<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1994
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PRIME HOSPITALITY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 22-2640625
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
</TABLE>
------------------------
700 ROUTE 46 EAST
FAIRFIELD, NEW JERSEY 07004
(201) 882-1010
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOSEPH BERNADINO, ESQ.
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
PRIME HOSPITALITY CORP.
700 ROUTE 46 EAST
FAIRFIELD, NEW JERSEY 07004
(201) 882-1010
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
with copies to:
<TABLE>
<S> <C>
WILLIAM N. DYE, ESQ. RAYMOND Y. LIN, ESQ.
WILLKIE FARR & GALLAGHER LATHAM & WATKINS
ONE CITICORP CENTER 885 THIRD AVENUE
153 EAST 53RD STREET SUITE 1000
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022
(212) 821-8000 (212) 906-1200
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with dividend or interest
reinvestment plans, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Senior Subordinated Notes
due 2004................... $100,000,000 100% $100,000,000 $34,483
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of determining the registration fee.
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
***************************************************************************
* *
* 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. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED MARCH 24, 1994
PROSPECTUS
[LOGO]
PRIME HOSPITALITY CORP.
$100,000,000
% SENIOR SUBORDINATED NOTES DUE 2004
(INTEREST PAYABLE AND )
------------------------
The % Senior Subordinated Notes due 2004 (the "Notes") are being
offered (the "Offering") by Prime Hospitality Corp. (the "Company"). Interest on
the Notes is payable semiannually on and of each year,
commencing , 1994.
The Notes will mature on , 2004. The Notes may be redeemed at
the option of the Company, in whole or in part, at any time on or after
, 1999, at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the redemption date. In addition, at any time prior
to , 1997, the Company may redeem up to 25% of the initial principal
amount of the Notes originally issued with the net proceeds of one or more
Public Offerings (as defined herein) of the Common Stock of the Company at a
redemption price equal to % of the principal amount thereof, plus accrued
and unpaid interest, if any, to the redemption date. In the event of a Change of
Control (as defined herein), the Company will be required to offer to repurchase
all outstanding Notes at 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase.
The Notes are unsecured senior subordinated obligations of the Company and
will be subordinated to all existing and future Senior Indebtedness (as defined
herein) of the Company. The Notes will also be structurally subordinated to
indebtedness and other obligations of the Company's subsidiaries. The Notes will
be senior to any indebtedness which by its terms is subordinate to the Notes
regardless of when such indebtedness is issued. As of December 31, 1993, on a
pro forma basis, the Company had approximately $77.8 million of outstanding
Senior Indebtedness (as defined herein) and no indebtedness that is either pari
passu or subordinate to the Notes. As of December 31, 1993, the Restricted
Subsidiaries (as defined herein) of the Company had no additional indebtedness
and an Unrestricted Subsidiary (as defined herein) of the Company had an
additional $23.4 million of indebtedness.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.
------------------------
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.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............................. % % %
- -----------------------------------------------------------------------------------------------
Total................................ $ $ $
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(3) Before deducting estimated expenses of $800,000 payable by the Company.
The Notes are being offered by the Underwriters subject to receipt and
acceptance by the Underwriters and their right to reject any order in whole or
in part. It is expected that delivery of the Notes will be made on or about
, 1994.
KIDDER, PEABODY & CO. MONTGOMERY SECURITIES
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1994
<PAGE> 3
[PHOTOGRAPHS]
WITH RESPECT TO SALES OF THE NOTES OFFERED HEREBY TO CALIFORNIA RESIDENTS,
SUCH NOTES MAY BE SOLD ONLY TO THE FOLLOWING INDIVIDUALS: (1) "ACCREDITED
INVESTORS" WITHIN THE MEANING OF REGULATION D UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, (2) BANKS, SAVINGS AND LOAN ASSOCIATIONS, TRUST COMPANIES, INSURANCE
COMPANIES, INVESTMENT COMPANIES REGISTERED UNDER THE INVESTMENT COMPANY ACT OF
1940, PENSION AND PROFIT SHARING TRUSTS, CORPORATIONS OR OTHER ENTITIES WHICH,
TOGETHER WITH THE CORPORATION'S OR OTHER ENTITY'S AFFILIATES WHICH ARE UNDER
COMMON CONTROL, HAVE A NET WORTH ON A CONSOLIDATED BASIS ACCORDING TO THEIR MOST
RECENT REGULARLY PREPARED FINANCIAL STATEMENTS (WHICH SHALL HAVE BEEN REVIEWED,
BUT NOT NECESSARILY AUDITED, BY OUTSIDE ACCOUNTANTS) OR NOT LESS THAN
$14,000,000 AND SUBSIDIARIES OF THE FOREGOING OR (3) PERSONS WHO HAVE EITHER:
(I) A NET WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) OF AT
LEAST $250,000 AND AN ANNUAL GROSS INCOME OF AT LEAST $75,000 OR (II)
IRRESPECTIVE OF ANNUAL GROSS INCOME, A NET WORTH OF AT LEAST $500,000 (EXCLUSIVE
OF HOME, HOME FURNISHINGS AND AUTOMOBILES).
2
<PAGE> 4
[MAP]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith will file reports and other information with the Securities and
Exchange Commission (the "Commission"). The reports 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 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the Commission at Seven
World Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates. The Company's Common
Stock is listed on the New York Stock Exchange. Reports, proxy materials and
other information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Notes offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain portions of which are
omitted as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Notes, reference is made to the
Registration Statement, including the exhibits and schedules. The Registration
Statement, together with its exhibits and schedules thereto, may be inspected,
without charge, at the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20459, and also at the regional offices of the Commission
listed above. Copies of such material may also be obtained from the Commission
upon the payment of prescribed fees.
Statements contained in the Prospectus as to any contracts, agreements or
other documents filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is hereby made to the copy
of such contract, agreement or other document filed as an exhibit to the
Registration Statement for a full statement of the provisions thereof, and each
such statement in the Prospectus is qualified in all respects by such reference.
3
<PAGE> 5
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
are incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1993; and
2. All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since the end of the fiscal year ended
December 31, 1993.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the Offering shall be deemed incorporated herein by reference,
and such documents shall be deemed to be a part hereof from the date of filing
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 such statement as so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the request of any such person, a copy of any or all
of the above documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into the documents that this Prospectus incorporates). Requests should be
directed to Prime Hospitality Corp., 700 Route 46 East, Fairfield, New Jersey
07004, Attention: Joseph Bernadino, Esq., Senior Vice President, Secretary and
General Counsel, (201) 882-1010.
4
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and combined financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. Unless the context indicates or
requires otherwise, references in this Prospectus to the "Company" are to Prime
Hospitality Corp. and its subsidiaries.
THE COMPANY
The Company is a leading independent hotel operating company with ownership
or management of 86 full-service and limited-service hotels in 19 states and one
resort hotel in the U.S. Virgin Islands (the "Hotels"). The Company's Hotels are
generally moderately priced hotels which are designed to attract business and
leisure travelers desiring quality accommodations at affordable prices. Located
primarily in secondary and tertiary markets, the Hotels typically contain 100 to
200 guest rooms or suites and operate under franchise agreements with national
hotel chains (the "Franchised Hotels") or under the Company's proprietary
Wellesley Inns(R) or AmeriSuites(R) trade names (the "Proprietary Hotels"). The
Company owns or leases 40 of the Hotels (the "Owned Hotels") and manages the
remaining 47 Hotels for others (the "Managed Hotels"). The Company holds
significant mortgages or other financial interests in 12 of the 47 Managed
Hotels.
The Company's proprietary hotel brands, Wellesley Inns and AmeriSuites, are
limited-service hotels that primarily target the business traveler. Wellesley
Inns are upper-economy hotels located in Florida, the Middle Atlantic and the
Northeast United States, generally within short distances from restaurant
facilities. AmeriSuites are all-suites hotels mainly situated near corporate
office parks and major attractions in locations in the Southern and Central
United States. The Company has entered into an agreement in which it or its
joint venture partner may, if certain conditions are met, contribute its eight
AmeriSuites to a joint venture of which it will be a 50% owner. See
"Business -- Lodging Operations -- AmeriSuites."
The following table sets forth information with respect to the Company's
Hotels at March 1, 1994:
<TABLE>
<CAPTION>
HOTELS
MANAGED WITH OTHER
OWNED SIGNIFICANT MANAGED TOTAL
HOTELS(1) INTEREST(2) HOTELS HOTELS
--------- ------------ ------- ------
<S> <C> <C> <C> <C>
Wellesley Inn............................. 11 5 11 27
AmeriSuites............................... 8 0 0 8
Marriott.................................. 0 1 1 2
Radisson.................................. 0 1 1 2
Sheraton.................................. 2 0 1 3
Holiday Inn............................... 2 1 4 7
Ramada.................................... 7 2 12 21
Howard Johnson............................ 8 2 4 14
Other..................................... 2 0 1 3
-- -- -- --
Total........................... 40 12 35 87
-- -- -- --
-- -- -- --
</TABLE>
- ---------------
(1) Of the 40 Owned Hotels, ten are leased.
(2) Twelve Managed Hotels in which the Company holds a significant mortgage on
the property.
As a leading hotel operating company, the Company enjoys a number of
operating advantages over other lodging companies. With 87 Hotels covering a
number of price points and a broad geographic range, the Company possesses the
critical mass to support sophisticated operating, marketing and financial
systems. The Company believes that its array of central services permits on-site
hotel general managers to focus effectively on providing guest services, results
in economies of scale and helps generate above-market hotel profit
5
<PAGE> 7
margins. As a result of these operating strategies, the Company's Hotels
generated average operating profit margins that exceeded comparable industry
standards for 1992, as reported by industry sources, by approximately six
percent for limited-service hotels and 16 percent for full-service hotels.
In addition to its hotel operations, the Company owns a portfolio of notes
and real estate (the "Other Assets"). As of December 31, 1993, the Other Assets
included $115.3 million in notes related to the Managed Hotels, $50.0 million in
other notes and $23.6 million in real estate. The Company intends over time to
convert certain of these Other Assets to cash and hotel assets. In 1992 and
1993, the Company converted $46.2 million and $14.6 million, respectively, of
other assets to cash and added six operating hotel assets through settlements
and lease expirations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business -- Lodging
Operations -- Franchised Hotels" and "Business -- Other Assets."
Improving hotel industry fundamentals have had a favorable impact on the
Hotels and the Other Assets. The significant restrictions on new hotel
development caused by scarcity of investment capital, coupled with increases in
room demand, have resulted in higher occupancy and room rates for the domestic
hotel industry. Industry-wide average occupancy increased in both 1992 and 1993
by 1.8% and industry-wide average room rates increased in both 1992 and 1993 by
$0.50 and $1.37, respectively. The Company believes that industry fundamentals
are continuing to strengthen. See "Business -- Lodging Industry" and
"Business -- Other Assets."
THE REORGANIZATION
The Company emerged from the chapter 11 reorganization of its predecessor,
Prime Motor Inns, Inc. and certain of its subsidiaries ("PMI") on July 31, 1992
(the "Effective Date"). PMI had filed for protection under chapter 11 of the
United States Bankruptcy Code in September 1990. During its approximately two-
year reorganization, PMI restructured its assets, operations and capital
structure. As a result, the Company (i) eliminated numerous unprofitable lease
and management agreements, (ii) revalued its assets to reflect the then
approximate current fair market value of such assets on its financial statements
and (iii) reduced its liabilities by approximately $500 million. On the
Effective Date, the Company emerged from chapter 11 reorganization with 75 owned
or managed hotels (as compared to 141 owned or managed hotels prior to the
chapter 11 reorganization), $135.6 million of stockholders' equity and $266.4
million of long-term debt.
Since the Effective Date, the Company has taken the following steps to
further strengthen its operations and financial condition:
- Reduced overhead costs, reconstituted its management team and recruited
new senior management to the Company that is responsible to a new,
independent board of directors;
- Converted a portion of its notes, mortgages and other assets to cash or
hotel operating assets that provided the Company with approximately $61.0
million in cash and six operating hotel properties obtained through
settlements or lease terminations;
- Repaid approximately $87.0 million of its long-term debt using the cash
proceeds from conversions of other assets, tax refunds and income
generated from Hotel operations;
- Formulated and began implementing a hotel development and improvement
plan pursuant to which the Company purchased one full-service hotel and
built one new Wellesley Inn in 1993; and
- Allocated more than 6.0% of its hotel revenues during this period to
enhance the product quality and market position of its existing Hotels,
including repositioning eight Hotels and changing the franchise
affiliations of four of such Hotels.
6
<PAGE> 8
THE OFFERING
Securities Offered......... $100 million aggregate principal amount of %
Senior Subordinated Notes due , 2004
(the "Notes").
Issuer..................... Prime Hospitality Corp.
Interest Payment Dates..... and , commencing , 1994.
Ranking.................... The Notes will rank junior in right of payment to
all existing and future Senior Indebtedness of the
Company. The Notes will also be structurally
subordinated to indebtedness and other obligations
of the Company's subsidiaries. The Notes will be
senior to any indebtedness which by its terms is
subordinate to the Notes, regardless of when such
indebtedness is incurred. As of December 31, 1993,
after giving effect to the Offering and the
application of the net proceeds therefrom and the
purchase by the Company of an aggregate of $7.2
million of its Senior Indebtedness as of March 15,
1994, the Company will have approximately $77.8
million of outstanding Senior Indebtedness, and no
indebtedness that is either pari passu or
subordinate to the Notes.
Mandatory Redemption....... None.
Optional Redemption........ The Notes may be redeemed at the option of the
Company in whole or in part, at any time on or
after , 1999, at the redemption prices
set forth herein, plus accrued and unpaid interest,
if any, to the redemption date. In addition, at any
time prior to , 1997, the Company may
redeem up to 25% of the initial principal amount of
the Notes originally issued with the net proceeds
of one or more Public Offerings of the Common Stock
of the Company at a redemption price equal to
% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the
redemption date; provided that at least 75% of the
principal amount of Notes originally issued remain
outstanding immediately after the occurrence of
such redemption and that such redemption occurs
within 90 days following the closing of any such
Public Offering. See "Description of the Notes
Optional Redemption."
Change of Control.......... In the event of a Change of Control (as defined
herein), the Company will be required to offer to
repurchase all outstanding Notes at 101% of the
then outstanding principal amount thereof, plus
accrued and unpaid interest, if any, to the date of
repurchase. See "Description of the
Notes -- Repurchase at the Option of Holders."
Certain Covenants.......... The indenture relating to the Notes (the
"Indenture") will contain certain covenants that,
among other things, limit the ability of the
Company and its subsidiaries to incur Indebtedness
and issue Disqualified Stock (as defined herein),
make restricted payments, engage in certain
transactions with the Company's affiliates, sell
assets, incur or suffer to exist certain liens and
engage in mergers or consolidations.
Use of Proceeds............ The estimated net proceeds from the Offering of
$96.2 million will be used as follows: (i) $26.4
million to repay then existing Senior Secured Notes
of the Company (the "Senior Secured Notes") in
full, (ii) $53.1 million to repay then existing
Junior Secured Notes of the Company (the "Junior
Secured Notes") in full and (iii) $16.7 million for
general working capital purposes, which the Company
currently intends will include acquisitions,
refurbishments and repositionings of hotels. The
Company is prepaying debt with the proceeds of this
Offering in order to obtain relief from restrictive
covenants that, among other things, limit
7
<PAGE> 9
the amount of capital that may be invested in
acquisitions or development of new hotels and to
increase its flexibility in the management of the
Other Assets, some of which collateralize the
Senior Secured Notes and the Junior Secured Notes.
In anticipation of the Offering, the Company may
use cash on hand and proceeds from the Rose and
Cohen Settlement (as defined herein) to prepay
indebtedness prior to the closing of the Offering.
See "Management's Discussion and Analysis of
Financial Condition and Results of
Operations -- Liquidity and Capital Resources Asset
Realizations."
Unrestricted Subsidiary.... Suites of America, Inc., a wholly owned subsidiary
of the Company ("Suites of America"), as of the
Issuance Date (as defined herein) initially will be
an Unrestricted Subsidiary pursuant to the
Indenture.
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
As of the Effective Date, the Company adopted "fresh start" reporting and
the purchase method of accounting was applied, adjusting the carrying value of
the Company's assets on the balance sheet to approximate fair market value at
that date. Liabilities were recorded at face value, which approximated the
present value of amounts to be paid based on specified interest rates. See
"Prospectus Summary -- The Reorganization." Subsequent to the Effective Date,
the Company also changed its fiscal year end from June 30 to December 31. The
table below presents selected consolidated financial data derived from the
Company's historical financial statements as of and for the year ended December
31, 1993 and as of and for the five month period ended December 31, 1992. This
data should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements, related notes and other financial information included and
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
POST-REORGANIZATION
-----------------------------------------
AS OF AND FOR THE
-----------------------------------------
FIVE MONTHS ENDED YEAR ENDED
DECEMBER 31, 1992 DECEMBER 31, 1993
------------------ ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues:
Rooms................................................. $ 24,639 $ 69,487
Food and beverage..................................... 4,598 12,270
Management and other fees............................. 5,000 10,831
Interest on mortgages and notes receivable............ 6,335 14,765
Rental and other...................................... 762 1,507
---------- ----------
Total revenues................................... 41,334 108,860
---------- ----------
Costs and expenses:
Direct hotel operating expenses:
Rooms............................................... 6,952 19,456
Food and beverage................................... 4,027 10,230
Selling and general................................. 7,811 20,429
Occupancy and other operating......................... 4,351 11,047
General and administrative............................ 5,929 15,685
Depreciation and amortization......................... 2,918 7,117
---------- ----------
Total costs and expenses......................... 31,988 83,964
---------- ----------
Operating income......................................... 9,346 24,896
---------- ----------
---------- ----------
Interest expense(2)...................................... 7,718 16,116
---------- ----------
---------- ----------
Net income(3)............................................ $ 1,393 $ 12,164
---------- ----------
---------- ----------
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
POST-REORGANIZATION
---------------------------------------
AS OF AND FOR THE
---------------------------------------
FIVE MONTHS ENDED YEAR ENDED
DECEMBER 31, 1992 DECEMBER 31, 1993
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OTHER DATA(1):
EBITDA before extraordinary items(4)..................... $12,264 $32,013
Capital expenditures..................................... $ 1,803 $14,346
MARGIN AND RATIO DATA(1):
EBITDA margin............................................ 29.7% 29.4%
Fixed charge coverage ratio(5)........................... 1.68 2.24
Ratio of EBITDA to interest.............................. 1.59 1.99
Ratio of earnings to fixed charges(6).................... 1.28 1.77
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1993(1)(7)
----------------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA(1):
Cash and cash equivalents..................................... $ 41,569 $ 51,272
Property, equipment and leasehold improvements................ 172,786 172,786
Mortgages and other notes receivable, net of current
portion.................................................... 163,033 163,033
Total assets.................................................. 410,685 420,388
Current portion of debt....................................... 19,282 19,282
Long-term debt, net of current portion........................ 168,618 181,935
Stockholders' equity.......................................... 171,364 171,364
</TABLE>
- ---------------
(1) Includes data with respect to eight AmeriSuites which are owned by Suites of
America, which as of the Issuance Date initially will be an Unrestricted
Subsidiary pursuant to the Indenture. In the five months ended December 31,
1992 and the year ended December 31, 1993, respectively, Suites of America
contributed $4.1 million and $11.7 million to total revenues, $3.6 million
and $9.2 million to total costs and expenses, $500,000 and $1.6 million to
interest expense, none and $500,000 to net income, $1.1 million and $4.1
million to EBITDA before extraordinary items, $300,000 and $300,000 to cash
and cash equivalents, $39.5 million and $47.4 million to property, equipment
and leasehold improvements, none to mortgages and other notes receivable,
net of current portion, $40.3 million and $48.6 million to total assets,
$9.9 million and $14.3 million to current portion of debt, $5.1 million and
$9.1 million to long-term debt, net of current portion, and $21.5 million
and $24.2 million to stockholders' equity.
(2) The Company's pro forma interest expense for fiscal year 1993 would have
been $18.5 million. Pro forma interest expense gives effect to the issuance
of the Notes at an assumed interest rate of 10 1/4% and the use of the net
proceeds from the Offering to repay the Senior Secured Notes in full and the
Junior Secured Notes in full at the beginning of 1993.
(3) Includes extraordinary items (gains on discharges of indebtedness, net of
income taxes of $2.8 million) of $4.0 million.
(4) EBITDA represents earnings before extraordinary items, net interest expense,
provision for income taxes (if applicable) and depreciation and amortization
and excludes interest income on cash investments and other income. EBITDA
data, which are not a measure of financial performance under generally
accepted accounting principles, are presented because such data are used by
certain investors to determine the Company's ability to meet historical debt
service requirements. Such data should not be considered as an alternative
to net earnings as an indicator of the Company's operating performance or as
an alternative to cash flows as a measure of liquidity.
9
<PAGE> 11
(5) As defined in the Indenture but including data related to Suites of America.
If data relating to Suites of America were excluded, the fixed charge
coverage ratio would have been 1.63 and 2.21 for the five months ended
December 31, 1992 and the year ended December 31, 1993.
(6) Earnings used in computing the ratio of earnings to fixed charges consists
of income before income taxes and extraordinary items. Fixed charges
consists of interest expense and that portion of rental expense
representative of interest (deemed to be one third of rental expense).
(7) Pro forma after giving effect to the Offering and the application of the
estimated net proceeds therefrom and the purchase by the Company of $7.2
million of Senior Secured Notes and Junior Secured Notes as of March 15,
1994.
The following table sets forth certain operating data for the five years
ended December 31, 1993 with respect to the 41 Owned Hotels that were in the
Company's portfolio on December 31, 1993 since the later of the year in which
they were acquired or January 1, 1989. The data includes full year operating
results for hotels that the Company previously managed and then acquired during
the year.
<TABLE>
<CAPTION>
1989 1990(1) 1991(1) 1992(1) 1993(1)
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT ADR AND PER ROOM DATA)
<S> <C> <C> <C> <C> <C>
Number of locations...................... 21 31 32 35 41
Number of rooms.......................... 2,545 3,953 4,083 4,425 5,145
Occupancy %.............................. 67.8% 65.9% 66.6% 68.0% 70.0%
ADR(2)................................... $ 59.19 $ 55.88 $ 53.60 $ 54.83 $ 56.01
REVPAR(3)................................ $ 40.10 $ 36.80 $ 35.68 $ 37.30 $ 39.19
Room revenues............................ $29,809 $44,101 $51,774 $57,992 $66,721
Total hotel revenues..................... $43,090 $59,437 $68,137 $74,162 $83,652
Gross operating profit(4)................ $17,741 $25,312 $26,798 $26,607 $31,997
Gross operating profit %................. 41.2% 42.6% 39.3% 35.9% 38.2%
</TABLE>
- ---------------
(1) Includes information relating to Suites of America, which owns eight
AmeriSuites and as of the Issuance Date initially will be an Unrestricted
Subsidiary pursuant to the Indenture. Suites of America owned no AmeriSuites
in 1989 and three, four, six and eight AmerSuites in 1990, 1991, 1992 and
1993, respectively. See "Business Lodging Operations AmeriSuites."
(2) "ADR" means average daily room rate, which is equal to total room revenue
divided by number of occupied rooms.
(3) "REVPAR" means revenues per available room and is equal to the amount of
room revenue divided by the number of rooms available for sale.
(4) Gross operating profit is defined as total hotel revenues less direct hotel
operating expenses including room, food and beverage and selling and general
expenses.
10
<PAGE> 12
RISK FACTORS
Prospective investors should carefully consider, among other things, the
following risk factors before purchasing the Notes offered hereby.
LEVERAGE
As of December 31, 1993, as adjusted for the issuance of the Notes and the
application of the estimated net proceeds therefrom and the purchase by the
Company of $7.2 million of its senior indebtedness as of March 15, 1994, the
Company's total long-term debt (including current installments and the debt of
Suites of America) and shareholders' equity would have been $181.9 million and
$171.4 million, respectively, and the Company's EBITDA would have exceeded fixed
charges by $13.5 million for the year ended December 31, 1993. The Indenture
will limit, but will not prohibit, the incurrence of additional indebtedness by
the Company and its Restricted Subsidiaries (as defined herein). The Company
expects it will incur additional indebtedness in addition to the Notes in
connection with the implementation of its growth strategy. The Indenture does
not restrict the incurrence of indebtedness by Unrestricted Subsidiaries.
Additional indebtedness of the Company may rank senior or pari passu with the
Notes in certain circumstances, while additional indebtedness of the Company's
subsidiaries will rank structurally senior to the Notes. See "Description of the
Notes." The debt service requirements of any additional indebtedness could make
it more difficult for the Company to make principal and interest payments on the
Notes. The Company's ability to satisfy its obligations will be dependent upon
its future performance, which is subject to prevailing economic conditions and
financial, business and other factors, including factors beyond the Company's
control. There can be no assurance that the Company's operating cash flow will
be sufficient to meet its debt service requirements or to repay the Notes at
maturity or that the Company will be able to refinance the Notes or other
indebtedness at maturity. The Company has had a limited operating history since
its reorganization under chapter 11 of the U.S. Bankruptcy Code. See "Prospectus
Summary -- The Reorganization" and "Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Liquidity and Capital
Resources."
SUBORDINATION; NOTES ARE UNSECURED OBLIGATIONS
The Notes will be unsecured senior subordinated obligations of the Company
and will be subordinated in right of payment to all present and future Senior
Indebtedness of the Company and will be structurally subordinated to debt of the
Company's subsidiaries. In the event of bankruptcy, liquidation or
reorganization of the Company, the assets of the Company will be available to
pay obligations on the Notes only after all Senior Indebtedness have been paid
in full, and there may not be sufficient assets remaining to pay amounts due on
any or all of the Notes then outstanding. The holders of any indebtedness of the
Company's subsidiaries will be entitled to payment of their indebtedness from
the assets of the subsidiaries prior to the holders of any general unsecured
obligations of the Company, including the Notes. As of December 31, 1993, on a
pro forma basis, the Company had approximately $77.8 million of outstanding
Senior Indebtedness and no indebtedness that is either pari passu or subordinate
to the Notes. As of December 31, 1993, the Restricted Subsidiaries of the
Company had no additional indebtedness and an Unrestricted Subsidiary of the
Company had an additional $23.4 million of indebtedness.
In the event of a payment default with respect to Senior Indebtedness, no
payments may be made on account of the Notes until such default has been cured
or waived. In addition, under certain circumstances, no payments with respect to
the Notes may be made for a period of up to 179 days if certain non-payment
defaults exist with respect to Designated Senior Indebtedness (as defined
herein) of the Company. See "Description of the Notes." Suites of America
initially will be an Unrestricted Subsidiary pursuant to the Indenture and had
as of December 31, 1993 $48.6 million of assets and $23.4 million of debt which
is non-recourse to the Company and the Company's other subsidiaries. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Lodging
Operations -- AmeriSuites."
11
<PAGE> 13
COMPETITION AND RISKS OF THE LODGING INDUSTRY
The Company generally operates in areas that contain numerous other
competitors. During the 1980's, excess construction of lodging facilities in the
United States resulted in a general over supply of available rooms. This
oversupply has had an adverse effect on occupancy levels and room rates in many
markets in the industry and may continue to have such an effect until the
oversupply is absorbed. Competitive factors in the industry include
reasonableness of room rates, quality of accommodations, service level and
convenience of locations. The lodging industry in general, including the
Company, may be adversely affected by (i) national and regional economic
conditions, (ii) changes in travel patterns, (iii) taxes and government
regulations which influence or determine wages, prices, interest rates,
construction procedures and costs and (iv) the availability of credit. The
Company's ownership of real property, including hotels, is substantial. Real
estate values are sensitive to changes in local market and economic conditions
and to fluctuations in the economy as a whole. There can be no assurance that
downturns or prolonged adverse conditions in the real estate or capital markets
or the economy as a whole will not have a material adverse effect on the
Company. See "Business -- Lodging Industry."
DEPENDENCE ON THE FRENCHMAN'S REEF
The Company operates Marriott's Frenchman's Reef Hotel in the U.S. Virgin
Islands (the "Frenchman's Reef"), which contributed approximately $4.3 million
or 28.8% of the Company's 1993 interest income on mortgages and notes and
comprised 12.2% of the Company's 1993 total assets. The Frenchman's Reef is
currently operating under the jurisdiction of the U.S. bankruptcy court.
Pursuant to a plan of reorganization, which is subject to confirmation by the
bankruptcy court and has been consented to by all major creditors of the
Frenchman's Reef (but not by all classes that are entitled to vote on such
plan), the Company would assume ownership of the Frenchman's Reef. A group
purporting to represent a significant number of limited partners has filed an
objection to the disclosure statement related to such plan and seeks to replace
the Frenchman's Reef's general partner with a new general partner that may seek
to redirect the bankruptcy proceedings, including investigating the validity and
priority of the Company's mortgages, in a manner that may be materially adverse
to the Company. In light of this uncertainty, the Company intends to defend its
positions and to pursue a foreclosure of its mortgages and has filed a motion
with the bankruptcy court seeking to lift the stay of relief under the chapter
11 petition to permit a commencement of a foreclosure action. The motion is
subject to approval by the Bankruptcy Court. Due to, among other factors, the
contingent nature of bankruptcy proceedings, there can be no assurance of when
and if any court approval will be obtained. In addition, the Company's
management agreement with respect to the Frenchman's Reef could be rejected in
connection with the bankruptcy case. The Company recognized management fees in
1993 of $842,000 related to the Frenchman's Reef. The Company had, as of
December 31, 1993, $39.6 million of debt secured by the Company's mortgage on
the Frenchman's Reef. The Company does not intend to obtain ownership of the
Frenchman's Reef unless the lender of such debt consents. The Company has
entered into discussions with the lender regarding revising the terms of such
debt. The Frenchman's Reef's operating revenues have been adversely affected in
recent years by a hurricane, airline insolvencies which caused disruption in
airline service and the Persian Gulf War. Adverse developments with respect to
the Frenchman's Reef may have a material adverse effect on the results of
operations of the Company. See "Risk Factors -- Risks Associated with Other
Assets," "Management's Discussion and Analysis of Financial Conditions and
Results of Operations," "Business -- Lodging Operations -- Franchised Hotels"
and "Business -- Other Assets."
RISKS ASSOCIATED WITH OTHER ASSETS
The Company derived approximately 14.9% of its total revenues from Other
Assets in 1993. A substantial portion of the Other Assets are fixed-rate
mortgages and other notes receivable. Many of these mortgage notes are secured
by hotel properties. The largest Other Asset is the Frenchman's Reef mortgage,
which the Company is currently seeking to restructure. The Frenchman's Reef
accounts for $50.0 million of the mortgage notes on the Company's balance sheet
and has a face value of approximately $79.0 million (excluding accrued
interest). The Company has restructured approximately $36.5 million of the
remaining
12
<PAGE> 14
mortgages and notes generally to include senior, mandatory-payment notes which
are reflected on the Company's balance sheet, and junior, accruing or cash
flow-based notes, which are not reflected on the Company's balance sheet.
Generally, the junior, accruing or cash flow-based notes represent the
difference between the amount of the mortgage indebtedness at the time of the
restructuring and the approximate fair value of the assets securing the other
senior secured indebtedness of the hotel and the senior, mandatory-payment notes
of the hotel. Although the Company believes that these senior mortgage notes
generally do not exceed the current realizable value of the hotels they
encumber, it believes that the senior and junior notes, together with other
senior secured debt of the properties, do exceed such current realizable value.
As a result, the junior, accruing or cash flow-based notes bear many of the
characteristics and risks of operating hotel equity investments. The investments
are subject to potential bankruptcy or insolvency proceedings by the owning
entities in the event of a default. The Company does not control all capital
investment decisions with respect to the hotels which secure the Other Assets,
which may affect continued asset quality. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations Liquidity -- and
Capital Resources" and "Business -- Other Assets."
HOTEL DEVELOPMENT, ACQUISITION AND REPOSITIONING RISKS
The Company is planning to undertake acquisitions and repositionings of
certain hotels, and it is likely that the Company will develop or acquire other
hotels in the future. Repositioning a hotel generally requires renovation and
refurbishment of the exterior and interior of the building and may result in a
change in brand name. The Company's strategy of building new hotels and
acquiring hotels with turnaround and repositioning potential will subject the
Company to pre-opening and pre-stabilization costs. As the Company opens
additional Company-owned hotels, such start-up costs may adversely affect the
Company's results of operations. Newly opened hotels historically begin with
lower occupancy and room rates that improve over time. Company-owned hotels have
historically attained stabilized operating levels within approximately 12 to 24
months of their opening. While the Company has in the past successfully opened
new lodging facilities, there can be no assurance that the Company will be able
to do so in the future. The Company anticipates that substantially all of its
acquisition and repositioning activity in 1994 will be funded from existing cash
balances, projected cash flow from operations, conversion of Other Assets to
cash and a portion of the net proceeds of the Offering. Additionally, the
Company may in the future incur mortgage financing on certain of its 15
unencumbered properties or enter into alliances with capital partners to provide
additional funds for the development and acquisition of hotels to the extent
such financing is available. See "Use of Proceeds." Acquisition and
repositioning of hotels involves certain risks, including the possibility of
construction cost overruns and delays, uncertainties as to market potential,
market deterioration after commencement of the acquisition or repositioning,
possible unavailability of financing on favorable terms and the emergence of
market competition from unanticipated sources. Although the Company seeks to
manage its acquisition and repositioning activities so as to minimize such
risks, there can be no assurance that such projects will perform in accordance
with the Company's expectations.
MANAGEMENT AGREEMENTS
Terms of the management agreements vary but the majority are considered
short-term and, therefore, there are risks associated with termination of these
agreements. Eight Managed Hotels are in default on their mortgage debt and other
obligations, including two Managed Hotels which are in default on mortgage notes
receivable held by the Company. In such cases, the Company's management
agreement could be terminated if, through foreclosure or otherwise, the owner
loses possession of the Managed Hotel. However, the Company believes that in
many of these instances these risks are mitigated due to its role as lender or
provider of the Wellesley Inns brand name to the Managed Hotels. The Company has
a significant interest as mortgagee in 12 of the Managed Hotels and holds other
financial interests in 19 additional properties, which include subordinated
mortgage or equity positions or licensing rights under the Wellesley Inns brand
name. Of the 47 Managed Hotels, approximately $3.5 million of the Company's
third-party management fee revenues derived
13
<PAGE> 15
from the Company's management agreements in 1993 are from partnerships
controlled by four general partners, one of which is a related party. See "Risk
Factors -- Dependence on the Frenchman's Reef."
DEPENDENCE ON KEY EMPLOYEES
The Company is dependent on its President, Chief Executive Officer and
Chairman of the Board, David A. Simon, its Executive Vice President and Chief
Financial Officer, John M. Elwood, its Executive Vice President of Operations,
Paul H. Hower, and on certain other key members of its executive management
staff, the loss of whose services could have a material adverse effect on the
Company's business and future operations. See "Management."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Notes are a new issue of securities for which there is currently no
public market. There can be no assurance as to the liquidity of the market for
the Notes that may develop, the ability of the holders to sell their Notes or
the prices at which holders of the Notes would be able to sell their Notes. If a
market for the Notes does develop, the Notes may trade at a discount from their
initial public offering price, depending on prevailing interest rates, the
market for similar securities, performance of the Company, performance of the
lodging sector and other factors. The Underwriters have informed the Company
that they currently intend to make a market for the Notes. However, the
Underwriters are not obligated to do so and any such market-making may be
discontinued at any time without notice. The Company does not intend to apply
for listing of the Notes on any securities exchange. Therefore, no assurance can
be given as to whether an active trading market will develop or be maintained
for the Notes. See "Underwriting."
14
<PAGE> 16
THE COMPANY
The Company is a leading independent hotel operating company with ownership
or management of 86 full-service and limited-service Hotels in 19 states and one
resort Hotel in the U.S. Virgin Islands. The Company's Hotels are generally
moderately priced hotels which are designed to attract business and leisure
travelers desiring quality accommodations at affordable prices. Located
primarily in secondary and tertiary markets, the Hotels typically contain 100 to
200 guest rooms or suites and operate under franchise agreements with national
hotel chains or under the Company's proprietary Wellesley Inns or AmeriSuites
trade names. The Company has 40 Owned Hotels and 47 Managed Hotels. The Company
holds significant mortgages or other financial interests in 12 of the 47 Managed
Hotels. See "Prospectus Summary -- The Reorganization."
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "PDQ." The Company is a Delaware corporation incorporated in 1985.
The principal office of the Company is 700 Route 46 East, Fairfield, New Jersey
07007-2700 and its telephone number is (201) 882-1010.
15
<PAGE> 17
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby are estimated to
be $96.2 million after deducting the estimated expenses related to the Offering.
The Company intends to use the net proceeds from the Offering to repay its
Senior Secured Notes and Junior Secured Notes in full and to retain the
remainder of the net proceeds for general working capital purposes, which the
Company currently intends will include acquisitions, refurbishments and
repositionings of hotels. As of March 15, 1994, the Company had outstanding
$26.4 million of Senior Secured Notes and $53.1 million of Junior Secured Notes.
The Company is prepaying debt with the proceeds of this Offering in order to
obtain relief from restrictive covenants that, among other things, limit the
amount of capital that may be invested in acquisition or development of new
hotels and to increase its flexibility in the management of the Other Assets,
some of which collateralize the Company's Senior Secured Notes and the Junior
Secured Notes. In anticipation of the Offering, the Company may use cash on hand
and proceeds from the Rose and Cohen Settlement to prepay the indebtedness
described above prior to the closing of the Offering. If the Company were to
prepay the Senior Secured Notes prior to the Offering, the net proceeds from the
Offering available for general working capital purposes would be $43.1 million.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Asset Realizations."
