion and marketing of entertainment
companies. Ms. Long joined the Company in August 1991 as Vice President of
Public Relations. Prior to August 1991, Ms. Long was the senior account
executive in charge of entertainment and film accounts (including "Dances with
Wolves" and "Sea of Love") for Zarem, Inc., a public relations firm.
THOMAS MANDULA has been Vice President of Finance since 1992. Prior to 1992,
Mr. Mandula was Senior Audit Manager and Director of Accounting Systems
Consulting at KPMG Peat Marwick. Mr. Mandula, a certified public accountant, is
a member of the American Institute of Certified Public Accountants.
JIM STANLEY, Senior Vice President of Operations, PLANET HOLLYWOOD, has been
in the restaurant business for over 20 years. Prior to joining the Company, Mr.
Stanley spent eight years as Vice President of Operations at Hard Rock Cafe.
While at Hard Rock Cafe, Mr. Stanley was responsible for overseeing all phases
of the development and operation of units in 18 countries. Previously, Mr.
Stanley was the Director of Operations for a 30-unit dinner house chain in
southern California.
MICHELLE STEINBERG, Senior Vice President of Corporate Communications and
Special Projects, joined the Company in 1997. Prior to joining the Company, Ms.
Steinberg spent four years as Vice President of Corporate Communications for
House of Blues, having previously served as an account executive at McMullen &
Company Public Relations, Annett Wolf & Associates Public Relations, and Mahoney
Communications Public Relations.
DAVID TERRY, Vice President of Business Development, since April 1996.
Previously, from September 1993 to April 1996, he was the Vice President of
Operations for OFFICIAL ALL STAR CAFE. Mr. Terry has over fifteen years
experience in the restaurant industry. From September 1987 to September 1993, he
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served as Vice President for Development for Hard Rock Cafe, in charge of
international development and European operations. Prior to September 1987, Mr.
Terry was a Regional Director of C & C Services, Inc., responsible for the
operations of 12 restaurants in Northern California.
BRIAN WOODS, President--Entertainment, PLANET HOLLYWOOD, has an extensive
background in brand development. Mr. Woods' entire career has been involved in
the marketing and development of entertainment based companies. Prior to joining
the Company, Mr. Woods was Executive Vice President and Chief Marketing Officer
for Blockbuster Video, Blockbuster Music and Blockbuster International.
Additionally, he served as Co-Chairman of Viacom Marketing Council, which was
responsible for the development of Blockbuster's cross-country marketing efforts
with Paramount Pictures and Home Video, MTV, VH-1, Nickelodeon, Simon and
Schuster, Paramount Theme Parks, the United Paramount Network and Showtime
Network.
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DESCRIPTION OF THE NOTES
GENERAL
The Old Notes were issued and the New Notes will be issued pursuant to the
Indenture between the Company and United States Trust Company of New York, as
trustee (the "Trustee"), which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The terms of the New Notes will
be identical in all material respects with the terms of the Old Notes, except
that the New Notes have been registered under the Securities Act and are issued
free of any covenant regarding registration, including the payment of additional
interest upon failure to file or have declared effective an exchange offer
registration statement or to consummate the Exchange Offer by certain dates. The
New Notes and the Old Notes are deemed the same series of Notes under the
Indenture and are entitled to the benefits thereof. Accordingly, unless
specifically stated to contrary, the following description applies equally to
the Old Notes and the New Notes. The terms of the Notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Notes are
subject to all such terms, and prospective investors are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Indenture does not purport to be complete.
Copies of the Indenture and the Registration Rights Agreement are available as
set forth under "--Additional Information." The definitions of certain terms
used in the following summary are set forth below under "--Certain Definitions."
The Notes represent general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company, including borrowings under the Credit Agreement. The Notes rank
PARI PASSU with all Senior Subordinated Indebtedness, whenever Incurred, of the
Company and senior in right of payment to all Subordinated Indebtedness,
whenever Incurred, of the Company. The Notes will be effectively subordinated to
all current and future Indebtedness and other liabilities of the Company's
Subsidiaries. As of December 28, 1997, outstanding Indebtedness and other
liabilities of the Company's Subsidiaries totaled approximately $33.1 million.
As of the date of the Indenture, all of the Company's existing Subsidiaries
were Restricted Subsidiaries. However, under certain circumstances, the Company
will be able to designate Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to the restrictive covenants set
forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $250.0 million
and will mature on April 1, 2005. Interest on the Notes will accrue at the rate
of 12% per annum and will be payable semi-annually in arrears on April 1 and
October 1 of each year, commencing on October 1, 1998, to holders of record on
the immediately preceding March 15 and September 15. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of and premium, interest and Liquidated Damages, if any, on the Notes
will be payable at the office or agency of the Company maintained for such
purpose or, at the option of the Company, payment of interest and Liquidated
Damages, if any, may be made by check mailed to holders of the Notes at their
respective addresses set forth in the register of holders; provided, however,
that all payments of interest and Liquidated Damages, if any, with respect to
Notes the holders of which have given wire transfer instructions to the Company
will be required to be made by wire transfer of immediately available funds to
the accounts specified by the holders thereof. Until otherwise designated by the
Company, the Company's office or agency will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of $1,000
and integral multiples thereof.
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<PAGE>
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes will
be subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full of all Senior Indebtedness, whether outstanding on the date of
the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Indebtedness) before the Holders
of Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Indebtedness are paid in full in
cash or Cash Equivalents, any distribution to which the Holders of Notes would
be entitled shall be made to the holders of Senior Indebtedness (except that
Holders of Notes may receive and retain Permitted Junior Securities and payments
made from the trust described under "--Legal Defeasance and Covenant
Defeasance").
The Company may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if (i) any Designated Senior Indebtedness is not
paid when due or (ii) any other default on Designated Senior Indebtedness occurs
and the maturity of such Designated Senior Indebtedness is accelerated in
accordance with its terms unless, in either case, the default has been cured or
waived and any such acceleration has been rescinded or such Designated Senior
Indebtedness has been paid in full. However, the Company may pay the Notes
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of the Designated Senior
Indebtedness with respect to which either of the events set forth in clause (i)
or (ii) of the immediately preceding sentence has occurred and is continuing.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the second preceding sentence) with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions described in the first sentence of this
paragraph), unless the holders of such Designated Senior Indebtedness or the
Representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness, the Company may resume payments on the Notes after the end
of such Payment Blockage Period. The Notes shall not be subject to more than one
Payment Blockage Period in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period. No nonpayment default that existed or was continuing on the date of
delivery of any Blockage Notice to the Trustee shall be, or be made, the basis
for a subsequent Blockage Notice unless such default shall have been waived for
a period of not less than 90 days.
The Indenture will further require that the Company promptly notify holders
of Senior Indebtedness if payment of the Notes is accelerated because of a
Default.
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As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. As of December
28, 1997, on a pro forma basis after giving effect to the sale of the Notes and
the use of proceeds therefrom, the aggregate principal amount of the Company's
outstanding Senior Indebtedness, together with liabilities of the Company's
subsidiaries to which the claims of Noteholders are effectively subordinated,
would have been approximately $33.1 million and the Company would have had no
outstanding Subordinated Indebtedness. The Indenture will permit the Company to
incur additional Indebtedness, including Senior Indebtedness, under certain
circumstances. See "Risk Factors-- Subordination" and "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
OPTIONAL REDEMPTION
Except as set forth in the following paragraph and under "--Gaming
Redemption", the Notes will not be redeemable at the Company's option prior to
April 1, 2003. Thereafter, the Notes will be subject to redemption at any time
at the option of the Company, in whole or in part, upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on April 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -------------
<S> <C>
2003.............................................................................. 108%
2004.............................................................................. 104
</TABLE>
For a period of three years following the Issue Date, the Company may redeem
up to 35% of the aggregate principal amount of Notes originally issued at a
redemption price of 112% of the principal amount thereof, plus accrued and
unpaid interest thereon (plus Liquidated Damages, if any) to the redemption
date, with the net cash proceeds of one or more Public Equity Offerings;
PROVIDED, HOWEVER, that (a) at least $162,500,000 aggregate principal amount of
Notes remain outstanding immediately following such redemption (excluding Notes
held by the Company and its Subsidiaries) and (b) such redemption shall occur
within 90 days of the date of such public offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; PROVIDED
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancelation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
GAMING REDEMPTION
Notwithstanding any other provision hereof, if any holder or beneficial
owner of Notes is required by a Gaming Authority to be licensed, qualified or
found suitable under any applicable gaming law in order to hold Notes, and such
holder or beneficial owner fails to apply for a license, qualification or
finding of suitability within the period required by such Gaming Authority, or
if such holder or beneficial owner is
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<PAGE>
notified by such Gaming Authority that such holder or beneficial owner will not
be so licensed, qualified or found suitable, and if so ordered by such Gaming
Authority or required by applicable gaming laws the Company shall have the
right, at its option, (i) to require that such holder or beneficial owner
dispose of such holder's or beneficial owner's Notes within 30 days (or such
earlier date as may be required by the applicable Gaming Authority) of (a) the
termination of the period described above for such holder or beneficial owner to
apply for a license, qualification or finding of suitability or (b) receipt of
the notice from such Gaming Authority that such holder or beneficial owner will
not be licensed, qualified or found suitable by such Gaming Authority or (ii) to
redeem the Notes held by such holder or beneficial owner at a redemption price
equal to the lesser of the price at which such holder or beneficial owner
acquired such Notes and the principal amount thereof, together with, in either
case, accrued and unpaid interest and Liquidated Damages, if any, thereon to the
earlier of date of redemption or the date of the finding that such holder or
beneficial owner will not be licensed, qualified or found suitable, which may be
less than 30 days following the notice of redemption.
Immediately upon a determination by any Gaming Authority that a holder or
beneficial owner of Notes will not be licensed, qualified or found suitable by
such Gaming Authority, such holder or beneficial owner shall have no further
rights with respect to the Notes (i) to exercise, directly or indirectly,
through any trustee, nominee or any other Person or entity, any right conferred
by the Notes or (ii) to receive any interest or any other distribution or
payment with respect to the Notes or any remuneration in any form from the
Company for services rendered or otherwise, except the redemption price of the
Notes described in the foregoing paragraph. In connection with any such
redemption, and except as may be required by a Gaming Authority, the Company
shall comply with the procedures contained in the Indenture for redemptions of
the Notes. Under the Indenture, the Company is not required to pay or reimburse
any holder or beneficial owner of Notes who is required to apply for such
license, qualification or finding of suitability for any costs associated with
obtaining or maintaining such licensure or associated with any investigation for
such qualification or finding of suitability. Such expenses are entirely the
obligation of such holder or beneficial owner. See "Business--Governmental
Regulation--Nevada Gaming Regulation."
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an offer (a "Change of Control Offer") to purchase all or any part (equal
to $1,000 or an integral multiple thereof) of each holder's Notes at an offer
price in cash equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase (the "Change of Control Payment"). Within 30 days following a Change
of Control, the Company will mail a notice to each holder of Notes describing
the transaction that constitutes the Change of Control and offering to purchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the purchase of Notes as a result of a Change of
Control. To the extent that the provisions of any securities laws or regulations
conflict with the provisions of the covenant described hereunder, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under the covenant described
hereunder by virtue thereof.
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On the Change of Control Payment Date, the Company will, to the extent
lawful, (a) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (b) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (c) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; PROVIDED, HOWEVER, that each new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the holders of the Notes to require that the Company
purchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction. In addition, the Company could enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that could affect the Company's capital structure or the value of the Notes, but
that would not constitute a Change of Control.
The Credit Agreement currently prohibits the Company from purchasing any
Notes and also provides that certain change of control events with respect to
the Company would constitute a default thereunder. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing Notes,
the Company could seek the consent of its lenders to the purchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing Notes.
Any future credit agreements or other agreements relating to Indebtedness to
which the Company becomes a party may contain restrictions and provisions
similar to those in the Credit Agreement. Moreover, the exercise by the holders
of their right to require the Company to purchase the Notes could cause a
default under such Indebtedness, even if the Change of Control itself does not,
due to the financial effect of such purchase on the Company. The Company's
ability to pay cash to the holders of Notes following the occurrence of a Change
of Control may be limited by the Company's then existing financial resources.
There can be no assurance that sufficient funds will be available when necessary
to make any required purchases. In any case, the Company's failure to purchase
tendered Notes would constitute an Event of Default under the Indenture which
would, in turn, constitute a default under the Credit Agreement. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the holders of Notes.
The provisions under the Indenture relative to the Company's obligation to
make an offer to purchase the Notes as a result of a Change of Control may be
waived or modified with the written consent of the holders of a majority in
principal amount of the Notes. Moreover, the Company will not be required to
make a Change of Control Offer following a Change of Control if a third party
makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Indenture applicable to a
Change of Control Offer made by the Company and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of Notes to require the Company to
purchase such Notes as a result of a sale, lease, transfer, conveyance or
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other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless (a) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors) of the assets or
Equity Interests issued or sold or otherwise disposed of and (b) at least 75% of
the consideration therefor received by the Company or such Subsidiary is in the
form of cash or Cash Equivalents; PROVIDED, HOWEVER, that the amount of (i) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or such Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (ii) any securities,
notes or other obligations received by the Company or such Restricted Subsidiary
from such transferee that are promptly converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received) shall be
deemed to be cash for purposes of this provision.