The Senior Secured Notes were issued in two series: the fixed rate series
which bears interest at the rate of 8.2% per annum ($10.3 million outstanding as
of March 15, 1994) and the adjustable rate series which bears interest at the
"prime rate" reported by Chemical Bank plus 0.5% per annum up to a maximum of
10.0% ($16.1 million outstanding as of March 15, 1994) . The interest rate on
the adjustable rate series was 6.5% at December 31, 1993. The Junior Secured
Notes bear interest at the rate of 9.2% per annum ($53.1 million outstanding as
of March 15, 1994). The Senior Secured Notes and the Junior Secured Notes are
scheduled to mature on July 31, 1997 and July 31, 2000, respectively.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1993, and as adjusted to give effect to the Offering and the
application of the estimated net proceeds therefrom and the purchase by the
Company of $7.2 million of Senior Secured Notes and Junior Secured Notes as of
March 15, 1994. This table should be read in conjunction with the Consolidated
Financial Statements and notes thereto included and incorporated by reference in
this Prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current portion of debt(1).................................... $ 19,282 $ 19,282
-------- -----------
Long-term debt, excluding current installments:
Senior Secured Notes........................................ 33,152 --
Junior Secured Notes........................................ 53,531 --
Notes and Mortgages payable, less current portion(2)........ 81,935 81,935
Senior Subordinated Notes due 2004.......................... -- 100,000
-------- -----------
Total long-term debt(2)............................. 168,618 181,935
Shareholders' equity.......................................... 171,364 171,364
-------- -----------
Total capitalization................................ $359,264 $ 372,581
-------- -----------
-------- -----------
</TABLE>
- ---------------
(1) Includes $14.3 million of debt of Suites of America, which as of the
Issuance Date initially will be an Unrestricted Subsidiary and which debt is
non-recourse to the Company.
(2) Includes $9.1 million of debt of Suites of America, which as of the Issuance
Date initially will be an Unrestricted Subsidiary and which debt is
non-recourse to the Company.
16
<PAGE> 18
RECENT CONSOLIDATED FINANCIAL DATA
As of the Effective Date the Company adopted "fresh start" reporting and
the purchase method of accounting was applied, adjusting the carrying value of
the Company's assets on the balance sheet to approximate fair market value at
that date. Liabilities were recorded at face value, which approximated the
present value of amounts to be paid based on specified interest rates. See
"Prospectus Summary -- The Reorganization." Subsequent to the Effective Date,
the Company also changed its fiscal year end from June 30 to December 31. The
table below presents selected consolidated financial data derived from the
Company's historical financial statements as of and for the year ended December
31, 1993 and as of and for the five month period ended December 31, 1992. The
following data includes information with respect to eight AmeriSuites Owned
Hotels owned by Suites of America, which as of the Issuance Date initially will
be an Unrestricted Subsidiary pursuant to the Indenture. This data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Selected Consolidated Financial Data of
the Company and its Predecessor" and the Consolidated Financial Statements,
related notes and other financial information included and incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
POST-REORGANIZATION
---------------------------------------
AS OF AND FOR THE
---------------------------------------
FIVE MONTHS ENDED YEAR ENDED
DECEMBER 31, 1992 DECEMBER 31, 1993
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues:
Rooms................................................ $ 24,639 $ 69,487
Food and beverage.................................... 4,598 12,270
Management and other fees............................ 5,000 10,831
Interest on mortgages and notes receivable........... 6,335 14,765
Rental and other..................................... 762 1,507
----------------- -----------------
Total revenues.................................. 41,334 108,860
----------------- -----------------
Costs and expenses:
Direct hotel operating expenses:
Rooms.............................................. 6,952 19,456
Food and beverage.................................. 4,027 10,230
Selling and general................................ 7,811 20,429
Occupancy and other operating........................ 4,351 11,047
General and administrative........................... 5,929 15,685
Depreciation and amortization........................ 2,918 7,117
----------------- -----------------
Total costs and expenses........................ 31,988 83,964
----------------- -----------------
Operating income..................................... 9,346 24,896
Interest income on cash investments.................. 693 1,267
Interest expense(2).................................. (7,718) (16,116)
Other income......................................... -- 3,809
----------------- -----------------
Income before income taxes and extraordinary items... 2,321 13,856
Provision for income taxes........................... 928 5,681
----------------- -----------------
Income before extraordinary items.................... 1,393 8,175
Extraordinary items -- gains on discharges of
indebtedness
(net of income taxes of $2,772).................... -- 3,989
----------------- -----------------
Net income(3)........................................ $ 1,393 $ 12,164
----------------- -----------------
----------------- -----------------
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
POST-REORGANIZATION
---------------------------------------
AS OF AND FOR THE
---------------------------------------
FIVE MONTHS ENDED YEAR ENDED
DECEMBER 31, 1992 DECEMBER 31, 1993
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
DATA(1):EBITDA before extraordinary items(4)............ $ 12,264 $ 32,013
Capital expenditures.................................... 1,803 14,346
MARGIN AND RATIO DATA(1):
EBITDA margin........................................... 29.7% 29.4%
Fixed charge coverage ratio(5).......................... 1.68 2.24
Ratio of EBITDA to interest............................. 1.59 1.99
Ratio of earnings to fixed charges(6)................... 1.28 1.77
BALANCE SHEET DATA(1):
Cash and cash equivalents............................... $ 36,616 $ 41,569
Property, equipment and leasehold improvements.......... 162,797 172,786
Mortgages and other notes receivable, net of current
portion.............................................. 165,654 163,033
Total assets............................................ 403,314 410,685
Current portion of debt................................. 18,275 19,282
Long-term debt, net of current portion.................. 192,913 168,618
Stockholders' equity.................................... 137,782 171,364
</TABLE>
- ---------------
(1) Includes data with respect to eight AmeriSuites which are owned by Suites of
America, which as of the Issuance Date initially will be an Unrestricted
Subsidiary pursuant to the Indenture. In the five months ended December 31,
1992 and the year ended December 31, 1993, respectively, Suites of America
contributed $4.1 million and $11.7 million to total revenues, $3.6 million
and $9.2 million to total costs and expenses, $500,000 and $1.6 million to
interest expense, none and $500,000 to net income, $1.1 million and $4.1
million to EBITDA before extraordinary items, $300,000 and $300,000 to cash
and cash equivalents, $39.5 million and $47.4 million to property, equipment
and leasehold improvements, none to mortgages and other notes receivable,
net of current portion, $40.3 million and $48.6 million to total assets,
$9.9 million and $14.3 million to current portion of debt, $5.1 million and
$9.1 million to long-term debt, net of current portion, and $21.5 million
and $24.2 million to stockholders' equity.
(2) The Company's pro forma interest expense for fiscal year 1993 would have
been $18.5 million. Pro forma interest expense gives effect to the issuance
of the Notes at an assumed interest rate of 10 1/4% and the use of net
proceeds from the offering to repay the Senior Secured Notes in full and the
Junior Secured Notes in full at the beginning of the 1993.
(3) Includes extraordinary items (gains on discharges of indebtedness, net of
income taxes of $2.8 million) of $4.0 million.
(4) EBITDA represents earnings before extraordinary items, net interest expense,
provision for income taxes (if applicable) and depreciation and amortization
and excludes interest income on cash investments and other income. EBITDA
data, which are not a measure of financial performance under generally
accepted accounting principles, are presented because such data are used by
certain investors to determine the Company's ability to meet historical debt
service requirements. Such data should not be considered as an alternative
to net earnings as an indicator of the Company's operating performance or as
an alternative to cash flows as a measure of liquidity.
(5) As defined in the Indenture but including data related to Suites of America.
If data relating to Suites of America were excluded, the fixed charge
coverage ratio would have been 1.63 and 2.21 for the five months ended
December 31, 1992 and the year ended December 31, 1993.
(6) Earnings used in computing the ratio of earnings to fixed charges consists
of income before income taxes and extraordinary items. Fixed charges
consists of interest expense and that portion of rental expense
representative of interest (deemed to be one third of rental expense).
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is the successor in interest to PMI, which emerged from chapter
11 reorganization on the Effective Date. During its approximately two-year
reorganization, PMI restructured its assets, operations and capital structure.
As a result, the Company (i) eliminated numerous unprofitable lease and
management agreements, (ii) revalued its assets to reflect the then approximate
current fair market value of such assets on its financial statements and (iii)
reduced its liabilities by approximately $500 million. On the Effective Date,
the Company emerged from chapter 11 reorganization with 75 owned or managed
hotels (as compared to 141 hotels prior to the chapter 11 reorganization),
$135.6 million of total equity and $266.4 million of long-term debt.
Since the Effective Date, the Company has taken the following actions to
further strengthen its operations and financial condition:
- Reduced overhead costs, reconstituted its management team and recruited
new senior management to the Company that is responsible to a new,
independent board of directors;
- Converted a portion of its notes, mortgages and other assets to cash or
hotel operating assets that provided the Company with approximately $61.0
million in cash and six operating hotel properties obtained through
settlements or lease expirations;
- Repaid approximately $87.0 million of its long-term debt using the cash
proceeds from conversions of other assets, tax refunds and income
generated from Hotel operations;
- Formulated and began implementing a hotel development and improvement
plan pursuant to which the Company purchased one full-service hotel and
built one new Wellesley Inn in 1993; and
- Allocated more than 6.0% of its hotel revenues during this period to
enhance the product quality and market position of its existing Hotels,
including repositioning eight Hotels and changing the franchise
affiliations of four of such Hotels.
The following table sets forth certain operating data for the five year
period ended December 31, 1993 with respect to the 41 Owned Hotels that were in
the Company's portfolio on December 31, 1993 since the later of the year in
which they were acquired or January 1, 1989. The data includes full year
operating results for hotels that the Company previously managed and then
acquired during the year.
<TABLE>
<CAPTION>
1989 1990(1) 1991(1) 1992(1) 1993(1)
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT ADR AND PER ROOM DATA)
<S> <C> <C> <C> <C> <C>
Number of locations...................... 21 31 32 35 41
Number of rooms.......................... 2,545 3,953 4,083 4,425 5,145
Occupancy %.............................. 67.8% 65.9% 66.6% 68.0% 70.0%
ADR...................................... $ 59.19 $ 55.88 $ 53.60 $ 54.83 $ 56.01
REVPAR................................... $ 40.10 $ 36.80 $ 35.68 $ 37.30 $ 39.19
Room revenues............................ $29,809 $44,101 $51,774 $57,992 $66,721
Total hotel revenues..................... $43,090 $59,437 $68,137 $74,162 $83,652
Gross operating profit................... $17,741 $25,312 $26,798 $26,607 $31,997
Gross operating profit %................. 41.2% 42.6% 39.3% 35.9% 38.2%
</TABLE>
- ---------------
(1) Includes information relating to Suites of America, which owns eight
AmeriSuites and as of the Issuance Date initially will be an Unrestricted
Subsidiary pursuant to the Indenture. Suites of America owned no AmeriSuites
in 1989 and three, four, six and eight AmerSuites in 1990, 1991, 1992 and
1993, respectively. See "Business -- Lodging Operations AmeriSuites."
19
<PAGE> 21
The Company's operating results for the five-year period from 1989 to 1993
were principally impacted by the overall trends in the U.S. lodging industry. In
1990 and 1991, occupancy and ADR declined due to the oversupply of hotel rooms
and the weakness in demand due to the general slowdown in the U.S. economy.
Beginning in 1992, the demand for hotel rooms increased primarily due to
improved economic conditions in the United States. Coupled with the lack of new
hotel supply, occupancy, ADR and REVPAR improved. In 1993, occupancy, ADR and
REVPAR continued to rise due to improving industry fundamentals, the
stabilization of the Company's Wellesley Inns and AmeriSuites and the positive
effects of the capital investments made by the Company to improve product
quality through repositionings of hotels.
Over the five-year period ended December 31, 1993, gross operating profit
was most affected by (i) the mix of the Company's limited-service hotels as
compared to full-service hotels, (ii) labor and related costs and (iii)
strategic marketing initiatives. The five Wellesley Inns added to the Company's
portfolio generated high gross operating margins and allowed the Company to
increase margins in 1990 despite a difficult economic environment. In 1991 and
1992, the positive impact on gross operating profits from the addition of the
Wellesley Inns were offset by (i) above inflation rate increases in direct hotel
labor and related expenses (including wages, health care benefits and workman's
compensation), (ii) the Company's decision to increase advertising and
promotions (including hiring additional sales staff, providing additional guest
services such as enhanced continental breakfasts and increasing outdoor
advertising and direct mail marketing campaigns) and (iii) the reallocation of
previously centralized costs to specific hotels. In 1993, gross operating profit
improved primarily due to the stabilization of labor and related costs and
increased sales volumes. Given the current positive industry fundamentals and
the Company's proposed new hotel development and acquisition refurbishment
programs, the Company believes it will continue to benefit from operating
leverage.
RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED
DECEMBER 31, 1992.
The Company implemented "fresh start" reporting in accordance with
Statement of Position 90-7 of the American Institute of Certified Public
Accountants upon its emergence from reorganization on the Effective Date. Under
"fresh start" reporting, the purchase method of accounting was used and the
assets and liabilities of the Company were restated to reflect their approximate
fair value at the Effective Date. In addition, during the reorganization period
(September 18, 1990 to the Effective Date), the Company's financial statements
were prepared under accounting principles for entities in reorganization which
includes reporting interest expense only to the extent paid and recording
transactions and events directly associated with the reorganization proceedings.
Accordingly, the consolidated financial statements of the Company are not
comparable in all material respects to any such financial statement as of any
date or for any period prior to the Effective Date. Subsequent to the Effective
Date, the Company elected to change its fiscal year end from June 30 to December
31.
For purposes of an analysis of the results of operations, comparisons of
the Company's results of operations for the year ended December 31, 1993 to the
prior year are made only when, in management's opinion, such comparisons are
meaningful. Prior to the Effective Date, the Company did not employ "fresh
start" reporting thereby making comparisons of certain financial statement data
prior to such date less meaningful. The financial information set forth below
presents the revenues and expenses which can be compared. The table excludes the
items which were impacted by the changes in accounting such as interest expense,
occupancy and other operating expense and depreciation expense for the years
ended December 31, 1992 and 1993. The financial information should be read in
conjunction with the consolidated financial statements of the Company included
elsewhere in this report. Since the Company changed its fiscal year in 1992,
management has compiled unaudited data for the calendar year ended December 31,
1992.
The direct revenues and expenses of the Owned Hotels are classified into
three categories: comparable hotels, new hotels and divested hotels. The
following discussion focuses primarily on the 29 comparable hotel properties
which were owned or leased by the Company during the entire two years presented.
The 12 hotels classified as new hotels are composed of four new AmeriSuites
hotels which were opened after December 31, 1991, a full-service Ramada Inn in
Meriden, Connecticut which was purchased in July 1993, a newly constructed
Wellesley Inn in Orlando, Florida which opened in November 1993 and six hotel
properties which were added through settlements of mortgages and notes
receivable and lease expirations. The hotels classified
20
<PAGE> 22
as divested hotels are composed of three hotel properties divested primarily as
a result of property restructurings in 1992 and the Holiday Inn in Milford,
Connecticut which was sold in September 1993.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------------
1992 1993
------- -------
(DOLLARS IN THOUSANDS,
EXCEPT FOR STATISTICAL
INFORMATION)
<S> <C> <C>
Room revenues:
Comparable hotels.................................................. $51,679 $55,219
New hotels......................................................... 2,001 12,941
Divested hotels.................................................... 8,699 1,327
------- -------
Total...................................................... 62,379 69,487
Food and beverage revenues:
Comparable hotels.................................................. 9,549 10,055
New hotels......................................................... 91 2,032
Divested hotels.................................................... 3,422 183
------- -------
Total...................................................... 13,062 12,270
Management fees...................................................... 11,452 10,831
Interest income...................................................... 20,063 14,765
Rental and other revenue............................................. 2,232 1,507
Direct room expenses:
Comparable hotels.................................................. 14,003 14,848
New hotels......................................................... 574 4,115
Divested hotels.................................................... 3,281 493
------- -------
Total...................................................... 17,858 19,456
Direct food and beverage expenses:
Comparable hotels.................................................. 8,278 8,480
New hotels......................................................... 78 1,504
Divested hotels.................................................... 3,046 246
------- -------
Total...................................................... 11,402 10,230
Direct selling and general hotel expenses:
Comparable hotels.................................................. 16,004 16,200
New hotels......................................................... 541 3,860
Divested hotels.................................................... 5,574 369
------- -------
Total...................................................... 22,119 20,429
General and administrative expenses.................................. 17,162 15,685
Other income......................................................... -- 3,809
Extraordinary items (pre-tax)........................................ -- 6,761
Statistical information:
Comparable hotels:
Average occupancy %............................................. 68.11% 72.15%
ADR............................................................. $ 54.66 $ 55.96
New hotels:
Average occupancy %............................................. 50.67% 63.86%
ADR............................................................. $ 55.59 $ 57.17
</TABLE>
Room revenues increased by $7.1 million or 11.4% for the year ended
December 31, 1993 over the prior year due to the impact of new hotels and
improved occupancy and room rates at comparable hotels. The increase was
partially offset by a decrease in room revenues as a result of the divestiture
of hotels. Room revenues for comparable hotels increased by $3.5 million or 6.8%
for the year ended December 31, 1993 compared to the prior year. The increase
was primarily due to improved occupancy which increased 5.9% in 1993 reflecting
improved economic conditions and the limited new construction of hotels. Average
daily room rates were slightly higher in the year ended December 31, 1993
compared to the prior year, increasing by $1.30 or 2.4% over the prior year. The
Company's comparable full-service hotels had an average occupancy of 69.3% for
the year ended December 31, 1993 as compared to 65.2% in 1992. Average occupancy
at the seven
21
<PAGE> 23
comparable Wellesley Inns in Florida remained relatively stable at approximately
90% while average occupancy at the three comparable Wellesley Inns in the
Northeast increased to 73.4% for the year ended December 31, 1993 from 61.3% in
1992 primarily as a result of improved direct marketing efforts. Significant
occupancy increases were also reported at the four comparable AmeriSuites hotels
all of which were opened within the past four years. The average occupancy at
the comparable AmeriSuites hotels increased to 67.7% for the year ended December
31, 1993 from 63.7% in 1992 reflecting stabilization of these hotels and their
increased recognition in the market.
Food and beverage revenues decreased by $792,000 or 6.1% for the year ended
December 31, 1993 as compared to 1992 because all of the divested hotels
contained food and beverage operations while many of the new hotels are
limited-service hotels. Food and beverage revenues for comparable hotels
increased by 5.3% for the year ended December 31, 1993 compared to the prior
year primarily as a result of increased beverage revenues at the Company's
sports lounges located in two Franchised Hotels.
Management and other fees consist of base and incentive fees earned under
management agreements, fees for additional services rendered to Managed Hotels
and sales commissions earned by the Company's national sales group, Market
Segments, Inc. The base and incentive fees comprise approximately 60% or $6.5
million of total management and other fees for the year ended December 31, 1993.
Management and other fees decreased by $621,000 for the year ended December 31,
1993 as compared to the prior year primarily due to a decrease in charges for
additional services. In addition, during the year ended December 31, 1993, the
number of Managed Hotels declined by five due to property divestitures by
independent owners, two of which were acquired by the Company. The decreases
have been partially offset by increases in management fees attributable to
increased hotel occupancies and higher incentive related performance fees.
Interest income on mortgages and notes decreased by $5.3 million for the
year ended December 31, 1993 as compared to the prior year primarily due to the
Company's early collection of a note receivable with a face amount of $58.0
million in August 1992. Interest income for the year ended December 31, 1993
primarily related to mortgages secured by 12 Managed Hotels. Approximately $4.3
million or 28.8% of interest income is derived from the Company's $50 million
note receivable secured by the Frenchman's Reef. For the year ended December 31,
1993, operating profits improved for the Frenchman's Reef over the prior year
due to the stronger economy, the new affiliation with Marriott and product
improvements and cost controls at the hotel. The Company's proposed mortgage
restructuring is intended to provide the Company with ownership and control of
the Frenchman's Reef. If consummated, the impact of this restructuring on
operating income is expected to be minimal as direct revenues, expenses and
depreciation would increase and interest income would decrease. In the year
ended December 31, 1993, interest income also includes $976,000 recognized on
subordinated mortgages which have been assigned no value on the Company's
balance sheet due to substantial doubts as to their recoverability. These
subordinated mortgages generated interest income primarily due to declines in
interest rates on the variable rate mortgages senior to the Company's positions
on these hotels. See "Risk Factors Dependence on the Frenchman's Reef," "Risk
Factors Risks Associated with Other Assets" and Note 3 to Notes to the
Consolidated Financial Statements.
Direct room expenses increased by $1.6 million or 9.0% for the year ended
December 31, 1993 over the prior year, as the increased occupancy of the
comparable hotels combined with the new hotels more than offset the impact of
the divested full-service hotels. Direct room expenses for comparable hotels
increased by 6.0% for the year ended December 31, 1993 over the prior year
primarily due to increased expenses associated with the higher occupancy levels
including payroll costs, guest room supplies and reservation fees. In addition,
the increase is also attributable to higher health benefits and worker's
compensation expenses which have risen faster than the general inflation rate
over the past three years. Direct room expenses as a percentage of room revenues
decreased to 28.0% in 1993 as compared to 28.6% in 1992 primarily due to the
impact of the divested hotels. Direct room expenses as a percentage of room
revenues for comparable hotels were approximately 27% in 1993 and 1992 as the
Company was able to increase room rates to offset the increases in costs.
Direct food and beverage expenses decreased by $1.2 million or 10.3%
primarily due to the impact of divested full-service hotels. Direct food and
beverage expenses for comparable Hotels increased by 2.4% for the year ended
December 31, 1993 over the prior year. Direct food and beverage expenses as a
percentage of food and beverage revenues for comparable hotels decreased to
84.3% for the year ended December 31, 1993
22
<PAGE> 24
as compared to 86.7% for the year ended December 31, 1992. This improvement
reflects the increase in beverage sales which have a lower cost of sales
percentage versus food sales.
Direct selling and general expenses consist primarily of hotel expenses
which are not specifically allocated to rooms or food and beverage activities
such as administration, selling and advertising, utilities and repairs and
maintenance. Direct selling and general expenses decreased by $1.7 million or
7.6% as the divested hotels were all full-service operations which generally
require increased overhead to support food and beverage operations. Direct
selling and general expenses for comparable Hotels increased by only 1.2% for
the year ended December 31, 1993 over the prior year primarily due to the
restructuring of the Company's centralized operations which eliminated certain
allocated central office charges. These cost savings were offset by higher
utility charges as a result of the unusually warm summer in 1993.
General and administrative expenses consist primarily of centralized
management expenses such as operations management, sales and marketing, finance
and hotel support services associated with operating both the Owned and Managed
Hotels and general corporate expenses. For the year ended December 31, 1993,
general and administrative expenses consisted of $11.7 million of centralized
management expenses and $4.0 million in general corporate expenses. General and
administrative expenses decreased by $1.5 million or 8.6% for the year ended
December 31, 1993 as compared to the prior year primarily due to the
restructuring of the Company's centralized management operations in February
1993 which eliminated approximately $2.5 million of annual costs.
Other income consists primarily of a gain on the sale of a hotel of $1.0
million, settlement of closing adjustments of $625,000 related to the sale of a
hotel in a prior year, interest of $1.2 million received as part of a federal
tax refund and $500,000 received in settlement of prior year's fees on a Managed
Hotel.
The pre-tax extraordinary gains of $6.8 million in 1993 relate to the
repurchase of debt. Pretax extraordinary gains of approximately $187,000 will be
recognized in the first quarter of 1994 related to additional repurchases. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources."
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that it has sufficient financial resources to provide
for its working capital needs, capital expenditures and debt service obligations
in 1994. The Company anticipates meeting its future capital needs through a
combination of existing cash balances, projected cash flow from operations,
conversion of Other Assets to cash, and a portion of the proceeds from this
Offering. Additionally, the Company may in the future incur mortgage financing
on certain of its 15 unencumbered properties or enter into alliances with
capital partners to provide additional funds for the development and acquisition
of hotels to the extent such financing is available. At December 31, 1993, the
Company had cash and cash equivalents of $41.6 million and restricted cash of
$11.0 million, which was primarily collateral for various debt obligations.
Cash flow from operations was approximately $19.7 million for the year
ended December 31, 1993. Cash flow from operations exceeded income before
extraordinary items of $8.2 million due to non-cash items such as depreciation
and amortization of $7.1 million and the utilization of net operating loss
carryforwards ("NOL's") of $4.5 million. At December 31, 1993, the Company has
NOL's relating to its predecessor, PMI, of approximately $121.0 million which,
subject to annual limitations, expire beginning in 2005 and continuing through
2008.
The Company's other major sources of cash for the year ended December 31,
1993 were proceeds from asset settlements and scheduled collections of mortgages
and notes receivable of $10.9 million and refunds of Federal income taxes of
$17.7 million (of which approximately $1.2 million related to interest and was
recorded as other income) related to PMI.
The Company's major uses of cash for the year ended December 31, 1993 were
debt repurchases and required principal payments of $30.9 million and capital
expenditures of $14.3 million. During 1993, the Company repurchased $500,000 of
its Senior Secured Notes, $16.5 million of its Junior Secured Notes and $8.8
million of its mortgage notes payable for an aggregate purchase price of $19.0
million. The repurchases were funded through internal sources of $17.5 million
and additional borrowings of $1.5 million. As of March 15, 1994, the Company had
repurchased during 1994 $7.2 million of its Senior Secured Notes and
23
<PAGE> 25
Junior Secured Notes for an aggregate purchase price of $7.0 million. During the
first quarter of 1994, the Company also purchased through a third party agent
approximately $5.2 million of its Senior Secured and Junior Secured Notes for
aggregate consideration of $4.8 million. These notes are currently held by the
third party agent and have not been retired due to certain restrictions under
the note agreements. The purchases will be recorded as investments on the
Company's balance sheet and no gain will be recorded on these transactions by
the Company until the notes mature or are redeemed.
The Company has a fully-secured demand credit agreement which permits
borrowing of up to $5.0 million. This facility is supported by a certificate of
deposit which is maintained by the lender.
The Company currently has debt obligations of $19.3 million, $8.9 million
and $42.8 million due in 1994, 1995, and 1996, respectively. Approximately $14.3
million, $5.0 million and $4.1 million of the debt due in 1994, 1995 and 1996,
respectively, is owed by Suites of America. Of the approximately $14.3 million
of Suites of America's debt due in 1994, approximately $9.2 is owed to ShoLodge
and scheduled to mature in April 1994. The Company believes it will be able to
refinance that debt with ShoLodge due to its relationship as a potential joint
venture partner. Suites of America as of the Issuance Date initially will be an
Unrestricted Subsidiary pursuant to the Indenture and its debt is non-recourse
to the Company and the Company's other Restricted Subsidiaries. Upon exercise of
an option by either the Company or ShoLodge under a joint venture agreement,
ShoLodge will hold a 50% equity interest in Suites of America and $9.1 million
of its debt will be converted into equity of the joint venture. The remaining
debt owed to ShoLodge will become debt of the joint venture with a five-year
maturity. In addition, the Company has $34.0 million of debt obligations related
to the Frenchman's Reef due in December 1996. The Company believes it will be
required to seek an extension of the maturity of such debt or refinance it. The
debt is secured by a first mortgage note receivable held by its Company with a
book value of $50.0 million. See "Risk Factors -- Dependence on the Frenchman's
Reef," "Business -- Lodging Operations -- Franchised Hotels,"
"Business -- Lodging Operations -- AmeriSuites" and Note 9 to the Notes to the
Consolidated Financial Statements.
Capital Investments. The Company is implementing a hotel development and
acquisition program, which focuses on its proprietary limited-service brands,
Wellesley Inns and AmeriSuites, and on strategically positioned full-service
hotels. In November 1993, the Company opened its newly constructed Wellesley Inn
in Orlando, Florida. The Company is constructing a new Wellesley Inn in the
Sawgrass section of Fort Lauderdale, Florida and has begun development of a
Wellesley Inn site in Lakeland, Florida. The Company plans to acquire and
convert two additional Wellesley Inns in 1994. The Company has also purchased a
site in Tampa, Florida for planned construction of an AmeriSuites hotel. The
Company plans to develop two additional AmeriSuites in 1994. The Company is also
evaluating opportunities to acquire and rehabilitate existing full-service
hotels either for its own portfolio or with investors. As part of the Company's
full-service acquisition program, the Company acquired the Ramada Inn in
Meriden, Connecticut in July 1993. The Company spent $7.8 million on its
development and acquisition program in 1993. The Company anticipates capital
spending for its hotel development and acquisition programs in 1994 will range
between $35.0 million and $40.0 million. No assurance can be given that the
Company will locate suitable acquisitions and therefore will complete such
capital expenditures in 1994.
The Company is pursuing a program of refurbishing its Owned Hotels and
repositioning them in order to meet the local market's demand characteristics.
In some instances, this may involve a change in franchise affiliation. The
refurbishment and repositioning program primarily involves Hotels which the
Company has recently acquired through mortgage foreclosures or settlements,
lease evictions/terminations or acquisitions. In 1993, the Company spent
approximately $5.0 million on capital improvements at its Owned Hotels, of which
$2.5 million related to refurbishments and repositionings on eight Owned Hotels.
The Company intends to spend approximately $7.1 million on capital improvements
related to its refurbishment and repositioning program at its Owned Hotels in
1994. Of this amount, $5.1 million relates to refurbishments and repositionings
on eight Owned Hotels, which includes five hotels that were being refurbished in
1993 and will continue to be refurbished in 1994.
Asset Realizations. The Company continues to negotiate settlements with
mortgage and note obligors, from which it anticipates receiving cash or
operating hotel assets. The Company intends to use the cash proceeds from asset
conversions for debt repayments and general corporate purposes.
24
<PAGE> 26
In June 1993, the Company reached a settlement of an adversary proceeding
regarding a note and promissory guarantee commenced by a subsidiary of PMI
during PMI's bankruptcy case (the "Rose and Cohen Settlement") with Allan V.
Rose ("Rose") and Arthur G. Cohen ("Cohen"). The settlement provided for Rose or
his affiliate to pay the Company the sum of $25.0 million, all of which was paid
into escrow on February 25, 1994, plus proceeds from approximately 1.1 million
shares of the Company's Common Stock held by Rose which will be liquidated over
a period of time. The Rose and Cohen Settlement is subject to a claim on the
entire amount by Financial Security Assurance, Inc. ("FSA"). All proceeds from
the Rose and Cohen Settlement must continue to be held in escrow until the
Company receives an order of the U.S. Bankruptcy Court for the Southern District
of Florida determining the Company's exclusive right to the settlement proceeds.
A trial was held on such claim in such court in January 1994. The Company
expects an order to be issued by that court in the near future, which order will
be subject to appeal. Assuming the Company receives a favorable order of the
court before the consummation of this Offering, substantially all of the net
proceeds will be used to repay the Senior Secured Notes and Junior Secured
Notes.
The Company has entered into a restructuring agreement relating to its
mortgage notes receivable secured by the Frenchman's Reef with the general
partner of the Frenchman's Reef Beach Associates ("FRBA"), the owner of the
hotel. In conjunction with the agreement, FRBA filed a pre-negotiated chapter 11
petition in September 1993. The plan of reorganization dated October 21, 1993
provides for the Company to receive ownership and control of the hotel through a
100% equity interest in the reorganized FRBA. The plan also provides for the
existing equity holders and any other impaired claim holders to participate in
excess cash flow above specified levels and all administrative and unsecured
trade claims incurred in the ordinary course of business to be paid in full.
There can be no assurance that the plan will become effective. A group
purporting to represent a significant number of limited partners has filed an
objection to the disclosure statement related to such plan and seeks to replace
the Frenchman's Reef's general partner with a new general partner that may seek
to redirect the bankruptcy proceedings, including investigating the validity and
priority of the Company's mortgages, in a way that may be materially adverse to
the Company. In light of this uncertainty, the Company intends to defend its
positions, and to pursue a foreclosure of its mortgages and has filed a motion
with the bankruptcy court seeking to lift the stay of relief under the chapter
11 petition to permit a commencement of a foreclosure action. The motion is
subject to approval by the Bankruptcy Court. Due to, among other factors, the
contingent nature of bankruptcy proceedings, there can be no assurance of when
and if any court approval will be obtained. In addition, the Company's
management agreement with respect to the Frenchman's Reef could be rejected in
connection with the bankruptcy case. The Company had, as of December 31, 1993,
$39.6 million of debt secured by the Company's mortgage on the Frenchman's Reef.
The Company does not intend to obtain ownership of the Frenchman's Reef unless
the lender of such debt consents. The Company has entered into discussion with
the lender regarding revising the terms of such debt. See "Risk
Factors -- Dependence on the Frenchman's Reef," "Management's Discussion and
Analysis of Financial Conditions and Results of Operations,"
"Business -- Lodging Operations -- Franchised Hotels" and Note 3 to Notes to
Consolidated Financial Statements.
During 1993, the Company also collected a $5.0 million installment
obligation related to the Baltimore Marriott hotel and received $4.0 million in
settlement of a mortgage note secured by the East Brunswick, New Jersey Sheraton
hotel. During 1993, the Company received the fee interest in a Ramada hotel in
Danbury, Connecticut in settlement of its mortgage note receivable. The Company
also acquired three hotels through lease expiration or foreclosure, one of which
it is presently converting to a Shoney's Inn in Orlando, Florida. In September
1993, the Company sold the Holiday Inn in Milford, Connecticut for a net sales
price of $2.4 million. After retiring the property's debt of $1.4 million, the
Company received net cash proceeds of $1.0 million from the transaction.
25
<PAGE> 27
SELECTED CONSOLIDATED FINANCIAL DATA
OF THE COMPANY AND ITS PREDECESSOR
The Company is the successor in interest to PMI. The Company implemented
"fresh start" reporting pursuant to the Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code" of the
American Institute of Certified Public Accountants, as of the Effective Date.
Accordingly, the consolidated financial statements of the Company are not
comparable in all material respects to any such financial statement as of any
date or any period prior to the Effective Date. Subsequent to the Effective
Date, the Company changed its fiscal year end from June 30 to December 31. The
table below presents selected consolidated financial data derived from: (i) the
Company's historical financial statements for the year ended December 31, 1993,
(ii) the Company's historical financial statements as of and for the five month
period ended December 31, 1992, (iii) the Company's "fresh start" balance sheet
as of the Effective Date, and (iv) the historical consolidated financial
statements of PMI for the one month ended July 31, 1992 and for each of the four
years in the period ended June 30, 1992. The following data includes information
with respect to eight AmeriSuites Owned Hotels owned by Suites of America, which
as of the Issuance Date initially will be an Unrestricted Subsidiary pursuant to
the Indenture. This data should be read in conjunction with the Consolidated
Financial Statements, related notes and other financial information included and
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
PRE-REORGANIZATION POST-REORGANIZATION
---------------------------------------------------------- -----------------------------
AS OF AND FOR THE
------------------------
ONE MONTH FIVE MONTHS AS OF AND FOR
AS OF AND FOR THE YEAR ENDED JUNE 30, ENDED ENDED THE YEAR ENDED
---------------------------------------------- JULY 31, DECEMBER 31, DECEMBER 31,
1989 1990(1)(2) 1991(1) 1992(1) 1992(1) 1992 1993
---------- --------- --------- --------- --------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues............... $ 315,189 $ 277,239 $ 205,699 $ 134,190 $ 8,793 $ 41,334 $108,860
Valuation writedowns and
reserves................... (9,398) (240,855) (59,149) (62,123) (13,000 ) -- --
Reorganization items......... -- -- (181,655) (23,194) 1,796 -- --
Income (loss) from continuing
operations before
extraordinary items(3)..... (6,630) (280,387) (246,110) (71,965) (10,274 ) 1,393 8,175
Extraordinary items -- gains
on discharge of
indebtedness (net of income
taxes)..................... -- -- -- -- 249,600 -- 3,989
Net income (loss)............ (6,630) (267,075) (227,188) (71,965) 239,326 1,393 12,164
BALANCE SHEET DATA:
Total assets................. 1,079,682 934,116 679,916 554,118 468,650 403,314 410,685
Long-term debt, net of
current portion............ 422,828 368,925 2,851 8,921 204,438 192,913 168,618
Stockholders' equity
(deficiency)............... 334,014 66,681 (157,327) (229,292) 135,600 137,782 171,364
</TABLE>
- ---------------
(1) PMI filed for chapter 11 bankruptcy protection on September 18, 1990, at
which time it owned or managed 141 hotels. During its approximately two-year
reorganization, PMI restructured its assets, operations and capital
structure. On the Effective Date, the Company emerged from chapter 11
reorganization with 75 owned or managed hotels (as compared to 141 owned or
managed hotels prior to the chapter 11 reorganization), $135.6 million of
stockholders' equity and $266.4 million of long-term debt.
(2) PMI effectively discontinued the operations of its franchise segment on July
1, 1990, with the sales of the Howard Johnson, Ramada and Rodeway franchise
businesses in July 1990.
(3) Approximately $2.3 million, $28.0 million and $25.3 million of contractual
interest expense during the one month ended July 31, 1992 and for the fiscal
years ended June 30, 1992 and 1991, respectively, was not accrued and was
not paid due to the chapter 11 proceeding.
26
<PAGE> 28
BUSINESS
The Company is a leading independent hotel operating company with ownership
or management of 86 full-service and limited-service Hotels in 19 states and one
resort Hotel in the U.S. Virgin Islands. The Company's Hotels are generally
moderately priced hotels which are designed to attract business and leisure
travelers desiring quality accommodations at affordable prices. Located
primarily in secondary and tertiary markets, the Hotels typically contain 100 to
200 guest rooms or suites and operate under franchise agreements with national
hotel chains or under the Company's proprietary Wellesley Inns or AmeriSuites
trade names. The Company has 40 Owned Hotels and 47 Managed Hotels. The Company
holds significant mortgages or other financial interests in 12 of the 47 Managed
Hotels.
Wellesley Inns and AmeriSuites are limited-service hotels that primarily
target the business traveler. Wellesley Inns are upper-economy hotels located in
Florida, the Middle Atlantic and the Northeast United States, generally within
short distances from restaurant facilities. AmeriSuites are all-suites hotels
mainly situated near corporate office parks and major attractions in locations
in the Southern and Central United States. The Company has entered into an
agreement in which it or its joint venture partner may, if certain conditions
are met, contribute its eight AmeriSuites to a joint venture of which it will be
a 50% owner.
As a leading domestic hotel operating company, the Company enjoys a number
of operating advantages over other lodging companies. With 87 Hotels covering a
number of price points and a broad geographic range, the Company possesses the
critical mass to support sophisticated operating, marketing and financial
systems. The Company believes that its array of central services permits on-site
hotel general managers to focus effectively on providing guest services, results
in economies of scale and helps generate above-market hotel profit margins. As a
result of these operating efficiencies, the Company's Hotels generated average
operating profit margins that exceeded comparable industry standards for 1992,
as reported by industry sources, by approximately six percent for
limited-service hotels and 16 percent for full-service hotels.
In addition to its hotel operations, the Company owns a portfolio of Other
Assets. As of December 31, 1993, the Other Assets included $115.3 million in
notes related to the Managed Hotels, $50.0 million in other notes and $23.6
million in real estate. The Company intends over time to convert certain of
these Other Assets to cash and hotel assets. In 1992 and 1993, the Company
converted $46.2 million and $14.6 million, respectively, of other assets to cash
and added six operating hotel assets through settlements and lease terminations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Lodging Operations -- Franchised Hotels" and
"Business -- Other Assets."
LODGING INDUSTRY
As of December 31, 1993, there were approximately 3.1 million hotel rooms
in the United States. During the past decade, approximately 742,000 rooms were
added to the hotel industry, producing a 3.1% annual growth rate. However,
subsequent to 1990, the growth rate of new construction diminished
significantly, with only an estimated 40,000 rooms added in 1992 (for a growth
rate of 1.3%) and 31,000 rooms added in 1993 (for a growth rate of 1.0%). Such
decreases in supply, coupled with increases in demand in 1992 and 1993 generally
have resulted in improved operating results for domestic hotels. The improvement
in industry fundamentals has contributed to higher occupancy percentages and
room rates for the domestic hotel industry, including the Company. Over the next
three years industry analysts project national demand for hotel rooms to grow at
a 3% to 4% annual rate due to an improved economic environment while supply
growth will be negligible. Such projections also call for increases in occupancy
and room rates.
27
<PAGE> 29
The following table sets forth industry data for 1992 and 1993 as to (i)
the average occupancy, (ii) the average room rate, (iii) REVPAR and (iv) the
percentage change of supply and demand. The table includes further industry
information relative to the Company's principal operating regions and types of
accommodations.
LODGING INDUSTRY PROFILE
<TABLE>
<CAPTION>
AVERAGE AVERAGE % CHANGE
OCCUPANCY ROOM RATE REVPAR 1992-1993
------------- ----------------- --------------- ---------------
SEGMENT 1992 1993 1992 1993 1992 1993 SUPPLY DEMAND
- ------------------------------ ---- ---- ------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Industry................. 61.9% 63.7% $ 59.62 $ 60.99 $36.90 $38.85 1.0% 4.0%
By Region:
Middle Atlantic(1).......... 61.8% 64.4% $ 77.03 $ 77.48 $47.60 $49.90 0.6% 4.8%
South Atlantic.............. 62.7% 64.8% $ 59.29 $ 60.92 $37.17 $39.48 0.7% 4.1%
By Service:
Luxury...................... 67.4% 69.6% $104.77 $106.86 $70.61 $74.37 2.0% 5.2%
Upscale..................... 64.7% 66.0% $ 73.11 $ 74.47 $47.30 $49.15 0.9% 2.9%
Mid-Price................... 62.9% 63.9% $ 53.98 $ 54.77 $33.95 $35.00 1.4% 2.9%
Economy..................... 61.4% 61.9% $ 43.76 $ 43.68 $26.87 $27.04 0.8% 1.6%
Budget...................... 59.9% 59.3% $ 33.07 $ 33.68 $19.81 $19.97 0.3% -0.7%
</TABLE>
- ---------------
Source: Smith Travel Lodging Outlook, February 1994.
(1) Middle Atlantic includes New Jersey, New York and Pennsylvania.
STRATEGY
The Company believes that its equity ownership in the Hotels has generated
attractive yields and therefore it seeks to expand its role as equity owner. As
an owner/operator of hotels, the Company has control over hotel product quality
and service and benefits directly from both improving industry fundamentals and
its ability to improve individual hotel operating performance. The Company's
strategy to meet the foregoing objective and achieve sustainable earnings growth
has five key elements:
- Expand Proprietary Hotel Chains. The Company believes that its two
proprietary hotel brands, Wellesley Inns and AmeriSuites, are well
positioned in attractive segments of the lodging industry. The Company
plans to continue the expansion of the Wellesley Inns chain in the
Southeast, the Middle Atlantic and the Northeast United States through
development of new hotels and the acquisition and conversion of existing
hotels. The Company also intends to expand the AmeriSuites chain through
development of new hotels in business and corporate markets throughout
the country.
- Acquire and Reposition Hotels. The Company believes short-term
opportunities exist to acquire and reposition hotels at attractive
multiples of cash flow or at significant discounts to replacement values.
Generally, this strategy requires investment of additional capital to
improve product quality and implementation of marketing and operating
systems to enhance market position and improve operating performance.
- Refurbish and Improve Operations at Existing Company-owned
Hotels. During the last two years, the Company has acquired operating
control of six Hotels through mortgage foreclosures, lease
termination/evictions or acquisitions. The Company is pursuing a program
of refurbishing, repositioning and, in some instances, changing the
franchise affiliation of these recently acquired Hotels as well as other
Hotels in the Company's portfolio.
- Expand Management Service Operations. The Company seeks to expand the
number of Managed Hotels as a complement to its core hotel ownership
operations. The Company believes that its management services business
provides profit opportunities without significant capital investment or
incremental costs.
28
<PAGE> 30
- Monetize or Convert Other Assets. The Company is currently seeking to
monetize or convert Other Assets to hotel operating assets and cash. The
Company converted $46.2 million and $14.6 million of other assets in 1992
and 1993 to cash and added six operating hotels through settlements and
lease terminations. The Company presently is attempting to convert Other
Assets which presently carry a book value of $75.0 million, to
approximately $50.0 million in operating assets with respect to the
Frenchman's Reef and $32.0 million in cash from the Rose and Cohen
Settlement, of which $25.0 million represents cash held in escrow as
settlement for notes receivable and an estimated $7.0 million from the
proceeds of the sale of 1.1 million shares of the Company's Common Stock
held by Rose. See "Risk Factors -- Dependence on the Frenchman's Reefs,"
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Business -- Lodging Operations -- Franchised Hotels" and
"Business -- Other Assets."
LODGING OPERATIONS
The Hotels are located in 19 states and the U.S. Virgin Islands and contain
a total of 13,011 rooms. Hotel size generally ranges between 100 to 200 guest
rooms or suites. The Hotels are operated primarily under franchise agreements
with national chains including Marriott, Radisson, Sheraton, Holiday Inn, Ramada
and Howard Johnson trade names and under the proprietary trade names Wellesley
Inns and AmeriSuites. The Hotels generally serve secondary and tertiary markets
and focus primarily on the business traveler customer base. The following table
sets forth information with respect to the Owned and Managed Hotels as of March
1, 1994:
<TABLE>
<CAPTION>
MANAGED WITH
SIGNIFICANT
OWNED(1) INTEREST(2) OTHER MANAGED TOTAL
---------------- ---------------- ---------------- -----------------
HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS
------ ----- ------ ----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wellesley Inn......................... 11 1,157 5 478 11 1,031 27 2,666
AmeriSuites(3)........................ 8 993 0 0 0 0 8 993
Marriott.............................. 0 0 1 517 1 525 2 1,042
Radisson.............................. 0 0 1 204 1 192 2 396
Sheraton.............................. 2 364 0 0 1 225 3 589
Holiday Inn........................... 2 363 1 158 4 827 7 1,348
Ramada................................ 7 1,031 2 423 12 2,483 21 3,937
Howard Johnson........................ 8 846 2 361 4 515 14 1,722
Other................................. 2 228 0 0 1 90 3 318
-- ----- -- ----- -- ----- -- ------
TOTAL......................... 40 4,982 12 2,141 35 5,888 87 13,011
-- ----- -- ----- -- ----- -- ------
-- ----- -- ----- -- ----- -- ------
</TABLE>
- ---------------
(1) Of the 40 Owned Hotels, ten are leased.
(2) Twelve Managed Hotels in which the Company holds a significant mortgage on
the property.
(3) The AmeriSuites presently owned by the Company are managed by ShoLodge.
The following table sets forth for the five years ended December 31, 1993
the number of hotels and rooms and the occupancy and ADR of the Owned and
Managed Hotels. The data includes full year operating results for hotels that
the Company had previously managed and then acquired during the year.
<TABLE>
<CAPTION>
MANAGED WITH
SIGNIFICANT
OWNED INTEREST OTHER MANAGED TOTAL
YEAR ENDED ---------------- ---------------- ---------------- -----------------
DECEMBER 31, HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS
- -------------------------------------- ------ ----- ------ ----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1989.............................. 21 2,687 12 2,141 31 5,245 64 10,073
1990.............................. 31 3,941 12 2,141 31 5,245 74 11,327
1991.............................. 32 4,071 12 2,141 32 5,489 76 11,701
1992.............................. 35 4,419 12 2,141 32 5,489 79 12,049
1993.............................. 41 5,092 12 2,141 33 5,604 86 12,837
</TABLE>
29
<PAGE> 31
<TABLE>
<CAPTION>
OCCUPANCY ADR OCCUPANCY ADR OCCUPANCY ADR OCCUPANCY ADR
--------- ------ --------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1989...................... 67.7% $59.19 71.0% $82.29 71.1% $58.53 70.3% $64.41
1990...................... 65.9% $55.88 69.1% $78.63 66.3% $60.99 66.6% $63.19
1991...................... 66.6% $53.60 64.1% $78.14 61.4% $59.15 63.7% $60.80
1992...................... 68.0% $54.83 64.9% $80.45 66.3% $58.64 66.6% $61.16
1993...................... 70.0% $56.02 68.8% $84.36 68.4% $59.88 69.1% $62.74
</TABLE>
The leases covering the Company's leased Hotels provide for fixed lease
rents and, in most instances, additional percentage rents based on a percentage
of room revenues. The leases also generally require the Company to pay the cost
of repairs, insurance and real estate taxes. In addition, some of the Company's
Owned Hotels are located on land subject to long-term leases, generally for
terms in excess of the depreciable lives of the improvements.
The Company continuously refurbishes its Owned Hotels in order to maintain
consistent quality standards. The Company generally spends approximately 4% to
6% of hotel revenue on capital improvements at its Owned Hotels and typically
refurbishes each hotel approximately every five years. The Company believes that
its Owned Hotels are in generally good physical condition, with over half of the
Owned Hotels being less than five years old. The Company recommends the
refurbishment and repair projects on its Managed Hotels although spending
amounts vary based on the financial strength of the hotel and its owner and the
significance of the Company's interest as a mortgagee.
Franchised Hotels
The Company currently operates 36 full-service Hotels and 15
limited-service Hotels under franchise agreements with Marriott, Radisson,
Sheraton, Holiday Inn, Ramada and Howard Johnson. Additionally, the Company owns
one independent hotel. The Franchised Hotels are mostly located in the
Northeast, Middle Atlantic and Western regions in the United States. The hotels
are generally positioned along major highways within close proximity to
corporate headquarters, office parks, airports, convention or trade centers and
other major facilities. The customer base for Franchised Hotels consists
primarily of business travelers as well as tourists. The Company's sales force
markets to companies which have a significant number of employees traveling in
the Company's operating regions who consistently produce a high volume demand
for hotel room nights. Full-service hotels generally have pool, restaurant,
lounge, banquet and meeting facilities, whereas limited-service hotels generally
only have a pool and, in some instances, meeting facilities.
The Company manages one resort hotel, Marriott's Frenchman's Reef in St.
Thomas, U.S. Virgin Islands. The Frenchman's Reef is a 517-room resort hotel
which includes a 421-room eight-story building and 96 rooms in the adjacent
Morningstar Beach Resort. The Frenchman's Reef has seven restaurants, extensive
convention facilities, complete sports and beach facilities and a self-contained
total energy and desalinization system. The Frenchman's Reef is marketed
directly through its own sales force in New York City and at the Hotel, and
through the Marriott reservation system. The Frenchman's Reef markets primarily
to tour groups, corporate meetings, conventions and individual vacationers. The
Company currently manages the Frenchman's Reef for an independent owner,
although the Company holds a significant interest in the property through a
first mortgage that the Company acquired when it sold the Frenchman's Reef in
1985. See "Risk Factors -- Dependence of the Frenchman's Reef" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The full-service Franchised Hotels generally are larger Hotels and have
between 150 and 300 rooms, pool, restaurant, lounge, banquet and meeting
facilities. Other amenities include fitness rooms, room service, remote-control
cable television and facsimile services. In order to improve guest satisfaction,
the Company has recently introduced or expanded theme concept lounges such as
sports bars, fifties clubs and country and western bars in six of its Hotels.
The hotels actively market meeting and banquet services to groups and
individuals for seminars, business meetings, holiday parties and weddings. The
full-service Franchised Hotels are operated under agreements with Marriott,
Radisson, Sheraton, Holiday Inn (including Crowne Plaza Hotels) and Ramada. The
Company received recognition in 1993 as a highly awarded Ramada franchisee for
hotel quality and service and received awards from other franchisors and
associations as well.
30
<PAGE> 32
The following table sets forth for the five years ended December 31, 1993,
with respect to the full-service Franchised Hotels that were Owned and Managed
Hotels, the number of locations, number of rooms, occupancy percentage and ADR.
The data includes full year operating results for hotels that the Company had
previously managed and then acquired during the year.
<TABLE>
<CAPTION>
NUMBER OF
-------------------
LOCATIONS ROOMS OCCUPANCY % ADR
--------- ----- ----------- ------
<S> <C> <C> <C> <C>
1989........................................ 34 7,032 68.3 $72.41
1990........................................ 36 7,389 64.3 $72.48
1991........................................ 37 7,633 61.4 $69.57
1992........................................ 37 7,633 64.7 $70.31
1993........................................ 37 7,633 67.0 $73.00
</TABLE>
The Company's limited-service Franchised Hotels generally have an average
of between 100 and 120 rooms and offer complimentary continental breakfast,
remote control cable television, pool facilities and facsimile services,
generally with restaurant facilities within a short distance of the hotel. They
are designed to appeal primarily to business travelers and secondarily to
tourists. The following table sets forth for the five years ended December 31,
1993, with respect to the limited-service Franchised Hotels that were Owned and
Managed Hotels, the number of locations, number of rooms, occupancy percentage
and ADR. The data includes full year operating results for hotels that the
Company had previously managed and then acquired during the year.
<TABLE>
<CAPTION>
NUMBER OF
-------------------
LOCATIONS ROOMS OCCUPANCY % ADR
--------- ----- ----------- ------
<S> <C> <C> <C> <C>
1989........................................ 9 1,010 69.1 $52.02
1990........................................ 9 1,010 61.8 $52.17
1991........................................ 9 1,010 54.4 $49.42
1992........................................ 10 1,106 57.4 $47.01
1993........................................ 13 1,465 60.4 $45.67
</TABLE>
The Company reviews on an on-going basis each Franchised Hotel's
competitive position in its local market in order to decide the types of product
that will best meet the market's demand characteristics. Repositioning a hotel
generally requires renovation and refurbishment of the exterior and interior of
the building and may result in a change in brand name. In 1993, the Company
changed the franchise affiliations of four of its Hotels and will continue to do
so where appropriate. The Company has completed or is in the process of
repositioning eight of its Franchised Owned Hotels.
The Company believes short-term opportunities exist for acquisitions of
full-service Franchised Hotels at attractive multiples of cash flow or at
significant discounts to replacement values. Due to competition among hotel
buyers, the Company cannot predict when or if it will acquire additional hotels.
The Company seeks to complement its acquisition objectives by adding Managed
Hotels. The Company believes there is a market for experienced hotel operators
to manage for hotel equity holders such as banks, insurance companies and other
capital investors.
WELLESLEY INNS
The Company's proprietary Wellesley Inns chain consists of 27
limited-service hotels, 14 of which are located in Florida and the remainder in
the Middle Atlantic and Northeast United States. The Company owns and operates
11 Wellesley Inns and manages 16 Wellesley Inns for independent owners. The
Company has developed separate strategies for the Wellesley Inns located in
Florida and the northern Wellesley Inns. In Florida, where the population has
grown rapidly and development opportunities continue to exist, it has built a
geographically concentrated group of Wellesley Inns thereby developing brand
name recognition in Florida. In 1993, the Florida Wellesley Inns average
occupancy was approximately 90% and gross operating profits averaged over 50% of
hotel revenues. The prototypical Florida Wellesley Inn has 105 rooms and is
distinguished by its classic stucco exterior, spacious lobby and amenities such
as continental breakfast, remote
31
<PAGE> 33
control cable television and facsimile services. The Florida properties are
operated through the Company's Florida regional office. Marketing efforts rely
heavily on direct marketing and billboard advertising. In the Middle Atlantic
and Northeast where the Company believes new development opportunities are
limited, the Company has focused on building the Wellesley Inns system through
acquisition and conversion of existing properties. In 1993, the northern
Wellesley Inns average occupancy was over 72% and gross operating profits
averaged approximately 46% of hotel revenues. The Company owns eight Florida
Wellesley Inns and three northern Wellesley Inns.
The following table sets forth for the five years ended December 31, 1993,
with respect to the Wellesley Inns that are Owned and Managed Hotels, the number
of locations, number of rooms, occupancy percentage and the average daily rate
ADR. The data includes full year operating results for hotels that the Company
had previously managed and then acquired during the year.
<TABLE>
<CAPTION>
NUMBER OF
-------------------
LOCATIONS ROOMS OCCUPANCY % ADR
--------- ----- ----------- -------
<S> <C> <C> <C> <C>
1989........................................ 21 2,031 78.8 $ 43.54
1990........................................ 26 2,561 78.4 $ 43.75
1991........................................ 26 2,561 76.5 $ 43.75
1992........................................ 26 2,561 78.0 $ 43.74
1993........................................ 27 2,666 81.2 $ 45.28
</TABLE>
The majority of the Florida Wellesley Inns were constructed within the past
five years. Historically, the Company has built Florida Wellesley Inns at a cost
of approximately $35,000 to $40,000 per room, depending on land costs. Florida
Wellesley Inns have a low cost structure and have had rapid stabilization
periods generally within six to 18 months of opening. The Company has begun
construction of one Wellesley Inn in the Sawgrass section of Fort Lauderdale,
Florida and one Wellesley Inn in Lakeland, Florida. The Company plans to expand
the Northern portion of the Wellesley Inn chain through conversion of existing
mid-priced limited-service hotels rather than through new construction.
AMERISUITES
The Company owns eight AmeriSuites hotels, which are positioned in the
all-suites segment of the hotel industry. AmeriSuites hotels offer guests an
attractively designed suite unit with a complimentary continental breakfast in a
spacious lobby cafe, remote control cable television and facsimile service.
AmeriSuites is a limited-service concept which offers group meeting space, but
does not include restaurant or lounge facilities. AmeriSuites attract customers
which typically stay in mid-market limited-service and full-service hotels
principally because of the quality of the guest suites, which offer distinct
living, sleeping and kitchen areas. AmeriSuites contain approximately 125 suites
and two to four meeting rooms. AmeriSuites are primarily located near corporate
office parks and major attractions in the South and Central parts of the United
States. The target market is primarily the business traveler with an average
length of stay of two to three nights and secondarily traveling families. The
Company's eight AmeriSuites are managed by ShoLodge. The Company currently
intends to manage the AmeriSuites it is planning to build in Tampa, Florida and
any other AmeriSuites owned by the Company outside the ShoLodge joint venture.
AmeriSuites are marketed on a local level primarily through direct sales and use
the ShoLodge reservation system.
The following table sets forth for the five years ended December 31, 1993,
with respect to AmeriSuites that are Owned Hotels, the number of locations,
number of rooms, occupancy percentage and the ADR. The data includes full year
operating results for hotels that the Company had previously managed and then
acquired during the year.
32
<PAGE> 34
<TABLE>
<CAPTION>
NUMBER OF
-------------------
LOCATIONS ROOMS OCCUPANCY % ADR
--------- ----- ----------- -------
<S> <C> <C> <C> <C>
1989........................................ 0 0 0.0 $ 0.00
1990........................................ 3 367 37.9 $ 60.23
1991........................................ 4 497 48.5 $ 55.33
1992........................................ 6 749 60.0 $ 54.99
1993........................................ 8 993 64.1 $ 56.21
</TABLE>
In 1993, the Company, through Suites of America, entered into a joint
venture agreement with ShoLodge designed to increase the number of AmeriSuites
from the six hotels owned at that time by adding six hotels to be built and
financed by ShoLodge. ShoLodge has completed development of three hotels, two of
which the Company has acquired subject to ShoLodge mortgages, bringing to eight
the total number of AmeriSuites owned by the Company. In addition, ShoLodge has
three hotels currently under construction. Upon the occurrence of certain events
and the exercise of an option by either ShoLodge or the Company, Suites of
America will own 12 AmeriSuites, ShoLodge will own a 50% interest in Suites of
America and Suites of America will enter into a 20 year management agreement
with ShoLodge. The Company will retain ownership of and all rights to license
and develop the brand name for its own account, regardless of whether the
Company or ShoLodge executes such option. Suites of America initially will be
designated an Unrestricted Subsidiary pursuant to the Indenture and, therefore,
will not be constrained from taking actions which may limit the Company's access
to its revenues and cash flows. The debt of Suites of America is not guaranteed
by the Company.
The Company plans to develop the AmeriSuites chain through new construction
for its own account outside the joint venture. The Company has begun development
of a site in Tampa, Florida and has other sites currently under review. All of
the AmeriSuites were constructed within the past four years. The Company has
historically built AmeriSuites at a cost of approximately $45,000 to $48,000 per
room, depending on land costs. AmeriSuites have a low cost structure and have
had stabilization periods, generally of 24 to 36 months of opening. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
OTHER ASSETS
On the December 31, 1993 balance sheet, Other Assets totaled approximately
$188.9 million and consisted of an aggregate principal amount of $115.3 million
of mortgages and notes secured by Managed Hotels, $50.0 million of other
mortgages and notes and $23.6 million of real property not related to Owned
Hotels (approximately $12 million of which consisted of office buildings). The
Company intends to convert certain of these Other Assets to cash and hotel
assets. In 1992 and 1993, the Company converted $46.2 million and $14.6 million,
respectively, of other assets to cash and added six operating hotel assets
through settlements and lease terminations.
The Company's mortgage notes secured by hotel properties consist primarily
of notes with a book value of $100.2 million secured by mortgages on 12 Managed
Hotels. These notes currently bear interest at rates ranging from 8.5% to 14.0%
per annum and have various maturities through 2014. The mortgages were primarily
derived from the sales of hotel properties. The largest of the 12 is the
Frenchman's Reef mortgage, which the Company is seeking to restructure. The
Frenchman's Reef accounts for $50.0 million of the mortgage notes and has a face
value of approximately $79.0 million (excluding accrued interest). The Company
has restructured approximately $36.5 million of the remaining mortgages and
notes to receive the majority of available cash flow and a participation in the
future excess cash flow of such hotel properties. The restructurings generally
include senior mandatory-payment notes and junior notes payable annually based
on cash flow. The Company believes that, taken together, the restructured senior
and junior mortgage notes often exceed the value of the properties they
encumber. As a result, these junior notes bear many of the characteristics and
risks of operating hotel equity investments and are not reflected on the
Company's balance sheet. Earnings on the Other Assets totaled 14.9% of Company's
revenues in 1993. See "Risk Factors -- Risks
33
<PAGE> 35
Associated with Other Assets" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
In addition to the 12 significant mortgage positions referred to above, the
Company also holds the junior, accruing or cash flow notes and other interests
on 19 other properties managed by the Company. With regard to these 19
properties, third parties generally hold significant senior mortgages. Because
there is substantial doubt that the Company will recover any of their value,
none of these subordinated financial interests are valued on the Company's
balance sheet.
In 1993, the Company recognized $3.8 million of interest income from the
senior, mandatory payment notes and $1.0 million of interest income related to
the junior, accruing or cash flow-based notes. The ability to collect on these
junior notes is affected by interest rates on other hotel debt owed to third
parties that is senior to the Company's mortgages and notes on the hotel
properties. The junior, accruing or cash flow notes have benefitted recently
from lower floating interest rates on the more senior debt. Approximately $4.3
million or 28.8% of the 1993 interest income on mortgages and notes was derived
from the Company's note receivable secured by the Frenchman's Reef. See "Risk
Factors -- Dependence on the Frenchman's Reef" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The Company's other notes receivable consist primarily of a note with a
book value of $25 million related to loans its predecessor made to entities
controlled by Rose and Cohen. The Company has collected $25.0 million from Rose,
which amount has been placed in escrow in settlement of the Rose and Cohen Note.
The entire amount of the settlement is subject to a claim by FSA. The Rose and
Cohen Settlement will include an additional amount from the liquidation of
approximately 1.1 million shares of the Company's Common Stock held by Rose. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Asset Realizations."
MANAGEMENT AGREEMENTS
The Company provides hotel management services to third party hotel owners
of 47 Managed Hotels. Management fees are derived from the Managed Hotels based
on fixed percentages of the property's total revenues. Additional fees are also
generated from the rendering of specific services such as accounting services,
construction services, design services and sales commissions and performance
related incentive payments based on certain measures of hotel income. The
Company's fixed management fee percentages range from 0.5% to 5.0% and average
3.5% of the Managed Hotel's total revenues before giving consideration to
performance related incentive payments. The base and incentive fees comprised
approximately 60.1%, or $6.5 million, of the total management and other fees in
1993. Terms of the management agreements vary but the majority are considered
short-term and, therefore, there are risks associated with termination of these
agreements. However, the Company believes these risks are mitigated due to its
role as lender or provider of trade names in many of these instances. The
Company seeks to expand the number of hotels under management agreements for
third parties as a complement to its core hotel ownership operation. In the
first quarter of 1994 the Company added two Managed Hotels in Santa Clara,
California and Atlanta, Georgia. It believes that the management service
business provides gross revenue opportunities without the investment of
significant capital expenses and operating costs. See "Risk
Factors -- Management Agreements."
OPERATIONS
As a leading domestic hotel operating company, the Company enjoys a number
of operating advantages over other lodging companies. With 87 Hotels covering a
number of price points and broad geographic regions, the Company possesses the
critical mass to support sophisticated operating, marketing and financial
systems. The Company believes that its broad array of central services permits
on-site hotel general managers to effectively focus on providing guest services,
results in economies of scale and leads to above-market hotel profit margins. As
a result of these operating strategies, the Company's Hotels generated average
operating profit margins that exceeded comparable industry standards for 1992,
as reported by industry sources, by approximately six percent for
limited-service hotels and 16 percent for full-service hotels.
34
<PAGE> 36
The Company's operating strategy combines operating service and guidance
from its central management team, with decentralized decision-making authority
delegated to each hotel's on-site management. On-site hotel managers focus on
providing guest services. The on-site hotel management teams focus on providing
guest services and consist of a general manager and, depending on the hotel's
size and market positioning, managers of sales and marketing, food and beverage,
front desk services, housekeeping and engineering. The Company's operating
objective is to exceed guest expectations by providing quality services and
comfortable accommodations at the lowest cost consistent with each hotel's
market position. On-site hotel management is responsible for efficient expense
controls and uses operating standards provided by the Company. Within parameters
established in the operating and capital planning process, on-site management
possesses broad decision-making authority on operating issues such as guest
services, marketing strategies, hiring practices and incentive programs. Each
hotel's management team is empowered to take all necessary steps to ensure guest
satisfaction within established guidelines. Key on-site personnel participate in
an incentive program based on hotel revenues and profits.
The central management team, located in Fairfield, New Jersey, provides
four major categories of services: (i) operations management, (ii) sales and
marketing management, (iii) financial reporting and control and (iv) hotel
support services.
Operations Management. Operations management consists of the development,
implementation and monitoring of hotel operating standards and is provided by a
network of regional operating officers who are each responsible for the
operations of 10-15 hotels. Supporting them are training, food and beverage and
human resources departments, each staffed full-time by specialized
professionals. The cornerstone of operations management is employee training,
with a staff of professionals dedicated to training in sales, housekeeping, food
service, front desk services and leadership. The Company believes these efforts
increase employee effectiveness, reduce turnover and improve the level of guest
services.
The Company's cost-effective centralized management services benefit not
only its existing operations but also provide additional opportunities for
growth and development from acquisitions. In all of the recently acquired
Hotels, the Company's headquarters have assumed certain of the operational
responsibilities which previously had been performed by the on-site Hotel
management. In addition, the Company believes it has improved operating
efficiencies for each of these Hotels that it has acquired.
Sales and Marketing. Aggressive sales and marketing is a top operating
priority. Sales and marketing management is directed by a corporate staff of 20
professionals, including regional marketing directors who are responsible for
each Hotel's sales and marketing strategies, and the Company's 12-member
national sales group, Market Segments, Inc. ("MSI"). In cooperation with the
regional marketing and organization staff, on-site sales management develops and
implements short-and intermediate-term marketing plans. The Company focuses on
yield management techniques, which optimize the relationship between hotel rates
and occupancies and seek to maximize profitability. In addition, the Company
assumes prominent roles in franchise marketing associations to obtain maximum
benefit from franchise affiliations. The Company's in-house creative department
creates hotel advertising materials and programs at cost-effective rates.
Complementing regional and on-site marketing efforts, MSI's marketing team
targets specific hotel room demand generators including tour operators, major
national corporate accounts, athletic teams, religious groups and others with
segment-specialized sales initiatives. MSI's primary objective is to book hotel
rooms at the Company's Hotels and its secondary objective is to market its
services on a commission basis to major operators throughout the industry. Sales
activities on behalf of non-affiliated hotels increase the number of hotels
where bookings can be made to support marketing efforts and defray the costs of
the marketing organization.
Financial Reporting and Control. The Company's system of centralized
financial reporting and control permits management to closely monitor
decentralized hotel operations without the cost of financial personnel on site.
Centralized accounting personnel produce detailed financial and operating
reports for each Hotel. Additionally, central management directs budgeting and
analysis, processes payroll, handles accounts payable, manages each Hotel's
cash, oversees credit and collection activities and conducts on-site hotel
audits.
35
<PAGE> 37
Hotel Support Services. The Company's hotel support services combine a
number of technical functions in central, specialized management teams to attain
economies of scale and minimize costs. Central management handles purchasing,
directs construction and maintenance and provides design services. Technical
staff teams support each hotel's information and communication systems needs.
Additionally, the Company directs safety/risk management activities and provides
central legal services.
FRANCHISE AGREEMENTS
The Company enters into non-exclusive franchise licensing agreements with
various franchisors, which agreements typically have a ten year term and allow
the Company to benefit from franchise brand recognition and loyalty. The
non-exclusive nature of the franchise agreement allows the Company the
flexibility to continue to develop properties with the brands that have shown
success in the past or to develop in conjunction with other brand names. While
the Company currently has a good relationship with its franchisors, there can be
no assurance that a desirable replacement would be available if any of the
franchise agreements were to be terminated. See "Risk Factors -- Relationship
with Franchisors."
The franchise agreements require the Company to pay annual fees, to
maintain certain standards and to implement certain programs which require
additional expenditures by the Company such as remodeling or redecorating. The
payment of annual fees, which typically total 7% to 8% of room revenues, cover
royalty fees and the costs of marketing and reservation services provided by the
franchisors. The use of franchisor reservation systems typically result in
increased occupancy. Franchise agreements, when initiated, generally provide for
an initial fee in addition to annual fees payable to the franchisor.
36
<PAGE> 38
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names, ages and positions of the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- ----------------------------------------------------------
<S> <C> <C>
David A. Simon........... 41 President, Chief Executive Officer and Chairman of the
Board of Directors
John M. Elwood........... 39 Executive Vice President, Chief Financial Officer and
Director
Herbert Lust, II(1)...... 65 Director
Leon Moore(1)............ 52 Director
Allen J. Ostroff......... 57 Director
A.F. Petrocelli(1)....... 49 Director
Paul H. Hower............ 59 Executive Vice President
Denis W. Driscoll........ 49 Senior Vice President
John H. Leavitt.......... 40 Senior Vice President
John E. Stetz............ 52 Senior Vice President
Joseph Bernadino......... 47 Senior Vice President, Secretary and General Counsel
Richard T. Szymanski..... 36 Vice President and Corporate Controller
Douglas W. Vicari........ 34 Vice President and Treasurer
</TABLE>
- ---------------
(1) Member of the Compensation and Audit Committee
The following is a biographical summary of the experience of the directors
and executive officers of the Company:
David A. Simon has been President, Chief Executive Officer and a Director
since 1992 and Chairman of the Board of the Company since 1993. Mr. Simon was a
director of PMI from 1988 to 1992. Mr. Simon was the Chief Operating Officer of
PMI from 1988 to 1989 and Chief Executive Officer of PMI from 1989 to 1992 and
was an executive officer in September 1990 when PMI filed for protection under
chapter 11 of the United States Bankruptcy Code.
John M. Elwood has been a Director and Executive Vice President of the
Company since 1992, Chief Financial Officer since 1993 and the Director of
Reorganization of the Company during 1992. Mr. Elwood was the Director of
Reorganization of PMI from 1990 to 1992. Mr. Elwood was the Director of
Reorganization of Allegheny International, Inc. from 1988 to 1990 and a Vice
President of Mellon Bank, N.A. during 1988.
Herbert Lust II has been a Director since 1992 and Chairman of the
Compensation and Audit Committee of the Company since 1993 and Chairman of the
Compensation Committee and a member of the Audit Committee of the Company from
1992 to 1993. Mr. Lust was a member of the Committee of Unsecured Creditors of
PMI from 1990 to 1992. Mr. Lust is a director of BRT Realty Trust.
Leon Moore has been a Director since 1992 and a member of the Audit and
Compensation Committee since 1993. From 1992 to 1993, Mr. Moore was a member of
the Compensation Committee. Mr. Moore has been the President, Chief Executive
Officer and Chairman of the Board of Directors of ShoLodge, Inc. for more than
the past five years. Mr. Moore is a director of the Bank of Nashville.
Allen J. Ostroff has been a Director since 1992. Mr. Ostroff was Chairman
of the Board of the Company and a member of the Audit Committee from 1992 to
1993. Mr. Ostroff has been a Senior Vice President of the Prudential Realty
Group, a subsidiary of the Prudential Insurance Company of America, for more
than the last five years.
37
<PAGE> 39
A. F. Petrocelli has been a Director since 1992 and a member of the
Compensation and Audit Committee of the Company since 1993 and of the
Compensation Committee of the Company from 1992 to 1993. Mr. Petrocelli has been
the Chairman of the Board of Directors and Chief Executive Officer of United
Capital Corp. for more than the past five years.
Paul H. Hower has been an Executive Vice President of the Company since
1993. Mr. Hower was President of Integrity Hospitality Services from 1992 to
1993 and Vice President and Hotel Division Manager of B.F. Saul Co. from 1988 to
1991.
Denis W. Driscoll has been a Senior Vice President of the Company since
1993. Mr. Driscoll was President of Driscoll Associates, a human resources
consulting organization, from 1988 to 1993.
John H. Leavitt has been a Senior Vice President of the Company since 1992.
Mr. Leavitt was a Senior Vice President of PMI from 1991 to 1992 and a Senior
Vice President of Medallion Hotel corporation from 1988 to 1991.
John E. Stetz has been a Senior Vice President of the Company since 1993.
Mr. Stetz was a Vice President -- Development of Choice Hotels International
from 1988 to 1992.
Joseph Bernadino has been Senior Vice President, Secretary and General
Counsel of the Company since 1993. Mr. Bernadino was an Assistant Secretary and
Assistant General Counsel of PMI from 1988 to 1992.
Richard T. Szymanski has been a Vice President and Corporate Controller of
the Company since 1992. Mr. Szymanski was Corporate Controller of PMI from 1989
to 1992, and Division Controller from 1988 to 1989.
Douglas W. Vicari has been a Vice President and Treasurer of the Company
since 1992 and was Vice President and Treasurer of PMI during 1992. Mr. Vicari
was the Director of Budget and Financial Analysis of PMI from 1989 to 1992, and
Budget Manager from 1988 to 1989.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 10, 1994, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to own beneficially 5% or more of the Company's
Common Stock, (ii) each director of the Company, (iii) the Company's Chief
Executive Officer and each of the five remaining most highly compensated
executive officers, and (iv) all executive officers and directors of the Company
as a group.
38
<PAGE> 40
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------------------------------------------------------ ---------- --------
<S> <C> <C>
Ingalls & 2,506,123 8.6
Snyder(1)...............................................................
61 Broadway
New York, NY 10006
David A. Simon.......................................................... 108,895 (2) *
John M. Elwood.......................................................... 42,122 (3) *
Herbert Lust, II........................................................ 20,700 (4) *
Leon Moore.............................................................. 50,000 *
Allen J. Ostroff........................................................ 5,000 *
A.F. Petrocelli......................................................... 161,026 (5) *
John Leavitt............................................................ 111 (6) *
Joseph Bernadino(7)..................................................... 1,000 *
Richard T. Szymanski(7)................................................. 0 *
Douglas W. Vicari(7).................................................... 0 *
All directors and executive officers as a group (13 persons)............ 395,140 1.4
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Ingalls & Snyder filed a Schedule 13G, dated February 1, 1994, with the
Commission reporting ownership of 2,506,123 shares of Common Stock, with
sole voting power with respect to 208,754 shares and sole dispositive power
with respect to 2,506,123 shares.
(2) Includes 101,736 shares owned by David A. Simon, 146 shares owned by his
wife and 249 shares held by Mr. Simon as custodian for his children. Mr.
Simon disclaims beneficial ownership of the shares owned by his wife and
held as custodian for his children. Also includes warrants to purchase 6,774
shares with an exercise price of $2.71 a share, of which Mr. Simon disclaims
beneficial ownership of 467 warrants owed by his wife and 697 warrants held
as custodian for his children.
(3) Includes warrants to purchase 12,122 shares with an exercise price of $2.71
a share.
(4) Held by a trust under which Mr. Lust and his wife are co-trustees and
beneficiaries.
(5) These shares are owned by United Capital Corp. Mr. Petrocelli is Chairman of
the Board of Directors and Chief Executive Officer of United Capital Corp.
(6) Includes warrants to purchase 85 shares with an exercise price of $2.71.
(7) Messrs. Hower and Driscoll were hired by the Company in June and July, 1993,
respectively. As a result of their employment with the Company for less than
the full fiscal year of 1993, they earned less compensation than Messrs.
Bernadino, Szymanski and Vicari in fiscal year 1993. However, it is
anticipated that in fiscal year 1994, Messrs. Hower and Driscoll will be
among the five most highly compensated executive officers after the
Company's Chief Executive Officer.