Within one year after the receipt of any Net Proceeds from an Asset Sale,
the Company or any such Restricted Subsidiary may apply such Net Proceeds at its
option (a) to repay Senior Indebtedness or (b) to the acquisition of (i) any
assets or property (other than Capital Stock) in a Permitted Business, (ii) the
Capital Stock of a Person engaged in a Permitted Business that becomes a
Restricted Subsidiary of the Company as a result of the acquisition of such
Capital Stock or (iii) Capital Stock constituting a minority interest in an
existing Restricted Subsidiary, except that an acquisition of such minority
interest Capital Stock in excess of $1.0 million shall be authorized by a
resolution of the Company's Board of Directors. Pending the final application of
any such Net Proceeds, the Company or any such Restricted Subsidiary may
temporarily reduce outstanding borrowings under the Credit Agreement or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5.0 million in any
calendar year, the Company will be required to make an offer to all holders of
Notes (and to holders of other Senior Subordinated Indebtedness designated by
the Company) (an "Asset Sale Offer") to purchase the maximum principal amount of
Notes (and such other Senior Subordinated Indebtedness) that may be purchased
out of the Excess Proceeds at an offer price in cash in an amount equal to 100%
of the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes (and other Senior Subordinated Indebtedness) tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of Notes (and other Senior
Subordinated Indebtedness) surrendered by holders thereof exceeds the amount of
Excess Proceeds, Notes (and other Senior Subordinated Indebtedness) to be
purchased shall be selected on a pro rata basis. Upon completion of such offer
to purchase, the amount of Excess Proceeds shall be reset at zero.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the purchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this clause by virtue thereof.
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CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, (a) declare or
pay any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) or similar payment to the direct or indirect holders of
the Company's Equity Interests (other than dividends, payments or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company); (b)
purchase, redeem or otherwise acquire or retire for value (including without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary of the Company); (c)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Subordinated Indebtedness, except a
payment of interest, customary fees and charges or principal at Stated Maturity;
or (d) make any Restricted Investment (all such payments and other actions set
forth in clauses (a) through (d) above being collectively referred to as
"Restricted Payments"), unless at the time of and after giving effect to such
Restricted Payment:
(i) no Default shall have occurred and be continuing or would occur as a
consequence thereof;
(ii) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
(iii) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (b), (c) and (d), but including, without duplication, Restricted
Payments permitted by clauses (a) and (e), of the next succeeding
paragraph), is less than the sum of (A) 50% of the Consolidated Net Income
of the Company for the period (taken as one accounting period) from April 1,
1998 to the end of the Company's most recently ended fiscal quarter for
which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (B) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale since the Issue Date
of Equity Interests of the Company (other than Disqualified Stock) or of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than any such Equity Interests,
Disqualified Stock or convertible debt securities sold to a Restricted
Subsidiary of the Company and other than Disqualified Stock or convertible
debt securities that have been converted into Disqualified Stock), plus (C)
to the extent that any Restricted Investment that was made after the Issue
Date is (i) sold for cash or otherwise liquidated or repaid for cash or (ii)
in the case of Restricted Investments arising from guarantees by the Company
or any Restricted Subsidiary, terminated, the lesser of (x) the cash return
of capital or the amount of the terminated guarantee with respect to such
Restricted Investment (less the cost of disposition, if any) and (y) the
initial amount of such Restricted Investment, plus (D) the portion
proportionate to the Company's equity interest in such Subsidiary of the
fair market value (as determined by an independent appraisal) of the net
assets of an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary; PROVIDED, HOWEVER, that
such amount shall be limited to the amount of the Restricted Investment
previously made by the Company or a Restricted Subsidiary (and treated as a
Restricted Payment) in the Unrestricted Subsidiary.
The foregoing provisions will not prohibit (a) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the
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provisions of the Indenture; (b) any Restricted Payment (other than a Restricted
Payment described in clause (a) of the first paragraph of this covenant) made in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of, Equity Interests
of the Company (other than any Disqualified Stock); PROVIDED, HOWEVER, that the
amount of any such net cash proceeds that are utilized for any such Restricted
Payment shall be excluded from clause (iii)(B) of the preceding paragraph; (c)
the defeasance, redemption, repurchase or other acquisition of Subordinated
Indebtedness with (x) the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness; (d) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its Equity Interests on a pro rata
basis; and (e) so long as no Default shall have occurred and be continuing, the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company held by any member of the Company's or any of
its Subsidiaries' management; PROVIDED, HOWEVER, that the aggregate price paid
for all such repurchased, redeemed, acquired or retired Equity Interests shall
not exceed $1.0 million in any twelve-month period.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated shall be deemed to be Restricted Payments at the
time of such designation and shall reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments shall be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation shall only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors and
reflected in a resolution with respect thereto.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, Incur any
Indebtedness and that the Company will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that the
Company and its Restricted Subsidiaries may Incur Indebtedness if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is Incurred would have
been at least 2.5 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been Incurred at the beginning of such four-quarter period.
The foregoing provisions will not apply to the Incurrence by the Company or
any Restricted Subsidiary of any of the following items of Indebtedness
("Permitted Indebtedness"):
(a) Indebtedness pursuant to the Credit Agreement; PROVIDED, HOWEVER,
that the aggregate principal amount of all Indebtedness outstanding under
the Credit Agreement after giving effect to such Incurrence does not exceed
$100.0 million less, without duplication, (i) the amount of all repayments
of the revolving credit Indebtedness and letters of credit (with letters of
credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Restricted Subsidiaries
thereunder) made utilizing any Net Proceeds of an Asset Sale since the Issue
Date, other than temporary paydowns of such revolving credit Indebtedness
and letters of credit pending final application of such Net Proceeds and
(ii) the aggregate amount of all commitment
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reductions with respect to revolving credit Indebtedness under the Credit
Agreement that have been made since the Issue Date;
(b) Indebtedness represented by the Notes and the Indenture;
(c) Capital Lease Obligations or Indebtedness represented by Capital
Lease Obligations, mortgage financings or purchase money obligations, in
each case Incurred for the purpose of financing all or part of the purchase
price or cost of construction or improvement of property, plant or equipment
used in the business, in an amount not to exceed $15.0 million at any one
time outstanding;
(d) Permitted Refinancing Indebtedness with respect to Indebtedness
(other than intercompany Indebtedness) that was permitted by the Indenture
to be Incurred (i) pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of this covenant or (ii) clauses (a), (b) or
(e) of this covenant.
(e) Existing Indebtedness;
(f) intercompany Indebtedness between or among the Company and any of
its Restricted Subsidiaries; PROVIDED, HOWEVER, that (i) if the Company is
the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of
Equity Interest that results in any such Indebtedness being held by a Person
other than the Company or a Restricted Subsidiary thereof and (B) any sale
or other transfer of any such Indebtedness to a Person that is not either
the Company or a Restricted Subsidiary shall be deemed, in each case, to
constitute an Incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (f);
(g) Hedging Obligations that are Incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of the Indenture to be outstanding;
(h) the Guarantee by the Company or any Restricted Subsidiary of
Indebtedness of the Company or any Restricted Subsidiary that was permitted
to be Incurred by another provision of this covenant; and
(i) additional Indebtedness in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding not to exceed $15.0
million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Indebtedness described in clauses (a) through (i) above or is entitled
to be Incurred pursuant to the first paragraph of this covenant, the Company
shall, in its sole discretion, classify such item of Indebtedness in any manner
that complies with this covenant. Accrual of interest and accretion or
amortization of original issue discount will not be deemed to be an Incurrence
of Indebtedness for purposes of this covenant; PROVIDED, HOWEVER, in each such
case, that the amount thereof is included in Fixed Charges of the Company as
accrued.
LIMITATION ON LAYERING
The Indenture will provide that the Company shall not Incur any Indebtedness
if such Indebtedness is subordinate or junior in right of payment to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
contractually subordinate in right of payment to Senior Subordinated
Indebtedness.
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LIENS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Senior Subordinated Indebtedness or Subordinated Indebtedness of the
Company on or with respect to any of its property or assets, including any
shares of stock or indebtedness of any Restricted Subsidiary, whether owned at
the Issue Date or thereafter acquired, or any income, profits or proceeds
therefrom, or assign or otherwise convey any right to receive income thereon,
unless (i) in the case of any Lien securing Subordinated Indebtedness, the Notes
are secured by a Lien on such property, assets or proceeds that is senior in
priority to such Lien and (ii) in the case of any Lien securing Senior
Subordinated Indebtedness, the Notes are secured by a Lien on such property,
assets or proceeds that is senior in priority to or PARI PASSU with such Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary of the
Company to (a)(i) pay dividends or make any other distributions to the Company
or any of its Restricted Subsidiaries on its Capital Stock or with respect to
any other interest or participation in, or measured by, its profits, or (ii) pay
any indebtedness owed to the Company or any of its Restricted Subsidiaries, (b)
make loans or advances to the Company or any of its Restricted Subsidiaries or
(c) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (1) an agreement in effect or entered into on the Issue
Date, (2) the Indenture and the Notes, (3) applicable law, (4) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired; PROVIDED,
HOWEVER, that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred, (5) by reason of customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (6) in the case of clause (c)
above, restrictions consisting of Liens not prohibited by the Indenture, (7)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no less
favorable to the holders of Notes than those contained in the agreements
governing the Indebtedness being refinanced; or (8) customary pre-closing
covenants in bona fide contracts for the sale of property or assets.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture will provide that the Company may not consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (a) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (the "Successor Company") is a corporation organized or existing under the
laws of the United States, any state thereof or the District of Columbia, (b)
the entity or Person formed by or surviving any such consolidation or merger (if
other than the Company) or the Successor Company assumes all the obligations of
the Company under the Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, (c) immediately
after such transaction no Default exists and (d) except in the case of a merger
of the Company with or into a wholly owned Restricted Subsidiary of the Company,
the Company or the Successor Company (A) will have Consolidated Net Worth
immediately after the
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transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
above under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock."
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of, premium (if any), interest and Liquidated Damages (if any) on
the Notes.
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate of the Company (each of the foregoing, an "Affiliate
Transaction"), unless the terms thereof (i) are no less favorable to the Company
or the relevant Restricted Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person, (ii) if such Affiliate Transaction or series of related
Affiliate Transactions involve aggregate consideration in excess of $1.0
million, shall be approved by a majority of the disinterested members of the
Board of Directors and evidenced in a resolution of such members of the Board of
Directors and (iii) if such Affiliate Transaction or series of related Affiliate
Transactions involves aggregate consideration in excess of $5.0 million, the
Company obtains an opinion from an accounting, appraisal or investment banking
firm of national standing to the effect that such Affiliate Transaction is fair
to the Company or the relevant Restricted Subsidiary from a financial point of
view or that the terms of such Affiliate Transaction are at least as favorable
to the Company or the relevant Restricted Subsidiary as might reasonably have
been obtained in a comparable arm's length transaction with an unaffiliated
third party.
The provisions of the foregoing paragraph shall not prohibit (i) any
employment agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Restricted Subsidiary, (ii) transactions between
or among the Company and/or its Restricted Subsidiaries, (iii) Restricted
Payments that are permitted by the provisions of the Indenture described above
under the caption "--Restricted Payments," (iv) transactions made pursuant to
Existing Affiliate Obligations, (v) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors, (vi) the grant of stock options or similar
rights to employees and directors of the Company pursuant to plans approved by
the Board of Directors, (vii) loans or advances to employees, other than the
Permitted Holders, in the ordinary course of business in accordance with the
past practices of the Company or its Restricted Subsidiaries, (viii) the payment
of reasonable fees to directors of the Company and its Restricted Subsidiaries
who are not employees of the Company or its Restricted Subsidiaries and (ix) the
issuance or sale of any Capital Stock (other than Disqualified Stock) of the
Company.