39
<PAGE> 41
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to an Indenture (the "Indenture") between
the Company and , as trustee (the "Trustee").
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 of
the Indenture and of the Trust Indenture Act, and Holders of the Notes 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 and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. A copy of the
proposed form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part and is 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 will rank pari passu with or senior in right of payment to all
existing and future subordinated Indebtedness of the Company. The Notes will
rank junior in right of payment to all existing and future Senior Indebtedness
of the Company.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be unsecured obligations of the Company, limited in
aggregate principal amount to $100 million and will mature on ,
2004. Interest on the Notes will accrue at the rate of % per annum and will
be payable semi-annually in arrears on and , commencing
on , 1994 to Holders of record on the immediately preceding
and . 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 Issuance Date. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. The Notes will be payable both as to
principal and interest at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of the
Company, payment of interest may be made by check mailed to the Holders of the
Notes at their respective addresses set forth in the register of Holders of
Notes. Until otherwise designated by the Company, the Company's office or agency
in New York will be the office of the Trustee maintained for such purpose. The
Notes will be issued in registered form, without coupons, and in denominations
of $1,000 and integral multiples thereof.
OPTIONAL REDEMPTION
Except as set forth in the next paragraph, the Notes are not redeemable at
the Company's option prior to , 1999. Thereafter, the Notes will be
subject to redemption at the option of the Company, in whole or in part, at any
time 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 thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
------------------------------------------------------------------ ----------
<S> <C>
1999.............................................................. %
2000.............................................................. %
2001.............................................................. %
2002 and thereafter............................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to , 1997, the
Company may redeem up to 25% of the initial principal amount of the Notes
originally issued with the net proceeds of one or more Public Offerings at a
redemption price equal to % of the principal amount thereof plus accrued
and unpaid interest, if any, to the redemption date; provided that at least 75%
of the principal amount of the Notes
40
<PAGE> 42
originally issued remain outstanding immediately after the occurrence of such
redemption and that such redemption occurs within 90 days following the closing
of any such Public Offering.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
NOTE PURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to purchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at a purchase offer price in
cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (the "Change of Control
Payment"). Within 10 Business Days following any Change of Control, the Company
will mail a notice to each Holder stating: (1) that the Change of Control Offer
is being made pursuant to the covenant entitled "Change of Control," the period
in which such offer will remain open and the expiration date of such offer; (2)
that all Notes tendered will be accepted for payment, the purchase price and the
purchase date (the "Change of Control Payment Date"); (3) that any Note not
tendered will continue to accrue interest; (4) that, unless the Company defaults
in the payment of the Change of Control Payment, all Notes accepted for payment
pursuant to the Change of Control Offer will cease to accrue interest after the
Change of Control Payment Date; (5) that Holders electing to have any Notes
purchased pursuant to a Change of Control Offer will be required to surrender
the Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address specified in
the notice prior to the expiration of such offer; (6) that Holders will be
entitled to withdraw their election if the Paying Agent receives, not later than
the expiration of such offer, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of Notes
delivered for purchase, and a statement that such Holder is withdrawing his
election to have such Notes purchased; (7) that Holders whose Notes are being
purchased only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof; and (8) the
circumstances and material facts regarding such Change of Control (including,
but not limited to, information with respect to pro forma and historical
financial information after giving effect to such Change of Control, and
information regarding the Person or Persons acquiring control).
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 the Notes in connection with a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (2) 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 (3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an officers' certificate stating the Notes or portions
thereof tendered to the Company. The Paying Agent will promptly mail to each
Holder of Notes so accepted the Change of Control Payment for such Notes, and
the Trustee will promptly authenticate and mail to each Holder a new Note equal
in principal amount to any unpurchased portion of the Notes surrendered, if any;
provided that each such new Note will be in a principal amount of $1,000 or an
integral multiple thereof. Prior to making the Change of Control Payment, but in
any event within 90 days following a Change of Control, the Company shall either
repay all outstanding Designated Senior Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Designated Senior
Indebtedness to permit the purchase of Notes required by this covenant. 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.
41
<PAGE> 43
Should a Change of Control occur and a substantial amount of the Notes be
presented for purchase, there can be no assurance that the Company or the
acquiring party would have sufficient financial resources to enable it to
purchase such Notes. In the event the Company is required to purchase
outstanding Notes pursuant to a Change of Control Offer, the Company expects
that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company, and, thus, the removal of incumbent
management. Consummation of any such transaction may require redemption or
purchase of the Notes under the Indenture and there can be no assurance that the
Company or the acquiring entity, if any, will have sufficient resources to
effect such redemption or purchase. The Change of Control purchase feature
resulted from negotiations between the Company and the Underwriters and is not
the result of management's knowledge of any specific effort to obtain control of
the Company.
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 restructuring.
ASSET SALES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, conduct an Asset Sale, unless (x) the
Company (or the 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 set forth in an
officers' certificate delivered to the Trustee; provided, however, that with
respect to an Asset Sale of all or any part of the Frenchman's Reef, the fair
market value shall be evidenced by an opinion as to the fairness of such
transaction from a financial point of view issued by, at the option of the
Company, an investment banking firm of national standing or an appraisal firm of
national standing with a hospitality business expertise) of the assets sold or
otherwise disposed of and (y) at least 85% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
Cash Equivalents; provided, however, that the principal amount of the following
shall be deemed to be cash for purposes of this provision: (A) any liabilities
(as shown on the Company's or such Restricted Subsidiary's most recent balance
sheet or in the notes thereto), of the Company or any Restricted Subsidiary
(other than liabilities that are by their terms subordinated or pari passu to
the Notes or any Guarantee thereof) that are assumed by the transferee of any
such assets and (B) any notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash within 90 days of the closing of
such Asset Sale (to the extent of the cash received). Notwithstanding the
foregoing, clause (y) above will not apply with respect to mortgages or other
notes receivable received by the Company or any such Restricted Subsidiary from
such transferee to the extent such mortgages or other notes receivable are
Investments permitted to be made by the Company or such Restricted Subsidiary
under the covenant entitled "Restricted Payments."
Within 365 days of any Asset Sale, the Company or such Restricted
Subsidiary may (a) apply the Net Proceeds from such Asset Sale to permanently
reduce Senior Indebtedness of the Company, Senior Indebtedness of any Guarantor
or Senior Indebtedness of such Restricted Subsidiary or (b) invest the Net
Proceeds from such Asset Sale in property or assets used in a
Hospitality-Related Business; provided that the Company or such Restricted
Subsidiary will have complied with this clause (b) if, within 365 days of such
Asset Sale, the Company or such Restricted Subsidiary shall have commenced and
not completed or abandoned an Investment in compliance with this clause (b) and
shall have segregated such Net Proceeds from the general funds of the Company
and their Subsidiaries for that purpose and such Investment is substantially
completed within 180 days after the first anniversary of such Asset Sale. Any
Net Proceeds from the Asset Sale 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 million, the
Company shall make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes, that is an integral multiple of
$1,000, that may be purchased out of the Excess
42
<PAGE> 44
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use such deficiency for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased in the manner described under the
caption "Selection and Notice.". Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero. Pending the final application
of any Net Proceeds from an Asset Sale pursuant to this paragraph, the Company
or any Restricted Subsidiary may temporarily reduce Senior Indebtedness of the
Company or Senior Indebtedness of any Guarantor or otherwise invest such Net
Proceeds in Cash Equivalents.
It is expected that any bank credit facility the Company may enter into
would prohibit the purchase of Indebtedness subordinated to Indebtedness
thereunder, which would include the Notes. Failure of the Company to purchase
the Notes validly tendered to the Company pursuant to a Change of Control Offer
or an Asset Sale would create an Event of Default with respect to the Notes. In
addition, the subordination provisions of the Indenture prohibit, subject to
certain conditions, the purchase or payment of the Notes if there is a default
under Designated Senior Indebtedness. As a result, the Company may be prohibited
from making payment upon a Change of Control or an Asset Sale.
SELECTION AND NOTICE
If less than all of the Notes are to be purchased in an Asset Sale Offer or
redeemed at any time, selection of Notes for purchase or 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 purchase or redemption date to each Holder of
Notes to be purchased or redeemed at its registered address. If any Note is to
be purchased or redeemed in part only, the notice of redemption that relates to
such Note shall state the portion of the principal amount thereof to be
purchased or redeemed.
A new Note in principal amount equal to the unpurchased or unredeemed
portion of any Note purchased or redeemed in part will be issued in the name of
the Holder thereof upon cancellation of the original Note. On and after the
purchase or redemption date, interest ceases to accrue on Notes or portions
thereof called for purchase or redemption.
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 of the Company, whether
outstanding on the Issuance Date 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 marshalling of the Company's
assets and liabilities, the holders of Senior Indebtedness of the Company 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 of the
Company) before the Holders of Notes will be entitled to receive any payment
with respect to the Notes and, until all such Obligations with respect to Senior
Indebtedness of the Company are paid in full, any distribution to which the
Holders of Notes would otherwise be entitled shall be made to the holders of
Senior Indebtedness of the Company (except that Holders of Notes may receive
securities that are subordinated, at least to the same extent as are the Notes,
to Senior Indebtedness and to any securities issued in exchange for any such
Senior Indebtedness).
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The Company also may not make any payment upon or in respect of, or
purchase, any of the Notes (except in such subordinated securities) if (a) a
default in the payment when due, whether upon acceleration or otherwise, of the
principal of, premium, if any, or interest on any Designated Senior Indebtedness
of the Company occurs and is continuing or (b) any other default occurs and is
continuing with respect to any Designated Senior Indebtedness that permits
holders of such Designated Senior Indebtedness as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Company or the holders of any such
Designated Senior Indebtedness. Payments on the Notes may and shall resume (i)
in the case of a payment default, upon the date on which such default is cured
or waived and (ii) in the case of a nonpayment default, on the earlier of the
date on which such nonpayment default is cured or waived or 179 days after the
date on which the applicable Payment Blockage Notice is received by the Trustee,
unless the maturity of any such Designated Senior Indebtedness has been
accelerated. No new period of payment blockage may be commenced within 365 days
after the receipt by the Trustee of any prior Payment Blockage Notice.
The Indenture will further require that the Company promptly notify holders
of Senior Indebtedness of the Company if payment of the Notes is accelerated
because of an Event of Default.
As a result of the subordination provisions described above, in the event
of the insolvency or liquidation of the Company, Holders of Notes may recover
less, ratably, than creditors of the Company who are holders of Senior
Indebtedness or of other indebtedness which is not subordinated to the Notes.
On a pro forma basis, after giving effect to the Offering and the
application of the proceeds therefrom, the aggregate principal amount of Senior
Indebtedness of the Company outstanding at , 1994 would have been
approximately $ million. In addition, at , 1994, Indebtedness of
Restricted Subsidiaries and Unrestricted Subsidiaries was approximately $
million and $ million, respectively. The Indenture will limit, subject to
certain financial tests, the amount of additional Indebtedness, including Senior
Indebtedness, that the Company and its Restricted Subsidiaries can incur. See
"-- Certain Covenants."
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: (i) declare or
pay any dividend or make any distribution on account of the Company's or any of
its Restricted Subsidiaries' Equity Interests (other than: (1) dividends or
distributions payable in Equity Interests of the Person making such dividend or
distribution (other than Disqualified Stock) provided that such dividend or
distribution is paid pro rata to all stockholders of such Person; (2) dividends
or distributions payable to holders (other than the Company or any of its Wholly
Owned Restricted Subsidiaries) provided that such dividend or distribution is
paid pro rata to all stockholders of such Person; or (3) dividends or
distributions payable to the Company or any Wholly Owned Restricted Subsidiary
of the Company); (ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company or any Restricted Subsidiary or other
Affiliate of the Company (other than any such Equity Interests owned by the
Company or any Wholly Owned Restricted Subsidiary of the Company); (iii)
purchase, redeem or otherwise acquire or retire for value any Indebtedness of
the Company or any Restricted Subsidiary (other than the Notes) that is pari
passu with or subordinated to the Notes or any Guarantee thereof; or (iv) make
any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) 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
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Charge Coverage Ratio test set forth in the covenant entitled "Incurrence
of Indebtedness and Issuance of Disqualified Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the Issuance Date (other than Restricted Payments permitted by
clauses (iii), (v), (vi), (vii), (viii) and (ix) of the next succeeding
paragraph), is less than the sum of (v) 50% of the sum of the Consolidated
Net Income of the Company plus any Consolidated Cash Asset Sale Gain of the
Company and its Restricted Subsidiaries as of such date for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter that begins after the Issuance Date 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 plus such Consolidated Cash Asset Sale Gain as of
such date for such period is a deficit, 100% of such deficit), plus (w)
100% of the aggregate net cash proceeds received by the Company from the
issue or sale since the Issuance Date of Equity Interests of the Company or
of debt securities of the Company that have been converted or exchanged
into such Equity Interests (other than Equity Interests (or convertible or
exchangeable debt securities) sold to a Restricted Subsidiary of the
Company and other than Disqualified Stock or debt securities that have been
converted or exchanged into Disqualified Stock), plus (x) in case any
Unrestricted Subsidiary has been redesignated a Restricted Subsidiary and
becomes a Guarantor pursuant to the terms of the Indenture and provided
that no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof, the lesser of (i) the book value
(determined in accordance with GAAP) at the date of such redesignation of
the aggregate Investments made by the Company and its Restricted
Subsidiaries in such Unrestricted Subsidiary and (ii) the fair market value
of such Investments in such Unrestricted Subsidiary at the time of such
redesignation, as determined in good faith by the Board of Directors of the
Company, whose determination shall be conclusive and evidenced by a
resolution of such Board, plus (y) the amount of Restricted Payments which
had been subject to this covenant as a result of the Company or the
applicable Restricted Subsidiary having previously opted not to become a
Guarantor under the covenant entitled "Subsidiary Guarantees," to the
extent such Restricted Subsidiary subsequently becomes a Guarantor pursuant
to the terms of the Indenture, plus (z) $2 million.
The foregoing provisions will not prohibit (i) 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 provisions of the
Indenture; (ii) the redemption, purchase, retirement or other acquisition of any
Equity Interests of the Company in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of other Equity Interests of the Company (other than any Disqualified
Stock); (iii) the defeasance, redemption, repayment or purchase of pari passu or
subordinated Indebtedness in a Permitted Refinancing; (iv) the purchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company pursuant to any management equity subscription agreement or stock
option agreement in effect as of the Issuance Date; provided, however, that the
aggregate price paid for all such purchased, redeemed, acquired or retired
Equity Interests shall not exceed $250,000 per year on a cumulative basis since
the Issuance Date; (v) the ShoLodge Joint Venture Contribution; (vi) Restricted
Investments made in Hospitality-Related Businesses outstanding at any time which
do not exceed $30 million, provided, however, that any Restricted Investments
made under this clause (vi) which are subsequently written off shall be deemed
to be outstanding under this clause (vi) and any cash or property received with
respect to such Restricted Investments was not credited in clause (x) or (y) in
the preceding paragraph; (vii) mortgages or other notes receivable not to exceed
$50 million if such mortgages or other notes receivable are secured by a first
priority perfected Lien (which is not pari passu with any other Lien securing
Indebtedness) on the Frenchman's Reef; (viii) mortgages and notes receivable
(other than with respect to the Frenchman's Reef) existing on the Issuance Date
and Permitted Note Exchanges; and (ix) Investments in any Unrestricted
Subsidiary so long as such Unrestricted Subsidiary becomes a Restricted
Subsidiary in compliance with the terms of the Indenture immediately after such
Restricted Payment; provided that, in the case of clauses (ii) through (ix)
above, no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof.
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In determining whether any Restricted Payment is permitted by the foregoing
covenant, the Company may allocate or reallocate all or any portion of such
Restricted Payment among the clauses (i) through (ix) of the preceding paragraph
or among such clauses and the first paragraph of this covenant including clauses
(a), (b) and (c), provided that at the time of such allocation or reallocation,
all such Restricted Payments, or allocated portions thereof, would be permitted
under the various provisions of the foregoing covenant.
DESIGNATION OF UNRESTRICTED SUBSIDIARY
The Indenture will provide that the Board of Directors of the Company may
designate any Restricted Subsidiary to be an Unrestricted Subsidiary, provided,
that: (i) at the time of designation, the Investment by the Company or any of
its Restricted Subsidiaries in such Subsidiary shall be deemed a Restricted
Investment (to the extent not previously included as a Restricted Investment)
made on the date of such designation in the amount of the greater of (a) the
total book value of such Investment and (b) the fair market value of the assets
in such Subsidiary (in each case, less any liabilities from which the Company or
any remaining Restricted Subsidiary shall be relieved that were on the
consolidated balance sheet of the Company and its Restricted Subsidiaries prior
to such designation and for which the Company and its Restricted Subsidiaries
will not be liable, directly or contingently, after such designation), and such
Restricted Investment would be permitted to be made on such date under the
covenant entitled "Restricted Payments," (ii) for so long as such Subsidiary
remains an Unrestricted Subsidiary, such Unrestricted Subsidiary has not
acquired any assets from the Company or any Restricted Subsidiary other than as
specifically permitted by the provisions of the Indenture, including the
provisions described under the covenant entitled "Restricted Payments"; (iii) at
the time of designation, no Default or Event of Default has occurred and is
continuing or results immediately after such designation; (iv) at the time of
designation and for so long as such Subsidiary remains an Unrestricted
Subsidiary, such Unrestricted Subsidiary has no Indebtedness other than
Non-Recourse Indebtedness of such Subsidiary; and (v) such Subsidiary does not
own any Equity Interests in a Restricted Subsidiary of the Company.
Notwithstanding the foregoing, on the Issuance Date, Suites of America, Inc.
initially shall be an Unrestricted Subsidiary.
Any such designation by the Board of Directors shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
Board of Directors of the Company giving effect to such designation and an
officers' certificate certifying that such designation complied with the
foregoing conditions.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guaranty or otherwise become directly or indirectly liable with
respect to (collectively, "incur" and correlatively, an "incurrence" of) any
Indebtedness (including Acquired Debt) and that the Company will not issue any,
and will not permit any of its Restricted Subsidiaries to issue any, shares of
Disqualified Stock; provided, however, that the Company or any of its Restricted
Subsidiaries may incur Indebtedness or issue shares of Disqualified Stock 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
or such Disqualified Stock is issued would have been at least 2 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, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The foregoing limitations will not apply to (a) additional Indebtedness of
up to $40 million in aggregate principal amount at any one time outstanding,
less the aggregate amount of all proceeds of all sales or other dispositions of
assets that have been applied since the Issuance Date to permanently reduce the
outstanding amount of such Indebtedness pursuant to the covenant entitled "Asset
Sales"; (b) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness; (c) the incurrence by the Company or
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any Subsidiary of Indebtedness represented by the Notes or any Guarantee
thereof; (d) intercompany Indebtedness between or among the Company and any of
its Restricted Subsidiaries; (e) 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; and (f) the incurrence or the issuance by the Company of
Refinancing Indebtedness or Refinancing Disqualified Stock of the Company or any
Restricted Subsidiary or the incurrence or issuance by a Restricted Subsidiary
of Refinancing Indebtedness or Refinancing Disqualified Stock of such Restricted
Subsidiary, as the case may be; provided, however, that such Refinancing
Indebtedness or Refinancing Disqualified Stock, as the case may be, is a
Permitted Refinancing.
Upon the occurrence of any Unrestricted Subsidiary ceasing to become an
Unrestricted Subsidiary and becoming a Restricted Subsidiary, any Indebtedness
of such Subsidiary shall be deemed to be incurred by such Restricted Subsidiary
upon such date, calculated on a pro forma basis as if such Unrestricted
Subsidiary had become a Subsidiary on the first day of the fourth full fiscal
quarter prior to such date.
LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK BY
RESTRICTED SUBSIDIARIES
The Indenture will provide that the Company will not permit any of its
Restricted Subsidiaries that is not a Guarantor to incur Indebtedness or issue
any Preferred Stock, unless the sum of all outstanding Indebtedness and
Preferred Stock (valued at the greater of liquidation value or redemption value)
of all such Restricted Subsidiaries that are not Guarantors does not exceed 5%
of Consolidated Net Tangible Assets of the Company and its Restricted
Subsidiaries at the time of such incurrence. The test set forth in this
paragraph shall be in addition to the Fixed Charge Coverage Ratio test set forth
in the covenant entitled "Incurrence of Indebtedness and Issuance of
Disqualified Stock."
LIENS
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly create, incur,
assume or suffer to exist any Lien on any asset now owned or hereafter acquired
by the Company or any Restricted Subsidiary, or any income or profits therefrom
or assign or convey any right to receive income therefrom to secure any
Indebtedness (other than Permitted Liens) unless contemporaneously therewith or
prior thereto, effective provision is made (such effective provision to be
evidenced by a resolution of the Board of Directors set forth in an officers'
certificate delivered to the Trustee) whereby the Notes are secured equally and
ratably with such other Indebtedness (or if such other Indebtedness is
subordinated to the Notes, the Notes are secured on a basis with at least as
favorable a relative priority to such other Indebtedness).
LIMITATION ON SALE AND LEASEBACK TRANSACTION
The Indenture will provide that the Company will not, and will not permit
its Restricted Subsidiaries to, enter, renew or extend, any Sale and Leaseback
Transaction, unless (i) the Company or such Restricted Subsidiary 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 covenant entitled "Incurrence
of Indebtedness and Issuance of Disqualified Stock" and (ii) the Company would
have been permitted to enter into such transaction pursuant to the terms of the
covenant entitled "Liens," had such Sale and Leaseback Transaction been
structured as a mortgage loan rather than a Sale and Leaseback Transaction.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED 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 encumbrance or
restriction on the ability of any Restricted Subsidiary to (a)(i) pay dividends
or make any other consensual distributions to the Company or any of its
Restricted Subsidiaries (A) on its Capital Stock or (B) with respect to any
other interest or participation in, or measured by, its profits, or (ii) pay any
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indebtedness owed to the Company or any of its Restricted Subsidiaries, (b) make
loans or advances or capital contributions 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 reasons of (i) Existing Indebtedness as in
effect on the Issuance Date, (ii) the Indenture and the Notes, (iii) applicable
law, (iv) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries or of any Person
that becomes a Restricted Subsidiary as in effect at the time of such
acquisition or such Person becoming a Restricted Subsidiary (except to the
extent such Indebtedness was incurred in connection with or, if incurred within
one year prior to such acquisition or such Person becoming a Restricted
Subsidiary, in contemplation of such acquisition or such Person becoming a
Restricted Subsidiary), 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 that the
Consolidated Cash Flow of such Person is not taken into account (to the extent
of such restriction) in determining whether such acquisition was permitted by
the terms of the Indenture, (v) any instrument governing Indebtedness or Capital
Stock of a Person who becomes a Guarantor as in effect at the time of becoming a
Guarantor (except to the extent such Indebtedness was incurred in connection
with or, if incurred within one year prior to the time of becoming a Guarantor,
in contemplation of such Guarantee), 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 who became a Guarantor, (vi)
by reason of customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (vii) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (c) above on the property
so acquired, (viii) permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Refinancing Indebtedness
are no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced, or (ix) customary restrictions in security
agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the property subject to such
security agreements and mortgages.
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 (i) the Company is the surviving
corporation 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 is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (ii) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the obligations of the Company pursuant to a supplemental
indenture under the Notes and the Indenture; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) the Company or any
Person formed by or surviving any such consolidation or merger, or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made (A) will have Consolidated Net Worth (immediately after the
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 covenant entitled "Incurrence of
Indebtedness and Issuance of Disqualified Stock." The ShoLodge Joint Venture
Contribution will not constitute a sale of all or substantially all of the
assets of the Company under the terms of the Indenture.
Upon any such consolidation, merger, lease, conveyance or transfer in
accordance with the foregoing, the successor Person formed by such consolidation
or into which the Company is merged or to which such lease, conveyance or
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Indenture with the same effect
as if such successor had been named as the
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Company therein and thereafter (except in the case of a lease) the predecessor
corporation will be relieved of all further obligations and covenants under the
Indenture and the Notes.
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into any contract, agreement, understanding, loan, advance
or Guarantee with, or for the benefit of, any Affiliate (each of the foregoing,
an "Affiliate Transaction"), unless (a) such Affiliate Transaction is on terms
that 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 on an arm's length basis with an unrelated
Person and (b) the Company delivers to the Trustee (i) with respect to any
Affiliate Transaction involving aggregate payments in excess of $1 million, an
officers' certificate certifying that such Affiliate Transaction complies with
clause (a) above and such Affiliate Transaction is approved by a majority of the
disinterested members of the Board of Directors and (ii) with respect to any
Affiliate Transaction involving aggregate payments in excess of $5 million, an
opinion as to the fairness to the Company or such Restricted Subsidiary from a
financial point of view issued, at the option of the Company, by an investment
banking firm of national standing or an appraisal firm of national standing with
a hospitality business expertise; provided, however, that the following shall
not be deemed Affiliate Transactions: (i) any employment, deferred compensation,
stock option, noncompetition, consulting or similar 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 Wholly
Owned Restricted Subsidiaries or any Guarantor and (iii) Restricted Payments
permitted by the provisions of the Indenture described above under the covenant
"-- Restricted Payments" (other than Restricted Investments permitted pursuant
to clause (ix) of the second paragraph of the covenant entitled "-- Restricted
Payments").
NO SENIOR SUBORDINATED INDEBTEDNESS
The Indenture will provide that the Company will not, and will not permit
any of its Guarantors to, incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Indebtedness of the Company or such Guarantors, as the
case may be, and senior in any respect in right of payment to the Notes or any
Guarantee thereof, as the case may be.
LINE OF BUSINESS
The Indenture will provide that for so long as any Notes are outstanding,
the Company will not, and will not permit any of its Subsidiaries to, engage in
any business or activity other than a Hospitality-Related Business.
SUBSIDIARY GUARANTEES
The Indenture will provide that if the Company or any Guarantor shall
transfer or cause to be transferred, in one or a series of related transactions,
any assets, businesses, divisions, real property or equipment having a book
value or fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive and evidenced
by a resolution of such Board) in excess of $1 million to any Restricted
Subsidiary that is not a Guarantor, at the Company's or such Restricted
Subsidiary's option, (a) such transferee Restricted Subsidiary shall execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Restricted Subsidiary shall guarantee all of the obligations of the Company with
respect to the Notes on a senior subordinated basis together with an opinion of
counsel (which counsel may be an employee of the Company) to the effect that
such supplemental indenture has been duly executed and delivered by such
Restricted Subsidiary and is in compliance with the terms of the Indenture or
(b), after giving effect to such transaction or series of related transactions,
such transaction or series of related transactions constitute a Restricted
Payment permitted pursuant to the provisions of the covenant entitled
"Restricted Payments." In addition, the Indenture will provide that upon the
designation of any Unrestricted
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<PAGE> 51
Subsidiary as a Restricted Subsidiary, including by reason of clause (ix) of the
covenant entitled "Restricted Payments," such designation shall be deemed to be
a transfer of assets to a Restricted Subsidiary for purposes of this covenant.
The Indenture will also provide that in the event of a sale or other disposition
of all or substantially all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the capital
stock of any Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all of the
capital stock of such Guarantor) or the corporation acquiring the property (in
the event of a sale or other disposition of all or substantially all of the
assets of such Guarantor) shall be released and relieved of any obligations
under its Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture. See "Repurchase at the Option of Holders -- Asset Sales."
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes all quarterly and annual financial information 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. In addition, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information with the Commission for public availability (unless the Commission
will not accept such a filing) and file such information with the Trustee and
make such information available to investors and securities analysts who request
it in writing.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest on the
Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in payment when due of the principal of or premium, if
any, on the Notes (whether or not prohibited by the subordination provisions of
the Indenture); (iii) failure by the Company to comply with the provisions
described under the covenants "-- Note Purchase at the Option of
Holders -- Change of Control" or "-- Certain Covenants -- Merger, Consolidation
or Sale of Assets"; (iv) failure by the Company or the Guarantors for 60 days in
the performance of any other covenant, warranty or agreement in the Indenture or
the Notes after written notice shall have been given to the Company by the
Trustee or to the Company and the Trustee from Holders of at least 25% in
principal amount of the Notes then outstanding; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
Guarantee now exists, or is created after the Issuance Date, which default
results in the acceleration of such Indebtedness (other than Non-Recourse
Indebtedness secured by (I) assets or property acquired after the Issuance Date
or (II) assets or property which were securing Non-Recourse Indebtedness on the
Issuance Date) prior to its express maturity or shall constitute a default in
the payment of such issue of Indebtedness at final maturity of such issue and,
in each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness the maturity of which has been
so accelerated or which has not been paid at final maturity, aggregates $5
million or more; (vi) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments (other than judgment liens without recourse
to any assets or property of the Company or any of its Restricted Subsidiaries
other than assets or property securing Non-Recourse Indebtedness) aggregating in
excess of $5 million, which judgments are not paid, discharged or stayed for a
period of 90 days (other than any judgments as to which a reputable insurance
company has accepted full liability); (vii) except as permitted by the
Indenture, any Guarantee with respect to the Notes shall be held in a judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Guarantor (or is successors or assigns), or any
Person acting on behalf of such Guarantor (or its successors or assigns), shall
deny or disaffirm its obligations or shall fail to comply with any obligations
under its Guarantee; and (viii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Restricted Subsidiaries or any Guarantor.
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If any Event of 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 an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company or any of its Restricted
Subsidiaries or any Guarantor, all outstanding Notes will become due and payable
without further action or notice. Under certain circumstances, the Holders of a
majority in principal amount of the outstanding Notes may rescind any
acceleration with respect to the Notes and its consequences. 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 or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
The Indenture will provide that no Holder of a Note may pursue a remedy
under the Indenture unless (i) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default or the Trustee receives such notice from
the Company; (ii) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue a remedy;
(iii) such Holder of a Note or Holders of Notes offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense; (iv) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the provision of
indemnity; and (v) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request; provided, however, that such provision
does not affect the right of a Holder of a Note to sue for enforcement of any
overdue payment thereon.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
, 1999 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to , 1999, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
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 or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, any Note held by a non-consenting Holder.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, including with respect to any
Restricted Payments made during such year, the basis upon which the calculations
required by the covenant entitled "Restricted Payments" were computed (which
calculations may be based on the Company's latest available financial
statements) and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default. The Company will also be required to deliver to the
Trustee, forthwith upon any Officer becoming aware of a Default or an Event of
Default, an officers' certificate specifying such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder, past, present
or future of the Company or any successor Person, as such, shall have any
liability for any obligations of the Company under the Notes, any Guarantee
thereof 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 and release may not be
effective to
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waive or release liabilities under the federal securities laws and it is the
view of the Commission that such a waiver or release 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 (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due, (ii) the Company's and the Guarantors'
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, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's and the Guarantors' obligations in connection
therewith and (iv) 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 or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of 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, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may be,
of such principal or installment of principal of, premium, if any, or interest
on the outstanding Notes; (ii) in the case of Legal Defeasance, the Company
shall have delivered to the Trustee an opinion of counsel (which counsel may be
an employee of the Company or any Subsidiary of the Company) 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 Issuance 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 (which counsel may be an employee of the Company or any Subsidiary of
the Company) 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 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 or Event of Default shall have occurred and be continuing on the date
of such deposit or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit (or greater period of time in which any such deposit of trust
funds may remain subject to bankruptcy or insolvency laws insofar as those apply
to the deposit by the Company); (v) such Legal Defeasance or Covenant Defeasance
shall 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 of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company shall have delivered 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 (vii) the Company shall have delivered
to the Trustee an officers' certificate and an opinion of counsel (which counsel
may be an employee of the Company or any Subsidiary of the Company), each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
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TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar (who will initially be the Trustee) 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 in the next succeeding paragraphs, 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 consents
obtained in connection with a 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 of Notes): (i) reduce
the principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Notes,
(iii) reduce the rate of or change the time for payment of interest on any Note,
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest 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), (v) make any Note payable in money other than that stated in the
Notes, (vi) 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, if any, or interest on the Notes, (vii) waive a
redemption payment with respect to any Note, (viii) make any change to the
subordination provisions of the Indenture that adversely affects Holders, or
(ix) make any change in the foregoing amendment and waiver provisions. In
addition, without the consent of at least 66 2/3% in principal amount of the
Notes then outstanding, an amendment or waiver may not make any change to the
covenant in the Indenture entitled "Change of Control."
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
assumption of the Company's obligations to Holders of the 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 the Notes (including providing for
Guarantees pursuant to the covenant entitled "Subsidiary Guarantees") 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 an Event of Default
shall occur (which shall
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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
without charge by writing to Prime Hospitality Corp., 700 Route 46 East, P.O.
Box 2700, Fairfield, New Jersey 07007-2700. Attention: Corporate Secretary.
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.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person
and (ii) Indebtedness encumbering any asset acquired by such specified Person.
"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 (i) beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control and (ii) ShoLodge, Inc. and its
Subsidiaries shall not be deemed Affiliates of the Company or any of its
Subsidiaries solely for the reason that an employee or designee of ShoLodge,
Inc. serves on the Board of Directors of the Company or any Subsidiary.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any property or assets of the Company or any Restricted Subsidiary (including by
way of a Sale and Leaseback Transaction) or (ii) the issuance or sale of Equity
Interests of any of its Restricted Subsidiaries, other than, with respect to
clauses (i) and (ii) above, the following: (1) the sale or disposition of
personal property held for sale in the ordinary course of business, (2) the
transfer of assets by the Company to a Restricted Subsidiary of the Company or
by a Restricted Subsidiary of the Company to the Company or to another
Restricted Subsidiary of the Company, (3) any Restricted Payment, dividend or
purchase or retirement of Equity Interests permitted under the covenant entitled
"Restricted Payments," (4) the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company in compliance with the
provisions of the Indenture described above under the caption "-- Change of
Control" and the provisions described below under the caption "-- Certain
Covenants -- Merger, Consolidation or Sale of Assets", (5) the conversion of or
foreclosure on any mortgage or note, provided that the Company or a Restricted
Subsidiary receives the real property underlying any such mortgage or note, (6)
any transaction or series of related transactions that would otherwise be an
Asset Sale where the fair market value of the assets, sold, leased, conveyed or
otherwise disposed of was less than $2 million and where the net proceeds was
less than $2 million.
"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 so required to be capitalized on the balance sheet in accordance
with GAAP.
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"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock, including, without
limitation, with respect to partnerships, partnership interests (whether general
or limited) and 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, such partnership.
"Cash Equivalents" means (i) United States dollars, (ii) 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, (iii) 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 from
the date of acquisition and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of $500 million,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above and (v) commercial paper having a rating of P-2 or the
equivalent thereof by Moody's Investors Service, Inc. or A-2 or the equivalent
thereof by Standard & Poor's Corporation and in each case maturing within six
months after the date of acquisition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease or transfer, in one or a series of related transactions, of all or
substantially all of the Company's assets to any person or group (as such term
is used in Section 13(d)(3) of the Exchange Act) other than to a Wholly-Owned
Restricted Subsidiary that is a Guarantor, (ii) the adoption of a plan relating
to the liquidation or dissolution of the Company, (iii) the acquisition by any
person or group (as such term is used in Section 13(d)(3) of the Exchange Act)
of a direct or indirect interest in more than 50% of the voting power of the
voting stock of the Company by way of purchase, merger or consolidation or
otherwise (other than a creation of a holding company that does not involve a
change in the beneficial ownership of the Company as a result of such
transaction) or (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors.
"Consolidated Cash Asset Sale Gain" means, with respect to any Person for
any period as of any date of determination, the aggregate gain (but not loss)
realized at any time in connection with any Asset Sale by the Person or its
Restricted Subsidiaries to the extent such gain consists of cash proceeds of
such Person and its Restricted Subsidiaries as of any date of determination for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, that: (i) such gain of any 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 to the
referent Person or Restricted Subsidiaries, (ii) such gain of any Person that is
a Restricted Subsidiary (other than a Guarantor) and that is restricted from
declaring or paying dividends or other distributions, directly or indirectly, by
operation of the terms of its charter, any applicable agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation or otherwise
shall be included only to the extent of the amount of dividends or distributions
paid to the referent Person or a Wholly Owned Restricted Subsidiary and (iii)
such gains of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus: (a) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing Consolidated
Net Income), plus (b) provision for taxes based on income or profits of such
Person for such period, to the extent such provision for taxes was included in
computing Consolidated Net Income, plus (c) Consolidated Interest Expense of
such Person for such period to the extent such expense was deducted in computing
Consolidated Net Income, plus (d) Consolidated Depreciation and Amortization
Expense of such Person for such period, to the extent deducted in computing
Consolidated Net Income in each case, on a consolidated basis for such Person
and its Restricted Subsidiaries and determined in accordance with GAAP.
"Consolidated Depreciation and Amortization Expense" means, with respect to
any Person for any period, the total amount of depreciation and amortization
expense (including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and the
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total amount of non-cash charges (other than non-cash charges that represent an
accrual or reserve for cash charges in future periods or which involved a cash
expenditure in a prior period) of such Person and its Restricted Subsidiaries
for such period on a consolidated basis as determined in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of (a) interest expense, whether paid or
accrued, to the extent such expense was deducted in computing Consolidated Net
Income (including amortization of original issue discount, non-cash interest
payments, the interest component of capital leases, and net payments (if any)
pursuant to Hedging Obligations; but excluding amortization of deferred
financing fees), (b) commissions, discounts and other fees and charges paid or
accrued with respect to letters of credit and bankers' acceptance financing, (c)
interest for which such Person or its Restricted Subsidiaries is liable, whether
or not actually paid, pursuant to Indebtedness or under a Guarantee of
Indebtedness of any other Person and (d) with respect to a Sale and Leaseback
Transaction entered into after the Issuance Date, Sale and Leaseback Interest;
in each case, calculated for such Person and its Restricted Subsidiaries for
such period on a consolidated basis as determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided, that the following shall be excluded: (i) the Net Income of any 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 to the referent Person or its Restricted
Subsidiaries, (ii) the Net Income of any Person that is a Restricted Subsidiary
and that is restricted from declaring or paying dividends or other
distributions, directly or indirectly, by operation of the terms of its charter,
any applicable agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation or otherwise shall be included only to the extent of the
amount of dividends or distributions paid to the referent Person or a Wholly
Owned Restricted Subsidiary, and (iii) 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.