PAYMENTS FOR CONSENT
The Indenture will provide that neither the Company nor any of its
Subsidiaries will, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes unless such consideration
is offered to be paid or is paid to all
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holders of the Notes that consent, waive or agree to amend in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
REPORTS
Whether or not the Company is required to do so by the rules and regulations
of the Commission, the Company will file with the Commission (unless the
Commission will no longer accept the same for filing) and furnish to the holders
of the Notes (a) all quarterly and annual financial and other information with
respect to the Company and its consolidated Subsidiaries (showing in reasonable
detail, the revenues and EBITDA of the Company and its Restricted Subsidiaries
separate from the revenues and EBITDA of the Unrestricted Subsidiaries of the
Company in the event that either the revenue or the EBITDA of the Unrestricted
Subsidiaries for the accounting period covered thereby was greater than or equal
to 10% of the revenues or EBITDA of the Company and its consolidated
Subsidiaries) that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants, and (b) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, the Company
will furnish to the holders of the Notes, prospective purchasers of the Notes
and securities analysts, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event
of Default: (a) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes; (b) default in payment when due of the
principal of or premium, if any, on the Notes; (c) failure by the Company to
comply with the provisions described under the captions "--Change of Control,"
"--Asset Sales," "--Restricted Payments" or "--Incurrence of Indebtedness and
Issuance of Preferred Stock," which failure remains uncured for 30 days after
notice; (d) failure by the Company or any of its Restricted Subsidiaries for 60
days after notice to comply with any of its other agreements in the Indenture or
the Notes; (e) the nonpayment within any applicable grace period after the final
maturity, or the acceleration by the holders because of a default, of
Indebtedness of the Company or any Significant Subsidiary, or group of
Restricted Subsidiaries that taken together would constitute a Significant
Subsidiary, and the total amount of such Indebtedness unpaid or accelerated
exceeds $10.0 million; (f) failure by the Company or any of its Significant
Subsidiaries, or a group of Restricted Subsidiaries that taken together would
constitute a Significant Subsidiary, to pay final judgments aggregating in
excess of $10.0 million, which judgments are not paid, discharged or stayed for
a period of 60 consecutive days; and (g) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries.
If any Default occurs and is continuing, the Trustee or the holders of at
least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately. Notwithstanding the foregoing, in the
case of a Default arising from certain events of bankruptcy or insolvency with
respect to the Company, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from holders of the Notes notice of any continuing Default (except
a Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest.
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The holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
Notes waive any existing Default and its consequences under the Indenture except
a continuing Default in the payment of the principal of or interest or
Liquidated Damages on the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default, to deliver to the Trustee a statement specifying
such Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
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 or the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the Federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (a) the rights of holders of outstanding Notes to
receive payments in respect of the principal of and premium, interest and
Liquidated Damages, if any, on such Notes when such payments are due from the
trust referred to below, (b) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (c) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (e) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default with respect to
the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events with respect to the Company) described under "Events of Default" will no
longer constitute a Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of and premium, interest and Liquidated Damages, if any, on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date, (ii) in the case
of Legal Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the Issue Date, there has been a
change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the holders
of the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred, (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on
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the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred, (iv) no Default shall
have occurred and be continuing on the date of such deposit (other than a
Default resulting from the borrowing of funds to be applied to such deposit) or
insofar as Defaults from bankruptcy or insolvency events of the Company are
concerned, at any time in the period ending on the 91st day after the date of
deposit, (v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material agreement or
instrument (other than the Indenture) to which the Company or any Restricted
Subsidiary is a party or by which the Company or Restricted Subsidiary is bound,
(vi) the Company must have delivered to the Trustee an opinion of counsel to the
effect that after the 91st day following the deposit, the trust funds will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the holders of
Notes over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others and (viii)
the Company must deliver to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A holder of Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not required to transfer
or exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided below, the Indenture or the Notes may be amended or
supplemented with the consent of the holders of at least a majority in principal
amount of the Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder): (a) reduce the
principal amount of Notes whose holders must consent to an amendment, supplement
or waiver, (b) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes, (c) reduce
the rate of or change the time for payment of interest on any Note, (d) waive a
Default in the payment of principal of or premium, interest or Liquidated
Damages on the Notes (except a rescission of acceleration of the Notes by the
holders of at least a majority in aggregate principal amount of the Notes and a
waiver of the payment default that resulted from such acceleration), (e) make
any Note payable in money other than that stated in the Notes, (f) make any
change in the provisions of the Indenture relating to waivers of past Defaults
or the rights of holders of Notes to receive payments of principal of or
premium, interest or Liquidated Damages on the Notes, (g) waive a redemption
payment with respect to any Note or (h) make any change in the foregoing
amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
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assumption of the Company's obligations to holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case a Default shall occur
(which shall not be cured), the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
holder of Notes, unless such holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Planet Hollywood
International, Inc., 8669 Commodity Circle, Orlando, Florida 32819, attention
Chief Financial Officer.
BOOK ENTRY, DELIVERY AND FORM
The New Notes will be represented by one or more Notes in registered, global
form without interest coupons (collectively, the "Global Notes"). The Global
Notes will be deposited upon issuance with the Trustee as custodian for The
Depository Trust Company ("DTC"), in New York, New York, and registered in the
name of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of Certificated Notes
(as defined below). Transfers of beneficial interests in the Global Notes will
be subject to the applicable rules and procedures of DTC and its direct or
indirect participants (including, if applicable, those of Euroclear and Cedel),
which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The Notes may
be presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC, Euroclear
and Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them from time to time. The Company
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takes no responsibility for these operations and procedures and urges investors
to contact the system or their participants directly to discuss these matters.
DTC has advised the Company that DTC is a limited purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Notes and (ii) ownership of such interests in the Global
Notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes).
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTEREST IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Company, the Trustee nor any agent of the Company or the Trustee has or will
have any responsibility or liability for (i) any aspect of DTC's records or any
Participant's or Indirect Participant's records relating to or payments made on
account of beneficial ownership interest in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to the beneficial ownership interests
in the Global Notes or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised the Company that its current practice, upon receipt of any payment in
respect of securities such as the Notes (including principal and interest), is
to credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in the
principal amount of beneficial interest in the relevant security as shown on the
records of DTC unless DTC has reason to believe it will not receive payment on
such payment date. Payments by the Participants and the Indirect Participants to
the beneficial owners of Notes will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Trustee or
the Company. Neither the Company nor the Trustee will be liable for any delay by
DTC or any of its Participants in identifying the beneficial owners of the
Notes, and the Company and the Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants, interests
in the Global Notes are expected to be eligible to trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will,
therefore, settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its Participants. See "--Same-Day Settlement and
Payment."
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Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same day funds, and transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and
Euroclear or Cedel participants, on the other hand, will be effected through DTC
in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case may
be, by its respective depositary; however, such cross-market transactions will
require delivery of instructions to Euroclear or Cedel, as the case may be, by
the counter-party in such system in accordance with the rules and procedures and
within the established deadlines (Brussels time) of such system. Euroclear or
Cedel, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Note in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear participants and Cedel participants may not deliver instructions
directly to the depositories for Euroclear or Cedel.
DTC has advised the Company that it will take any action permitted to be
taken by a Holder of Notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Default under the Notes, DTC reserves the right to
exchange the Global Notes for legended Notes in certificated form, and to
distribute such Notes to its Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among Participants in DTC,
Euroclear and Cedel, they are under no obligation to perform or to continue to
perform such procedures, and such procedures may be discontinued at any time.
Neither the Company nor the Trustee nor any of their respective agents will have
any responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered
certificated form ("Certificated Notes") if (i) DTC (x) notifies the Company
that it is unwilling or unable to continue as depositary for the Global Notes
and the Company thereupon fails to appoint a successor depositary or (y) has
ceased to be a clearing agency registered under the Exchange Act and the Company
fails to appoint a successor, (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of the Certificated
Notes or (iii) there shall have occurred and be continuing a Default with
respect to the Notes. In all cases, Certificated Notes delivered in exchange for
any Global Note or beneficial interests therein will be registered in the names,
and issued in any approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures) and will bear the
applicable restrictive legend referred to in "Notice to Investors," unless the
Company determines otherwise in compliance with applicable law.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Notes represented
by the Global Notes (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Holder of such Global Notes. With respect
to Notes in certificated form, the Company will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. The Notes represented by the Global Notes are eligible to
trade in the PORTAL market and to
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trade in the Depositary's Same-Day Funds Settlement System, and any permitted
secondary market trading activity in such Notes will, therefore, be required by
the Depositary to be settled in immediately available funds. The Company expects
that secondary trading in any certificated Notes will also be settled in
immediately available, funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised the Company that cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Holders of the New Notes are not entitled to any registration rights with
respect to the New Notes. Pursuant to the Registration Rights Agreement (the
"Registration Rights Agreement") entered into between the Company and the
Initial Purchasers for the benefit of the holders of Transfer Restricted
Securities on the Issue Date, the Company agreed to file the Exchange Offer
Registration Statement with the Commission on the appropriate form under the
Securities Act with respect to the New Notes. The registration statement of
which this Prospectus is a part constitutes the Exchange Offer Registration
Statement. The Registration Rights Agreement provides that if (a) the Company is
not required to file the Exchange Offer Registration Statement or permitted to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (b) any holder of Transfer Restricted
Securities notifies the Company prior to the 20th day following consummation of
the Exchange Offer that (i) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (ii) that it may not resell the New Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales or (iii) that it is a
broker-dealer and owns Notes acquired directly from the Company or an affiliate
of the Company, the Company will file with the Commission the Shelf Registration
Statement to cover resales of the Notes by the Holders thereof who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement. The Company will use its best efforts to cause
the applicable registration statement to be declared effective as promptly as
possible by the Commission. For purposes of the foregoing, "Transfer Restricted
Securities" means each Old Note until (A) the date on which such Old Note has
been exchanged by a person other than a broker-dealer for a New Note in the
Exchange Offer, (B) following the exchange by a broker-dealer in the Exchange
Offer of an Old Note for a New Note, the date on which such New Note is sold to
a purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (C) the date on which such Old Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (D) the date on which such Old Note is distributed to
the public pursuant to Rule 144 under the Act.
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The Registration Rights Agreement provides that (a) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 45 days
after the Closing Date, (b) the Company will use its best efforts to have the
Exchange Offer Registration Statement declared effective by the Commission on or
prior to 150 days after the Closing Date, (c) unless the Exchange Offer would
not be permitted by applicable law or Commission policy, the Company will
commence the Exchange Offer and use its best efforts to issue on or prior to 25
business days after the date on which the Exchange Offer Registration Statement
was declared effective by the Commission, New Notes in exchange for all Old
Notes tendered prior thereto in the Exchange Offer and (d) if obligated to file
the Shelf Registration Statement, the Company will use its best efforts to file
the Shelf Registration Statement with the Commission on or prior to 45 days
after such filing obligation arises and to cause the Shelf Registration to be
declared effective by the Commission on or prior to 150 days after such
obligation arises. If (i) the Company fails to file any of the registration
statements required by the Registration Rights Agreement on or before the date
specified for such filing, (ii) any of such registration statement is not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (iii) the Company fails to
consummate the Exchange Offer within 25 business days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement or (iv)
the Shelf Registration Statement or the Exchange Offer Registration Statement is
declared effective but thereafter ceases to be effective or usable in connection
with resales of Transfer Restricted Securities during the periods specified in
the Registration Rights Agreement (each such event referred to in clauses (i)
through (iv) above, a "Registration Default"), Liquidated Damages will accrue on
the Notes subject to the respective and applicable registration statements from
and including the day following such Registration Default to but excluding the
day on which such Registration Default has been cured. Liquidated Damages will
be paid semi-annually in arrears, with the first semi-annual payment due on the
first interest payment date following the date on which such Liquidated Damages
begin to accrue, and will accrue at a rate per annum of 25 basis points (0.25%)
of the principal amount of Notes held, which rate shall increase by an
additional 25 basis points (0.25%) per annum on the first day of any subsequent
90-day period that the Registration Default remains uncured up to a maximum rate
equal to 100 basis points (1.0%) per annum. Following the cure of all
Registration Defaults, the accrual of Liquidated Damages will cease.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED, HOWEVER,
that beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"ALADDIN GAMING" means the joint venture between the Company and Aladdin
Gaming LLC to construct, own and operate a music-themed hotel, casino and
entertainment center as part of a complex at the center of Las Vegas Boulevard
in Las Vegas, Nevada.
"ASSET SALE" means (a) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback), excluding sales of inventory and licensing of intellectual property
in the ordinary course of business (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole will be governed by the provisions
of the Indenture described above under the caption "--Change of
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Control" and/or the provisions described above under the caption "--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (b) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Restricted Subsidiaries (other
than directors' qualifying shares), in the case of either clause (a) or (b),
whether in a single transaction or a series of related transactions (i) that
have a fair market value in excess of $1.0 million or (ii) for net proceeds in
excess of $1.0 million. Notwithstanding the foregoing, (A) a transfer of assets
by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the
Company or to another Restricted Subsidiary, (B) an issuance of Equity Interests
by a Restricted Subsidiary to the Company or to another Restricted Subsidiary,
(C) a Permitted Investment or a Restricted Payment that is permitted by the
covenant described above under the caption "--Restricted Payments" and (D)
Permitted Asset Swaps will not be deemed to be Asset Sales for purposes of the
covenant described under "--Repurchases at the Option of Holders--Asset Sales."
"AVERAGE LIFE" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (a) in the case of a corporation, corporate stock,
(b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"CASH EQUIVALENTS" means (a) United States dollars, (b) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (c) certificates of deposit and Eurodollar
time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (d) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (b) and (c)
above entered into with any financial institution meeting the qualifications
specified in clause (c) above and (d) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition.