"Consolidated Net Tangible Assets" means, with respect to any Person, as of
any date of determination, the total amount of consolidated assets of such
Person and its Restricted Subsidiaries (less applicable reserves and other
properly deducted items), determined on a consolidated basis in accordance with
GAAP, after deducting therefrom (i) all current liability items, and (ii) all
goodwill, trade names, trademarks, service marks, patents, unamortized debt
discount and expense, and all other intangibles.
"Consolidated Net Worth" means, with respect to any Person, as of any date
of determination, the sum of (i) the consolidated equity of the common
stockholders of such Person and its Restricted Subsidiaries as of such date plus
(ii) the respective amounts reported on such Person's balance sheet as of such
date with respect to any series of Preferred Stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such Preferred Stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the Issuance Date in the
book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (y) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries (except, in each case,
Permitted Investments), and (z) all unamortized debt discount and expense and
unamortized deferred charges as of such date, all of the foregoing determined in
accordance with GAAP; provided, however, that Consolidated Net Worth shall not
include any gain (or loss) realized in connection with any Asset Sale after the
Issuance Date.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issuance Date or (ii) was nominated for election or elected to
such Board of Directors with the affirmative vote of at least a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
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"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) Senior Bank Indebtedness that is
not Non-Recourse Indebtedness and (ii) any other Senior Indebtedness that is not
Non-Recourse Indebtedness (a) permitted to be incurred under the Indenture the
principal amount of which is $10 million or more; and (b) designated in the
instrument creating or evidencing such Senior Indebtedness as "Designated Senior
Indebtedness."
"Disqualified Stock" means any Capital Stock which, 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 or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to
, 2005.
"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 Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than under any Indebtedness permitted under
clause (a) of the second paragraph of the covenant entitled "Incurrence of
Indebtedness and Issuance of Disqualified Stock") in existence on the Issuance
Date.
"Existing Real Estate" means any real estate owned, leased or optioned by
the Company or any of its Subsidiaries on the Issuance Date, or any real estate
on which the Company or any of its Subsidiaries holds a mortgage on the Issuance
Date.
"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. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
Preferred Stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, guarantee or redemption
of Indebtedness, or such issuance or redemption of Preferred Stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. For purposes of making the computation referred to above, acquisitions,
dispositions and discontinued operations (as determined in accordance with GAAP)
that have been made by the Company or any of its Restricted Subsidiaries,
including all mergers, consolidations and dispositions, during the four-quarter
reference period or subsequent to such reference period and on or prior to the
Calculation Date shall be calculated on a pro forma basis assuming that all such
acquisitions, dispositions, discontinued operations, mergers, consolidations
(and the reduction of any associated fixed charge obligations resulting
therefrom) had occurred on the first day of the four-quarter reference period.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (a) Consolidated Interest Expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, to the extent such
expense was deducted in computing Consolidated Net Income and (b) the product of
(i) all cash dividend payments (and non-cash dividend payments in the case of a
Person that is a Restricted Subsidiary) on any series of Preferred Stock of such
Person or its Restricted Subsidiaries (other than Preferred Stock owned by such
Person or its Restricted Subsidiaries), 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.
"Frenchman's Reef " means the Marriott's Frenchman's Reef Hotel in St.
Thomas, U.S. Virgin Islands.
"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 Issuance Date.
57
<PAGE> 59
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) or otherwise
incurring, assuming or becoming liable for the payment of any principal, premium
or interest, direct or indirect, in any manner (including, without limitation,
letters of credit and reimbursement agreements in respect thereof), of all or
any part of any Indebtedness.
"Guarantor" means persons that become a guarantor of the Notes pursuant to
the terms of the Indenture, and each of their respective successors.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Hospitality-Related Business" means the hotel business and other
businesses necessary for, incident to, in support of, connected with or arising
out of the hotel business, including, without limitation, (i) developing,
managing, operating, improving or acquiring lodging facilities, restaurants and
other food-service facilities, sports or entertainment facilities, convention or
meeting facilities, marketing services related thereto, (ii) acquiring,
developing, operating, managing or improving the Existing Real Estate, any real
estate taken in foreclosure (or similar settlement) by the Company or any of its
Subsidiaries, or any real estate ancillary or connected to any hotel owned,
managed or operated by the Company or any of its Restricted Subsidiaries, (iii)
owning and managing mortgages in, or other Indebtedness secured by Liens on
hotels and real estate related or ancillary to hotels or (iv) other related
activities thereto.
"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 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, and also includes, to the extent not otherwise included,
the Guarantee of any Indebtedness of such Person or any other Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of loans (including
Guarantees), 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 and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Issuance Date" means the closing date for the sale and original issuance
of the Notes.
"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).
"Management Agreement" means an agreement entered into by the Company
pursuant to which the Company agrees to manage a hotel for another Person.
"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, any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in
58
<PAGE> 60
connection with any Asset Sale, and excluding any extraordinary gain (but not
loss), together with any related provision for taxes on such extraordinary 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, net of the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions), and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets the
subject of such Asset Sale and any reserve for adjustment in respect of the sale
price of such asset or assets.
"Non-Recourse Indebtedness" means Indebtedness (a) as to which neither the
Company nor any of its Restricted Subsidiaries (i) provides credit support
(other than in the form of a Lien on an asset) pursuant to any undertaking,
agreement or instrument that would constitute Indebtedness, (ii) is directly or
indirectly liable, or (iii) constitutes the lender, and (b) 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 other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means (a) any Investments in the Company or any
Guarantor; (b) Investments in any Restricted Subsidiary that is not a Guarantor
not to exceed an aggregate of $1.0 million per Restricted Subsidiary; (c) any
Investments in Cash Equivalents; (d) Investments by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company or any Guarantor 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 Wholly Owned Restricted
Subsidiary of the Company or any Guarantor; and (e) any Investment in Suites of
America existing on the Issuance Date.
"Permitted Liens" means (i) Liens now or hereafter securing Senior
Indebtedness of the Company or Indebtedness of any Restricted Subsidiary,
provided that such Indebtedness is permitted by the terms of the Indenture; (ii)
Liens for taxes, assessments and governmental charges not yet delinquent or that
are being contested in good faith and that are appropriately reserved for in
accordance with GAAP; (iii) Liens incurred in the ordinary course of business
that are not incurred in connection with the borrowing of money; (iv) Liens
existing as of the Issuance Date; (v) Liens on property of a Person at the time
such Person was merged with the Company or a Restricted Subsidiary, Liens on
acquired property existing at the time of acquisition thereof, and Liens upon
any property of a Person existing at the time such Person becomes a Restricted
Subsidiary; provided in each case that such Liens were not created in
contemplation of such merger or acquisition, as the case may be, and such Liens
only extend to such merged or acquired property; (vi) Liens securing purchase
money obligations incurred or assumed in connection with the acquisition or
development of real or personal property used in a Hospitality-Related Business
within 180 days of such incurrence or assumption, provided that such Liens only
extend to such acquired or developed property; (vii) mechanics', workmen's,
materialmen's, operator's or similar Liens arising in the ordinary course of
business for sums that are not yet delinquent or are being contested in good
faith and by appropriate action; (viii) Liens in connection with workmen's
compensation, unemployment insurance or other social security, old age pension
or public liability obligations not yet due or which are being contested in good
faith by appropriate action; (ix) Liens, deposits or pledges to secure the
performance of bids, tenders, contracts (other than contracts for the payment of
money), leases, public or statutory obligations, surety, stay, appeal,
indemnity, performance or other similar bonds, or other similar obligations
arising in the ordinary course of business; (x) survey exceptions, encumbrances,
easements or reservations, or restrictions as to the use of real properties, and
minor defects in title which, in the case of any of the foregoing, were not
incurred or created to secure the payment of borrowed money or the deferred
purchase price of property or services; (xi) judgment and attachment Liens not
giving rise to an
59
<PAGE> 61
Event of Default or Liens created by or existing from any litigation or legal
proceedings that are currently being contested in good faith and that are
appropriately reserved for in accordance with GAAP; (xii) Liens on deposits to
secure public or statutory obligations or in lieu of surety or appeal bonds
entered into in the ordinary course of business; (xiii) Liens in favor of
collecting or payor banks having a right to setoff, revocation, refund or
chargeback with respect to money or instruments of the Company or any Restricted
Subsidiary on deposit with or in possession of such bank; and (xiv) Liens now or
hereafter securing any Hedging Obligations to the extent such Hedging
Obligations are permitted to be incurred under the Indenture.
"Permitted Note Exchanges" means exchanges by the Company or its Restricted
Subsidiaries of a mortgage or other note receivable (other than in connection
with the Frenchman's Reef) existing on the Issuance Date for a new mortgage or
other note receivable if (i) the aggregate consideration received by the Company
or such Restricted Subsidiary in connection with such exchange constituted fair
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be conclusive and evidenced by an officers'
certificate) and (ii) the principal amount of such new mortgage or other note
receivable does not exceed the principal amount of the mortgage or other note
receivable so exchanged.
"Permitted Refinancing" means Refinancing Indebtedness or Refinancing
Disqualified Stock, as the case may be, to the extent (a) the principal amount
of Refinancing Indebtedness or the liquidation preference amount of Refinancing
Disqualified Stock, as the case may be, does not exceed the principal amount of
Indebtedness or the liquidation preference amount of Disqualified Stock, as the
case may be, so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of premiums and reasonable expenses incurred in connection
therewith); (b) such Refinancing Indebtedness or Refinancing Disqualified Stock,
as the case may be, is scheduled to mature or is redeemable at the option of the
holder, as the case may be, no earlier than the Indebtedness or Disqualified
Stock, as the case may be, being refinanced; (c) in the case of Refinancing
Indebtedness, the Refinancing Indebtedness has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (d) in the case of Refinancing Disqualified Stock, the Disqualified
Stock has a Weighted Average Life to Mandatory Redemption equal to or greater
than the Weighted Average Life to Mandatory Redemption of the Disqualified Stock
being extended, refinanced, renewed, replaced, defeased or refunded; (e) if the
Indebtedness or the Disqualified Stock, as the case may be, being extended,
refinanced, renewed, replaced, defeased or refunded is pari-passu or
subordinated in right of payment to the Notes, the Refinancing Indebtedness or
Refinancing Disqualified Stock, as the case may be, is subordinated in right of
payment to the Notes on terms at least as favorable to the Holders of Notes as
those contained in the documentation governing the Indebtedness or the
Disqualified Stock, as the case may be, being extended, refinanced, renewed,
replaced, defeased or refunded or is payable solely in Equity Interests of the
Person whose Indebtedness is being purchased, redeemed or otherwise acquired or
retired for value.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock" means any Equity Interest with preferential right in the
payment of dividends or liquidation or any Disqualified Stock.
"Public Offering" means a public offering of the Common Stock of the
Company.
"Refinancing Disqualified Stock" means Disqualified Stock issued in
exchange for, or the proceeds of which are used, to extend, refinance, renew,
replace, defease or refund Disqualified Stock permitted to be issued pursuant to
the Fixed Charge Coverage Ratio test set forth in the covenant entitled
"Incurrence of Indebtedness and Issuance of Disqualified Stock" or Disqualified
Stock referred to in clause (c) of the second paragraph of the covenant entitled
"Incurrence of Indebtedness and Issuance of Disqualified Stock."
"Refinancing Indebtedness" means Indebtedness issued in exchange for, or
the proceeds of which are used to extend, refinance, renew, replace, defease or
refund Indebtedness permitted to be incurred pursuant to the Fixed Charge
Coverage Ratio test set forth in the covenant entitled "Incurrence of
Indebtedness and
60
<PAGE> 62
Issuance of Disqualified Stock" or Indebtedness referred to in clause (b) and
clauses (d) and (e) of the second paragraph of the covenant entitled "Incurrence
of Indebtedness and Issuance of Disqualified Stock."
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means, with respect to any Person, 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 Restricted Subsidiaries of that Person or a
combination thereof. Unrestricted Subsidiaries shall not be included in the
definition of Restricted Subsidiaries for any purpose of the Indenture;
provided, however, that upon the occurrence of any Unrestricted Subsidiary
ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in
the definition of "Restricted Subsidiaries."
"Sale and Leaseback Interest" means, with respect to a Sale and Leaseback
Transaction, the greater of (i) the interest component of such Sale and
Leaseback Transaction, determined in accordance with GAAP and (ii) the actual
interest expense on the Indebtedness securing such property subject to such Sale
and Leaseback Transaction.
"Sale and Leaseback Transaction" means any transaction or series of related
transactions pursuant to which the Company or any Restricted Subsidiary of the
Company sells or transfers any property or assets in connection with the
leasing, or resale against installment payments, or as part of an arrangement
involving the leasing, or the resale against installment payments, of such
property or assets to the seller or the transferor.
"Senior Bank Indebtedness" means the outstanding Indebtedness permitted
under clause (a) of the second paragraph of the covenant entitled "Incurrence of
Indebtedness and Issuance of Disqualified Stock" as any such agreement may be
restated, further amended, supplemented or otherwise modified or replaced from
time to time hereafter, together with any refunding or replacement of any such
Indebtedness.
"Senior Indebtedness" means, with respect to the Company or any Guarantor,
(i) the Senior Bank Indebtedness of the Company, or any Guarantee thereof by
such Guarantor, as the case may be, (ii) the Existing Indebtedness and (iii) any
other Indebtedness permitted to be incurred by the Company or such Guarantor, as
the case may be, 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 or any Guarantee thereof.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
shall not include (v) any liability for federal, state, local or other taxes
owed or owing by the Company or such Guarantor, as the case may be, (w) any
Indebtedness of the Company or such Guarantor, as the case may be, to any of the
Company's Subsidiaries or other Affiliates, (x) any trade payables, (y) any
Indebtedness that is incurred in violation of the Indenture or (z) Non-Recourse
Indebtedness of the Company or such Guarantor, as the case may be.
"ShoLodge Joint Venture Contribution" means the contribution by the Company
of 50% of its interest in Suites of America to ShoLodge, Inc. pursuant to that
certain joint venture agreement between the Company and ShoLodge, Inc. dated
, .
"Subsidiary" means, with respect to any Person, 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.
"Suites of America" means Suites of America, Inc., a Wholly Owned
Subsidiary of the Company.
"Unrestricted Subsidiary" means any entity that would have been a
Restricted Subsidiary of the Company but for its designation as an "Unrestricted
Subsidiary" in accordance with the provisions of the Indenture and any
Subsidiary of such entity.
61
<PAGE> 63
"Weighted Average Life to Mandatory Redemption" means, when applied to any
Disqualified Stock at any date, the number of years obtained by dividing (a) the
sum of the products obtained by multiplying (x) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect thereof, by (y)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
liquidation preference amount of such Disqualified Stock.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
62
<PAGE> 64
UNDERWRITING
The Underwriters named below have severally agreed, subject to the terms
and conditions of the Underwriting Agreement, to purchase from the Company, the
respective principal amounts of Notes set forth opposite their names below:
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
--------------------------------------------------------------- ------------
<S> <C>
Kidder, Peabody & Co. Incorporated............................. $
Montgomery Securities..........................................
------------
Total................................................ $100,000,000
------------
------------
</TABLE>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the Notes, if any are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the Notes to the public at the offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession of not in excess of % of the principal amount of the Notes, and
that the Underwriters and such dealers may reallow a discount of not in excess
of % of the principal amount of the Notes to other dealers. The public
offering price and the concession and discount to dealers may be changed by the
Underwriters after the initial public offering of the Notes.
The Company has agreed to indemnify the Underwriters and any person who
controls the Underwriters against certain liabilities, including liabilities
under the Securities Act.
The Notes are a new issue of securities for which there is currently no
public market. The Underwriters have advised the Company that they presently
intend to make a market in the Notes. The Underwriters are not obligated,
however, to make a market in the Notes and any such market-making may be
discontinued at any time at the sole discretion of the Underwriters.
Accordingly, no assurance can be given as to the liquidity of or trading market
for the Notes.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Notes offered
hereby will be passed upon for the Company by Willkie Farr & Gallagher, New
York, New York. Certain legal matters relating to the Offering will be passed
upon for the Underwriters by Latham & Watkins, New York, New York.
EXPERTS
The consolidated financial statements and schedules incorporated by
reference in this Prospectus and elsewhere in the Registration Statement, to the
extent and for the periods indicated in their reports, have been audited by
Arthur Andersen & Co. and J.H. Cohn & Company, independent public accountants,
and are included herein in reliance upon the authority of said firms as experts
in giving said reports.
63
<PAGE> 65
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Public Accountants........................................... F-2
Consolidated:
Balance Sheets at December 31, 1993 and 1992.................................... F-3
Statements of Income for the Year Ended December 31, 1993 and the Five Months
Ended December 31, 1992........................................................ F-4
Statements of Stockholders' Equity for the Year Ended December 31, 1993 and the
Five Months Ended December 31, 1992............................................ F-5
Statements of Cash Flows for the Year Ended December 31, 1993 and the Five
Months Ended December 31, 1992................................................. F-6
Notes to Consolidated Financial Statements......................................... F-7
</TABLE>
F-1
<PAGE> 66
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Prime Hospitality Corp.:
We have audited the accompanying consolidated balance sheets of Prime
Hospitality Corp. (a Delaware corporation) and subsidiaries ("the Company") as
of December 31, 1993 and 1992 and the related consolidated statements of income,
stockholders' equity and cash flows for the year ended December 31, 1993 and the
five months ended December 31, 1992. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Prime Hospitality Corp. and
subsidiaries as of December 31, 1993 and 1992 and the results of their
operations and their cash flows for the year ended December 31, 1993 and the
five months ended December 31, 1992 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN & CO.
Roseland, New Jersey
March 17, 1994
F-2
<PAGE> 67
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 41,569 $ 36,616
Restricted cash..................................................... 10,993 12,896
Accounts receivable, net of reserves................................ 6,266 6,395
Current portion of mortgages and other notes receivable............. 2,275 6,898
Accrued interest receivable......................................... 3,954 3,038
Other current assets................................................ 3,145 2,661
-------- --------
Total current assets........................................ 68,202 68,504
Property, equipment and leasehold improvements, net of accumulated
depreciation and amortization.................................... 172,786 162,797
Mortgages and other notes receivable, net of current portion........ 163,033 165,654
Other assets........................................................ 6,664 6,359
-------- --------
TOTAL ASSETS................................................ $410,685 $403,314
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt............................................. $ 19,282 $ 18,275
Other current liabilities........................................... 22,445 23,011
-------- --------
Total current liabilities................................... 41,727 41,286
Long-term debt, net of current portion................................ 168,618 192,913
Other liabilities..................................................... 28,976 31,333
-------- --------
Total liabilities........................................... 239,321 265,532
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.10 per share; 20,000,000 shares
authorized; none issued......................................... -- --
Common stock, par value $.01 per share; 50,000,000 shares
authorized; 33,075,880 and 33,000,000 shares issued and
outstanding in 1993 and 1992, respectively...................... 331 330
Capital in excess of par value...................................... 157,476 136,059
Retained earnings................................................... 13,557 1,393
-------- --------
Total stockholders' equity.................................. 171,364 137,782
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................. $410,685 $403,314
-------- --------
-------- --------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 68
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FIVE
YEAR MONTHS
ENDED ENDED
DECEMBER DECEMBER
31, 31,
1993 1992
-------- -------
<S> <C> <C>
Revenues:
Rooms........................................................... $ 69,487 $24,639
Food and beverage............................................... 12,270 4,598
Management and other fees....................................... 10,831 5,000
Interest on mortgages and other notes receivable................ 14,765 6,335
Rental and other................................................ 1,507 762
-------- -------
Total revenues.......................................... 108,860 41,334
-------- -------
Costs and expenses:
Direct hotel operating expenses:
Rooms........................................................ 19,456 6,952
Food and beverage............................................ 10,230 4,027
Selling and general.......................................... 20,429 7,811
Occupancy and other operating................................... 11,047 4,351
General and administrative...................................... 15,685 5,929
Depreciation and amortization................................... 7,117 2,918
-------- -------
Total costs and expenses................................ 83,964 31,988
-------- -------
Operating income.................................................. 24,896 9,346
Interest income on cash investments............................... 1,267 693
Interest expense.................................................. (16,116) (7,718)
Other income...................................................... 3,809 --
-------- -------
Income before income taxes and extraordinary items................ 13,856 2,321
Provision for income taxes........................................ 5,681 928
-------- -------
Income before extraordinary items................................. 8,175 1,393
Extraordinary items -- Gains on discharges of indebtedness (net of
income taxes of $2,772)......................................... 3,989 --
-------- -------
Net income........................................................ $ 12,164 $ 1,393
-------- -------
-------- -------
Net income per common share:
Income before extraordinary items............................... $ .24 $ .04
Extraordinary items............................................. .12 --
-------- -------
Net income per common share....................................... $ .36 $ .04
-------- -------
-------- -------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 69
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CAPITAL
IN
EXCESS
COMMON STOCK OF
------------------ PAR RETAINED
SHARES AMOUNT VALUE EARNINGS TOTAL
--------- ---- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance August 1, 1992................. 33,000,000 $330 $135,270 $ -- $135,600
Net income............................. -- -- -- 1,393 1,393
Utilization of net operating loss
carryforwards........................ -- -- 789 -- 789
--------- ---- -------- ------- --------
Balance December 31, 1992.............. 33,000,000 330 136,059 1,393 137,782
Net income............................. -- -- -- 12,164 12,164
Utilization of net operating loss
carryforwards........................ -- -- 4,525 -- 4,525
Federal income tax refund.............. -- -- 16,462 -- 16,462
Compensation expense related to stock
option plan.......................... -- -- 225 -- 225
Proceeds from exercise of stock
options.............................. 30,000 -- 81 -- 81
Proceeds from exercise of stock
warrants............................. 45,880 1 124 -- 125
--------- ---- -------- ------- --------
Balance December 31, 1993.............. 33,075,880 $331 $157,476 $13,557 $171,364
--------- ---- -------- ------- --------
--------- ---- -------- ------- --------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 70
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIVE
YEAR MONTHS
ENDED ENDED
DECEMBER DECEMBER
31, 31,
1993 1992
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income......................................................... $ 12,164 $ 1,393
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 7,117 2,918
Utilization of net operating loss carryforwards................. 4,525 789
Deferred income taxes........................................... 1,541 --
Gains on discharges of indebtedness............................. (6,761) --
Gains on disposals of assets.................................... (1,769) --
Compensation expense related to stock options................... 225 --
Increase (decrease) from changes in other operating assets and
liabilities:
Accounts receivable............................................. 269 320
Other current assets............................................ (1,791) (1,445)
Other liabilities............................................... 4,208 (248)
-------- --------
Net cash provided by operating activities.................. 19,728 3,727
-------- --------
Cash flows from investing activities:
Proceeds from mortgages and other notes receivable................. 10,861 46,165
Disbursements for mortgages and other notes receivable............. (515) --
Proceeds from sales of property, equipment and leasehold
improvements.................................................... 3,715 --
Purchases of property, equipment and leasehold improvements........ (14,346) (1,803)
Decrease in restricted cash........................................ 1,903 9,939
Other.............................................................. 663 (506)
-------- --------
Net cash provided by investing activities.................. 2,281 53,795
-------- --------
Cash flows from financing activities:
Payments of debt................................................... (30,890) (56,592)
Proceeds from issuance of debt..................................... 2,771 --
Proceeds from the exercise of stock options and warrants........... 206 --
Principal proceeds from federal income tax refund.................. 16,462 --
Reorganization items after emergence from bankruptcy............... (5,605) (3,807)
-------- --------
Net cash used in financing activities...................... (17,056) (60,399)
-------- --------
Net increase (decrease) in cash and cash equivalents................. 4,953 (2,877)
Cash and cash equivalents at beginning of period..................... 36,616 39,493
-------- --------
Cash and cash equivalents at end of period........................... $ 41,569 $ 36,616
-------- --------
-------- --------
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE> 71
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
NOTE 1 -- BUSINESS OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Business Activities
Prime Hospitality Corp. (the "Company") is a leading independent hotel
operating company with ownership or management of full-service and
limited-service hotels in the United States and one resort hotel in the U.S.
Virgin Islands. The Company's hotels primarily provide moderately priced,
quality accommodations in secondary or tertiary markets, and operate under
franchise agreements with national hotel chains or under the Company's
proprietary Wellesley Inns or AmeriSuites trade names.
In addition to its hotel operations, the Company has a portfolio of
financial assets including mortgages and notes receivable secured by hotel
properties and owns real estate that is not part of its hotel operations.
The Company emerged from the Chapter 11 reorganization case of its
predecessor, Prime Motor Inns, Inc. and certain of its subsidiaries ("PMI"),
which consummated its Plan of Reorganization ("the Plan") on July 31, 1992 (the
"Effective Date"). PMI and certain of its subsidiaries had filed for protection
under Chapter 11 of the United States Bankruptcy Code in September of 1990.
During the reorganization, PMI renegotiated most of its leases, management
agreements and debt commitments, resulting in the elimination of a substantial
number of unprofitable contract relationships and excessive debt obligations.
Basis of presentation
Pursuant to the American Institute of Certified Public Accountant's
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code" ("SOP 90-7"), the Company adopted fresh start
reporting as of July 31, 1992. Under fresh start reporting, the reorganization
value of the entity was allocated to the reorganized Company's assets on the
basis of the purchase method of accounting. The reorganization value (the
approximate fair value) of the assets of the emerging entity was determined by
consideration of many factors and various valuation methods, including
discounted cash flows and price/earnings and other applicable ratios believed by
management to be representative of the Company's business and industry.
Liabilities were recorded at face values, which approximate the present values
of amounts to be paid determined at appropriate interest rates. Under fresh
start reporting, the consolidated balance sheet as of July 31, 1992 became the
opening consolidated balance sheet of the emerging Company.
In accordance with SOP 90-7, financial statements covering periods prior to
July 31, 1992 are not presented because such statements have been prepared on a
different basis of accounting and are thus not comparable.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and all of its majority-owned subsidiaries. All material intercompany accounts
and transactions have been eliminated in consolidation.
Cash equivalents
Cash equivalents are highly liquid unrestricted investments with a maturity
of three months or less when acquired.
Restricted cash
Restricted cash consists primarily of highly liquid investments that serve
as collateral for debt obligations due within one year.
F-7
<PAGE> 72
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
Mortgages and other notes receivable
Mortgages and other notes receivable are reflected at their fair value as
of July 31, 1992, adjusted for payments and other advances since that date. The
amount of interest income recognized on mortgages and other notes receivable is
generally based on the stated interest rate and the carrying value of the notes.
The Company has a number of subordinated or junior mortgages which remit payment
based on hotel cash flow. Because there is substantial doubt that the Company
will recover their face value, these mortgages have not been valued in the
Company's consolidated financial statements. Interest on cash flow mortgages and
delinquent loans is only recognized when cash is received.
Property, equipment and leasehold improvements
Property, equipment and leasehold improvements that the Company intends to
continue to operate are stated at their fair market value as of July 31, 1992
plus the cost of acquisitions subsequent to that date less accumulated
depreciation and amortization from August 1, 1992. Provision is made for
depreciation and amortization using the straight-line method over the estimated
useful lives of the assets. Properties identified for disposal are stated at
their estimated net realizable value.
Income taxes
The Company and its subsidiaries file a consolidated Federal income tax
return. For financial reporting purposes, the Company follows Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 109
("FAS 109"). In accordance with FAS 109, as well as SOP 90-7, income taxes have
been provided at statutory rates in effect during the period. Tax benefits
associated with net operating loss carryforwards and other temporary differences
that existed at the time fresh start reporting was adopted are reflected as a
contribution to stockholders' equity in the period in which they are realized.
Income per common share
Net income per common share is computed based on the weighted average
number of common shares and common share equivalents outstanding during each
period. The weighted average number of common shares used in computing primary
net income per share was 33,808,000 for the year ended December 31, 1993 and
33,000,000 for the five months ended December 31, 1992. The dilutive effect of
stock warrants and options during the year ended December 31, 1993 and the five
months ended December 31, 1992 was not material (see Note 10).
Reclassifications
Certain reclassifications have been made to the December 31, 1992
consolidated financial statements to conform them to the December 31, 1993
presentation.
NOTE 2 -- CASH AND CASH EQUIVALENTS
Cash and cash equivalents are comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1992
------- -------
<S> <C> <C>
Cash................................................... $ 3,013 $ 1,526
Commercial paper and other cash equivalents............ 38,556 35,090
------- -------
Totals....................................... $41,569 $36,616
------- -------
------- -------
</TABLE>
F-8
<PAGE> 73
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
NOTE 3 -- MORTGAGES AND OTHER NOTES RECEIVABLE
Mortgages and other notes receivable are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
<S> <C> <C>
Frenchman's Reef resort hotel (a)..................... $ 50,000 $ 50,000
Rose and Cohen entities (b)........................... 25,000 25,000
Other properties managed by the Company (c)........... 65,323 62,070
Other (d)............................................. 24,985 35,482
-------- --------
Total....................................... 165,308 172,552
Less current portion.................................. 2,275 6,898
-------- --------
Long-term portion..................................... $163,033 $165,654
-------- --------
-------- --------
</TABLE>
- ---------------
(a) These mortgage notes are secured by the Marriott Frenchman's Reef resort
hotel, which is managed by the Company, and consist of first and second
mortgages with face values of $53,383,000 and $25,613,000, respectively,
with final scheduled principal payments of $51,976,000 and $25,613,000 due
on July 31, 1995. The notes bear interest at a stated rate of 13%. Interest
and principal payments on the first mortgage are payable in monthly
installments. Interest and scheduled principal payments on the second
mortgage note are payable only to the extent of available cash flow, as
defined, with any unpaid interest due at maturity. In connection with the
adoption of fresh start reporting, the Company valued the notes at
$50,000,000.
During the year ended December 31, 1993 and five months ended December 31,
1992, the Company recognized $4,250,000 and $1,770,000 of interest income
on these notes, respectively (an effective rate of approximately 8.5%),
based on the current level of cash flows generated from the hotel property
available to service the notes.
During 1993, the Company entered into a restructuring agreement related to
these notes with the general partner of Frenchman's Reef Beach Associates
("FRBA"), the owner of the hotel. In conjunction with the agreement, FRBA
filed a pre-negotiated Chapter 11 petition in September 1993. The
disclosure statement setting forth the plan of reorganization dated October
21, 1993 provided for the Company to receive ownership and control of the
hotel through a 100% equity interest in the reorganized FRBA. The plan also
provided for the existing equity holders and any other impaired claim
holders to participate in excess cash flow above specified levels and all
administrative and unsecured trade claims incurred in the ordinary course
of business to be paid in full. A group purporting to represent a
significant number of limited partners has filed an objection to the
disclosure statement and has challenged the authority of the general
partner. These holders have also indicated that they intend to challenge
the validity of the Company's lien. In light of this uncertainty, the
Company intends to defend its position and pursue a foreclosure of its
mortgages and has filed a motion to lift the stay of relief under the
Chapter 11 petition to permit a commencement of a foreclosure action. The
motion is subject to approval by the Bankruptcy Court.
In the event that the Company is successful in its foreclosure proceedings
and obtains title to the property, the assets and liabilities of the
Frenchman's Reef resort hotel will be included in the consolidated
financial statements of the Company at an initial net carrying value equal
to the carrying value of the notes.
(b) From 1988 through 1990, PMI loaned entities controlled by Allan Rose and
Arthur Cohen (the "Rose and Cohen entities"), an aggregate of $100,890,000
which was initially fully secured by property and/or
F-9
<PAGE> 74
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
personal guarantees. PMI was committed to make additional loans, also on a
fully secured basis, to the Rose and Cohen entities of up to an aggregate
of $130,000,000 if values of, and/or revenues generated by, certain hotel
properties controlled by the Rose and Cohen entities attained specified
levels. PMI was to receive a minimum annual return of 10% on all loans made
to the Rose and Cohen entities and a maximum return of 20%. All loans and
unpaid interest are payable on December 31, 1997.
In 1992, certain of the Rose and Cohen entities owning a portion of the
collateral that secures the loans filed for Chapter 11 protection in the
United States Bankruptcy Court, Southern District of New York. Also during
1992, PMI commenced an adversary proceeding against Rose and Cohen to
recover jointly and severally on the personal guarantees of $50,000,000
given by Rose and Cohen as part of the loan agreement. The accrual of
interest on the Rose and Cohen note was discontinued in fiscal 1990 and the
notes were reflected at their estimated net realizable value.
In June 1993, the Company reached a settlement with Allan Rose and Arthur
Cohen. The settlement provided for an affiliate of Rose to purchase the
notes for the sum of $25,000,000 in cash, which was fully funded into
escrow by Rose on February 25, 1994. The Company is also to receive the
cash proceeds from approximately 1,100,000 shares of the Company's common
stock owned by Rose which will be liquidated over a period of time. In
addition, pursuant to the settlement, certain bankruptcy claims against PMI
have been withdrawn (see Note 7).
The settlement is subject to a claim on the entire amount of the proceeds
by Financial Security Assurance, Inc. ("FSA"). A trial was held in the
United States Bankruptcy Court for the Southern District of Florida in
January 1994 to approve the settlement agreement and resolve FSA's claim on
the settlement proceeds. The Company expects an order to be issued by that
court in the near future, which may be subject to appeal. All proceeds
received pursuant to the settlement must be held in escrow until such order
is received. The Company believes that FSA is unlikely to prevail on its
claim, and as a result, does not believe it will have a material impact on
the financial statements. Upon receipt of a favorable order from the court,
substantially all of the net proceeds will be used to retire debt (see Note
6).
(c) The Company is the holder of mortgage notes receivable with a book value of
$50,670,000 secured primarily by 11 hotel properties operated by the
Company under management agreements and $14,653,000 in mortgages secured
primarily by 4 properties operated under lease agreements. These notes
currently bear interest at rates ranging from 8.5% to 14.0% and mature
through 2003. The mortgages were primarily derived from the sales of hotel
properties. Many of the 11 managed properties were unable to pay in full
the annual debt service required under the terms of the original mortgages.
The Company has restructured approximately $36,500,000 of these loans to
pay based upon available cash and a participation in the future excess cash
flow of such hotel properties. The restructurings generally include a
"senior portion" featuring defined payment terms, and a "junior portion"
payable annually based on cash flow. The junior portion represents the
difference between the original mortgage and the new senior portion and
provides the Company the opportunity to recover that difference if the
hotel's performance improves. In addition to the junior portions of the
restructured mortgages, the Company holds junior or other cash flow
mortgages and subordinated interests in 19 other hotel properties operated
by the Company under management agreements.
The Company's consolidated balance sheets do not reflect any value related
to the junior portion of the restructured notes or the junior mortgages and
subordinated interests on the 19 other hotels as there is substantial doubt
that the Company will recover any of their face value. During 1993, the
Company recognized $976,000 of interest income related to these mortgages
due to excess cash flow on certain properties attributable to decreased
interest expense on variable rate borrowings senior to the Company's
positions on these hotels.
F-10
<PAGE> 75
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
(d) Other notes receivable currently bear interest at effective rates ranging
from 4% to 11%, mature through 2011 and are secured primarily by hotel
properties not currently managed by the Company.
NOTE 4 -- PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, YEARS OF
-------------------- USEFUL
1993 1992 LIFE
-------- -------- --------
<S> <C> <C> <C>
Land and land leased to others............... $ 29,407 $ 26,074
Hotels....................................... 109,671 97,179 20 to 40
Furniture, fixtures and autos................ 21,879 18,333 3 to 10
Leasehold improvements....................... 10,222 15,771 3 to 40
Construction in progress..................... 2,555 --
Properties held for sale..................... 8,355 8,000
-------- --------
Sub-total............................... 182,089 165,357
Less accumulated depreciation and
amortization.......................... (9,303) (2,560)
-------- --------
Totals............................. $172,786 $162,797
-------- --------
-------- --------
</TABLE>
At December 31, 1993, the Company was the lessor of land and certain
restaurant facilities in Company-owned hotels with an approximate aggregate book
value of $8,676,000 pursuant to noncancelable operating leases expiring on
various dates through 2013. Minimum future rentals under such leases are
$10,730,000, of which $3,939,000 is scheduled to be received in the aggregate
during the five-year period ending December 31, 1998.
Depreciation and amortization expense on property, equipment and leasehold
improvements was $7,015,000 for the year ended December 31, 1993 and $2,784,000
for the five months ended December 31, 1992.
NOTE 5 -- OTHER CURRENT LIABILITIES
Other current liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
------- -------
<S> <C> <C>
Accounts payable........................................ $ 2,025 $ 1,626
Interest................................................ 4,454 4,933
Accrued payroll and related benefits.................... 2,190 3,181
Insurance reserves...................................... 6,206 2,103
Reorganization reserve.................................. 676 5,497
Other................................................... 6,894 5,671
------- -------
Totals........................................ $22,445 $23,011
------- -------
------- -------
</TABLE>
F-11
<PAGE> 76
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
NOTE 6 -- DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
<S> <C> <C>
Senior secured notes(a)............................... $ 33,152 $ 37,009
Junior secured notes(a)............................... 53,531 69,999
Mortgages and other notes payable(b).................. 99,946 104,180
Borrowings under credit agreement(c).................. 1,271 --
-------- --------
Total debt............................................ 187,900 211,188
Less current maturities............................... 19,282 18,275
-------- --------
Debt, net of current portion................ $168,618 $192,913
-------- --------
-------- --------
</TABLE>
- ---------------
(a) Pursuant to the Plan, the Company issued two classes of Secured Notes which
are identified as "Senior Secured Notes" and "Junior Secured Notes". Senior
Secured Notes were issued in two series of notes which are identified as the
"8.20% Fixed Rate Senior Secured Notes" and the "Adjustable Rate Senior
Secured Notes". Each series is identical except that the interest rate on
the Adjustable Rate Senior Secured Notes will be periodically adjusted to
one-half of one percent over the prime rate, with a maximum interest rate of
10.0% per annum. The aggregate principal amount of Senior Secured Notes
issued under the Plan was $91,300,000, comprised of $30,100,000 of 8.20%
Fixed Rate Senior Secured Notes and $61,200,000 of Adjustable Rate Senior
Secured Notes. On August 11, 1992, the Company prepaid $17,900,000 of the
8.20% Fixed Rate Senior Secured Notes and $36,400,000 of the Adjustable Rate
Senior Secured Notes from the proceeds of collections of portions of the
collateral for the Senior Secured Notes.
The other class of Secured Notes issued to satisfy claims was comprised of
Junior Secured Notes that bear interest at a rate of 9.20% per annum and
will mature on July 31, 2000. The aggregate principal amount of Junior
Secured Notes issued under the Plan was approximately $70,000,000.