A "CHANGE OF CONTROL" will be deemed to have occurred upon the occurrence of
any of the following: (a) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the assets of the
Company and its Restricted Subsidiaries, taken as a whole, to any "person" or
"group" (as such terms are used in Section 13(d) of the Exchange Act) (whether
or not otherwise in compliance with the Indenture), other than to a Permitted
Holder; (b) the adoption of a plan relating to the liquidation or dissolution of
the Company; (c) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" or "group" (as such terms are used in Section 13(d)(3) of the Exchange
Act) other than a Permitted Holder becomes the "beneficial owner" (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of more than 35% of the then outstanding Voting Stock of the Company
on a fully-diluted basis, PROVIDED, HOWEVER, that the Permitted Holders
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beneficially own (as defined above), directly or indirectly, in the aggregate a
lesser percentage of the total voting power of the Voting Stock of the Company
than such "person" or "group" and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority of
the Board of Directors; or (d) the first day on which more than a majority of
the members of the Board of Directors are not Continuing Directors.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income and Fixed Charges of such Person for such period
plus, to the extent deducted or excluded in calculating Consolidated Net Income
for such period, (a) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale, (b) provision for taxes based on
income or profits of such Person and its Restricted Subsidiaries, (c)
depreciation and amortization (including amortization of goodwill and other
intangibles and amortization of pre-opening expenses but excluding amortization
of other prepaid cash expenses that were paid in a prior period) of such Person
and its Restricted Subsidiaries, and (d) all other non-cash charges of such
Person and its Restricted Subsidiaries except to the extent such non-cash
charges are in contemplation of or in connection with future cash obligations,
in each case, on a consolidated basis and determined in accordance with GAAP.
"CONSOLIDATED NET ASSETS" means the total assets of the Company determined
on a consolidated basis in accordance with GAAP, less current liabilities except
for notes payable and current maturities of long-term Indebtedness, including
current portions payable of Capital Lease Obligations.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; PROVIDED,
HOWEVER, that (a) the Net Income (but not loss) of any Person (other than the
referent Person) that is not a Restricted Subsidiary or that is accounted for by
the equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent Person or a
Restricted Subsidiary thereof, (b) the Net Income of any Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, (c) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (d) the cumulative effect of a change in
accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the total of the amounts shown on the balance sheet of such Person and its
consolidated Restricted Subsidiaries, determined on a consolidated basis in
accordance with GAAP, as of the end of such Person's most recent fiscal quarter
ending at least 45 days prior to the taking of any action for the purpose of
which the determination is being made, as (i) the par or stated value of all
outstanding Capital Stock of such person plus (ii) paid-in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts attributable
to Disqualified Stock.
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors who (a) was a member of the Board of Directors on the
Issue Date or (b) was nominated for election to the Board of Directors with the
approval of at least two-thirds of the Continuing Directors who were members of
the Board of Directors at the time of such nomination or election.
"CREDIT AGREEMENT" means that certain Credit Agreement, dated as of
September 24, 1997, by and between the Company, SunTrust Bank, Central Florida,
N.A. and certain other lenders, providing for up to $20.0 million of term loan
borrowings, up to $100.0 million of revolving credit borrowings and up to $35.0
million of leveraged lease borrowings, and including any related notes,
guarantees, pledges, collateral documents, instruments and agreements executed
in connection therewith, in each case, as amended,
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extended, renewed, restated, supplemented or otherwise modified (in whole or in
part, and without limitation as to amount, terms, conditions, covenants and
other provisions) from time to time, and any agreement (and related document)
governing Indebtedness incurred to Refinance, in whole or in part, the
borrowings and commitments then outstanding or permitted to be outstanding under
such Credit Agreement or a successor Credit Agreement, whether by the same or
any other lender or group of lenders.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) any Indebtedness outstanding
under the Credit Agreement and (ii) any other Senior Indebtedness of the Company
which, at the date of determination, has an aggregate principal amount
outstanding of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $10.0 million and is specifically
designated by the Company in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures (other than as a
result of a "change of control" or asset sale) or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the option
of the Holder thereof (other than as a result of a "change of control" or asset
sale), in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING AFFILIATE OBLIGATIONS" means obligations existing on, or pursuant
to an agreement in effect on the Issue Date of the Company and its Restricted
Subsidiaries with Affiliates of the Company or its Restricted Subsidiaries and
any amendments thereto that do not adversely affect the rights of the holders of
Notes (as determined by resolution of the disinterested members of the Board of
Directors of the Company), until such obligations are extinguished.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Credit Agreement) in
existence on the Issue Date, until such amounts are repaid.
"EXISTING JOINT VENTURES" means Aladdin Gaming, Official All Star Hotel,
Planet Hollywood Hotel and Planet Movies.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (a) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), (b) the consolidated interest expense
of such Person and its Restricted Subsidiaries that was capitalized during such
period, (c) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such guarantee or Lien is called upon) and (d) the product of (i) all
dividend payments, whether or not in cash, on any series of preferred stock of
such Person or any of its Restricted Subsidiaries, other than dividend payments
on Equity Interests payable solely in Equity Interests of the Company, times
(ii) a fraction, the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local statutory tax rate
of such Person, expressed as a decimal, in each case, on a consolidated basis
and in accordance with GAAP.
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"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period; PROVIDED, HOWEVER, that (a)
if the Company or any Restricted Subsidiary has Incurred any Indebtedness since
the beginning of such period that remains outstanding or if the transaction
giving rise to the need to calculate the Fixed Charge Coverage Ratio is an
Incurrence of Indebtedness, or both, Consolidated Cash Flow and Fixed Charges
for such period shall be calculated after giving effect on a pro forma basis to
such Indebtedness as if such Indebtedness had been Incurred on the first day of
such period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period, (b) if the
Company or any Restricted Subsidiary has repaid, repurchased, defeased or
otherwise discharged any Indebtedness since the beginning of such period or if
any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged
(in each case other than Indebtedness Incurred under any revolving credit
facility unless such Indebtedness has been permanently repaid and has not been
replaced) on the date of the transaction giving rise to the need to calculate
the Fixed Charge Coverage Ratio, Consolidated Cash Flow and Fixed Charges for
such period shall be calculated on a pro forma basis as if such discharge had
occurred on the first day of such period and as if the Company or such
Restricted Subsidiary has not earned the interest income actually earned during
such period in respect of cash used to repay, repurchase, defease or otherwise
discharge such Indebtedness, (c) if since the beginning of such period the
Company or any Restricted Subsidiary shall have made any Asset Sale, the
Consolidated Cash Flow for such period shall be reduced by an amount equal to
the Consolidated Cash Flow (if positive) directly attributable to the assets
which are the subject of such Asset Sale for such period, or increased by an
amount equal to the Consolidated Cash Flow (if negative), directly attributable
thereto for such period and Fixed Charges for such period shall be reduced
(without duplication of reducing made pursuant to clause (b) above) by an amount
equal to the Fixed Charges directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Sale for such period (or, if the
Capital Stock of any Restricted Subsidiary is sold in whole but not in part, the
Fixed Charges for such period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale), (d) if
since the beginning of such period the Company or any Restricted Subsidiary (by
merger or otherwise) shall have made an investment in any Restricted Subsidiary
(or any person which becomes a Restricted Subsidiary) or an acquisition of
assets, including any acquisition of assets occurring in connection with a
transaction requiring a calculation to be made hereunder, which constitutes all
or substantially all of an operating unit of a business, Consolidated Cash Flow
and Fixed Charges for such period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period and (e) if
since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such period) shall have made any Asset Sale,
any Investment or acquisition of assets that would have required an adjustment
pursuant to clause (c) or (d) above if made by the Company or a Restricted
Subsidiary during such period, Consolidated Cash Flow and Fixed Charges for such
period shall be calculated after giving pro forma effect thereto as if such
Asset Sale, Investment or acquisition occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Fixed Charges associated with any Indebtedness Incurred in connection
therewith, the pro forma calculations shall be determined in good faith by the
principal financial officer of the Company in compliance with Regulation S-X
under the Securities Act. If any Indebtedness bears a floating rate of interest
and is being given pro forma effect, the interest of such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Hedging
Obligations applicable to such Indebtedness if such Interest Rate Agreement has
a remaining term in excess of 12 months) and (f) the Fixed Charges attributable
to discontinued operations, as determined in accordance with GAAP, shall be
excluded, but only to the extent
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that the obligations giving rise to such Fixed Charges will not be obligations
of the referent Person or any of its Restricted Subsidiaries following the date
of determination.
"GAAP" means 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 have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"GAMING AUTHORITY" means any agency, authority, board, bureau, commission,
department, office or instrumentality of any nature whatsoever of the United
States or foreign government, any state, province or any city or other political
subdivision, whether now or hereafter existing, or any officer or official
thereof, including without limitation, the Nevada Gaming Commission, the Nevada
State Gaming Control Board, the Clark County Liquor and Gaming Licensing Board,
with authority to regulate any gaming operation (or proposed gaming operation)
owned, managed or operated by the Company or any of its Subsidiaries.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (a) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (b) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"INCUR" means create, incur, issue, assume, guarantee or otherwise become
liable, directly or indirectly, contingently or otherwise, for any Indebtedness.
The term "Incurrence" when used as a noun shall have a correlative meaning. The
accretion of principal of a non-interest bearing or other discount security
shall not be deemed the Incurrence of Indebtedness.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such Indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any Indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (a) the accreted value
thereof, in the case of any Indebtedness that does not require current payments
of interest, and (b) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness. Except as required by the prior sentence, Indebtedness shall not
include any interest or similar obligations.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount
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determined as provided in the final paragraph of the covenant described above
under the caption "--Certain Covenants--Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (a) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (i) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (ii)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (b) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale, but only as and when
received, and excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to such properties or assets), net of (i) the direct costs relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions and all title and recording taxes) and any
relocation expenses incurred as a result thereof, (ii) taxes paid or payable as
a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), (iii) amounts required to be
applied to the repayment of Indebtedness (other than under the Credit Agreement)
secured by a Lien on the asset or assets that were the subject of such Asset
Sale, (iv) and any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP and (v) all distributions
and other payments required to be made to minority interest holders in a
Subsidiary as a result of an Asset Sale involving the assets of such Subsidiary
in proportion to such minority interest holders' respective ownership interests
in the Subsidiary.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"OBLIGATIONS" means, with respect to any Indebtedness, any principal,
interest, penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing such Indebtedness.
"OFFICIAL ALL STAR HOTEL" means the joint venture to acquire, develop and
operate a sports-themed hotel and entertainment complex at 401 Seventh Avenue in
New York City across from Madison Square Garden.
"PERMITTED ASSET SWAPS" means the exchange (i) by the Company or any of its
Restricted Subsidiaries of assets that the Board of Directors determines in good
faith are not core assets of the Company's
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business (ii) for assets (which may consist of an Equity Interest in the
business using such exchanged assets) of comparable value as determined by the
Board of Directors; PROVIDED, HOWEVER, that if the Consolidated Cash Flow of the
Company represented by such assets exceeds $5.0 million, the Company shall have
obtained an opinion from an investment banking firm of national standing to the
effect that such exchange is fair to the Company from a financial point of view.
"PERMITTED BUSINESS" means the business of developing and promoting
consumer brands in the entertainment, dining and lodging sectors and the lines
of businesses and services that are related to or complementary to the
foregoing.
"PERMITTED HOLDER" means each of Keith Barish, Robert Earl, Planet
Hollywood Holdings Pte. and their respective Affiliates.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Restricted Subsidiary, (b) any Investment in Cash Equivalents, (c) any
Investment by the Company or any Restricted Subsidiary in a Person if as a
result of such Investment (i) such Person becomes a Restricted Subsidiary or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Restricted Subsidiary, (d) any Restricted Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "--Asset Sales," (e) any Investment to the extent acquired in exchange
for the issuance of Equity Interests (other than Disqualified Stock) of the
Company, (f) Investments in the Existing Joint Ventures in an aggregate amount,
when taken together with all other Investments made pursuant to this clause (f)
that are at the time outstanding, that does not exceed $175.0 million and (g)
other Investments in any Person in an aggregate amount, when taken together with
all other Investments made pursuant to this clause (g) that are at the time
outstanding, that does not exceed $50.0 million.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to substantially the same
extent as, or to a greater extent than, the Notes are subordinated to Senior
Indebtedness pursuant to the subordination provisions of the Indenture.
"PERMITTED REFINANCING INDEBTEDNESS" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) such
Refinancing Indebtedness has a stated maturity no earlier than the stated
maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; PROVIDED FURTHER,
HOWEVER, that Permitted Refinancing Indebtedness shall not include Indebtedness
of a Subsidiary that Refinances Indebtedness of the Company.
"PERSON" means a natural person, company, corporation, partnership,
government, political subdivision, agency or instrumentality of a government, or
any other entity.
"PLANET HOLLYWOOD HOTEL" means the joint venture to acquire and develop a
movie-themed hotel in Times Square in Manhattan, New York.
"PLANET MOVIES" means the joint venture between the Company and AMC
Entertainment, Inc. to develop, own and operate a series of multi-screen, movie
theatre megaplexes that will include restaurants as well as various refreshment
and merchandise kiosks.