The collateral for the Secured Notes consists primarily of mortgages and
other notes receivable and real property, net of related liabilities, (the
"Secured Note Collateral") with a book value of $104,790,000 as of December
31, 1993.
Interest on the Secured Notes is payable semi-annually commencing January
31, 1993. The Secured Notes require that 85% of the cash proceeds from the
Secured Note Collateral be applied first to interest, second to prepayment
of the Senior Secured Notes and third to prepayment of the Junior Secured
Notes. Any remaining principal balance of the Senior Secured Notes is due
July 31, 1997. Aggregate principal payments on the Junior Secured Notes are
required in order that one-third of the principal balance outstanding on
December 31, 1996 is paid by July 31, 1998; two-thirds of the balance is
paid by July 31, 1999; and all of the balance is paid by July 31, 2000. To
the extent the cash proceeds from the Secured Note Collateral are
insufficient to pay interest or required principal payments on the Secured
Notes, the Company will be obligated to pay any deficiency out of its
general corporate funds.
The Secured Notes contain covenants which, among other things, require the
Company to maintain a net worth of at least $100,000,000, limit
expenditures related to the development of hotel properties through
December 31, 1996 and preclude cash distributions to stockholders,
including dividends and redemptions, until the Secured Notes have been paid
in full.
F-12
<PAGE> 77
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
During 1993, the Company repurchased $513,000 of its 8.2% Senior Secured
Notes and $16,467,000 of its 9.2% Junior Secured Notes for an aggregate
purchase price of $13,249,000. The Company recorded pre-tax extraordinary
gains of $3,731,000 related to these repurchases.
During the first quarter of 1994, the Company repurchased $6,527,000 of its
Adjustable Rate Senior Secured Notes, $217,000 of its 8.20% Senior Secured
Notes and $461,000 of its 9.20% Junior Secured Notes for an aggregate
purchase price of $7,018,000. The repurchases resulted in pretax
extraordinary gains of $187,000, which will be reflected in the Company's
first quarter 1994 consolidated financial statements. These notes have been
classified as long-term debt at December 31, 1993, in accordance with their
terms, as repurchase was not contemplated at the balance sheet date.
During the first quarter of 1994, the Company purchased through a third
party agent approximately $5.2 million of its Senior Secured and Junior
Secured Notes for aggregate consideration of $4.8 million. These notes are
currently held by the third party agent and have not been retired due to
certain restrictions under the note agreements. The purchases will be
recorded as investments on the Company's balance sheet and no gain will be
recorded on these transactions until the notes mature or are redeemed.
(b) The Company has mortgage and other notes payable of approximately
$66,039,000 that are secured by mortgage notes receivable and hotel
properties with a book value of $104,324,000. Principal and interest on
these mortgages and notes are generally paid monthly. At December 31, 1993
these notes bear interest at rates ranging from 4.68% to 10.5% and mature
through 2008.
At December 31, 1993, the Company has outstanding loans in the amount of
$18,361,000 payable to ShoLodge, Inc. ("ShoLodge"), a company controlled by
a director. The foregoing loans are secured by AmeriSuites hotel properties
with an aggregate book value of $35,588,000. Interest is payable monthly at
rates ranging from 8% (the prime rate plus 2%) to 9.5% (Note 9) and mature
through April 1996.
The Company has $11,665,000 of notes restructured under the Plan which bear
interest at rates ranging from 8.00% to 9.50% per annum payable
semi-annually. Prior to maturity, principal amounts outstanding will be
paid semi-annually based on a thirty-year amortization schedule. Each note
matures on July 31, 2002 and is secured by a lien on mortgage notes
receivable and hotel properties with a book value of $11,074,000 at
December 31, 1993. During 1993, the Company repurchased $8,828,000 of these
notes for an aggregate purchase price of $5,799,000. The repurchase
resulted in a pre-tax extraordinary gain of $3,030,000.
The Company has other notes payable of $3,881,000, which bear interest at
rates ranging from 8.0% to 8.2% and mature through 1999.
(c) The Company has a fully-secured demand credit agreement which permits
borrowing of up to $5,000,000 and bears interest at the prime rate plus 2%.
This facility is supported by a certificate of deposit which is maintained
by the bank.
Maturities of long-term debt for the next five years ending December 31 are
as follows (in thousands):
<TABLE>
<S> <C>
1994.............................................. $ 19,282
1995.............................................. 8,931
1996.............................................. 42,754
1997.............................................. 34,903
1998.............................................. 19,586
Thereafter........................................ 62,444
--------
Total................................... $187,900
--------
--------
</TABLE>
F-13
<PAGE> 78
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
NOTE 7 -- LEASE COMMITMENTS AND CONTINGENCIES
Leases
The Company leases various hotels under lease agreements with initial terms
expiring at various dates from 1994 through 2015. The Company has options to
renew certain of the leases for periods ranging from 1 to 94 years. Rental
payments are based on minimum rentals plus a percentage of the hotel properties'
revenues in excess of stipulated amounts.
The following is a schedule, by year, of future minimum lease payments
required under the remaining operating leases that have terms in excess of one
year as of December 31, 1993 (in thousands):
<TABLE>
<S> <C>
1994............................................... $ 4,028
1995............................................... 3,989
1996............................................... 3,957
1997............................................... 3,925
1998............................................... 3,756
Thereafter......................................... 38,817
-------
Total.................................... $58,472
-------
-------
</TABLE>
Rental expense for all operating leases, including those with terms of less
than one year, consist of the following for the year ended December 31, 1993 and
the five months ended December 31, 1992 (in thousands):
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Rentals................................................... $5,009 $1,844
Contingent rentals........................................ 764 266
------ ------
Rental expense.................................. $5,773 $2,110
------ ------
------ ------
</TABLE>
Employee Benefits
The Company does not provide any material post employment benefits to its
current or former employees.
Contingent Claims
As of March 1, 1994, unresolved bankruptcy claims of approximately
$437,000,000 have been asserted against PMI. The Company has disputed
substantially all of these unresolved claims and has filed objections to such
claims. The Company believes that substantially all of these claims will be
dismissed and disallowed. Any claims not disallowed will be satisfied through
the distribution of the Company's common stock. In accordance with SOP 90-7, the
consolidated financial statements have given full effect to the maximum
distribution, pursuant to the Plan of the Company's common stock (see Note 10).
The Company has responded to informal requests for information by the Staff
of the United States Securities and Exchange Commission's Division of
Enforcement relating to a number of the significant transactions of PMI, for the
years 1985 through 1991. However, no formal allegations have been made by the
Staff.
In addition to the foregoing legal proceedings, the Company is involved in
various other proceedings incidental to the normal course of its business.
F-14
<PAGE> 79
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
The Company believes that the resolution of these contingencies will not
have a material adverse effect on the Company's consolidated financial position
or results of operations.
Financial Instruments and Concentration of Credit Risk
The Company's accounts receivable and mortgages and other notes receivable
(see Note 3) are derived primarily from and are secured by hotel properties,
which constitutes a concentration of credit risk. These notes are subject to
many of the same risks as the Company's operating hotel assets. A significant
portion of the collateral is located in the Northeastern and Southeastern United
States.
In addition to the hotel property related receivables referred to above,
the Company's financial instruments include (i) assets; cash and cash
equivalents and restricted cash investments and (ii) liabilities; trade and
notes payable and long-term debt (see Note 6). As described in Note 1, in
connection with the adoption of fresh start accounting as of July 31, 1992, the
Company revalued its assets and liabilities at amounts approximating fair market
value. Since there have been no substantive changes in market conditions since
the date of the revaluation and on the basis of market quotes and experience on
recent redemption offers for the Company's long-term debt, the Company believes
that the carrying amount of these financial instruments approximated their fair
market value as of December 31, 1993 and 1992.
As a result of the reorganization proceedings and the rejection of certain
leases, management contracts and other guarantees, the Company has no other
material off-balance-sheet liabilities or credit risk as of December 31, 1993.
NOTE 8 -- INCOME TAXES
The provision for income taxes (including amounts applicable to
extraordinary items) consisted of the following for the year ended December 31,
1993 and the five months ended December 31, 1992 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1993 1992
------ ----
<S> <C> <C>
Current:
Federal.................................................. $2,167 $ --
State.................................................... 220 139
------ ----
2,387 139
Deferred:
Federal.................................................. 5,049 789
State.................................................... 1,017 --
------ ----
6,066 789
------ ----
Total............................................ $8,453 $928
------ ----
------ ----
</TABLE>
Income taxes are provided at the applicable federal and state statutory
rates.
F-15
<PAGE> 80
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
The tax effects of the temporary differences in the areas listed below
resulted in deferred income tax provisions for the year ended December 31, 1993
and the five months ended December 31, 1992 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1993 1992
------ ----
<S> <C> <C>
Utilization of net operating loss.......................... $4,525 $789
Basis difference -- properties and notes................... 1,356 --
Allowance for doubtful accounts............................ (545) --
Depreciation............................................... 415 --
Gains on property sales.................................... (366) --
Property transactions...................................... 348 --
Other...................................................... 333 --
------ ----
Total............................................ $6,066 $789
------ ----
------ ----
</TABLE>
At December 31, 1993, the Company had available federal net operating loss
carryforwards of approximately $121,000,000 which will expire beginning in 2005
and continuing through 2008. Of this amount, $114,000,000 is subject to an
annual limitation of $8,735,000 under the Internal Revenue Code due to a change
in ownership of the Company upon consummation of the Plan. The Company also has
potential state income tax benefits relating to net operating loss carryforwards
of approximately $9,900,000 which will expire during various periods from 1995
to 2006. Certain of these potential benefits are subject to annual limitations
similar to federal requirements due to a change in ownership. The utilization is
further dependent on such factors as the level of business conducted in each
state and the amount of income subject to tax within each state's carryforward
period.
In accordance with FAS 109, the Company has not recognized the future tax
benefits associated with the net operating loss carryforwards or with other
temporary differences. Accordingly, the Company has provided a valuation
allowance of approximately $42,000,000 against the deferred tax asset as of
December 31, 1993. To the extent any available carryforwards or other tax
benefits are utilized, the amount of tax benefit realized will be treated as
contribution to stockholders' equity and will have no effect on the income tax
provision for financial reporting purposes. For the year ended December 31, 1993
and the five months ended December 31, 1992, the Company recognized $4,525,000
and $789,000, respectively, of such tax benefits as a contribution to
stockholders' equity.
The Company's federal income tax returns for the years 1987 through 1991
were examined by the Internal Revenue Service. The Company received a
$17,700,000 federal income tax refund, including interest relating to its
predecessor, PMI. In accordance with SOP 90-7, the Company recorded the tax
refund and the interest related to its predecessor as a contribution to
additional paid in capital ($16,462,000). The remaining amount of $1,238,000,
which represents interest since July 31, 1992, is included in other income in
the accompanying financial statements.
F-16
<PAGE> 81
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
NOTE 9 -- RELATED PARTY TRANSACTIONS
The following summarizes significant financial information with respect to
transactions with present and former officers, directors, their relatives and
certain entities they control or in which they have a beneficial interest for
the year ended December 31, 1993 and the five months ended December 31, 1992 (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1993 1992
---- ----
<S> <C> <C>
Management and other fee income (a)......................... $810 $312
Interest income (a)......................................... 14 72
Management fee expense (b).................................. 222 162
Interest expense (b)........................................ 475 332
Reservation fee expense (b)................................. $468 $101
</TABLE>
- ------------
(a) The Company manages 12 hotels for partnerships in which a related party owns
various interests. The income amounts shown above primarily include
transactions related to these hotel properties.
(b) In 1991, PMI entered into an agreement (the "Development Agreement") with
ShoLodge, whereby ShoLodge was appointed the exclusive agent to develop and
manage certain hotel properties. The Company has loans payable to ShoLodge
of $18,361,000 at December 31, 1993 related to the development of Hotels
(see Note 6).
In January 1993, the Company and its wholly-owned subsidiary, Suites of
America, Inc. ("SOA") entered into agreements with ShoLodge designed to
enhance the growth of its AmeriSuites hotel chain from the six hotels owned
at that time by adding an additional six hotels to be built and financed by
ShoLodge. ShoLodge has completed development of three hotels, two of which
the Company has acquired subject to mortgages with ShoLodge. In addition,
ShoLodge has three hotels currently under construction. Upon completion of
the new hotels and the exercise of an option by either ShoLodge or the
Company, ShoLodge will contribute its fee or mortgage interests on six
hotels to SOA and will own a 50% interest in SOA. Upon exercise of this
option, the Development Agreement will terminate and ShoLodge will manage
all 12 hotels in SOA pursuant to a new management agreement. The Company
will retain ownership of the AmeriSuites brand name and all rights to
license and develop the name for its own account. In conjunction with the
agreement, ShoLodge has also relinquished its profit sharing interests of
$2,862,000 on the initial six hotels for cash and the cancellation of a
note receivable.
The Company uses the ShoLodge reservation system for its Wellesley and
AmeriSuites hotel properties.
NOTE 10 -- COMMON STOCK AND COMMON STOCK EQUIVALENTS
Pursuant to the Plan, on July 31, 1992 the Company began distributing
shares of common stock to certain claimants and holders of PMI stock. The Plan
provided for issuance of 33,000,000 shares of common stock and as of March 10,
1994, 29,124,324 shares of common stock were distributed. The remaining shares
are to be distributed semi-annually to holders of previously allowed claims and
pending final resolution of disputed claims (see Note 7). The consolidated
financial statements have given full effect to the issuance of the maximum
amount of 33,000,000 shares under the Plan. The number of shares ultimately
distributed under the Plan could be less than 33,000,000 depending on the final
outcome of the disputed claims. In addition to the shares distributed under the
Plan, warrants to purchase 2,100,000 shares of the Company's common stock were
issued to former shareholders of the Company's predecessor, PMI, in partial
settlement of their bankruptcy interests. The warrants became exercisable on
August 31, 1993 at an exercise price of $2.71 per share. The exercise price was
determined from the average per share daily closing price of the Company's
F-17
<PAGE> 82
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
common stock during the year following its reorganization on July 31, 1992. As
of December 31, 1993, 45,880 shares have been exercised.
On July 31, 1992, the Company adopted various stock option and performance
incentive plans under which options to purchase up to 1,320,000 shares of common
stock may be granted to directors, officers or key employees under terms
determined by the Board of Directors. During 1993 and 1992, options to purchase
20,000 and 350,000 shares, respectively, were granted to officers and directors,
130,000 of which are exercisable at December 31, 1993. In addition, options to
purchase 330,000 shares were granted to a former officer in 1992. Such options
are currently exercisable and expire on July 31, 1995. During 1993, 30,000 of
these options were exercised. The exercise prices of the above options are based
on the average market price one year from the date of grant and have been
determined to be $2.71 per share. Based on this exercise price, the amount of
compensation expense attributable to these options was $225,000 for the year
ended December 31, 1993.
In June 1993, options to purchase 393,000 shares of common stock were
granted to employees under the Company's stock option plan. The options were
granted at $3.625, which approximates the fair market value at the date of
grant. Generally, options can be exercised during a participant's employment
with the Company in equal annual installments over a three-year period and
expire six years after the date of grant.
In August 1993, options to purchase 315,000 shares of common stock were
granted to the members of the Company's Board of Directors. The options were
granted at $3.20, which approximates the fair market value at the date of grant.
One-third of these options became exercisable at the date of grant and the
remaining options can be exercised in equal annual installments over a two year
period. The options expire six years after the date of grant.
Summary of the stock option plans are as follows:
<TABLE>
<CAPTION>
OPTION
NUMBER PRICE
OF SHARES PER SHARE
--------- -----------
<S> <C> <C>
Outstanding -- July 31, 1992....................... --
Granted............................................ 680,000 $2.71
---------
Outstanding -- December 31, 1992................... 680,000 2.71
Granted............................................ 728,000 $2.71-$3.63
Exercised.......................................... (30,000) $2.71
Cancelled.......................................... (77,000) $2.71-$3.63
---------
Outstanding at December 31, 1993................... 1,301,000
---------
---------
</TABLE>
F-18
<PAGE> 83
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND 1992
(CONTINUED)
NOTE 11 -- TRANSITION PERIOD FINANCIAL INFORMATION (UNAUDITED)
Following the Effective Date, the Company elected to change its fiscal year
end from June 30 to December 31. As described in Note 1, financial statements
for periods prior to the Effective Date have been prepared on a different basis
of accounting and are thus not comparable. Selected financial information for
the six months ended December 31, 1992 and 1991, prepared on a pro-forma basis
as if the Plan became effective on June 30, 1991, are as follows (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
-------------------
1992 1991
------- -------
<S> <C> <C>
Revenues................................................ $50,820 $73,379
Income before income taxes.............................. 2,068 1,038
Net income.............................................. 1,241 623
Net income per common share............................. $ .04 $ .02
</TABLE>
NOTE 12 -- SUPPLEMENTAL CASH FLOW INFORMATION
The following summarizes non-cash investing and financing activities for
the year ended December 31, 1993 and the five months ended December 31, 1992 (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1993 1992
------ ------
<S> <C> <C>
Hotels acquired in exchange for the assumption of
mortgage notes payable................................. $9,161 $ --
Hotels received in settlement of mortgage notes
receivable............................................. 3,500 7,800
Sale of hotel in exchange for a mortgage note
receivable............................................. 6,500 --
</TABLE>
Cash paid for interest was $16,347,000 for the year ended December 31, 1993
and $2,981,000 for the five months ended December 31, 1992.
Cash paid for income taxes was $2,697,000 for the year ended December 31,
1993 and $0 for the five months ended December 31, 1992.
F-19
<PAGE> 84
[PHOTOGRAPHS]
<PAGE> 85
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESMAN OR PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE NOTES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Incorporation of Certain Documents by
Reference........................... 4
Prospectus Summary.................... 5
Risk Factors.......................... 11
The Company........................... 15
Use of Proceeds....................... 16
Capitalization........................ 16
Recent Consolidated Financial Data.... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Selected Consolidated Financial Data
of the Company and its
Predecessor......................... 26
Business.............................. 27
Management............................ 37
Security Ownership of Certain
Beneficial Owners and Management.... 38
Description of the Notes.............. 40
Underwriting.......................... 63
Legal Matters......................... 63
Experts............................... 63
Index to Financial Statements......... F-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
$100,000,000
[LOGO]
PRIME
HOSPITALITY
CORP.
% SENIOR SUBORDINATED NOTES
DUE 2004
------------------
PROSPECTUS
------------------
KIDDER, PEABODY & CO.
INCORPORATED
MONTGOMERY SECURITIES
------------------------------------------------------
------------------------------------------------------
<PAGE> 86
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the Notes being registered which will be paid solely by
the Company. All the amounts shown are estimates, except the Securities and
Exchange Commission registration fee:
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 34,483
NASD Fee.......................................................... 10,500
Trustee Fees and Expenses......................................... 13,500
Printing and Engraving Expenses................................... 100,000
Legal Fees and Expenses........................................... 350,000
Accounting Fees and Expenses...................................... 100,000
Blue Sky Fees and Expenses........................................ 15,000
Miscellaneous Expenses............................................ 176,517
---------
Total................................................... $ 800,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. A
corporation may, in advance of the final disposition of any civil, criminal,
administrative or investigative action, suit or proceeding, pay the expenses
(including attorneys' fees) incurred by any officer, director, employee or agent
in defending such action, provided that the director or officer undertake to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the corporation. A corporation may indemnify such
person against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him or
her against the expenses (including attorneys' fees) which he or she actually
and reasonably incurred in connection therewith. The indemnification provided is
not deemed to be exclusive of any other rights to which an officer or director
may be entitled under any corporation's by-law, agreement, vote or otherwise.
In accordance with Section 145 of the DGCL, Article 8 of the Company's
Restated Certificate of Incorporation (the "Restated Certificate") and the
Company's By-Laws (the "By-Laws") provide that the Company shall indemnify to
the fullest extent permitted under and in accordance with the laws of the State
of Delaware any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative 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
II-1
<PAGE> 87
of the Company as director, officer, trustee, employee or agent of or in any
other capacity with another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such 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, had no
reasonable cause to believe his conduct was unlawful. The indemnification
provided by the Restated Certificate and the By-Laws shall not be deemed
exclusive of any other rights to which any of those seeking indemnification or
advancement of expenses may be entitled under any other contract or agreement
between the Company and any officer, director, employee or agent of the Company.
Expenses incurred in defending a civil or criminal action, suit or proceeding
shall (in the case of any action, suit or proceeding against a director of the
Company) or may (in the case of any action, suit or proceeding against an
officer, trustee, employee or agent) be paid by the Company in advance of the
final disposition of such action, suit or proceeding as authorized by the Board
of Directors of the Company upon receipt of an undertaking by or on behalf of
the indemnified person to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Company. Subparagraph (d) of
Article 8 of the Restated Certificate provides that neither the amendment or
repeal of, nor the adoption of any provision inconsistent with, the
above-referenced provisions of the Restated Certificate shall eliminate or
reduce the effect of such provisions in respect of any matter occurring before
such amendment, repeal or adoption of an inconsistent provision or in respect of
any cause of action, suit or claim relating to any such matter which would have
given rise to a right of indemnification or right to receive expenses pursuant
to such provisions if any such provision had not been so amended or repealed or
if a provision inconsistent therewith had not been so adopted. Subparagraph (e)
of Article 8 of the Restated Certificate provides that a director of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL or
any amendment thereto or successor provision thereto, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
DGCL is amended to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of the
Company shall be eliminated or limited to the fullest extent permitted by the
DGCL as so amended.
II-2
<PAGE> 88
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT REPORT OR REGISTRATION STATEMENT IN
NO. DESCRIPTION WHICH DOCUMENT IS CONTAINED
- ------- ------------------------------------- -------------------------------------
<C> <S> <C>
1.1 Form of Underwriting Agreement Filed herewith
2.1 Disclosure Statement for Debtors' Filed as Exhibit 2(c) to the
Second Amended Joint Plan of Company's
Reorganization dated January 16, Form 8A dated July 9, 1992
1992, which includes the Debtors'
Second Amended Plan of Reorganization
as an exhibit thereto
4.1 Specimen Note Filed herewith
4.2 Form of Indenture, between the Filed herewith
Company and Bank One, Columbus, NA,
as the Trustee
5.1 Opinion of Willkie Farr & Gallagher To be filed by amendment
12.1 Statement re: Computation of Ratios Filed herewith
23.1 Consent of Willkie Farr & Gallagher Contained within Exhibit 5.1
23.2(a) Consent of Arthur Andersen & Co. Filed herewith
23.2(b) Report of Independent Public Filed herewith
Accountants on Schedules
23.3 Consent of J.H. Cohn & Company Filed herewith
24.1 Power of Attorney Included on Signature page hereto
25.1 Statement of Eligibility of Trustee Filed herewith
</TABLE>
(B) FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
II Amounts Receivable from Related Parties, Underwriters, Promoters, and employees other
than Related Parties
V Property, Equipment and Leasehold Improvements
VI Accumulated Depreciation, Depletion and Amortization of Property, Equipment and
Leasehold Improvements
X Supplementary Income Statement Information
</TABLE>
ITEM 17. UNDERTAKINGS
(1) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to its Certificate, By-laws, the Underwriting Agreement or
otherwise, the Registrant had been advised that, in the opinion of the
Securities and Exchange 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 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.
(2) The Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
II-3
<PAGE> 89
(b) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and this Offering of such securities at that time shall be
deemed to be the initial bona fide Offering thereof.
(3) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act ("Act") in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
II-4
<PAGE> 90
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 24th day of March, 1994.
PRIME HOSPITALITY CORP.
By: /s/ DAVID A. SIMON
---------------------------------
David A. Simon
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
The undersigned officers and directors of Prime Hospitality Corp., hereby
severally constitute and appoint David A. Simon and John M. Elwood, and each of
them, attorneys-in-fact for the undersigned, in any and all capacities, with the
power of substitution, to sign any amendments to this Registration Statement
(including post-effective amendments), and to file the same with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact, and each of them full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all interests
and purposes as he might or could do in person, hereby ratifying and confirming
all that each said attorney-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons, in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ----------------------------- ---------------
<C> <S> <C>
/s/ DAVID A. SIMON Chairman of the Board, March 24, 1994
- ------------------------------------------ President, Chief Executive
David A. Simon Officer and Director
(principal executive
officer)
/s/ JOHN M. ELWOOD Chief Financial Officer, March 24, 1994
- ------------------------------------------ Executive Vice President
John M. Elwood and Director
/s/ HERBERT LUST, II Director March 24, 1994
- ------------------------------------------
Herbert Lust, II
/s/ LEON MOORE Director March 24, 1994
- ------------------------------------------
Leon Moore
/s/ ALLEN J. OSTROFF Director March 24, 1994
- ------------------------------------------
Allen J. Ostroff
/s/ A.F. PETROCELLI Director March 24, 1994
- ------------------------------------------
A.F. Petrocelli
</TABLE>
II-5
<PAGE> 91
APPENDIX I
This Registration Statement contains spaces for the following graphic and
image materials: (i) photographs, on the front inside cover of the Prospectus,
(ii) a map, on the inside cover of the Prospectus, (iii) photographs on the back
inside cover of the Prospectus and (iv) the Company's logo on the front and back
covers of the Prospectus. At the time of the filing the graphic and image
materials and the Company's logo were not part of the Registration Statement.
When they are inserted into the Prospectus, an appendix with a narrative
description of the photographs, map and logo will be included therein.
II-6
<PAGE> 92
SCHEDULE II
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES, UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
DECEMBER 31, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN E
COLUMN D ------------------
----------------------
BALANCE AT
COLUMN B DEDUCTIONS END OF PERIOD
---------- ---------------------- ------------------
COLUMN A BALANCE AT COLUMN C (1) (2) (1) (2)
- -------------------------------------- BEGINNING -------- AMOUNTS VALUATION NOT
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED RESERVES CURRENT CURRENT
- -------------------------------------- ---------- -------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
We-Haven Associates(a)................ $818 -- $ 5 $-- $-- $ 813
FIVE MONTHS ENDED DECEMBER 31, 1992:
We-Haven Associates(a)................ 828 -- 10 -- 32 786
Gerald Bohm(b)........................ 134 -- 10 -- 28 96
</TABLE>
- ---------------
(a) 11%; secured by real property; payable in monthly installments of $16,994
including interest. During 1993, the Company began foreclosure proceedings
on this receivable.
(b) 10%; secured by real property; due September 1, 1996.
<PAGE> 93
SCHEDULE V
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
DECEMBER 31, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN B COLUMN E COLUMN F
---------- COLUMN C ------------ ----------
COLUMN A BALANCE AT -------- COLUMN D OTHER BALANCE AT
- ---------------------------------------- BEGINNING ADDITIONS ----------- CHANGES ADD CLOSE OF
CLASSIFICATION OF PERIOD AT COST RETIREMENTS (DEDUCT) PERIOD
- ---------------------------------------- ---------- -------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Land.................................... $ 26,074 $ 4,115 $ 1,422 $ 640(a) $ 29,407
Hotels.................................. 97,179 10,693 818 2,617(a) 109,671
Furniture, fixtures, autos.............. 18,333 4,585 1,183 144(a) 21,879
Leasehold improvements.................. 15,771 1,101 21 (6,629)(c) 10,222
Construction in progress................ -- 2,555 -- -- 2,555
---------- -------- ----------- ------------ ----------
157,357 23,049 3,444 (3,228) 173,734
Property held for sale.................. 8,000 355 -- -- 8,355
---------- -------- ----------- ------------ ----------
Totals........................ $ 165,357 $23,404 $ 3,444 $ (3,228) $ 182,089
---------- -------- ----------- ------------ ----------
---------- -------- ----------- ------------ ----------
FIVE MONTHS ENDED DECEMBER 31, 1992:
Land.................................... $ 24,855 $ 133 -- $ 1,086(a) $ 26,074
Hotels.................................. 95,942 5 -- 5,732(a) 97,179
(4,500)(b)
Furniture, fixtures, autos.............. 16,192 1,272 231 1,100(a) 18,333
Leasehold improvements.................. 15,428 393 50 -- 15,771
---------- -------- ----------- ------------ ----------
152,417 1,803 281 3,418 157,357
Property held for sale.................. 8,000 -- -- -- 8,000
---------- -------- ----------- ------------ ----------
Totals........................ $ 160,417 $ 1,803 $ 281 $ 3,418 $ 165,357
---------- -------- ----------- ------------ ----------
---------- -------- ----------- ------------ ----------
</TABLE>
- ---------------
(a) Transfer from notes receivable to land, hotels and furniture, fixtures and
autos.
(b) Represents a hotel conveyed to a third party in return for the assumption of
the related debt by the third party.
(c) Represents a transfer in exchange for a note receivable.
See Notes to Consolidated Financial Statements as to depreciation method and
useful lives.
<PAGE> 94
SCHEDULE VI
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
DECEMBER 31, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN B COLUMN E COLUMN F
---------- COLUMN C ------------ ----------
COLUMN A BALANCE AT ---------- COLUMN D OTHER BALANCE AT
- --------------------------------------- BEGINNING ADDITIONS ----------- CHANGES ADD CLOSE OF
CLASSIFICATION OF PERIOD AT COST RETIREMENTS (DEDUCT) PERIOD
- --------------------------------------- ---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Hotels................................. $1,065 $2,936 $ 28 $ 30 $4,003
Furniture, fixtures, autos............. 1,028 3,430 327 262 4,393
Leasehold improvements................. 467 649 -- 209 907
Construction in progress............... -- -- -- -- --
---------- ---------- ----------- ------------ ----------
Totals............................ $2,560 $7,015 $ 355 $ 83 $9,303
---------- ---------- ----------- ------------ ----------
---------- ---------- ----------- ------------ ----------
FIVE MONTHS ENDED DECEMBER 31, 1992:
Hotels................................. $ -- $1,065 $ -- $ -- $1,065
Furniture, fixtures, autos............. -- 1,252 224 -- 1,028
Leasehold improvements................. -- 467 -- -- 467
---------- ---------- ----------- ------------ ----------
Totals............................ $ -- $2,784 $ 224 $ -- $2,560
---------- ---------- ----------- ------------ ----------
---------- ---------- ----------- ------------ ----------
</TABLE>
<PAGE> 95
SCHEDULE X
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
DECEMBER 31, 1993 AND 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIVE MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
1993 1992
------------ ------------
<S> <C> <C>
Maintenance and repairs.................................... $4,163 $1,460
Real estate taxes.......................................... 4,170 1,847
Royalties.................................................. 1,239 429
Advertising and sales promotion costs...................... 5,010 1,947
</TABLE>
<PAGE> 96
EXHIBIT INDEX
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------------------------------------------------------------------- --------
<C> <S> <C>
1.1 Form of Underwriting Agreement*
2.1 Disclosure Statement for Debtors' Second Amended Joint Plan of
Reorganization dated January 16, 1992, which includes the Debtors'
Second Amended Plan of Reorganization as an exhibit thereto**
4.1 Specimen Note*
4.2 Form of Indenture, between the Company and Bank One, Columbus, NA, as
the Trustee*
5.1 Opinion of Willkie Farr & Gallagher***
12.1 Statement re: Computation of Ratios*
23.1 Consent of Willkie Farr & Gallagher****
23.2(a) Consent of Arthur Andersen & Co.*
(b) Report of Independent Public Accountants on Schedules*
23.3 Consent of J.H. Cohn & Company*
24.1 Power of Attorney*****
25.1 Statement of Eligibility of Trustee*
</TABLE>
(B) FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C>
II Amounts Receivable from Related Parties, Underwriters, Promoters, and employees other
than Related Parties
V Property, Equipment and Leasehold Improvements
VI Accumulated Depreciation, Depletion and Amortization of Property, Equipment and
Leasehold Improvements
X Supplementary Income Statement Information
</TABLE>
- ---------------
* Filed herewith.
** Filed as Exhibit 2(c) to the Company's Form 8A, dated July 9, 1992.
*** To be filed by amendment.
**** Contained in Exhibit 5.1.
***** Included on Signature page hereto.
<PAGE> 1
EXHIBIT 1.1
L&W DRAFT
03/11/94
================================================================================
PRIME HOSPITALITY CORP.
$100,000,000
___% Senior Subordinated Notes due 2004
Underwriting Agreement
_________ __, 1994
KIDDER, PEABODY & CO. INCORPORATED
MONTGOMERY SECURITIES
================================================================================
<PAGE> 2
Draft of 3/11/94
PRIME HOSPITALITY CORP.
$100,000,000
___% Senior Subordinated Notes due 2004
UNDERWRITING AGREEMENT
_________ __, 1994
KIDDER, PEABODY & CO. INCORPORATED
MONTGOMERY SECURITIES
c/o Kidder, Peabody & Co. Incorporated
10 Hanover Square
New York, New York 10005
Ladies and Gentlemen:
Prime Hospitality Corp., a Delaware corporation (the "Company"),
confirms its agreement with Kidder, Peabody & Co. Incorporated and Montgomery
Securities (collectively, the "Underwriters") as follows:
1. Description of Securities. The Company proposes to issue and
sell to the Underwriters, $100,000,000 in aggregate principal amount of ___%
Senior Subordinated Notes due 2004 (the "Notes") of the Company to be issued
under an indenture (the "Indenture") dated as of ________, between the Company
and _________________________________, as trustee (the "Trustee").
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, each Underwriter that:
(a) A registration statement on Form S-3 (Registration No.
33-___________) with respect to the Notes, including a preliminary
form of prospectus, has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder and has been filed with the Commission; one
or more amendments to such registration statement may have been so
prepared and may have been, or may be, so filed, including either (i)
prior to effectiveness of such registration statement, a further
amendment to such registration statement (including the form of final
prospectus) or (ii) after effectiveness of such registration
statement, a final prospectus in accordance with Rule 430A and
424(b)(1) or (4). Copies of such registration statement and
amendments, each related preliminary prospectus (the "Preliminary
Prospectus") (including one fully executed copy of the registration
statement and each amendment thereto for each of you and for counsel
to the Underwriters) and the final form of prospectus have been
delivered to you. Such registration statement as amended at the time
it becomes effective
<PAGE> 3
or, if a post-effective amendment is filed with respect thereto, as
amended by such post-effective amendment at the time of its
effectiveness, including in each case information incorporated by
reference therein and financial statements and exhibits, and the
information (if any) contained in a prospectus subsequently filed with
the Commission pursuant to Rule 424(b) under the Act and deemed to be
a part of the registration at the time of its effectiveness pursuant
to Rule 430A under the Act, is hereinafter referred to as the
"Registration Statement;" and such prospectus as then amended
including such information incorporated by reference therein, or first
used to confirm sales, whether or not filed with the Commission
pursuant to Rule 424(b) under the Act, is herein after referred to as
the "Prospectus."
(b) Each part of the Registration Statement, when such part
became or becomes effective, each Preliminary Prospectus, on the date
of filing thereof with the Commission, and the Prospectus and any
amendment or supplement thereto, on the date of filing thereof with
the Commission, or as first used to confirm sales, and at the Closing
Date (as hereinafter defined), conformed or will conform in all
material respects with the requirements of the Act, the Trust
Indenture Act and the Rules and Regulations; each part of the
Registration Statement, when such part became or becomes effective,
did not or will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; each
Preliminary Prospectus, on the date of filing thereof with the
Commission, and the Prospectus and any amendment or supplement
thereto, on the date of filing thereof with the Commission, or when
first used to confirm sales, and at the Closing Date, did not or will
not include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
except that the foregoing shall not apply to statements in or
omissions from any such document in reliance upon, and in conformity
with, written information relating to you furnished to the Company by
you, specifically for use in the preparation thereof.
(c) The Company is not in violation of its charter or by-laws or
in default in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence
of indebtedness or in any other agreement, indenture, mortgage, deed
of trust or other contract, lease or other instrument to which the
Company is a party or by which it or its property is bound, or to
which any of the property or assets of the Company is subject except
for any such violation or default that could not have a material
adverse effect on the condition (financial or other), business,
property, prospects or results of operations of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect").
(d) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, or to the knowledge of
the Company, has been threatened to be issued.
(e) The financial statements, together with the related notes
and schedules, of the Company and its subsidiaries set forth in the
Registration Statement and Prospectus fairly present the financial
condition of the Company and its subsidiaries as of the dates
indicated and the results of operations and changes in financial
position for the periods therein specified in conformity with
generally accepted accounting principles ("GAAP") consistently applied
throughout the periods involved (except as otherwise stated therein).
2
<PAGE> 4
(f) The Company and each of the Company's subsidiaries has been
duly incorporated and is an existing corporation in good standing
under the laws of its respective jurisdiction of incorporation, has
full power and authority (corporate and other) to conduct its business
as described in the Registration Statement and Prospectus and is duly
qualified to do business in each jurisdiction in which it owns or
leases real property or in which the conduct of its business requires
such qualification except where the failure to be so qualified,
considering all such cases in the aggregate, would not have a Material
Adverse Effect; and all of the outstanding shares of capital stock of
each such subsidiary have been duly authorized and validly issued, are
fully paid and nonassessable and (except as otherwise stated in the
Registration Statement) are owned beneficially by the Company subject
to no security interest, other encumbrance or adverse claim.
(g) Each of the Indenture and the Notes have been duly
authorized by the Company, the Indenture has been duly qualified under
the Trust Indenture Act and when duly executed and delivered will
constitute, and the Notes, when duly executed, authenticated, issued
and delivered as contemplated hereby and by the Indenture, will
constitute, valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors' rights
and to general equity principles.
(h) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, none of the Company or any of its
subsidiaries has incurred any liabilities or obligations, direct or
contingent, or entered into any transactions, not in the ordinary
course of business, that are material to the Company and its
subsidiaries, and there has not been any material adverse change, on a
consolidated basis, in the capital stock, short-term debt or long-term
debt of the Company and its subsidiaries, or any material adverse
change, or any development involving a prospective material adverse
change, in the condition (financial or other), business, prospects,
net worth or results of operations of the Company and its
subsidiaries.
(i) Except as set forth in the Prospectus, there is not pending
or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company or any of its subsidiaries is a party
before or by any court or governmental agency or body, that might
result in any material adverse change in the condition (financial or
other), business, prospects, net worth or results of operations of the
Company or any of its subsidiaries, or that might materially and
adversely affect the properties or assets thereof.
(j) The descriptions in the Registration Statement and the
Prospectus of statutes, legal and governmental proceedings and
contracts and other documents are accurate and fairly present the
information required to be shown and there are no legal or
governmental proceedings required to be described in the Registration
Statement, or the Prospectus that are not described as required.