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"PUBLIC EQUITY OFFERING" means a bona fide underwritten sale to the public
of Class A Common Stock of the Company pursuant to a registration statement
(other than on Form S-8 or any other form relating to securities issuable under
any benefit plan of the Company) that is declared effective by the Commission.
"REFINANCE" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"SENIOR INDEBTEDNESS" means, with respect to the Company, (i) Obligations
of the Company with respect to the Credit Agreement and (ii) any other
Indebtedness permitted to be Incurred by the Company under the terms of the
Indenture, unless the instrument under which such Indebtedness is Incurred
expressly provides that it is PARI PASSU with or subordinated in right of
payment to the Notes. Notwithstanding anything to the contrary in the foregoing,
Senior Indebtedness shall not include (a) any obligation of the Company to any
Restricted Subsidiary or Affiliate of the Company, (b) any liability for
Federal, state, foreign, local or other taxes owed or owing by the Company, (c)
any accounts payable or other liability to trade creditors arising in the
ordinary course of business (including guarantees thereof or instruments
evidencing such liabilities), (d) any Indebtedness that is Incurred in violation
of the Indenture on or after the Issue Date.
"SENIOR SUBORDINATED INDEBTEDNESS" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank PARI PASSU with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Issue Date (except that all references to 10% therein shall be deemed to be
references to 5%).
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"SUBSIDIARY" means, with respect to a Person, (a) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (b) any partnership (i) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (ii)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof); PROVIDED, HOWEVER,
that, with respect to the Company, its Subsidiaries directly investing in and
responsible for Aladdin Gaming and Planet Movies, and any Subsidiary of the
Company that is a general or managing partner of an entity majority owned by
Planet Movies, shall not be a
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Subsidiary for purposes of this Indenture; PROVIDED FURTHER, HOWEVER, that, with
respect to the Company and except with regard to Subsidiaries that own in the
aggregate less than 5% of the Consolidated Net Assets of the Company, at least
80% of the outstanding Capital Stock of each Subsidiary shall be owned by the
Company or a Subsidiary of the Company.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (e) has at least one director
on its board of directors that is not a director or executive officer of the
Company or any of its Restricted Subsidiaries and has at least one executive
officer that is not a director or executive officer of the Company or any of its
Restricted Subsidiaries. Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described under "--Certain Covenants-- Restricted
Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; PROVIDED, HOWEVER, that such designation shall be
deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under "--Certain Covenants--Incurrence of Indebtedness
and Issuance of Preferred Stock," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period,
and (ii) no Default would be in existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
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DESCRIPTION OF CREDIT AGREEMENT
The description set forth below does not purport to be complete and is
subject, and qualified in its entirety by reference, to the provisions of the
Credit Agreement. Certain capitalized terms used below are defined in the Credit
Agreement and have the meaning assigned to them therein.
The Company is party to the $100.0 million Credit Agreement, dated as of
September 18, 1997, as amended October 1, 1997, as amended and restated March
25, 1998 (the "Credit Agreement"), by and among the Company, SunTrust Bank,
Central Florida, N.A. ("STB") and a consortium of other lenders. The Credit
Agreement consists of (i) a two-year revolving credit facility (the "Revolving
Facility") (with a one-year extension option if certain financial tests are
satisfied) in an aggregate principal amount of $65.0 million, of which up to
$25.0 million is available for multicurrency advances and up to $10.0 million is
available for the issuance of letters of credit, and (ii) a three-year
LIBOR-based leveraged lease facility (the "Lease Facility") in an aggregate
principal amount of $35.0 million. Borrowings under the Revolving Facility are
intended to finance the general corporate needs of the Company, including
working capital, capital expenditures, acquisitions and stock repurchases.
Borrowings under the leveraged lease facility are intended to fund the
construction of the new PLANET HOLLYWOOD restaurant-condominium unit in the
PLANET HOLLYWOOD HOTEL.
Loans and letters of credit under the Revolving Facility are available at
any time prior to, in the case of loans, the final maturity of the Revolving
Facility and, in the case of letters of credit, the fifth business day prior to
the final maturity of the Revolving Facility. Nothing has been drawn under the
Revolving Facility and $33.0 million is outstanding under the Lease Facility.
Borrowings under the Credit Agreement bear interest, at the Company's
option, at a rate per annum equal to the then Base Rate or the LIBO rate plus an
Applicable Margin. Base Rate borrowings are at the higher of STB's prime rate
and the Federal funds rate plus .50%. The Applicable Margin for all LIBO rate
loans is 3.0%
Any loans under the Credit Agreement may be prepaid without premium or
penalty (subject to reimbursement of customary breakage costs) and commitments
may be reduced by the Company in minimum amounts starting at $5.0 million and
increasing only in $1.0 million increments thereafter. Any amount repaid or
prepaid under the Lease Facility may not be reborrowed.
The obligations of the Company under the Credit Agreement are guaranteed by
each of the Company's Material Subsidiaries (other than Foreign Subsidiaries and
certain other Subsidiaries identified in Schedule 7.10 of the Credit Agreement)
and the Revolving Facility will be secured by a pledge by the Company of the
stock of its Subsidiaries and a mortgage of its executive office building.
The Credit Agreement contains customary representations and warranties and
affirmative covenants that, among other things, limit indebtedness, liens,
guarantee obligations, mergers, sales of assets, leases, dividends and other
payments in respect of capital stock, capital expenditures, investments,
optional payments and modifications of subordinated and other debt instruments,
transactions with affiliates, sale leasebacks and negative pledge clauses. The
Credit Agreement also contains financial covenants including, but not limited
to, minimum interest coverage and maximum leverage.
The Credit Agreement contains customary events of default, including, but
not limited to, nonpayment of principal, interest or fees, material inaccuracy
of representations and warranties, violation of covenants, cross-default,
bankruptcy events, material judgments, ERISA, actual or asserted invalidity of
collateral documents and a Change of Control.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material U.S. Federal income
tax considerations applicable to the Exchange Offer and to holders of the Old
Notes in connection therewith. This discussion assumes that a holder of Old
Notes purchased such Old Notes for cash at original issue, and that a holder of
Old Notes holds such Old Notes as capital assets within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended (the "Code"). The
discussion does not deal with all aspects of U.S. Federal income taxation that
may be relevant to holders of the Old Notes in light of their personal
investment circumstances, including persons holding Old Notes as part of a
conversion transaction or as part of a hedge or hedging transaction, or as a
position in a straddle for tax purposes, nor does it discuss U.S. Federal income
tax considerations applicable to certain types of investors subject to special
treatment under the U.S. Federal income tax laws, including insurance companies,
tax-exempt organizations, financial institutions or broker-dealers, and former
citizens or former residents of the United States. In addition, the discussion
does not consider the effect of any foreign, state, local, gift, estate or other
tax laws that may be applicable to a particular investor.
This summary is based upon current provisions of the Code, regulations of
the Treasury Department, administrative rulings and pronouncements of the
Internal Revenue Service ("IRS") and judicial decisions currently in effect, all
of which are subject to change, possibly with retroactive effect. The Company
has not and will not seek any rulings or opinions from the IRS or counsel with
respect to the matters discussed below, and as a result, there can be no
assurance that the IRS will not take positions concerning the tax consequences
of the Exchange Offer which are different from those discussed herein.
HOLDERS OF OLD NOTES SHOULD CONSULT THEIR TAX ADVISOR CONCERNING THE
APPLICATION OF U.S. FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS OF ANY STATE,
LOCAL AND FOREIGN TAXING JURISDICTIONS, TO THEIR OWNING AND DISPOSING OF NEW
NOTES AND TO EXCHANGING OLD NOTES FOR NEW NOTES IN LIGHT OF THEIR PARTICULAR
SITUATIONS.
The Exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not constitute a taxable exchange. As a result, (i) a holder will not recognize
taxable gain or loss as a result of exchanging Old Notes for New Notes pursuant
to the Exchange Offer; (ii) the holding period of the New Notes will include the
holding period of the Old Notes exchanged therefor; and (iii) the adjusted tax
basis of the New Notes will be the same as the adjusted tax basis of the Old
Notes exchanged therefor.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in connection
with the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes if such
Old Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that for a period of 180 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer that requests such documents in the Letter of
Transmittal, for use in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account in
connection with the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account in
connection with the Exchange Offer and any broker or dealer that participates in
a distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the
89
<PAGE>
Securities Act, and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The financial statements of the Company and subsidiaries as of December 29,
1996 and December 28, 1997 and for each of the three years in the period ended
December 28, 1997 included in this Prospectus have been so included in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
90
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Statements of Operations for fiscal 1995, 1996 and 1997.................. F-3
Consolidated Balance Sheets as of December 29, 1996 and December 28, 1997............. F-4
Consolidated Statements of Changes in Stockholders' Equity for fiscal 1995, 1996 and
1997................................................................................ F-5
Consolidated Statements of Cash Flows for fiscal 1995, 1996 and 1997.................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
------------------------
To the Board of Directors and Stockholders of Planet Hollywood International,
Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity 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
F-2
<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.
F-3
<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.
F-4
<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
------------------------ ------------------------ EXCESS OF RETAINED DEFERRED
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS COMPENSATION
----------- ----------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995...... 80,000 $ 800 -- $ -- $ 7,568 $ -- ($ 990)
Net Income...................... 20,727
Celebrity restricted stock
options....................... 140
Employee restricted stock
awards........................ 100 1 99 220
Currency translation
adjustment....................
----------- ----- ----------- ----------- ----------- ----------- -------------
Balance at December 31, 1995.... 80,100 801 -- -- 7,807 20,727 (770)
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....................
----------- ----- ----------- ----------- ----------- ----------- -------------
Balance at December 29, 1996.... 95,973 960 11,547 115 252,695 58,386 (525)
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....................
----------- ----- ----------- ----------- ----------- ----------- -------------
Balance at December 28, 1997.... 97,128 $ 972 11,765 $ 118 $ 279,372 $ 66,644 ($ 4,125)
----------- ----- ----------- ----------- ----------- ----------- -------------
----------- ----- ----------- ----------- ----------- ----------- -------------
<CAPTION>
CUMULATIVE TOTAL
TRANSLATION STOCKHOLDERS'
ADJUSTMENT EQUITY
----------- -------------
<S> <C> <C>
Balance at January 1, 1995...... $ 81 $ 7,459
Net Income...................... 20,727
Celebrity restricted stock
options....................... 140
Employee restricted stock
awards........................ 320
Currency translation
adjustment.................... (501) (501)
----------- -------------
Balance at December 31, 1995.... (420) 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.................... 920 920
----------- -------------
Balance at December 29, 1996.... 500 312,131
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) (4,940)
----------- -------------
Balance at December 28, 1997.... ($ 4,440) $ 338,541
----------- -------------
----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<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.
F-6
<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. ("PHII") 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>
F-7
<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.
F-8
<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>
F-9
<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)
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.
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 approximates 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
F-10
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. IMPAIRMENT OF LONG LIVED ASSETS (CONTINUED)
were written down to their estimated fair values, based on the Company's
estimates of future discounted cash flows.
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
F-11
<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)
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 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>
F-12
<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.
F-13
<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
------------------------------- ------------------------------- --------------------------------
PH PH PH
OPERATING DATA: ASIA OTHER TOTAL ASIA OTHER TOTAL 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>
F-14
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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>
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.
F-15
<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)
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.
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).
F-16
<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)
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 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.
F-17
<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
------------------------- -------------------------
<S> <C> <C> <C> <C>
NUMBER WEIGHTED AVG. NUMBER WEIGHTED AVG.
OF SHARES OPTION PRICE OF SHARES OPTION PRICE
---------- ------------- ---------- -------------
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
- ---------------- ----------------- ---------------- -----------
<S> <C> <C> <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
</TABLE>
<TABLE>
<CAPTION>
CELEBRITIES: WEIGHTED
RANGE OF NUMBER WEIGHTED-AVERAGE AVERAGE
EXERCISE OUTSTANDING AT REMAINING EXERCISE
PRICES DECEMBER 28, 1997 CONTRACTUAL LIFE PRICE
- ---------------- ----------------- ---------------- -----------
<S> <C> <C> <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
F-18
<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)
provisions of SFAS 123, the Company's net income and earnings per share would
approximate the following pro forma amounts:
<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
F-19
<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)
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.
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>
F-20
<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)
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.
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. SFAS No. 109
requires that deferred tax assets 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.
F-21
<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 carry forward..................................................... (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.
F-22
<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.
F-23
<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.
F-24
<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>
F-25
<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
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MAR. 31 JUNE 30 SEP. 29 DEC. 29 TOTAL
---------- ---------- ---------- ---------- ----------
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
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MAR. 30 JUNE 29 SEP. 28 DEC. 28 TOTAL
---------- ---------- ---------- ---------- ----------
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).
F-26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITY OTHER THAN THE NOTES OFFERED HEREBY NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY NOTES IN
ANY JURISDICTION, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Summary......................................... 1
Risk Factors.................................... 13
Use of Proceeds................................. 20
Capitalization.................................. 20
Selected Historical and Pro Forma Operating
Data........................................... 21
The Exchange Offer.............................. 24
Management's Discussion and Analysis of
Financial Condition and Results of
Operations..................................... 31
Business........................................ 39
Management...................................... 55
Description of the Notes........................ 60
Description of Credit Agreement................. 88
Certain U.S. Federal Income Tax Consequences.... 89
Plan of Distribution............................ 89
Legal Matters................................... 90
Experts......................................... 90
Index to Financial Statements................... F1
</TABLE>
$250,000,000
[LOGO]
12% SENIOR SUBORDINATED
NOTES DUE 2005
----------------------------
PROSPECTUS
----------------------------
MAY , 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL"), the Second Amended and Restated By-laws of the Company
(the "By-laws") provide that the Company may indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Company) by reason of the fact that he is or was a director, officer, employee
or agent of the Company, or is or was serving at the request of the Company as a
director, partner, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees inclusive of any appeal), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such claim, action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, and with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct unlawful.
Pursuant to Section 145 of the DGCL, the By-laws further provide that the
Company may indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed claim, action or suit by or
in the right of the Company to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the Company, or
is or was serving at the request of the Company as a director, partner, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees inclusive of any
appeal) actually and reasonably incurred by him in connection with the defense
or settlement of such claim, action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Company unless and only to the extent that a court of competent jurisdiction
(the "Court") in which such claim, action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court shall deem proper.
Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to above or in the defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith; that indemnification provided for by Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may be entitled;
and that the corporation is empowered to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation against any liability asserted against him in any such capacity or
arising out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under Section 145.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-1
<PAGE>
ITEM 21. EXHIBITS [AND FINANCIAL STATEMENT SCHEDULES].
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
- --------- ---------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Registrant................................. *
3.2 Second Amended and Restated By-laws 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 Credit Agreement, dated as of September 18, 1997, among the Registrant, Suntrust Bank
and certain other banks................................................................. **
4.4 First Amendment to the Credit Agreement, dated as of October 1, 1997, among the
Registrant, Suntrust Bank and certain other banks....................................... **
4.5 Amended and Restated Credit Agreement, dated as of March 25, 1998, among the Registrant,
Suntrust Bank and certain other banks................................................... ***
4.6 Indenture dated as of March 25, 1998, between the Company and United States Trust
Company of New York, as Trustee, relating to the Company's 12% Senior Subordinated Notes
due 2005................................................................................ ***
4.7 Initial Global Notes, dated March 25, 1998.............................................. ***
5. Opinion of Cravath, Swaine & Moore...................................................... ***
10.1 Form of Master Franchise Agreement...................................................... *
10.2 Form of Memorabilia Lease............................................................... *
10.3 Form of License Agreement............................................................... *
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, 1997, by and between
the Registrant and Planet Hollywood (Asia) Pte. Ltd..................................... **
10.8 Form of Master Franchise Agreement for 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...................................................................... *
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.... *
10.19 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 Planet Hollywood Hotel
joint venture between Planet Hospitality Holdings, Inc., Times Square Partners LLC and
others.................................................................................. **
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
- --------- ---------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
10.21 Registration Rights Agreement, dated March 20, 1998, among the Company and Bear, Stearns
& Co. Inc., Salomon Brothers Inc, NationsBanc Montgomery Securities LLC, Cowen &
Company, SunTrust Equitable Securities Corporation and Scotia Capital Markets........... ***
21.1 Subsidiaries............................................................................ **
23.1 Consent of Price Waterhouse LLP......................................................... ***
23.2 Consent of Cravath, Swaine & Moore (included in Exhibit 5).............................. ***
24.1 Powers of Attorney...................................................................... ***
25. Statement of Eligibility and Qualification on Form T-1 of The United States Trust
Company of New York under the Indenture dated March 25, 1998............................ ***
27.1 Financial Data Schedule................................................................. **
99.1 Form of Letter of Transmittal........................................................... ***
99.2 Form of Notice of Guaranteed Delivery................................................... ***
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees................................................................................ ***
99.4 Form of Letter to Clients............................................................... ***
99.5 Form of Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9................................................................................ ***
99.6 Ruling Request to Nevada State Gaming Control Board..................................... ***
99.7 Ruling from Nevada Board Chairman....................................................... ***
</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 (Registration no. 333-01490)
** Incorporated by reference to the exhibits with the corresponding exhibit
numbers in the Annual Report on Form 10-K for the year ended December 28,
1997, as amended, previously filed by the Registrant
*** Filed herewith
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions described under Item 20 above, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in Securities Act and is, heretofore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted against the Registrant by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This undertaking also includes documents filed subsequent
to the effective date of the Registration Statement through the date of
responding to the request.
II-3
<PAGE>
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
undersigned undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the application form.
The undersigned Registrant hereby undertakes that every prospectus: (i) that
is filed pursuant to the immediately preceding paragraph or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Orlando, State of
Florida, on this 1st day of May, 1998.
PLANET HOLLYWOOD INTERNATIONAL, INC.
Registrant
<TABLE>
<S> <C>
By: /s/ THOMAS AVALLONE
-----------------------------------------
Thomas Avallone
DIRECTOR, EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
* Chairman of the Board of
- ------------------------------ Directors May 1, 1998
Keith Barish
Director, President and
* Chief Executive Officer
- ------------------------------ (Principal Executive May 1, 1998
Robert Earl Officer)
Director, Executive Vice
/s/ THOMAS AVALLONE President and Chief
- ------------------------------ Financial Officer May 1, 1998
Thomas Avallone (Principal Financial and
Accounting Officer)
* Director
- ------------------------------ May 1, 1998
Claudio Gonzalez
* Director
- ------------------------------ May 11, 1998
Robert Krasnow
* Director
- ------------------------------ May 11, 1998
Mark McCormack
* Director
- ------------------------------ May 1, 1998
Ong Beng Seng
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<C> <S> <C>
* Director
- ------------------------------ May 1, 1998
Isadore Sharp
* Director
- ------------------------------ May 1, 1998
Michael Tarnopol
</TABLE>
- ------------------------
* The undersigned, by signing his name hereto, does hereby sign this
registration statement or amendment thereto on behalf of the above indicated
directors and officers of Planet Hollywood International, Inc. pursuant to
powers of attorney executed on behalf of each such director and officer.
<TABLE>
<S> <C>
By: /s/ THOMAS AVALLONE
-----------------------------------------
Thomas Avallone
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
- --------- ---------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Registrant................................. *
3.2 Second Amended and Restated By-laws 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 Credit Agreement, dated as of September 18, 1997, among the Registrant, Suntrust Bank
and certain other banks................................................................. **
4.4 First Amendment to the Credit Agreement, dated as of October 1, 1997, among the
Registrant, Suntrust Bank and certain other banks....................................... **
4.5 Amended and Restated Credit Agreement, dated as of March 25, 1998, among the Registrant,
Suntrust Bank and certain other banks................................................... ***
4.6 Indenture dated as of March 25, 1998, between the Company and United States Trust
Company of New York, as Trustee, relating to the Company's 12% Senior Subordinated Notes
due 2005................................................................................ ***
4.7 Initial Global Notes, dated March 25, 1998.............................................. ***
5. Opinion of Cravath, Swaine & Moore...................................................... ***
10.1 Form of Master Franchise Agreement...................................................... *
10.2 Form of Memorabilia Lease............................................................... *
10.3 Form of License Agreement............................................................... *
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, 1997, by and between
the Registrant and Planet Hollywood (Asia) Pte. Ltd..................................... **
10.8 Form of Master Franchise Agreement for 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...................................................................... *
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.... *
10.19 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 Planet Hollywood Hotel
joint venture between Planet Hospitality Holdings, Inc., Times Square Partners LLC and
others.................................................................................. **
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION
NO. DESCRIPTION BY REFERENCE
- --------- ---------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
10.21 Registration Rights Agreement, dated March 20, 1998, among the Company and Bear, Stearns
& Co. Inc., Salomon Brothers Inc, NationsBanc Montgomery Securities LLC, Cowen &
Company, SunTrust Equitable Securities Corporation and Scotia Capital Markets........... ***
21.1 Subsidiaries............................................................................ **
23.1 Consent of Price Waterhouse LLP......................................................... ***
23.2 Consent of Cravath, Swaine & Moore (included in Exhibit 5).............................. ***
24.1 Powers of Attorney...................................................................... ***
25. Statement of Eligibility and Qualification on Form T-1 of The United States Trust
Company of New York under the Indenture dated March 25, 1998............................ ***
27.1 Financial Data Schedule................................................................. **
99.1 Form of Letter of Transmittal........................................................... ***
99.2 Form of Notice of Guaranteed Delivery................................................... ***
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees................................................................................ ***
99.4 Form of Letter to Clients............................................................... ***
99.5 Form of Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9................................................................................ ***
99.6 Ruling Request to Nevada State Gaming Control Board..................................... ***
99.7 Ruling from Nevada Board Chairman....................................................... ****
</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 (Registration no. 333-01490)
** Incorporated by reference to the exhibits with the corresponding exhibit
numbers in the Annual Report on Form 10-K for the year ended December 28,
1997, as amended, previously filed by the Registrant
*** Filed herewith
****To be filed by amendment.
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
PLANET HOLLYWOOD INTERNATIONAL, INC.
The undersigned Directors of Planet Hollywood International, Inc. (the
"Company") hereby severally constitute and appoint Thomas Avallone and Scott E.
Johnson, and each of them singularly, as attorney to sign for me and in my name,
as a director of the Company, any and all documents, registrations and other
papers necessary in connection with the filing by the Company, with the
Securities and Exchange Commission (the "Commission") under the provisions of
the Securities Act of 1933, as amended, and any rules and regulations of the
Commission, a Registration Statement (the "Registration Statement") with respect
to the exchange of its outstanding 12% Senior Subordinated Notes due 2005 for
registered 12% Senior Subordinated Notes due 2005 and to file with the
Commission any and all amendments to any such Registration Statement with all
exhibits thereto, and any applications or other documents to be filed with the
Commission or any national securities exchange pertaining to such securities or
to such registration, with full power and authority to do and perform any and
all acts and things whatsoever required and necessary to be done, hereby
ratifying and approving the acts of said attorney.
Dated May 11, 1998
- -----------------------------
Thomas Avallone
Executive Vice President,
Chief Financial Officer
and Director
/s/ Mark McCormack
- -----------------------------
Mark McCormack
Director
- -----------------------------
Keith Barish
Chairman of the Board of
Directors and Director
- -----------------------------
Ong Beng Seng
Director
- -----------------------------
Robert I. Earl
President, Chief Executive
Officer and Director
- -----------------------------
Isadore Sharp
Director
- -----------------------------
Claudio Gonzalez
Director
- -----------------------------
Michael Tarnopol
Director
- -----------------------------
Robert Krasnow
Director
<PAGE>
POWER OF ATTORNEY
PLANET HOLLYWOOD INTERNATIONAL, INC.
The undersigned Directors of Planet Hollywood International, Inc. (the
"Company") hereby severally constitute and appoint Thomas Avallone and Scott E.
Johnson, and each of them singularly, as attorney to sign for me and in my name,
as a director of the Company, any and all documents, registrations and other
papers necessary in connection with the filing by the Company, with the
Securities and Exchange Commission (the "Commission") under the provisions of
the Securities Act of 1933, as amended, and any rules and regulations of the
Commission, a Registration Statement (the "Registration Statement") with respect
to the exchange of its outstanding 12% Senior Subordinated Notes due 2005 for
registered 12% Senior Subordinated Notes due 2005 and to file with the
Commission any and all amendments to any such Registration Statement with all
exhibits thereto, and any applications or other documents to be filed with the
Commission or any national securities exchange pertaining to such securities or
to such registration, with full power and authority to do and perform any and
all acts and things whatsoever required and necessary to be done, hereby
ratifying and approving the acts of said attorney.
Dated May 11, 1998
- -----------------------------
Thomas Avallone
Executive Vice President,
Chief Financial Officer
and Director
- -----------------------------
Mark McCormack
Director
- -----------------------------
Keith Barish
Chairman of the Board of
Directors and Director
- -----------------------------
Ong Beng Seng
Director
- -----------------------------
Robert I. Earl
President, Chief Executive
Officer and Director
- -----------------------------
Isadore Sharp
Director
- -----------------------------
Claudio Gonzalez
Director
- -----------------------------
Michael Tarnopol
Director
/s/ Robert Krasnow
- -----------------------------
Robert Krasnow
Director
<PAGE>
LETTER OF TRANSMITTAL
PLANET HOLLYWOOD INTERNATIONAL, INC.