There are no contracts or documents of the Company or any of its
subsidiaries that are required to be filed as exhibits to the
Registration Statement by the Act, the Trust Indenture Act or by the
Rules and Regulations that have not been so filed.
(k) This Agreement has been duly authorized, executed and
delivered by the Company. The performance of this Agreement and the
consummation of the transactions herein contemplated will not result
in a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any agreement or instrument
to
3
<PAGE> 5
which the Company or any of its subsidiaries is a party or by which it
is bound or to which any of the property of the Company or any of its
subsidiaries is subject, the charter or by-laws of the Company or any
of its subsidiaries, or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their respective properties; no
consent, approval, authorization or order of, or filing with, any
court or governmental agency or body is required for the consummation
of the transactions contemplated by this Agreement in connection with
the issuance or sale of the Notes by the Company, except such as may
be required under the Act, the Trust Indenture Act or state securities
laws; and the Company has full power and authority to authorize, issue
and sell the Notes as contemplated by this Agreement.
(l) The Company is not an "investment company" under the
Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(m) There is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic
or foreign, now pending, threatened, or to the knowledge of the
Company, contemplated to which the Company or any of its subsidiaries
is or may be a party or to which the business or property of the
Company or any of its subsidiaries is or may be subject, (ii) no
statute, rule, regulation or order that has been enacted, adopted or
issued by any governmental agency or that has been proposed by any
governmental body (other than Blue Sky laws, regulations or orders),
or (iii) no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction to which the Company
or any of its subsidiaries is or may be subject issued that, in the
case of clauses (i), (ii) and (iii) above, (1) is required to be
disclosed in the Registration Statement or the Prospectus and that is
not so disclosed, (2) might suspend the effectiveness of the
Registration Statement, (3) might prevent or suspend the use of any
preliminary prospectus in any jurisdiction, (4) except as disclosed in
the Registration Statement or the Prospectus, might have a Material
Adverse Effect, (5) would interfere with or adversely affect the
issuance of the Notes, or (6) might in any manner invalidate or
question the validity of any provisions of this Agreement, the
Indenture or the Notes.
(n) None of the Company or any of its subsidiaries is in
violation of any safety or similar law applicable to its business, nor
any federal, state or foreign law relating to discrimination in the
hiring, promotion or pay of employees, nor any applicable federal,
state or foreign wages and hours laws, nor any provisions of the
Employee Retirement Income Security Act, as amended, or the rules and
regulations promulgated thereunder ("ERISA"), which in each case would
have a Material Adverse Effect. In the ordinary course of business,
employees of the Company conduct periodic reviews of the effect of
Environmental Laws (as defined below) on the business operations and
properties of the Company and its subsidiaries, in the ordinary course
of which they seek to identify and evaluate associated costs and
liabilities. Except as disclosed in the registration Statement, the
Company and its subsidiaries are in compliance with all applicable
existing federal, state, local and foreign laws and regulations
relating to the protection of human health or the environment or
imposing liability or requiring standards of conduct concerning any
Hazardous Materials ("Environmental Laws"), except for such instances
of noncompliance which, either singly or in the aggregate, would not
have a Material Adverse Effect. The term "Hazardous Material" means
(a) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, (b) any "hazardous waste" as defined by the Resource
Conservation and Recovery
4
<PAGE> 6
Act, as amended, (c) any petroleum or petroleum product, (d) any
polychlorinated biphenyl and (e) any pollutant or contaminant or
hazardous, dangerous or toxic chemical, material, waste or substance
regulated under or within the meaning of any other Environmental Law.
(o) There is no alleged liability, or to the best knowledge and
information of the Company potential liability (including, without
limitation, alleged or potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries, or penalties) of the Company or
any of its subsidiaries arising out of, based on or resulting from (i)
the presence or release into the environment of any Hazardous Material
at any location at which the Company or any of its subsidiaries has
previously conducted or is currently conducting any business (whether
or not owned by the Company or any of its subsidiaries) or has
previously owned or currently owns any property or (ii) any violation
or alleged violation of any Environmental Law, in either case (x)
which alleged or potential liability is required to be disclosed in
the Registration Statement, other than as disclosed therein, or (y)
which alleged or potential liability, singly or in the aggregate,
would have a Material Adverse Effect.
(p) Neither the Company nor any of its Subsidiaries is involved
in any material labor dispute nor, to the best of the knowledge of the
Company and its Subsidiaries, is any material labor dispute threatened
which, if such dispute were to occur, would have a Material Adverse
Effect.
(q) All tax returns required to be filed by the Company and each
of its subsidiaries in any jurisdiction have been filed, and all
material taxes (including, but not limited to, withholding taxes,
penalties and interest, assessments, fees and other charges due or
claimed to be due from any taxing authority) have been paid other than
those (i) being contested in good faith and for which adequate
reserves have been provided or (ii) currently payable without penalty
or interest.
(r) Neither the issuance, sale and delivery of the Notes, nor
the application of the proceeds thereof by the Company and its
subsidiaries as set forth in the Prospectus, will violate Regulations
G, T, U or X promulgated by the Board of Governors of the Federal
Reserve System.
(s) Except as otherwise disclosed in the Prospectus or such as
are not material to the condition (financial or other), business,
prospects, net worth or results of operations of the Company and its
subsidiaries, taken as a whole, the Company and each of its
subsidiaries has good and marketable title, free and clear of all
liens, claims, encumbrances and restrictions, except liens for taxes
not yet due and payable, to all property and assets described in the
Prospectus as being owned by it.
(t) The Company and each of its subsidiaries maintain adequate
insurance covering their properties, operations, personnel and
businesses. Such insurance insures against such losses and risks as
are adequate in accordance with customary industry practice to protect
the Company and each of its subsidiaries and their respective
businesses.
(u) Any material real property leases to which the Company or
any of its subsidiaries is a party are valid and binding and no
default has occurred and is continuing thereunder which would result
in any Material Adverse Effect, and the Company and its subsidiaries
5
<PAGE> 7
enjoy peaceful and undisturbed possession under all such material real
property leases to which any of them is party as lessee with such
exceptions as do not materially interfere with the use made of such
property by the Company or such subsidiary.
(v) Other than as contemplated by this Agreement, there is no
broker, finder or other party that is entitled to receive from the
Company any brokerage or finder's fee or other fee or commission as a
result of any of the transactions contemplated by this Agreement.
(w) No consent, approval, authorization or order of, or filing
or qualification with, any governmental agency or body or any court is
required to be obtained or made by the Company for the consummation of
the transactions contemplated by this Agreement or in connection with
the sale of the Notes by the Company pursuant to this Agreement,
except such as have been obtained and made under the Act and such as
may be required under state securities law.
(x) The Company has complied with all provisions of Section
517.075 Florida Statutes, relating to doing business with the
Government of Cuba or with any person or any affiliate located in
Cuba.
(y) The Company and each of its subsidiaries maintains a system
of internal accounting controls sufficient to provide assurance that:
(1) transactions are executed in accordance with management's general
or specific authorizations; (2) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP
and to maintain accountability for assets; (3) access to assets is
permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(z) Prior to and immediately after the issuance of the Notes,
(1) the present fair salable value of the assets of the Company
exceeded and will exceed the amount that will be required to be paid
on, or in respect of, the Company's debts and other liabilities
(including contingent liabilities) as they become absolute and
matured, (2) the Company does not have and will not have unreasonably
small capital to carry out its business as conducted or as proposed to
be conducted and (3) the Company does not intend to, and does not
believe that it will, incur debts or other liabilities beyond its
ability to pay such debts and liabilities as they mature. The Company
does not intend to permit any of its subsidiaries to incur debts or
other liabilities beyond their respective ability to pay such debts
and liabilities as they mature.
(aa) Arthur Andersen & Co. are the independent public accountants
with respect to the Company as required by the Act.
(ab) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act
with respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities in
the securities registered pursuant to the Registration Statement, or
in any securities being registered pursuant to any other registration
statement filed by the Company under the Act.
6
<PAGE> 8
(ac) The order confirming the Company's (or its predecessor's)
plan of reorganization under Chapter 11 of the Bankruptcy Code (the
"Code") is a valid and binding Final Order (as defined in the Code)
and has not been overturned by a court of competent jurisdiction.
There are no appeals of such Final Order pending in the District of
Florida or in the Court of Appeals for the Eleventh Circuit and there
are no motions for reconsideration of such confirmation order.
(ad) Each certificate signed by any officer of the Company and
delivered to the Underwriter or counsel for the Underwriter shall be
deemed to be a representation and warranty by the Company to the
Underwriter as to the matters covered thereby.
3. Purchase, Sale and Delivery of Notes. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to issue and sell to
each Underwriter, and each Underwriter severally, but not jointly, agrees to
purchase from the Company, at a purchase price of _____% of the principal
amount of the Notes, plus accrued interest, if any, from ________, to the
Closing Date, the amount of Notes set forth opposite the name of such
Underwriter in Schedule A hereto.
The Notes will be delivered by the Company to you for your accounts against
payment of the purchase price therefor by certified or official bank check or
checks in New York Clearing House (next day) funds payable to the order of the
Company at the office of Latham & Watkins, 885 Third Avenue, Suite 1000, New
York, New York at 10:00 a.m. on ___________, 1994 (or if the New York or
American Stock Exchanges or commercial banks in The City of New York are not
open on such day, the next day on which such exchanges and banks are open), or
at such other time not later than eight full business days thereafter as you
and the Company determine, such time being herein referred to as the "Closing
Date." The Notes will be prepared, in definitive form and in such
denominations and registered in such names as you may request upon at least two
business days' prior notice to the Company and will be made available for
checking and packaging at the office of Kidder, Peabody & Co. Incorporated at
10 Hanover Square, New York, New York, at least one business day prior to the
Closing Date.
4. Covenants. The Company covenants and agrees with you that:
(a) The Company will cause the Prospectus to be filed with the
Commission as required by Section 2(a) hereof (but only if you have not
reasonably objected thereto by notice to the Company after having been
furnished a copy a reasonable time prior to filing) and will notify you
promptly of such filing; the Company will notify you promptly of the time
when any subsequent amendment to the Registration Statement has become
effective or any supplement to the Prospectus has been filed and of any
request by the Commission for any amendment or supplement to the
Registration Statement or Prospectus or for additional information; the
Company will prepare and file with the Commission, promptly upon your
request, any amendments or supplements to the Registration Statement or
Prospectus that, in your opinion, may be necessary or advisable in
connection with the distribution of the Notes by the Underwriters; and the
Company will file no amendment or supplement to the Registration Statement
or Prospectus to which you shall reasonably object by notice to the Company
after having been furnished a copy a reasonable time prior to the filing.
(b) The Company will advise you, promptly after it shall have
received notice or obtained knowledge thereof, of the issuance by the
Commission of any stop order suspending the
7
<PAGE> 9
effectiveness of the Registration Statement, of the suspension of the
qualification of the Notes for offering or sale in any jurisdiction, or of
the initiation or threatening of any proceeding for any such purpose; and
the Company will promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such a stop order should be
issued.
(c) Within the time during which a prospectus relating to the Notes
is required to be delivered under the Act, the Company will comply as far
as it is able with all requirements imposed upon it by the Act, as now and
hereafter amended, and by the Rules and Regulations, as from time to time
in force, so far as necessary to permit the continuance of sales of or
dealings in the Notes as contemplated by the provisions hereof and the
Prospectus. If during such period any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend
the Registration Statement or supplement the Prospectus to comply with the
Act, the Company will promptly notify you and will amend the Registration
Statement or supplement the Prospectus (at the expense of the Company) so
as to correct such statement or omission or effect such compliance.
(d) The Company will use its best efforts to qualify the Notes for
sale under the securities laws of such jurisdictions as you reasonably
designate and to continue such qualifications in effect so long as required
for the distribution of the Notes but in no event for more than 180 days,
except that the Company shall not be required in connection therewith to
qualify as a foreign corporation or to execute a general consent to service
of process in any jurisdiction or to subject itself to general taxation in
respect of doing business in any jurisdiction in which it is not otherwise
so subject. The Company will also arrange for the determination of the
eligibility for investment of the Notes under the laws of such
jurisdictions as you reasonably request.
(e) The Company will furnish to the Underwriters copies of the
Registration Statement (two of which will be signed and will include all
exhibits), each Preliminary Prospectus, the Prospectus, and all amendments
and supplements to such documents, in each case as soon as available and in
such quantities as you may from time to time reasonably request.
(f) The Company will make generally available to its security holders
as soon as practicable, but in any event not later than 15 months after the
end of the Company's current fiscal quarter, an earnings statement (which
need not be audited) covering a 12-month period beginning after the
effective date of the Registration Statement that shall satisfy the
provisions of Section 11(a) of the Act.
(g) The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming
effective under the provisions of Section 9(a) hereof or is terminated,
will pay all expenses incident to the performance of its obligations
hereunder, will pay the expenses of printing all documents relating to the
offering, and will reimburse you for any expenses (including fees and
disbursements of counsel) incurred by you in connection with the matters
referred to in Section 4(d) hereof and the preparation of memoranda
relating thereto and for any filing fee of the National Association of
Securities Dealers, Inc. relating to the Notes. If the sale of the Notes
provided for herein is not consummated by reason of action by the Company
pursuant to Section 9(b)(i) hereof that prevents this Agreement from
becoming effective, or by reason of any failure, refusal or inability on
the part of the Company to perform any agreement on its part to be
performed, or because
8
<PAGE> 10
any other condition of your obligations hereunder required to be fulfilled
by the Company is not fulfilled, the Company will reimburse you for all
reasonable out-of-pocket disbursements (including fees and disbursements of
counsel) incurred by you in connection with your investigation, preparing
to market and marketing the Notes or in contemplation of performing your
obligations hereunder. The Company shall not in any event be liable to any
of you for loss of anticipated profits from the transactions covered by
this Agreement.
(h) The Company will apply the net proceeds from the sale of the
Notes to be sold by it hereunder for the purposes set forth in the
Prospectus.
5. Conditions of Your Obligations. The obligations of the Underwriters
to purchase and pay for the Notes, as provided herein, shall be subject to the
accuracy, as of the date hereof and the Closing Date (as if made at and as of
the Closing Date), of the representations and warranties of the Company herein,
to the performance by the Company of each of its respective obligations
hereunder and to the following additional conditions:
(a) The Prospectus shall have been filed with the Commission as
required by Section 2(a) hereof; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been instituted or, to the knowledge
of the Company or any Underwriter, threatened by the Commission, and any
request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been
complied with to your satisfaction.
(b) No Underwriter shall have advised the Company that the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, contains an untrue statement of fact that in your opinion is
material, or omits to state a fact that in your opinion is material and is
required to be stated therein or is necessary to make the statements
therein not misleading.
(c) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there shall not have been any change, on a
consolidated basis, in the capital stock, short-term debt or long-term debt
of the Company and its subsidiaries, or any adverse change, or any
development involving a prospective adverse change, in the condition
(financial or other), business, prospects, net worth or results of
operations of the Company, that, in your judgment, makes it impractical or
inadvisable to offer or deliver the Notes on the terms and in the manner
contemplated in the Prospectus.
(d) You shall have received the opinion of Willkie Farr & Gallagher,
counsel for the Company, dated the Closing Date, to the effect that:
(i) The Company and each of the Company's subsidiaries has been
duly incorporated and is an existing corporation in good standing
under the laws of its respective jurisdiction of incorporation, has
full power and authority (corporate and other) to conduct its business
as described in the Registration Statement and Prospectus and is duly
qualified to do business in each jurisdiction in which it owns or
leases real property or in which the conduct of its business requires
such qualification except where the failure to be so qualified,
considering all such cases in the aggregate, does not involve a
material adverse risk to the business, properties, financial position
or results of operations of the Company and the Company's
subsidiaries.
9
<PAGE> 11
(ii) Each of the Indenture and the Notes have been duly authorized
by the Company, the Indenture has been duly qualified under the Trust
Indenture Act and when duly executed and delivered will constitute,
and the Notes, when duly executed, authenticated, issued and delivered
as contemplated hereby and by the Indenture, will constitute, valid
and legally binding obligations of the Company, enforceable in
accordance with their terms and, in the case of the Notes, entitled to
the benefits of the Indenture, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles.
(iii) The Registration Statement has become effective under the Act;
the Prospectus has been filed with the Commission as required by
Section 2(a) hereof and to the best knowledge of such counsel no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for that purpose has been instituted or,
to the knowledge of such counsel, threatened by the Commission.
(iv) Each part of the Registration Statement, when such part became
effective, and the Prospectus, and any amendment or supplement
thereto, as of the respective date thereof, complied as to form in all
material respects with the requirements of the Act, the Trust
Indenture Act and the Rules and Regulations; and such counsel has no
reason to believe that either the Registration Statement or the
Prospectus or any amendment or supplement thereto contained or
contains an untrue statement of a material fact or omitted or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading; it being understood that
such counsel need express no opinion as to the financial statements or
other financial data included or incorporated by reference in any of
the documents mentioned in this clause.
(v) The descriptions in the Registration Statement and Prospectus
of statutes, legal and governmental proceedings, contracts and other
documents are accurate and fairly present the information required to
be shown; and such counsel does not know of any statutes or legal or
governmental proceedings required to be described in the Prospectus
that are not described as required, or of any contracts or documents
of a character required to be described in the Registration Statement
or Prospectus or to be filed as exhibits to the Registration Statement
that are not described and filed as required.
(vi) The Company is not an "investment company" under the Investment
Company Act of 1940, as amended, and the rules and regulations
thereunder.
(vii) There is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic
or foreign, now pending or threatened, to which the Company or any its
subsidiaries is or may be a party or to which the business or property
of the Company or any of its subsidiaries is or may be subject, or
(ii) no injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction to which the Company
or any of its subsidiaries is or may be subject issued that, in the
case of clauses (i) and (ii) above, (a) is required to be disclosed in
the Registration Statement or the Prospectus and that is not so
disclosed, (b) might suspend the effectiveness of the Registration
Statement, (c) might prevent or suspend the use of any preliminary
prospectus in any jurisdiction, (d) except as disclosed in the
Registration Statement or the Prospectus, would have a Material
Adverse Effect, (e) would interfere with or adversely
10
<PAGE> 12
affect the issuance of the Notes, or (f) would in any manner
invalidate any provisions of this Agreement, the Indenture or the
Notes.
(viii) The statements contained in the Prospectus under the caption
"Description of the Notes" insofar as they purport to describe the
terms of the Notes, constitute accurate summaries thereof in all
material respects;
(ix) Neither the issuance, sale and delivery of the Notes, nor the
application of the proceeds thereof by the Company and its
subsidiaries as set forth in the Prospectus, will violate Regulations
G, T, U or X promulgated by the Board of Governors of the Federal
Reserve System.
(x) No consent, approval, authorization or order of, or filing or
qualification with, any governmental agency or body or any court is
required to be obtained or made by the Company for the consummation of
the transactions contemplated by this Agreement or in connection with
the sale of the Notes by the Company pursuant to this Agreement,
except such as have been obtained and made under the Act and such as
may be required under state securities law.
(xi) This Agreement has been duly authorized, executed and delivered
by the Company. The performance of this Agreement and the
consummation of the transactions herein contemplated will not result
in a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute or any agreement or instrument
filed as an exhibit to the Registration Statement, the charter or
by-laws of the Company, or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or
any of its properties; no consent, approval, authorization or order
of, or filing with, any court or governmental agency or body is
required for the consummation of the transactions contemplated by this
Agreement in connection with the issuance or sale of the Notes by the
Company, except such as may be required under the Act, the Trust
Indenture Act or state securities laws; and the Company has full power
and authority to authorize, issue and sell the Notes as contemplated
by this Agreement.
(e) You shall have received the opinion of Joseph Bernadino, general
counsel to Prime Hospitality Corp., dated the Closing Date, to the effect
that:
(i) This Agreement has been duly authorized, executed and delivered
by the Company. The performance of this Agreement and the
consummation of the transactions herein contemplated will not result
in a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, or any agreement or
instrument filed as an exhibit to the Registration Statement, the
charter or by-laws of the Company, or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the
Company or any of its properties; no consent, approval, authorization
or order of, or filing with, any court or governmental agency or body
is required for the consummation of the transactions contemplated by
this Agreement in connection with the issuance or sale of the Notes by
the Company, except such as may be required under the Act, the Trust
Indenture Act or state securities laws; and the Company has full power
and authority to authorize, issue and sell the Notes as contemplated
by this Agreement.
11
<PAGE> 13
(ii) None of the Company or any of its subsidiaries is in violation
of any safety or similar law applicable to its business, nor any
federal, state or foreign law relating to discrimination in the
hiring, promotion or pay of employees, nor any applicable federal,
state or foreign wages and hours laws, nor any provisions of ERISA,
which in each case would have a Material Adverse Effect.
(iii) To his knowledge, except as set forth in the Registration
Statement, the Company and its subsidiaries are in compliance with all
applicable existing federal, state, local and foreign laws and
regulations relating to Environmental Laws, except for such instances
of noncompliance which, either singly or in the aggregate, would not
have a Material Adverse Effect. There is no alleged liability, or, to
the best of his knowledge, potential liability (including, without
limitation, alleged or potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries, or penalties) of the Company or
any of its subsidiaries arising out of, based on or resulting from (i)
the presence or release into the environment of any Hazardous Material
at any location at which the Company or any of its subsidiaries has
previously conducted or is currently conducting any business (whether
or not owned by the Company or any of its subsidiaries) or has
previously owned or currently owns any property or (ii) any violation
or alleged violation of any Environmental Law, in either case (x)
which alleged or potential liability is required to be disclosed in
the Registration Statement, other than as disclosed therein, or (y)
which alleged or potential liability, singly or in the aggregate,
would have a Material Adverse Effect.
(iv) Neither the Company nor any of its Subsidiaries is involved in
any material labor dispute nor, to the best of the knowledge of the
Company and its Subsidiaries, is any material labor dispute threatened
which, if such dispute were to occur, would have a Material Adverse
Effect.
(v) Except as would not have a Material Adverse Effect, neither the
Company nor any of its subsidiaries is in violation of its charter or
by-laws and, to the best of his knowledge, neither the Company nor any
of its subsidiaries is in default in the performance of any
obligation, agreement or condition contained in any of the agreements
filed as an exhibit to the Registration Statement.
(vi) All of the outstanding shares of capital stock of each such
subsidiary have been duly authorized and validly issued, are fully
paid and nonassessable and (except as otherwise stated in the
Registration Statement), to the best of his knowledge, are owned
beneficially by the Company subject to no security interest, other
encumbrance or adverse claim.
(f) You shall have received from Latham & Watkins, counsel for the
Underwriters, such opinion, dated the Closing Date, with respect to the
validity of the Notes, the Registration Statement, the Prospectus and other
related matters as you reasonably may request, and such counsel shall have
received such papers and information as they request to enable them to pass
upon such matters.
(g) At the time of execution of this Agreement and on the Closing
Date, you shall have received a letter from Arthur Andersen & Co., dated
the date of delivery thereof, to the effect set forth in Exhibit I hereto.
12
<PAGE> 14
(h) At the time of execution of this Agreement and on the Closing
Date, you shall have received a letter from J.H. Cohn & Company, dated the
date of delivery thereof, to the effect set forth in Exhibit II hereto.
(i) You shall have received from the Company a certificate, signed by
the respective Chairman of the Board, President or Vice President and by
the respective principal financial or accounting officer, dated the Closing
Date, to the effect that, to the best of their knowledge based upon
reasonable investigation:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made at and as of the Closing
Date, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied
at or prior to the Closing Date;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceeding for that
purpose has been instituted or is threatened by the Commission; and
(iii) Since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an amendment
or supplement to the Registration Statement or Prospectus that has not
been so set forth.
(j) The Company shall have furnished to you such further certificates
and documents in connection with the offering as you shall have reasonably
requested.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to you. The Company will furnish you with such conformed copies of
such opinions, certificates, letters and other documents as you shall
reasonably request.
6. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which you may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
each of you for any legal or other expenses reasonably incurred by any of you
in connection with investigating or defending against such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that (i)
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
such amendment or supplement, in reliance upon and in conformity with written
information relating to any of you furnished to the Company by you specifically
for use in the preparation thereof and (ii) the foregoing indemnity shall not
inure to the benefit of any Underwriter from whom the person asserting any such
losses, claims, damages or liabilities purchased Notes, or any controlling
person of such Underwriter, if a copy of the Prospectus (including any
amendment or supplement thereto delivered to such Underwriter prior to the date
such Prospectus was sent or given to such
13
<PAGE> 15
purchaser) was not sent or given by or on behalf of such Underwriter to such
person at or prior to the written confirmation of the sale of Notes to such
person, and if the Prospectus (including any amendment or supplement thereto
delivered to such Underwriter prior to the date such Prospectus was sent or
given to such purchaser) cured the defect giving rise to such losses, claims,
damages or liabilities.
(b) Each Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers who sign the Registration Statement and
each person who controls the Company within the meaning of the Act against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any such
amendment or supplement, in reliance upon and in conformity with written
information relating to you furnished to the Company by you specifically for
use in the preparation thereof; and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending against any such loss, claim, damage, liability or
action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
shall not relieve it from any liability that it may have to any indemnified
party otherwise than under such subsection. In case any such action shall be
brought against any indemnified party, and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish, jointly with any other
indemnifying party, similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation.
(d) If the indemnification provided for in this Section 6 is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above, (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the Underwriters on the other from the offering of the Notes
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
either of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering
14
<PAGE> 16
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. Each of the Company and you agree that it would not be
just and equitable if contributions pursuant to this subsection (d) were to be
determined by pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in the first
sentence of this subsection (d). The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim that is the subject of
this subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Notes underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligation in this subsection
(d) are several in proportion to their respective underwriting obligations and
not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability that the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act and to the respective officers,
directors, partners, employees, representatives and agents of any of the
Underwriters; and the obligations of Underwriters under this Section 6 shall be
in addition to any liability that the respective Underwriter may otherwise have
and shall extend, upon the same terms and conditions, to each director of the
Company, to each officer of the Company who has signed the Registration
Statement and to each person, if any, who controls the Company within the
meaning of the Act.
7. Representations and Agreements to Survive Delivery. All
representations, warranties and agreements of the Company herein or in
certificates delivered pursuant hereto, and the agreements of the several
Underwriters contained in Section 6 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any controlling persons, or the Company or any of their
respective officers, directors or any controlling persons, and shall survive
delivery of the Notes to you hereunder.
8. Substitution of Underwriters. (a) If any Underwriter or Underwriters
shall fail to take up and pay for the amount of Notes agreed by such
Underwriter or Underwriters to be purchased hereunder, upon tender of such
Notes in accordance with the terms hereof, and the amount of Notes not
purchased does not aggregate more than 10% of the total amount of Notes that
the Underwriters are obligated to purchase hereunder at the Closing Date, the
remaining Underwriter shall be obligated to take up and pay for the Notes that
the withdrawing of defaulting Underwriter agreed but failed to purchase.
(b) If any Underwriter or Underwriters shall fail to take up and pay for
the amount of Notes agreed by such Underwriter or Underwriters to be purchased
hereunder, upon tender of such Notes
15
<PAGE> 17
in accordance with the terms hereof, and the amount of Notes not purchased
aggregated more than 10% of the total amount of Notes that the Underwriters are
obligated to purchase hereunder at the Closing Date, and arrangements
satisfactory to you and the Company for the purchase of such Notes by other
persons are not made within 36 hours thereafter, this Agreement shall
terminate. In the event of any such termination the Company shall not be under
any liability to any Underwriter with respect to Notes not purchased by reason
of such termination (except to the extent provided in Section 4(g) and Section
6 hereof nor shall any Underwriter (other than an Underwriter who shall have
failed, otherwise than for some reason permitted under this Agreement, to
purchase the amount of Notes agreed by such Underwriter to be purchased
hereunder) be under any liability to the Company with respect to such Notes
(except to the extent provided in Section 6 hereof).
9. Effective Date of this Agreement and Termination. (a) This Agreement
shall become effective at 10:00 a.m., New York City time, on the first full
business day following the later of the effective date of the Registration
Statement or the execution of this Agreement, or at such earlier time after the
effective date of the Registration Statement as you in your discretion shall
first release the Notes for sale to the public. For the purposes of this
Section, the Notes shall be deemed to have been released for sale to the public
upon release by you of the publication of a newspaper advertisement relating
thereto or upon release by you of telexes offering the Notes for sale to
securities dealers, whichever shall first occur. By giving notice as
hereinafter specified before the time this Agreement becomes effective, you or
the Company may prevent this Agreement from becoming effective without
liability of any party to any other party, except that the provisions of
Section 4(g) and Section 6 hereof shall at all times be effective.
(b) You shall have the right to terminate this Agreement by giving notice
as hereinafter specified at any time at or prior to the Closing Date if (i) the
Company shall have failed, refused or been unable, at or prior to the Closing
Date, to perform any agreement on its part to be performed hereunder, (ii) any
other condition of your obligations hereunder is not fulfilled, (iii) trading
on the New York Stock Exchange or the American Stock Exchange shall have been
wholly suspended, (iv) minimum or maximum prices for trading shall have been
fixed, or maximum ranges for prices for securities shall have been required, on
the New York Stock Exchange or the American Stock Exchange, by such exchange or
by order of the Commission or any other governmental authority having
jurisdiction, (v) a banking moratorium shall have been declared by Federal or
New York authorities, or (vi) an outbreak or escalation of major hostilities in
which the United States is involved, a declaration of war by Congress, any
other substantial national or international calamity or any other event or
occurrence of a similar character shall have occurred or shall have worsened
since the execution of this Agreement that, in your judgment, makes it
impractical or inadvisable to proceed with the completion of the sale of and
payment for the Notes. Any such termination shall be without liability of any
party to any other party except that the provisions of Section 4(g) and Section
6 hereof shall at all times be effective.
(c) If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section, the Company shall be
notified promptly by you by telephone or telegram, confirmed by letter. If the
Company elects to prevent this Agreement from becoming effective, you shall be
notified promptly by the Company by telephone or telegram, confirmed by letter.
10. Notices. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to you shall
be mailed, delivered or telegraphed and confirmed to you c/o Kidder, Peabody &
Co. Incorporated at 10 Hanover Square, New York, New
16
<PAGE> 18
York 10005, or if sent to the Company, shall be mailed, delivered or
telegraphed and confirmed to the Company at 700 Route 46 East, Fairfield, New
Jersey 07004 to the attention of Joseph Bernadino, Esq., General Counsel. Any
party to this Agreement may change such address for notices by sending to the
parties to this Agreement written notice of a new address for such purpose.
11. Parties. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons, officers and directors referred to in Section 6, and no other person
will have any right or obligation hereunder.
12. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICT OF LAWS PROVISIONS THEREOF.
If the foregoing correctly sets forth the understanding between the Company
and you, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and the several Underwriters.
Very truly yours,
PRIME HOSPITALITY CORP.
By:
--------------------------------------
Accepted and agreed to as of the date first above written.
KIDDER, PEABODY & CO. INCORPORATED
MONTGOMERY SECURITIES
By: Kidder, Peabody & Co. Incorporated
By:
--------------------------------------
John E. Lopez-Ona
Managing Director
17
<PAGE> 19
SCHEDULE A
<TABLE>
<CAPTION>
Principal
Underwriter Amount
----------- ---------
<S> <C>
Kidder, Peabody & Co. Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Montgomery Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000,00
===========
</TABLE>
<PAGE> 1
EXHIBIT 4.1
(Face of Note)
____% Senior Subordinated Notes due 2004
No. $__________
PRIME HOSPITALITY CORP.
<TABLE>
<S> <C>
promises to pay to
or registered assigns,
the principal sum of
Dollars on _________ __, 2004.
Interest Payment Dates: ________ __, and _____ __
Record Dates: ________ __, and ________ __
Dated: _________ __, 1994
PRIME HOSPITALITY CORP.
By:
------------------------------
Name:
Title:
By:
------------------------------ Name:
Title:
</TABLE>
This is one of the Notes
referred to in the
within-mentioned Indenture:
Bank One, Columbus, N.A.,
as Trustee
By:
-------------------------------
<PAGE> 2
(Back of Security)
__% SENIOR SUBORDINATED NOTE
DUE ________, 2004
Capitalized terms used herein have the meanings assigned to
them in the Indenture (as defined below) unless otherwise indicated.
1. Interest. Prime Hospitality Corp., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount
of this Note at the rate and in the manner specified below.
The Company shall pay interest on the principal amount of this
Note at the rate per annum of __%. The Company will pay interest semi-annually
on _______ and _______ of each year, or if any such day is not a Business Day
(as defined in the Indenture), on the next succeeding Business Day (each an
"Interest Payment Date").
Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Interest shall accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of the original issuance of the Notes. To the extent lawful, the Company
shall pay interest on overdue principal at the rate of 1% per annum in excess
of the then applicable interest rate on the Notes; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful.
2. Method of Payment. The Company will pay interest on
the Notes (except defaulted interest) to the Persons who are registered Holders
of Notes at the close of business on the record date next preceding the
Interest Payment Date, even if such Notes are cancelled after such record date
and on or before such Interest Payment Date. The Holder hereof must surrender
this Note to a Paying Agent to collect principal payments. The Company will
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. The Company,
however, may pay principal, premium, if any, and interest by check payable in
such money. It may mail an interest check to a Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee
will act as Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co-registrar without notice to any Holder. The Company or
any Guarantor may act in any such capacity.
4. Indenture. The Company issued the Notes under an
Indenture dated as of _________, 1994 (the "Indenture") between the Company and
the Trustee. 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 (15 U.S. Code Section Section 77aaa-77bbbb) as in effect on the date of
the Indenture. The Notes are subject to all such terms, and Holders are
referred to the Indenture and such act for a statement of such terms. The
terms of the Indenture shall govern any inconsistencies between the Indenture
and the Notes. The Notes are unsecured general obligations of the Company
limited to $100,000,000 in aggregate principal amount.
5. Optional Redemption. Except as set forth below, the
Company shall not have the option to redeem the Notes pursuant to Section 3.07
of the Indenture prior to ____________,
<PAGE> 3
1999. Thereafter, the Company shall have the option to redeem the Notes, in
whole or in part, at the redemption prices (expressed as percentages of the
principal amount) set forth below, plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the 12 month period
beginning on __________ of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999 %
2000 %
2001 %
2002 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to __________
__, 1997, the Company may redeem up to 25% of the initial principal amount of
the Notes originally issued with the net proceeds of one or more Public
Offerings at a redemption price equal to ___% of the principal amount thereof
plus accrued and unpaid interest thereon, if any, to the redemption date;
provided that at least 75% of the principal amount of the Notes originally
issued remain outstanding immediately after the occurrence of any such
redemption and that such redemption occurs within 90 days following the closing
of any such Public Offering.
6. Mandatory Redemption. The Company shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
7. Redemption or Repurchase at Option of Holder. (a)
If there is a Change of Control (as defined in the Indenture), the Company
shall be required to offer to purchase all Notes at 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase. Holders of Notes that are subject to an offer to purchase will
receive an offer to purchase from the Company prior to any related purchase
date, and may elect to have such Notes purchased by completing the form
entitled "Option of Holder to Elect Purchase" appearing below.
(b) When the aggregate amount of Excess Proceeds from Asset
Sales (as defined in the Indenture) exceeds $5 million, the Company shall be
required to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date fixed for the closing of
such offer. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Notes to be redeemed shall
be selected pursuant to the terms of Section 3.02 of the Indenture (with such
adjustments as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased).
To the extent that the aggregate amount of Notes tendered by Holders thereof is
less than the Excess Proceeds, the Company may use such deficiency for general
corporate purposes. Holders of Notes which are the subject of an offer to
purchase will receive an offer to purchase from the Company prior to any
related purchase date, and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" appearing below.
8. Notice of Redemption. Notice of redemption shall be
mailed at least 30 days but not more than 60 days before the redemption date to
each Holder of Notes to be redeemed at its registered address. Notes may be
redeemed in part but only in whole multiples of $1,000, unless all of the Notes
held by a Holder are to be redeemed. On and after the redemption date,
interest ceases to accrue on Notes or portions of them called for redemption.
9. Subordination. The Notes are subordinated to Senior
Indebtedness (as defined in the Indenture) (whether outstanding on the date of
the Indenture or thereafter created, incurred,
<PAGE> 4
assumed or guaranteed) and all Obligations (as defined in the Indenture) with
respect thereto. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Notes may be paid. The Company agrees, and each Holder
by accepting a Note agrees, to the subordination and authorizes the Trustee to
give it effect.
10. Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not exchange or register the transfer of
any Note or portion of a Note selected for redemption. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed, during the period between a record date and
the corresponding Interest Payment Date.
11. Persons Deemed Owners. Prior to due presentment to
the Trustee for registration of the transfer of this Note, the Trustee, any
Agent, the Company and the Guarantors, if any, may deem and treat the Person in
whose name this Note is registered as its absolute owner for the purpose of
receiving payment of principal of and interest on this Note and for all other
purposes whatsoever, whether or not this Note is overdue, and neither the
Trustee, any Agent, the Company nor any Guarantor shall be affected by notice
to the contrary. The registered holder of a Note shall be treated as its owner
for all purposes.
12. Amendments and Waivers. Subject to certain
exceptions, the Indenture or the Notes may be amended with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes (including consents obtained in connection with a 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 any Holder, the Indenture or the
Notes may be amended to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Notes in addition to or in place of certificated Notes, to
provide for assumption of the Company's obligations to Holders in the case of a
merger or consolidation or to make any change that would provide any additional
rights or benefits to the Holders (including providing for Note Guarantees
pursuant to Section 4.13 hereof) or that does not adversely affect the rights
of any Holder under the Indenture or to comply with the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
13. Defaults and Remedies. Events of Default include:
default for 30 days in the payment when due of interest on the Notes (whether
or not prohibited by the subordination provisions of the Indenture); default in
payment when due of principal of or premium, if any, on the Notes (whether or
not prohibited by the subordination provisions of the Indenture); failure by
the Company to comply with Sections 4.07, 4.09, 4.10 or 4.14 of the Indenture;
failure by the Company or the Guarantors for 60 days after notice to comply
with any of its other agreements in the Indenture or the Notes; default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Subsidiaries or Holding (or the payment of which is
guaranteed by the Company or any of its Subsidiaries or Holding) whether such
Indebtedness or Guarantee now exists, or is created after the Issuance Date,
which default (a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal
<PAGE> 5
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $2 million
or more; failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $2 million, which judgments are not paid,
discharged or stayed for a period of 60 days; except as permitted by the
Indenture, any Note Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations or shall fail to comply with any obligations
under its Note Guarantee; and certain events of bankruptcy or insolvency with
respect to the Company, any Guarantor or any of their respective Subsidiaries.
If any Event of 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; except, that if any Indebtedness
is outstanding pursuant to the New Revolving Credit Facility, upon a
declaration of acceleration, the principal and interest on the Notes shall be
payable upon the earlier of (1) the day which is five business days after
notice of acceleration is given to the Company and the lender under the New
Revolving Credit Facility or (2) the date of acceleration of the Indebtedness
under the New Revolving Credit Facility and except that in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, with
respect to the Company or any of its Subsidiaries, all outstanding Notes will
become due and payable without further action or notice. Holders 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 notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. The Company must furnish an annual compliance certificate
to the Trustee.
14. Guarantees. Under certain circumstances the Company
or any Guarantor may be required to cause a Restricted Subsidiary to execute
and deliver to the Trustee a supplemental indenture pursuant to which such
Restricted Subsidiary shall unconditionally guarantee all of the Company's
obligations under the Notes pursuant to a Note Guarantee on the terms and
conditions set forth in Exhibit B to the Indenture.
15. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company, any Guarantor or their
respective Affiliates, and may otherwise deal with the Company, any Guarantor
or their respective Affiliates, as if it were not Trustee.
16. No Recourse Against Others. No past, present or
future director, officer, employee, incorporator or stockholder, as such, of
the Company, any Guarantor, as such, shall have any liability for any
obligations of the Company or any Guarantor under the Notes, the Note
Guarantees or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a Note
and the Note Guarantees, if any, waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
17. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
18. Abbreviations. Customary abbreviations may be used
in the name of a Holder or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
<PAGE> 6
19. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes and has directed
the Trustee to use CUSIP numbers in notices of redemption as a convenience to
Holders. No representation is made as to the accuracy of such numbers either
as printed on the Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
20. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE NOTE
GUARANTEES, IF ANY.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Request may be made to:
Prime Hospitality Corp.
700 Route 46 East
P.O. Box 2700
Fairfield, New Jersey 07007-2700
Attention: Chief Financial Officer
<PAGE> 7
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Date:
-------------------------------------
Your Signature:
------------------------------------------------------------
(Sign exactly as your name appears on the face of this Note)
</TABLE>
Signature Guarantee.
<PAGE> 8
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
<TABLE>
<S> <C>
Date: Your Signature:
-------------------------- ------------------------------------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No.:
--------------------
</TABLE>
Signature Guarantee.
<PAGE> 1
EXHIBIT 4.2
PRIME HOSPITALITY CORP.
__% SENIOR SUBORDINATED NOTES DUE 2004
-----------------
INDENTURE
Dated as of _ __, 1994
-----------------
Bank One, Columbus, N.A.
Trustee
<PAGE> 2
<TABLE>
<CAPTION>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06;7.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06;12.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03;12.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05;12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07;9.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE Page
<S> <C> <C>
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . 12
Section 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.04. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.05. Lists of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.07. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.08. Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.13. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.14. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 3
REDEMPTION AND OFFERS TO PURCHASE
Section 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.02. Selection of Notes to Be Purchased or Redeemed . . . . . . . . . . . . . . . . . . . . 18
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.07. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.08. Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.09. Offers to Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.03. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.04. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.05. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.06. Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.07. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . . 26
</TABLE>
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<TABLE>
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Section 4.09. Incurrence of Indebtedness and Issuance of Disqualified Stock . . . . . . . . . . . . . . 27
Section 4.10. Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.11. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.12. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.13. Additional Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.14. Designation of Unrestricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.15. Offer to Purchase Upon Change of Control . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.16. Corporate Existence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.17. Limitation on Incurrence of Indebtedness and Issuance of Preferred
Stock by Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.18. Limitation on Sale and Leaseback Transactions. . . . . . . . . . . . . . . . . . . . . . 31
Section 4.19. Line of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.20. No Senior Subordinated Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.02. Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 6.07. Rights of Holders of Notes to Receive Payment . . . . . . . . . . . . . . . . . . . . . . 36
Section 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 7.09. Successor Trustee by Merger, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . 43
</TABLE>
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<TABLE>
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Section 8.02. Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.03. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 8.04. Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . 44
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . 45
Section 8.06. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 8.07. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 9.02. With Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 9.03. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.04. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 9.05. Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.06. Trustee to Sign Amendments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 10
NOTE GUARANTEES
Section 10.01. Note Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 10.02. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 10.03. Liquidation; Dissolution; Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.04. Default on Designated Senior Indebtedness of the Guarantor . . . . . . . . . . . . . . . 51
Section 10.05. Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.06. When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.07. Notice by a Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.08. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.09. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.10. Subordination May Not Be Impaired By Any Guarantor . . . . . . . . . . . . . . . . . . . 53
Section 10.11. Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.12. Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.13. Authorization to Effect Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.14. Limitation of Guarantor's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.15. Releases Following Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 11
SUBORDINATION
Section 11.01. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.02. Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.03. Default on Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 11.04. Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.05. When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 11.06. Notice by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.07. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.08. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.09. Subordination May Not Be Impaired By Company . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.10. Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.11. Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.12. Authorization to Effect Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
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<TABLE>
<CAPTION>
ARTICLE 12
MISCELLANEOUS
<S> <C> <C>
Section 12.01. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 12.03. Communication by Holders of Notes with Other Holders of Notes . . . . . . . . . . . . . . 60
Section 12.04. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . 60
Section 12.05. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.06. Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders . . . . . . . . 61
Section 12.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.09. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.10. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 12.12. Counterpart Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 12.13. Table of Contents, Headings, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 62
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF SUPPLEMENTAL INDENTURE
</TABLE>
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INDENTURE dated as of __________, 1994 between Prime Hospitality
Corp., a Delaware corporation (the "Company"), and Bank One, Columbus, N.A., a
national association organized under the laws of the United States of America,
as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the __% Senior
Subordinated Notes due 2004:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Subsidiary of such specified Person, including
Indebtedness incurred in connection with, or in contemplation of, such other
Person merging with or into or becoming a Subsidiary of such specified Person
and (ii) Indebtedness encumbering any asset acquired by such specified Person.
"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 (i) beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control and (ii) ShoLodge, Inc. and its
Subsidiaries shall not be deemed Affiliates of the Company or any of its
Subsidiaries solely for the reason that an employee or designee of ShoLodge,
Inc. serves on the Board of Directors of the Company or any Subsidiary.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any property or assets of the Company or any Restricted
Subsidiary (including by way of a Sale and Leaseback Transaction) or (ii) the
issuance or sale of Equity Interests of any of its Restricted Subsidiaries,
other than, with respect to clauses (i) and (ii) above, the following: (1) the
sale or disposition of personal property held for sale in the ordinary course
of business, (2) the transfer of assets by the Company to a Restricted
Subsidiary of the Company or by a Restricted Subsidiary of the Company to the
Company or to another Restricted Subsidiary of the Company, (3) any Restricted
Payment, dividend or purchase or retirement of Equity Interests permitted under
Section 4.07 hereof, (4) the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company in compliance with the
provisions of Section 4.15, and Article 5 hereof, (5) the conversion of or
foreclosure on any mortgage or note, provided that the Company or a Restricted
Subsidiary receives the real property underlying any such mortgage or note, (6)
any transaction or series of related transactions that would otherwise be an
Asset Sale where the fair market value of the assets, sold, leased, conveyed or
otherwise disposed of was less than $2.0 million and where the net proceeds was
less than $2.0 million.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
<PAGE> 8
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"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 so required to be capitalized on the balance
sheet in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, including,
without limitation, with respect to partnerships, partnership interests
(whether general or limited) and 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, such partnership.
"Cash Equivalents" means (i) United States dollars, (ii) 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, (iii) 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 from the date of acquisition and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million, (iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (ii) and (iii)
entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having a rating of P-2
or the equivalent thereof by Moody's Investors Service, Inc. or A-2 or the
equivalent thereof by Standard & Poor's Corporation and in each case maturing
within six months after the date of acquisition.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related transactions, of
all or substantially all of the Company's assets to any person or group (as
such term is used in Section 13(d)(3) of the Exchange Act) other than to a
Wholly-Owned Restricted Subsidiary that is a Guarantor, (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company, (iii) the
acquisition by any person or group (as such term is used in Section 13(d)(3) of
the Exchange Act) of a direct or indirect interest in more than 50% of the
voting power of the voting stock of the Company by way of purchase, merger or
consolidation or otherwise (other than a creation of a holding company that
does not involve a change in the beneficial ownership of the Company as a
result of such transaction) or (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing Directors.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Consolidated Cash Asset Sale Gain" means, with respect to any Person
for any period as of any date of determination, the aggregate gain (but not
loss) realized at any time in connection with any Asset Sale by such Person or
its Restricted Subsidiaries to the extent such gain consists of cash proceeds
of such Person and its Restricted Subsidiaries as of any date of determination
for such period, on a consolidated basis, determined in accordance with GAAP;
provided, that: (i) such gain of any 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 to the
referent Person or Restricted Subsidiaries, (ii) such gain of any Person that
is a Restricted Subsidiary (other than a
2
<PAGE> 9
Guarantor) and that is restricted from declaring or paying dividends or other
distributions, directly or indirectly, by operation of the terms of its
charter, any applicable agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation or otherwise shall be included only to
the extent of the amount of dividends or distributions paid to the referent
Person or a Wholly Owned Restricted Subsidiary and (iii) such gains of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus: (a) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing
Consolidated Net Income), plus (b) provision for taxes based on income or
profits of such Person for such period, to the extent such provision for taxes
was included in computing Consolidated Net Income, plus (c) Consolidated
Interest Expense of such Person for such period to the extent such expense was
deducted in computing Consolidated Net Income, plus (d) Consolidated
Depreciation and Amortization Expense of such Person for such period, to the
extent deducted in computing Consolidated Net Income in each case, on a
consolidated basis for such Person and its Restricted Subsidiaries and
determined in accordance with GAAP.
"Consolidated Depreciation and Amortization Expense" means, with
respect to any Person for any period, the total amount of depreciation and
amortization expense (including amortization of goodwill and other intangibles
but excluding amortization of prepaid cash expenses that were paid in a prior
period) and the total amount of non-cash charges (other than non-cash charges
that represent an accrual or reserve for cash charges in future periods or
which involved a cash expenditure in a prior period) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis as determined
in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (a) interest expense, whether paid
or accrued, to the extent such expense was deducted in computing Consolidated
Net Income (including amortization of original issue discount, non-cash
interest payments, the interest component of capital leases, and net payments
(if any) pursuant to Hedging Obligations; but excluding amortization of
deferred financing fees), (b) commissions, discounts and other fees and charges
paid or accrued with respect to letters of credit and bankers' acceptance
financing, (c) interest for which such Person or its Restricted Subsidiaries is
liable, whether or not actually paid, pursuant to Indebtedness or under a
Guarantee of Indebtedness of any other Person and (d) with respect to a Sale
and Leaseback Transaction entered into after the Issuance Date, Sale and
Leaseback Interest; in each case, calculated for such Person and its Restricted
Subsidiaries for such period on a consolidated basis as determined in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, that the following shall be excluded: (i) the Net Income
of any 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 to the referent Person or its
Restricted Subsidiaries, (ii) the Net Income of any Person that is a Restricted
Subsidiary (other than a Restricted Subsidiary) and that is restricted from
declaring or paying dividends or other distributions, directly or indirectly,
by operation of the terms of its charter, any applicable agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation or otherwise
shall be included only to the extent of the amount of dividends or
distributions paid to the referent Person
3
<PAGE> 10
or a Wholly Owned Restricted Subsidiary, and (iii) 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.
"Consolidated Net Tangible Assets" means, with respect to any Person,
as of any date of determination, the total amount of consolidated assets of
such Person and its Restricted Subsidiaries (less applicable reserves and other
properly deducted items), determined on a consolidated basis in accordance with
GAAP, after deducting therefrom (i) all current liability items, and (ii) all
goodwill, trade names, trademarks, service marks, patents, unamortized debt
discount and expense, and all other intangibles.
"Consolidated Net Worth" means, with respect to any Person, as of any
date of determination, the sum of (i) the consolidated equity of the common
stockholders of such Person and its Restricted Subsidiaries as of such date
plus (ii) the respective amounts reported on such Person's balance sheet as of
such date with respect to any series of Preferred Stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to
the extent of any cash received by such Person upon issuance of such Preferred
Stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business)
subsequent to the Issuance Date in the book value of any asset owned by such
Person or a consolidated Restricted Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP; provided,
however, that Consolidated Net Worth shall not include any gain (or loss)
realized in connection with any Asset Sale after the Issuance Date.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Issuance Date or (ii) was nominated for election or
elected to such Board of Directors with the affirmative vote of at least a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 12.02 hereof or such other address as to which
the Trustee may give notice to the Company.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"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) Senior Bank Indebtedness
that is not Non-Recourse Indebtedness and (ii) any other Senior Indebtedness
that is not Non-Recourse Indebtedness (a) permitted to be incurred under this
Indenture the principal amount of which is $10.0 million or more; and (b)
designated in the instrument creating or evidencing such Senior Indebtedness as
"Designated Senior Indebtedness."
"Disqualified Stock" means any Capital Stock which, 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,
4
<PAGE> 11
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the Holder thereof, in whole or in
part, on or prior to _____________ __, 2005.
"Distribution" means, for purposes of Articles 10 and 11, a
distribution consisting of cash, securities or other property, by set-off or
otherwise.
"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).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than under any Indebtedness permitted under
clause (a) of the second paragraph of Section 4.09 hereof) in existence on the
Issuance Date.
"Existing Real Estate" means any real estate owned, leased or
optioned by the Company or any of its Subsidiaries on the Issuance Date, or any
real estate on which the Company or any of its Subsidiaries holds a mortgage on
the Issuance Date.
"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. In the event that
the Company or any of its Restricted Subsidiaries incurs, assumes, guarantees
or redeems any Indebtedness (other than revolving credit borrowings) or issues
Preferred Stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
(the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee or
redemption of Indebtedness, or such issuance or redemption of Preferred Stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. For purposes of making the computation referred to above,
acquisitions, dispositions and discontinued operations (as determined in
accordance with GAAP) that have been made by the Company or any of its
Restricted Subsidiaries, including all mergers, consolidations and
dispositions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be calculated on
a pro forma basis assuming that all such acquisitions, dispositions,
discontinued operations, mergers, consolidations (and the reduction of any
associated fixed charge obligations resulting therefrom) had occurred on the
first day of the four-quarter reference period.
"Fixed Charges" means, with respect to any Person for any period, the
sum of (a) Consolidated Interest Expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, to the extent such
expense was deducted in computing Consolidated Net Income and (b) the product
of (i) all cash dividend payments (and non-cash dividend payments in the case
of a Person that is a Restricted Subsidiary) on any series of Preferred Stock
of such Person or its Restricted Subsidiaries (other than Preferred Stock owned
by such Person or its Restricted Subsidiaries), 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.
"Frenchman's Reef" means the Marriott's Frenchman's Reef Hotel in St.
Thomas, U.S. Virgin Islands.
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<PAGE> 12
"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 Issuance Date.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States of America is
pledged.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business) or
otherwise incurring, assuming or becoming liable for the payment of any
principal, premium or interest, direct or indirect, in any manner (including,
without limitation, letters of credit and reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"Hospitality-Related Business" means the hotel business and other
businesses necessary for, incident to, in support of, connected with or arising
out of the hotel business, including, without limitation, (i) developing,
managing, operating, improving or acquiring lodging facilities, restaurants and
other food-service facilities, sports or entertainment facilities, convention
or meeting facilities, marketing services related thereto, (ii) acquiring,
developing, operating, managing or improving the Existing Real Estate, any real
estate taken in foreclosure (or similar settlement) by the Company or any of
its Subsidiaries, or any real estate ancillary or connected to any hotel owned,
managed or operated by the Company or any of its Restricted Subsidiaries, (iii)
owning and managing mortgages in, or other Indebtedness secured by Liens on
hotels and real estate related or ancillary to hotels or (iv) other related
activities thereto.
"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 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, and also includes, to the extent not
otherwise included, the Guarantee of any Indebtedness of such Person or any
other Person.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of loans
(including Guarantees), advances or capital
6
<PAGE> 13
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 and all other items that are or would be classified as investments
on a balance sheet prepared in accordance with GAAP.
"Issuance Date" means the closing date for the sale and original
issuance of the Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or in the City of Columbus, Ohio or at a
place of payment are authorized by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
"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).
"Management Agreement" means an agreement entered into by the Company
pursuant to which the Company agrees to manage a hotel for another Person.
"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, any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with any Asset Sale, and excluding any
extraordinary gain (but not loss), together with any related provision for
taxes on such extraordinary 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, net
of the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions), and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets the
subject of such Asset Sale and any reserve for adjustment in respect of the
sale price of such asset or assets.
"Non-Recourse Indebtedness" means Indebtedness (a) as to which
neither the Company nor any of its Restricted Subsidiaries (i) provides credit
support (other than in the form of a Lien on an asset) pursuant to any
undertaking, agreement or instrument that would constitute Indebtedness, (ii)
is directly or indirectly liable, or (iii) constitutes the lender, and (b) 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 other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Notes" means the ___% Senior Subordinated Notes due 2004, as amended
or supplemented from time to time pursuant to the terms of this Indenture, that
are issued under this Indenture.
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<PAGE> 14
"Note Guarantee" means each guarantee of the Notes by a Guarantor
pursuant to Article 10 hereof.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Permitted Investments" means (a) any Investments in the Company or
any Guarantor; (b) Investments in any Restricted Subsidiary that is not a
Guarantor not to exceed an aggregate of $1.0 million per Restricted Subsidiary;
(c) any Investments in Cash Equivalents; (d) Investments by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company or any Guarantor 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 Wholly Owned Restricted
Subsidiary of the Company or any Guarantor; and (e) any Investment in Suites of
America existing on the Issuance Date.
"Permitted Liens" means (i) Liens now or hereafter securing Senior
Indebtedness of the Company or Indebtedness of any Restricted Subsidiary,
provided that such Indebtedness is permitted by the terms of this Indenture;
(ii) Liens for taxes, assesments and governmental charges not yet delinquent or
that are being contested in good faith and that are appropriately reserved for
in accordance with GAAP; (iii) Liens incurred in the ordinary course of
business that are not incurred in connection with the borrowing of money; (iv)
Liens existing as of the Issuance Date; (v) Liens on property of a Person at
the time such Person was merged with the Company or a Restricted Subsidiary,
Liens on acquired property existing at the time of acquisition thereof, and
Liens upon any property of a Person existing at the time such Person becomes a
Restricted Subsidiary; provided in each case that such Liens were not created
in contemplation of such merger or acquisition, as the case may be, and such
Liens only extend to such merged or acquired property; (vi) Liens securing
purchase money obligations incurred or assumed in connection with the
acquisition or development of real or personal property used in a
Hospitality-Related Business within 180 days of such incurrence or assumption,
provided that such Liens only extend to such acquired or developed property;
(vii) mechanics', workmen's, materialmen's, operator's or similar Liens arising
in the ordinary course of business for sums that are not yet delinquent or are
being contested in good faith and by appropriate action; (viii) Liens in
connection with workmen's compensation, unemployment insurance or other social
security, old age pension or public liability obligations not yet due or which
are being contested in good faith by appropriate action; (ix) Liens, deposits
or pledges to secure the performance of bids, tenders, contracts (other than
contracts for the payment of money), leases, public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business; (x) survey
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<PAGE> 15
exceptions, encumbrances, easements or reservations, or restrictions as to the
use of real properties, and minor defects in title which, in the case of any of
the foregoing, were not incurred or created to secure the payment of borrowed
money or the deferred purchase price of property or services; (xi) judgment and
attachment Liens not giving rise to an Event of Default or Liens created by or
existing from any litigation or legal proceedings that are currently being
contested in good faith and that are appropriately reserved for in accordance
with GAAP; (xii) Liens on deposits to secure public or statutory obligations or
in lieu of surety or appeal bonds entered into in the ordinary course of
business; (xiii) Liens in favor of collecting or payor banks having a right to
setoff, revocation, refund or chargeback with respect to money or instruments
of the Company or any Restricted Subsidiary on deposit with or in possession of
such bank; and (xiv) Liens now or hereafter securing any Hedging Obligations to
the extent such Hedging Obligations are permitted to be incurred under this
Indenture.
"Permitted Note Exchanges" means exchanges by the Company or its
Restricted Subsidiaries of a mortgage or other note receivable (other than in
connection with the Frenchman's Reef) existing on the Issuance Date for a new
mortgage or other note receivable if (i) the aggregate consideration received
by the Company or such Restricted Subsidiary in connection with such exchange
constituted fair value (as determined in good faith by the Board of Directors
of the Company, whose determination shall be conclusive and evidenced by an
Officers' Certificate) and (ii) the principal amount of such new mortgage or
other note receivable does not exceed the principal amount of the mortgage or
other note receivable so exchanged.
"Permitted Refinancing" means Refinancing Indebtedness or Refinancing
Disqualified Stock, as the case may be, to the extent (a) the principal amount
of Refinancing Indebtedness or the liquidation preference amount of Refinancing
Disqualified Stock, as the case may be, does not exceed the principal amount of
Indebtedness or the liquidation preference amount of Disqualified Stock, as the
case may be, so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of premiums and reasonable expenses incurred in connection
therewith); (b) such Refinancing Indebtedness or Refinancing Disqualified
Stock, as the case may be, is scheduled to mature or is redeemable at the
option of the holder, as the case may be, no earlier than the Indebtedness or
Disqualified Stock, as the case may be, being refinanced; (c) in the case of
Refinancing Indebtedness, the Refinancing Indebtedness has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (d) in the case of Refinancing Disqualified Stock, the Disqualified
Stock has a Weighted Average Life to Mandatory Redemption equal to or greater
than the Weighted Average Life to Mandatory Redemption of the Disqualified
Stock being extended, refinanced, renewed, replaced, defeased or refunded; (e)
if the Indebtedness or the Disqualified Stock, as the case may be, being
extended, refinanced, renewed, replaced, defeased or refunded is pari-passu or
subordinated in right of payment to the Notes, the Refinancing Indebtedness or
Refinancing Disqualified Stock, as the case may be, is subordinated in right of
payment to the Notes on terms at least as favorable to the Holders of Notes as
those contained in the documentation governing the Indebtedness or the
Disqualified Stock, as the case may be, being extended, refinanced, renewed,
replaced, defeased or refunded or is payable solely in Equity Interests of the
Person whose Indebtedness is being purchased, redeemed or otherwise acquired or
retired for value.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock" means any Equity Interest with preferential right
in the payment of dividends or liquidation or any Disqualified Stock.
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<PAGE> 16
"Public Offering" means a public offering of the Common Stock of the
Company.
"Refinancing Disqualified Stock" means Disqualified Stock issued in
exchange for, or the proceeds of which are used, to extend, refinance, renew,
replace, defease or refund Disqualified Stock permitted to be issued pursuant
to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof or
Disqualified Stock referred to in clause (c) of the second paragraph of Section
4.09 hereof.
"Refinancing Indebtedness" means Indebtedness issued in exchange for,
or the proceeds of which are used to extend, refinance, renew, replace, defease
or refund Indebtedness permitted to be incurred pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof or
Indebtedness referred to in clause (b) and clauses (d) and (e) of the second
paragraph of Section 4.09 hereof.
"Representative" means, for purposes of Articles 10 and 11, the
indenture trustee or other trustee, agent or representative for any Senior
Indebtedness or, with respect to any Guarantor, for any Senior Indebtedness of
such Guarantor.
"Responsible Officer" when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means, with respect to any Person, 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 Restricted Subsidiaries of that
Person or a combination thereof. Unrestricted Subsidiaries shall not be
included in the definition of Restricted Subsidiaries for any purpose of this
Indenture; provided, however, that upon the occurrence of any Unrestricted
Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be
included in the definition of "Restricted Subsidiaries."
"Sale and Leaseback Interest" means, with respect to a Sale and
Leaseback Transaction, the greater of (i) the interest component of such Sale
and Leaseback Transaction, determined in accordance with GAAP and (ii) the
actual interest expense on the Indebtedness securing such property subject to
such Sale and Leaseback Transaction.
"Sale and Leaseback Transaction" means any transaction or series of
related transactions pursuant to which the Company or any Restricted Subsidiary
of the Company sells or transfers any property or assets in connection with the
leasing, or resale against installment payments, or as part of an arrangement
involving the leasing, or the resale against installment payments, of such
property or assets to the seller or the transferor.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
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<PAGE> 17
"Senior Bank Indebtedness" means the outstanding Indebtedness under
the credit facilities permitted under clause (a) of the second paragraph of
Section 4.09 hereof as any such agreement may be restated, further amended,
supplemented or otherwise modified or replaced from time to time hereafter,
together with any refunding or replacement of any such Indebtedness.
"Senior Indebtedness" means, with respect to the Company or any
Guarantor, (i) the Senior Bank Indebtedness of the Company, or any Guarantee
thereof by such Guarantor, as the case may be, (ii) the Existing Indebtedness
and (iii) any other Indebtedness permitted to be incurred by the Company or
such Guarantor, as the case may be, under the terms of this 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 or
any Guarantee thereof. Notwithstanding anything to the contrary in the
foregoing, Senior Indebtedness shall not include (v) any liability for federal,
state, local or other taxes owed or owing by the Company or such Guarantor, as
the case may be, (w) any Indebtedness of the Company or such Guarantor, as the
case may be, to any of the Company's Subsidiaries or other Affiliates, (x) any
trade payables, (y) any Indebtedness that is incurred in violation of this
Indenture or (z) Non-Recourse Indebtedness of the Company or such Guarantor, as
the case may be.
"ShoLodge Joint Venture Contribution" means the contribution by the
Company of 50% of its interest in Suites of America to ShoLodge, Inc. pursuant
to that certain joint venture agreement between the Company and ShoLodge, Inc.
dated _____ __, ____.
"Subsidiary" means, with respect to any Person, 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.
"Suites of America" means Suites of America, Inc., a Wholly Owned
Subsidiary of the Company.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
Section 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means any entity that would have been a
Restricted Subsidiary of the Company but for its designation as an
"Unrestricted Subsidiary" in accordance with the provisions of this Indenture
and any Subsidiary of such entity.
"Weighted Average Life to Mandatory Redemption" means, when applied
to any Disqualified Stock at any date, the number of years obtained by dividing
(a) the sum of the products obtained by multiplying (x) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect thereof, by (y)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
liquidation preference amount of such Disqualified Stock.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount
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<PAGE> 18
of each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in respect
thereof, by (y) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by (b) the
then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . 4.11
"Benefitted Party" . . . . . . . . . . . . . . . . . . . . 10.01
"Commencement Date" . . . . . . . . . . . . . . . . . . . 3.09
"Covenant Defeasance" . . . . . . . . . . . . . . . . . . 8.03
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . 4.13
"Event of Default" . . . . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . 4.10
"Guarantor" . . . . . . . . . . . . . . . . . . . . . . . 10.01
"Guarantor Payment Blockage Notice . . . . . . . . . . . . 10.04
"incur" . . . . . . . . . . . . . . . . . . . . . . . . . 4.09
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . 8.02
"Offer Amount" . . . . . . . . . . . . . . . . . . . . . . 3.09
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . 3.09
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . 2.03
"Payment Blockage Notice" . . . . . . . . . . . . . . . . 11.01
"Payment Default" . . . . . . . . . . . . . . . . . . . . 6.01
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . 3.09
"Purchase Offer" . . . . . . . . . . . . . . . . . . . . . 3.09
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Restricted Payments" . . . . . . . . . . . . . . . . . . 4.07
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture,
other than those provisions of the TIA that may be excluded herein, which
provision shall be excluded to the extent specifically excluded in this
Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and the Note Guarantees, if
any;
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<PAGE> 19
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, the Guarantors, if any, and
any successor obligor upon the Notes or any Note Guarantee, as the case may be.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule or regulation
promulgated by the SEC under the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act or
the Exchange Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. The Notes may have
notations, legends or endorsements approved as to form by the Company and
required by law, stock exchange rule, agreements to which the Company or any
Guarantor is subject, or usage. Each Note shall be dated the date of its
authentication. The Notes shall be issuable only in denominations of $1,000
and integral multiples thereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers of the Company shall sign the Notes for the Company by
manual or facsimile signature. The Company's seal shall be reproduced on the
Notes and may be in facsimile form. An
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Officer of the Guarantor, if any, shall sign any Note Guarantee for such
Guarantor by manual or facsimile signature.
If an Officer of the Company or any Guarantor whose signature is on a
Note or a Note Guarantee, as the case may be, no longer holds that office at
the time the Note is authenticated, the Note or the Note Guarantee, as the case
may be, shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature of the Trustee shall be conclusive evidence that
the Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially
as set forth in Exhibit A hereto.
The Trustee shall, upon a written order of the Company signed by two
Officers of the Company, authenticate Notes for original issue up to an
aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time shall not exceed the amount
set forth herein except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or any Guarantor or an
Affiliate of the Company or any Guarantor.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange (including any
co-registrar, the "Registrar") and (ii) an office or agency where Notes may be
presented for payment ("Paying Agent"). The Registrar shall keep a register of
the Notes and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent, Registrar or co-registrar without prior notice to any Holder of a Note.
The Company shall notify the Trustee and the Trustee shall notify the Holders
of the name and address of any Agent not a party to this Indenture. The
Company or any Guarantor may act as Paying Agent, Registrar or co-registrar.
The Company shall enter into an appropriate agency agreement with any Agent not
a party to this Indenture, which shall be subject to any obligations imposed by
the provisions of the TIA. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee
of the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such, and shall be entitled to appropriate compensation and
indemnity in accordance with Section 7.07 hereof.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all money held by the Paying Agent for the payment
of principal of, premium, if any, and interest on the Notes, and shall notify
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the Trustee of any Default by the Company or any Guarantor in making any such
payment. While any such Default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other than the Company or a
Guarantor, if any) shall have no further liability for the money delivered to
the Trustee. If the Company or any Guarantor acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceeding relating to the Company or any Guarantor, the Trustee shall serve as
Paying Agent for the Notes and the Company shall forward to the Trustee all
money for the benefit of the Holders.
SECTION 2.05. LISTS OF HOLDERS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is
not the Registrar, the Company and/or any Guarantor shall furnish to the
Trustee at least seven Business Days before each interest payment date and at
such other times as the Trustee may request in writing a list in such form and
as of such date as the Trustee may reasonably require of the names and
addresses of Holders, including the aggregate principal amount of the Notes
held by each thereof, and the Company and each Guarantor, if any, shall
otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
When Notes are presented to the Registrar with a request to register
the transfer or to exchange them for an equal principal amount of Notes of
other denominations, the Registrar shall register the transfer or make the
exchange if its requirements for such transactions are met; provided, however,
that any Note presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instruction of transfer in
form satisfactory to the Registrar duly executed by the Holder thereof or by
his attorney duly authorized in writing. To permit registrations of transfer
and exchanges, the Company shall issue and the Trustee shall authenticate Notes
at the Registrar's request, subject to such rules as the Trustee may reasonably
require.
Neither the Company nor the Registrar shall be required to (i) issue,
register the transfer of or exchange Notes during a period beginning at the
opening of business on a Business Day 15 days before the day of any selection
of Notes for redemption or purchase under Sections 3.02 or 3.09 hereof or (ii)
register the transfer of or exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part.
No service charge shall be made to any Holder of a Note for any
registration of transfer or exchange (except as otherwise expressly permitted
herein), but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Sections 2.10, 3.06 or 9.05 hereof, which shall be paid
by the Company).
Prior to due presentment to the Trustee for registration of the
transfer of any Note, the Trustee, any Agent, the Company and any Guarantor may
deem and treat the Person in whose name any Note is registered as the absolute
owner of such Note for the purpose of receiving payment of principal of,
premium, if any, and interest on such Note and for all other purposes
whatsoever, whether or not such Note is overdue, and none of the Trustee, any
Agent, the Company or any Guarantor shall be affected by notice to the
contrary.
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SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate
a replacement Note (accompanied by a notation of the Note Guarantee duly
endorsed by the Guarantors, if applicable) if the Trustee's requirements for
replacements of Notes are met. If required by the Trustee, the Company or the
Guarantors, if any, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee, the Company and the Guarantors, if
any, to protect the Company, the Guarantors, if any, the Trustee, any Agent or
any authenticating agent from any loss which any of them may suffer if a Note
is replaced. Each of the Company, the Guarantors, if any, and the Trustee may
charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
the Guarantors, if any, and shall be entitled to all of the benefits of this
Indenture equally and ratably with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation and those described in this Section 2.08 as not outstanding.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
Subject to Section 2.09 hereof, a Note does not cease to be
outstanding because the Company, a Subsidiary of the Company or an Affiliate of
the Company holds the Note.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, any Guarantor, any of their respective Subsidiaries or any Affiliate
of the Company or any Guarantor shall be considered as though not outstanding,
except that for purposes of determining whether the Trustee shall be protected
in relying on any such direction, waiver or consent, only Notes which a
Responsible Officer knows to be so owned shall be so considered.
Notwithstanding the foregoing, Notes that are to be acquired by the Company,
any Guarantor, any Subsidiary of the Company or any Guarantor or an Affiliate
of the Company or any Guarantor pursuant to an exchange offer, tender offer or
other agreement shall not be deemed to be owned by the Company, such Guarantor,
a Subsidiary of the Company or such Guarantor or an Affiliate of the Company or
such Guarantor until legal title to such Notes passes to the Company, such
Guarantor, Subsidiary of the Company or such Guarantor or Affiliate of the
Company or such Guarantor, as the case may be.
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SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes (accompanied by a
notation of the Note Guarantee duly endorsed by the Guarantors, if applicable).
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company and the Trustee consider appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare and the
Trustee, upon receipt of the written order of the Company signed by two
Officers of the Company, shall authenticate definitive Notes (accompanied by a
notation of the Note Guarantee duly endorsed by the Guarantors, if applicable)
in exchange for temporary Notes. Until such exchange, temporary Notes shall be
entitled to the same rights, benefits and privileges as definitive Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall destroy cancelled
Notes (subject to the record retention requirement of the Exchange Act), unless
the Company directs cancelled Notes to be returned to it. The Company may not
issue new Notes to replace Notes that it has redeemed or paid or that have been
delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
the Company, unless by a written order, signed by two Officers of the Company,
the Company shall direct that cancelled Notes be returned to it.
SECTION 2.12. DEFAULTED INTEREST.
If the Company or any Guarantor defaults in a payment of interest on
the Notes, the Company or such Guarantor (to the extent of their obligations
under the Note Guarantees) shall pay the defaulted interest in any lawful
manner plus, to the extent lawful, interest payable on the defaulted interest,
to the Persons who are Holders on a subsequent special record date, which date
shall be at the earliest practicable date but in all events at least five
Business Days prior to the payment date, in each case at the rate provided in
the Notes and in Section 4.01 hereof. The Company shall fix or cause to be
fixed each such special record date and payment date, and shall, promptly
thereafter, notify the Trustee of any such date. At least 15 days before the
special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail to Holders a notice that states the special
record date, the related payment date and the amount of such interest to be
paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of Holders
entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA
Section 316(c).
SECTION 2.14. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number and, if it
does so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes and that reliance may be placed
only on the other
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identification numbers printed on the Notes. The Company will promptly notify
the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION AND OFFERS TO PURCHASE
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 75 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant
to which the redemption shall occur, (ii) the redemption date, (iii) the
principal amount of Notes to be redeemed and (iv) the redemption price.
If the Company is required to make an offer to purchase Notes
pursuant to the provisions of Sections 4.10 or 4.15, it shall furnish to the
Trustee, at least 30 days before the scheduled purchase date, an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the offer to purchase shall occur, (ii) the offer's terms, (iii) the purchase
price, (iv) the principal amount of the Notes to be purchased, and (v) further
setting forth a statement to the effect that (a) the Company or one of its
Subsidiaries has made an Asset Sale and there are Excess Proceeds aggregating
more than $5.0 million and the amount of such Excess Proceeds, or (b) a Change
of Control has occurred, as applicable.
SECTION 3.02. SELECTION OF NOTES TO BE PURCHASED OR REDEEMED.
If less than all of the Notes are to be purchased in an Asset Sale
Offer or redeemed at any time, the Trustee shall select the Notes to be
purchased or redeemed among the applicable Holders 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,
or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption in the manner provided above,
the particular Notes to be redeemed shall be selected, unless otherwise
provided herein, not less than 30 nor more than 60 days prior to the redemption
date by the Trustee from the outstanding Notes not previously called for
redemption. In the event that less than all of the Notes properly tendered in
an Asset Sale Offer are to be purchased, the particular Notes to be purchased
shall be selected promptly upon the expiration of such Asset Sale Offer.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
purchase or redemption, the principal amount thereof to be purchased or
redeemed. Notes and portions of Notes selected shall be in amounts of $1,000
or whole multiples of $1,000; except that if all of the Notes of a Holder are
to be purchased or redeemed, the entire outstanding amount of Notes held by
such Holder, even if not a multiple of $1,000, shall be purchased or redeemed.
Except as provided in the preceding sentence, provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for
redemption.
In the event the Company is required to make an Asset Sale Offer
pursuant to Sections 3.09 and 4.10 hereof and the amount of Excess Proceeds to
be applied to such purchase would result in the purchase of a principal amount
of Notes which is not evenly divisible by $1,000, the Trustee shall promptly
refund to the Company the portion of such Excess Proceeds that is not necessary
to purchase the immediately lesser principal amount of Notes that is so
divisible.
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SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a purchase or
redemption date, the Company shall mail or cause to be mailed, by first class
mail, a notice of redemption to each Holder whose Notes are to be redeemed at
its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that
the Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as
provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess
of the amounts necessary to pay the redemption price of, and accrued interest
on, all Notes to be redeemed.
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If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption, whether or not such
Notes are presented for payment. If a Note is redeemed on or after an interest
record date but on or prior to the related interest payment date, then any
accrued and unpaid interest shall be paid to the Person in whose name such Note
was registered at the close of business on such record date. If a redemption
date is a Legal Holiday, payment shall be made on the next succeeding