OFFER TO EXCHANGE ITS REGISTERED
12% SENIOR SUBORDINATED NOTES DUE 2005,
FOR UP TO $250,000,000 AGGREGATE PRINCIPAL AMOUNT
OF ITS OUTSTANDING 12% SENIOR SUBORDINATED NOTES DUE 2005
PURSUANT TO THE PROSPECTUS, DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON JUNE 15,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
<TABLE>
<CAPTION>
BY MAIL: BY OVERNIGHT COURIER:
- --------------------------------------------- ---------------------------------------------
<S> <C>
United States Trust Company of New York United States Trust Company of New York
P.O. Box 844 770 Broadway, 13th Floor
Cooper Station New York, NY 10003
New York, NY 10276-0844 Attn: Corporate Trust
(registered or certified mail recommended) Operations Department
<CAPTION>
BY HAND: BY FACSIMILE:
- --------------------------------------------- ---------------------------------------------
<S> <C>
United States Trust Company of New York Fax No. (212) 420-6152
111 Broadway, Lower Level (For Eligible Institutions Only)
New York, NY 10006 Confirm by telephone:
Attn: Corporate Trust Services Telephone No. (800) 548-6565
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges that he or she has received the Prospectus,
dated , 1998 (the "Prospectus"), of Planet Hollywood International,
Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal
(this "Letter"), which together constitute the Company's offer (the "Exchange
Offer") to exchange an aggregate principal amount of up to $250,000,000 of
registered 12% Senior Subordinated Notes due 2005 (the "New Notes") of the
Company for an equal principal amount of the Company's outstanding 12% Senior
Subordinated Notes due 2005 (the "Old Notes"). The New Notes and the Old Notes
are collectively referred to herein as the "Notes."
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. Interest on the New Notes will accrue and be payable semiannually in
arrears on each April 1 and October 1, commencing October 1, 1998, at a rate of
12% per annum. If (i) neither a registration statement relating to the Exchange
Offer (the "Exchange Offer Registration Statement") nor a shelf registration
statement with respect to the Old Notes (the "Shelf Registration Statement" and,
together with the Exchange Offer Registration Statement, the "Registration
Statements") has been filed on or prior to 45 days after the original issue date
of the Old Notes, (ii) any of such Registration Statements is not declared
effective on or prior to 150 days after the original issue date of the Old Notes
(the "Effectiveness Target Date"), (iii) the Company fails to consummate the
Exchange Offer within 25 business days of the Effectiveness Target Date with
respect to the Exchange Offer Registration Statement or (iv) the Shelf
Registration Statement or the Exchange Offer Registration Statement is declared
effective but thereafter ceases to be effective or usable in connection with
resales of Transfer Restricted Securities (as defined in the Prospectus) during
the periods specified (each such event referred to in clauses (i) through (iv)
above, a "Registration Default"), then commencing on the day after the
occurrence of such Registration Default, the Company shall pay additional
interest on the Old Notes at a rate per annum equal to 0.25% of the principal
amount of Old Notes held, which rate shall increase by an
<PAGE>
additional 0.25% per annum on the first day of any subsequent 90-day period that
the Registration Default remains uncured up to a maximum rate equal to 1.0% per
annum (such additional interest being herein called "Liquidated Damages").
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest time and date to which the Exchange Offer is extended. The
Company shall notify the holders of the Old Notes of any extension as promptly
as practicable by oral or written notice thereof.
This Letter is to be completed by a holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of Old Notes, if
available, is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in "The Exchange Offer" section
of the Prospectus. Holders of Old Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other
documents required by this Letter to the Exchange Agent on or prior to the
Expiration Date, must tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 1. Delivery of documents
to the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
2
<PAGE>
List below the Old Notes to which this Letter relates. If the space provided
below is inadequate, the certificate numbers and principal amount at maturity of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES
1 2 3
<S> <C> <C> <C>
<CAPTION>
CERTIFICATE AGGREGATE
NUMBER(S) OF PRINCIPAL PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED OLD AMOUNT AMOUNT OF
HOLDER(S) NOTES OF OLD OLD NOTES
(PLEASE FILL IN, IF BLANK) TENDERED* NOTE(S) TENDERED**
<S> <C> <C> <C>
TOTAL
* Need not be completed if Old Notes are being tendered by book-entry transfer.
** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL
of the Old Notes represented by the Old Notes indicated in column 2. See Instruction 2.
Old Notes tendered hereby must be in denominations of principal amount at maturity of
$1,000 and any integral multiple thereof. See Instruction 1.
</TABLE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
Account Number _________________ Transaction Code Number _________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s) _____________________________________________
Window Ticket Number (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution which guaranteed delivery _______________________________
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number _________________ Transaction Code Number _________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _______________________________________________________________________
Address: ____________________________________________________________________
________________________________________
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount at
maturity of Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, that neither the holder of such Old Notes nor any such other
person is engaged in, or intends to engage in a distribution of such New Notes,
or has an arrangement or understanding with any person to participate in the
distribution of such New Notes, and that neither the holder of such Old Notes
nor any such other person is an "affiliate," as defined in Rule 405 under the
Securities Act of 1933 (the "Securities Act"), of the Company.
The undersigned also acknowledges that this Exchange Offer is being made by
the Company based upon the Company's understanding of an interpretation by the
staff of the Securities and Exchange Commission (the "Commission") as set forth
in no-action letters issued to third parties, that the New Notes issued in
exchange for the Old Notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that: (1) such
holders are not affiliates of the Company within the meaning of Rule 405 under
the Securities Act; (2) such New Notes are acquired in the ordinary course of
such holders' business; and (3) such holders are not engaged in, and do not
intend to engage in, a distribution of such New Notes and have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, the staff of the Commission has not considered the Exchange
Offer in the context of a no-action letter, and there can be no assurance that
the staff of the Commission would make a similar determination with respect to
the Exchange Offer as in other circumstances. The undersigned also ackknowledges
that if it is an affiliate of the Company, and is engaged in or intends to
engage in a distribution of the New Notes or has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, the undersigned could not rely on the applicable
interpretations of the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. If the undersigned is a
broker-dealer that will receive New Notes for its own account in exchange for
Old Notes, it represents that the Old Notes to be exchanged for the New Notes
were acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus in connection with
any resale of such New Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall
4
<PAGE>
survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in "The Exchange
Offer--Withdrawal of Tenders" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes in the name of the undersigned
or, in the case of a book-entry delivery of Old Notes, please credit the account
indicated above maintained at the Book-Entry Transfer Facility. Similarly,
unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, please send the New Notes to the undersigned at the address
shown above in the box entitled "Description of Old Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
5
<PAGE>
<TABLE>
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for To be completed ONLY if certificates for
Old Notes not exchanged and/or New Notes Old Notes not exchanged and/or New Notes
are to be issued in the name of and sent are to be sent to someone other than the
to someone other than the person(s) whose person(s) whose signature(s) appear(s) on
signature(s) appear(s) on this Letter this Letter above or to such person(s) at
above, or if Old Notes delivered by an address other than shown in the box
book-entry transfer which are not accepted entitled "Description of Old Notes" on
for exchange are to be returned by credit this Letter above.
to an account maintained at the Book-Entry Mail New Notes and/or Old Notes to:
Transfer Facility other than the account Name(s):
indicated above. (Please Type or Print)
Issue New Notes and/or Old Notes to: (Please Type or Print)
Name(s): Address:
(Please Type or Print) (Including Zip Code)
(Please Type or Print)
Address:
(Including Zip Code)
(Complete accompanying Substitute Form
W-9)
/ / Credit unexchanged Old Notes delivered
by book-entry transfer to the
Book-Entry Transfer Facility account
set forth below.
(Book-Entry Transfer Facility
Account Number, if applicable)
</TABLE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR
OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED
DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY
THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE
COMPLETING ANY BOX ABOVE.
6
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Dated: ___________________________________________________________________, 1998
<TABLE>
<S> <C>
x: , 1998
x: , 1998
(SIGNATURE(S) OF OWNER(S)) (DATE)
</TABLE>
Area Code and Telephone Number: ________________________________________________
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old
Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s): _______________________________________________________________________
________________________________________________________________________________
(PLEASE TYPE OR PRINT)
Capacity: ______________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature Guaranteed by
an Eligible Institution: _______________________________________________________
(AUTHORIZED SIGNATURE)
________________________________________________________________________________
(TITLE)
________________________________________________________________________________
(NAME AND FIRM)
Dated: ___________________________________________________________________, 1998
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER TO EXCHANGE REGISTERED
12% SENIOR SUBORDINATED NOTES DUE 2005 FOR UP TO $250,000,000 AGGREGATE
PRINCIPAL
AMOUNT OF OUTSTANDING 12% SENIOR SUBORDINATED NOTES DUE 2005 OF
PLANET HOLLYWOOD INTERNATIONAL, INC.
1. DELIVERY OF THIS LETTER AND OLD NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders of Old Notes either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Old Notes tendered hereby must be in
denominations of principal amount at maturity of $1,000 and any integral
multiple thereof.
Holders of Old Notes whose certificates for Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer-- Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined below), (ii) prior to the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes, the certificate number or numbers of such
Old Notes and the principal amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within five business days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof),
together with the certificate or certificates representing the Old Notes to be
tendered in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by this Letter will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) such properly completed
and executed Letter of Transmittal (or facsimile thereof), as well as the
certificate or certificates representing all tendered Old Notes in proper form
for transfer, or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal are received by the Exchange
Agent within five business days after the Expiration Date.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders. Instead of
delivery by mail, it is recommended that holders use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
delivery to the Exchange Agent before the Expiration Date. No Letter of
Transmittal or Old Notes should be sent to the Company. Holders may request
their respective brokers, dealers, commercial banks, trust companies or nominees
to effect the tenders for such holders.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF OLD NOTES WHO TENDER BY
BOOK-ENTRY TRANSFER).
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of Old
Notes -- Principal Amount Tendered." A reissued certificate representing the
8
<PAGE>
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF OLD NOTES WHO TENDER BY
BOOK-ENTRY TRANSFER). (CONTINUED)
balance of nontendered Old Notes will be sent to such tendering holder, unless
otherwise provided in the appropriate box on this Letter, promptly after the
Expiration Date. All of the Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
3. SIGNATURES ON THIS LETTER, BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Notes tendered
hereby, the signature must correspond exactly with the name as written on the
face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder of the Old Notes
specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued
to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate bond powers are required. Signatures
on such certificates must be guaranteed by an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed by such
registered holder or accompanied by a properly completed bond power, in each
case signed or endorsed in blank by such registered holder as such registered
holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed or
endorsed by trustees, executors, administrators, guardians, attorney-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
Signature on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution unless the Old Notes
tendered pursuant thereto are tendered (i) by a registered holder who has not
completed the box entitled "Special Payment Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. In the event that signatures on a Letter of Transmittal or
a notice of withdrawal, as the case may be, are required to be guaranteed, such
guarantee must be by a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (an "Eligible Institution").
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer are to
be issued or sent, if different from the name or address of the person signing
this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. A holder of Old Notes tendering Old Notes by book-entry transfer may
request that Old Notes not exchanged be credited to such account maintained at
the Book-Entry Transfer Facility as such holder of Old Notes may designate
hereon.
9
<PAGE>
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. (CONTINUED)
If no such instructions are given, such Old Notes not exchanged will be returned
to the name or address of the person signing this Letter.
5. TAX IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose Old
Notes are accepted for exchange must provide the Company (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below or otherwise establish a basis for exemption from backup withholding. If
such holder is an individual, the TIN is his or her social security number. If
the Company is not provided with the current TIN or an adequate basis for an
exemption, such tendering holder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, delivery of New Notes to such tendering
holder may be subject to backup withholding in an amount equal to 31% of all
reportable payments made after the exchange.
Certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9 set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Company a completed Form W-8, Certificate
of Foreign Status. These forms may be obtained from the Exchange Agent. If the
Old Notes are in more than one name or are not in the name of the actual owner,
such holder should consult the W-9 Guidelines for information on which TIN to
report. If such holder does not have a TIN, such holder should consult the W-9
Guidelines for instructions on applying for a TIN, check the box in Part 2 of
the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note:
checking this box and writing "applied for" on the form means that such holder
has already applied for a TIN or that such holder intends to apply for one in
the near future. If a holder checks the box in Part 2 of the Substitute Form W-9
and writes "applied for" on that form, backup withholding at a 31% rate will
nevertheless apply to all reportable payments made to such holder. If such a
holder furnishes its TIN to the Company within 60 days, however, any amounts so
withheld shall be refunded to such holder.
Backup withholding is not an additional Federal income tax. Rather, the
Federal income tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in overpayment of
taxes, a refund may be obtained from the Internal Revenue Service.
6. TRANSFER TAXES.
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith. If, however, New Notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered hereby, or if tendered Old Notes are
registered in the name of any person other than the person signing this Letter,
or if a transfer tax is imposed for any reason other than the exchange of Old
Notes in connection with the Exchange Offer, the amount of any such transfer
taxes (whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
10
<PAGE>
6. TRANSFER TAXES. (CONTINUED)
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES SPECIFIED IN THIS LETTER.
7. WAIVER OF CONDITIONS.
The Company reserves the right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
11
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: PLANET HOLLYWOOD INTERNATIONAL, INC.
<TABLE>
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY SOCIAL SECURITY NUMBER(S)
BY SIGNING AND DATING BELOW. OR
EMPLOYER IDENTIFICATION
NUMBER(S)
PART 2--TIN Applied For / /
DEPARTMENT OF THE CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
TREASURY
INTERNAL REVENUE SERVICE
(1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to be
issued to me),
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION (2) I am not subject to backup withholding because: (a) I am
NUMBER ("TIN") AND exempt from backup withholding, or (b) I have not been
CERTIFICATION notified by the Internal Revenue Service (the "IRS") that I am
subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding, and
(3) any other information provided on this form is true and
correct.
Signature: Date:
You must cross out item (2) of the above certification if you have been notified by the IRS
that you are subject to backup withholding because of underreporting of interest or
dividends on your tax returns and you have not been notified by the IRS that you are no
longer subject to backup withholding.
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU CHECKED THE BOX IN PART 2
OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of the
exchange, 31 percent of all reportable payments made to me thereafter will be
withheld until I provide a number.
Signature ___________________________________________ Date _____________________
12
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
PLANET HOLLYWOOD INTERNATIONAL, INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Planet Hollywood International, Inc. (the "Company") made
pursuant to the Prospectu, dated , 1998 (the "Prospectus"), and the
enclosed Letter of Transmittal (the "Letter of Transmittal") if certificates for
Old Notes of the Company are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Exchange Agent (as defined) prior to
5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer.
Such form may be delivered or transmitted by facsimile transmission, mail or
hand delivery to United States Trust Company of New York (the "Exchange Agent")
as set forth below. In addition, in order to utilize the guaranteed delivery
procedure to tender Old Notes pursuant to the Exchange Offer, a completed,
signed and dated Letter of Transmittal (or facsimile thereof) must also be
received by the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date. Capitalized terms not defined herein are defined in the
Prospectus.
DELIVERY TO: UNITED STATES TRUST COMPANY OF NEW YORK, EXCHANGE AGENT
<TABLE>
<CAPTION>
BY MAIL: BY OVERNIGHT COURIER:
- --------------------------------------------- ---------------------------------------------
<S> <C>
United States Trust Company United States Trust Company
of New York of New York
P.O. Box 844 770 Broadway, 13th Floor
Cooper Station New York, NY 10003
New York, NY 10276-0844 Attn: Corporate Trust Operations Department
(registered or certified mail recommended)
<CAPTION>
BY HAND: BY FACSIMILE:
- --------------------------------------------- ---------------------------------------------
<S> <C>
United States Trust Company Fax No. (212) 420-6152
of New York (For Eligible Institutions Only)
111 Broadway, Lower Level Confirm by telephone:
New York, NY 10006 Telephone No. (800) 548-6565
Attn: Corporate Trust Services
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus.
<TABLE>
<S> <C>
Principal Amount of Old Notes Tendered: If Old Notes will be delivered by book-entry
$ ---------------------------------- transfer to The Depository Trust Company,
provide account number.
</TABLE>
Certificate Nos. (if available):
- ----------------------------------
Total Principal Amount Represented by Old
Notes Certificate(s):
$__________________________________ Account
Number_____________________________________
<PAGE>
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
<TABLE>
<CAPTION>
PLEASE SIGN HERE
<S> <C>
X
Signature(s) of Owner(s) or Date
Authorized Signatory
</TABLE>
Area Code and Telephone Number: ________________________________________________
Must be signed by the holder(s) of Old Notes as the name(s) of such holder(s)
appear(s) on the Old Notes certificate(s) or on a security position listing, or
by person(s) authorized to become registered holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If any signature
is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
set forth his or her full title below.
<TABLE>
<S> <C>
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
Capacity:
Address(es):
</TABLE>
GUARANTEE
The undersigned, a member of a registered national securities exchange, or a
member of the National Association of Securities Dealers, Inc., or a commercial
bank trust company having an office or correspondent in the United States, or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 of the
Securities Exchange Act of 1934, as amended, hereby guarantees that the
certificates representing the principal amount of Old Notes tendered hereby in
proper form for transfer, or timely confirmation of the book-entry transfer of
such Old Notes into the Exchange Agent's account at the Depository Trust Company
pursuant to the procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus, together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantee and any other documents required by the Letter of
Transmittal, will be received by the Exchange Agent at the address set forth
above, within five business days after the Expiration Date.
<TABLE>
<S> <C>
Name of Firm Authorized Signature
Address Title
Name:
Zip Code (Please Type or Print)
Area Code and Tel. No.: Dated:
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC.
OFFER TO EXCHANGE ITS REGISTERED
12% SENIOR SUBORDINATED NOTES DUE 2005,
FOR UP TO $250,000,000 AGGREGATE PRINCIPAL AMOUNT
OF ITS OUTSTANDING
12% SENIOR SUBORDINATED NOTES DUE 2005
To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
Planet Hollywood International, Inc. (the "Company") is offering to exchange
(the "Exchange Offer"), upon and subject to the terms and conditions set forth
in the Prospectus, dated , 1998 (the "Prospectus"), and the enclosed
Letter of Transmittal (the "Letter of Transmittal"), its registered 12% Senior
Subordinated Notes due 2005 (the "New Notes") for up to $250,000,000 aggregate
principal amount of its outstanding 12% Senior Subordinated Notes due 2005 (the
"Old Notes"). The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
as of March 25, 1998, between the Company and the Initial Purchasers.
We are requesting that you contact your clients for whom you hold Old Notes
regarding the Exchange Offer. For your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated , 1998;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time
will not permit all required documents to reach the Exchange Agent prior to
the Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to United States Trust Company of New
York, the Exchange Agent for the Old Notes.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City time, on June 15, 1998 (the "Expiration Date") (20 business
days following the commencement of the Exchange Offer), unless extended by the
Company. The Old Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time before 5:00 p.m, New York City time, on the Expiration Date.
To participate in the Exchange Offer, a duly executed and properly completed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, should be sent to the Exchange
Agent and certificates representing the Old Notes should be delivered to the
Exchange Agent, all in accordance with the instructions set forth in the Letter
of Transmittal and the Prospectus.
If holders of Old Notes wish to tender, but it is impracticable for them to
forward their certificates for Old Notes prior to the expiration of the Exchange
Offer or to comply with the book-entry transfer procedures on a timely basis, a
tender may be effected by following the guaranteed delivery procedures described
in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures."
<PAGE>
Any inquiries you may have with respect to the Exchange Offer, or requests
for additional copies of the enclosed materials should be directed to the
Exchange Agent for the Old Notes, at its address and telephone number set forth
on the front of the Letter of Transmittal.
Very truly yours,
Planet Hollywood International, Inc.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF
THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN
THE PROSPECTUS OR THE LETTER TO TRANSMITTAL.
Enclosures
<PAGE>
PLANET HOLLYWOOD INTERNATIONAL, INC.
OFFER TO EXCHANGE ITS REGISTERED
12% SENIOR SUBORDINATED NOTES DUE 2005,
FOR UP TO $250,000,000 AGGREGATE PRINCIPAL AMOUNT
OF ITS OUTSTANDING
12% SENIOR SUBORDINATED NOTES DUE 2005
To Our Clients:
Enclosed for your consideration is a Prospectus, dated , 1998 (the
"Prospectus"), and the Letter of Transmittal (the "Letter of Transmittal"),
relating to the offer (the "Exchange Offer") of Planet Hollywood International,
Inc. (the "Company") to exchange its registered 12% Senior Subordinated Notes
due 2005 (the "New Notes") for up to $250,000,000 aggregate principal amount of
its outstanding 12% Senior Subordinated Notes due 2005 (the "Old Notes"), upon
the terms and subject to the conditions described in the Prospectus. The
Exchange Offer is being made in order to satisfy certain obligations of the
Company contained in the Registration Rights Agreement dated as of March 25,
1998, between the Company and the Initial Purchasers.
This material is being forwarded to you as the beneficial owner of the Old
Notes carried by us in your account but not registered in your name. A TENDER OF
SUCH OLD NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in order
to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on June 15, 1998 (the "Expiration Date") (20 business days
following the commencement of the Exchange Offer), unless extended by the
Company. Any Old Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time before 5:00 p.m., New York City time, on the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in the
Prospectus in the section captioned "The Exchange Offer--Conditions to the
Exchange Offer".
3. The Exchange Offer expires at 5:00 p.m., New York City time, on the
Expiration Date, unless extended by the Company.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form on the back of
this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY
AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER OLD NOTES.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by Planet
Hollywood International, Inc. with respect to its Old Notes.
This will instruct you to tender the Old Notes held by you for the account
of the undersigned, upon and subject to terms and conditions set forth in the
Prospectus and the related Letter of Transmittal.
Please tender the Old Notes held by you for my account as indicated below:
<TABLE>
<S> <C>
AGGREGATE PRINCIPAL AMOUNT OF OLD NOTES
12% Senior Subordinated Notes due 2005......
/ / Please do not tender any Old Notes held
by you for my account.
Dated:, 1998 Signature(s)
Please print name(s) here
Address(es)
Area Code(s) and Telephone Number(s)
Tax Identification or Social Security No(s).
</TABLE>
None of the Old Notes held by us for your account will be tendered unless we
receive written instructions from you to do so. Unless a specific contrary
instruction is given in the space provided, your signature(s) hereon shall
constitute an instruction to us to tender all the Old Notes held by us for your
account.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
<C> <S> <C>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the minor
account) is the only contributor,
the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust account The actual owner (1)
that is not a legal
valid trust under State
law
8. Sole proprietorship account The owner(4)
- ------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
NUMBER OF--
FOR THIS TYPE OF ACCOUNT:
- ------------------------------------------------------------
9. A valid trust, estate, or The legal entity (do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the department The public entity
of Agriculture in the name
of a public entity (such as
a State or local
government, school
district, or prison) that
receives agricultural
program payments
</TABLE>
- ------------------------------------------------
- ------------------------------------------------
(1) List all names first and circle the name of the person whose number you
furnish. If only one person on a joint account has a Social Security number,
that person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your Social Security number or
employer identification number (if you have one).
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number (for business and all other
entities), at the local office of the Social Security Administration or the
Internal Revenue Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan, or a custodial account under Section 403(b)(7), if the account
satisfies the requirements of Section 401(f)(7).
- The United States or any agency or instrumentalities.
- A State, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S.,
the District of Columbia or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a) of the Code.
- An exempt charitable remainder trust, or a non-exempt trust described in
Section 4947(a)(1) of the Code.
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
- A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under Section 1441
of the Code.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
- Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
Section 852 of the Code).
- Payments described in Section 6049(b)(5) of the Code to nonresident
aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
- Mortgage interest paid to you.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE
FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN
ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH A PAYER A COMPLETED INTERNAL
REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under Sections 6041, 6041(A)(a),
6045, and 6050(A) of the code and the regulations promulgated thereunder.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers whether or not
receipts are required to file tax returns. Payers must generally withhold 31% of
taxable interest, dividends, and certain other payments to a payee who does not
furnish a taxpayer identification number to a payer. Certain penalties may also
apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Wilfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Letterhead
May 13, 1998
John A. Godrey, Esq.
Schreck Morris
1200 Bank of America Plaza
300 South Fourth Street
Las Vegas, NV 89101
Re: Planet Hollywood International, Inc. - Request for
Administrative Determination
Dear Mr. Godfrey:
I am in receipt of your correspondence dated April 21, 1998, regarding
Planet Hollywood International, Inc.'s ("Planet Hollywood") planned exchange
offer ("Exchange Offer"). According to your correspondence and the offering
documents, Planet Hollywood intends to exchange its $250 million 12% Senior
Subordinated Notes ("Notes") for newly registered $250 million 12% Senior
Subordinated Notes ("Exchange Notes"). Because it is an exact exchange, there
will be no proceeds resulting from the transaction. However, the initial
offering of the Notes netted approximately $242.5 million of which approximately
$41.3 million will be contributed to the joint venture with a subsidiary of
Aladdin Gaming Holdings, LLC to construct and develop the Las Vegas Project.
Pursuant to NGC Regulation 16.118(5), and based upon the information submitted
in your letter and the contents of the offering documents, it is not necessary
for Planet Hollywood to submit an application for approval to proceed with the
Exchange Offer.
This ruling is issued upon the fact that the current Note holders are, and
the prospective Exchange Note holders will be, sophisticated institutional
investors and not retail investors and that no new proceeds will result from the
Exchange Offer. Further, the offering documents appear to contain adequate
material disclosures, the offering raises no apparent concerns regarding the
standards enunciated in NGC Regulation 16.060, and the Board will have full
opportunity to review the financing activities of Planet Hollywood when it
submits an application for participation in the Las Vegas Project.
This administrative determination is conditioned that, as represented in
your letter, no new proceeds will be received from the Exchange Offer. This
administrative determination should not be construed in any way as an
approval or
<PAGE>
John A. Godfrey, Esq.
Schreck Harris
May 13, 1998
Page 2
reflection of the merits of the offering. Finally, this determination is
further conditioned that the Corporate Securities Division be kept promptly and
continuously informed as to the progress of the offering.
This letter is based upon your representations and the content of the
offering documents that were provided therein. Should any such factual
information change, notify the Board immediately. Please contact me if you have
any questions.
Sincerely,
/s/ William A. Bible
William A. Bible
Chairman
WAB/SNN:dgs
cc: Steve DuCharme
C. Brian Harris
Corporate Securities Division
Investigations Division
Central Files
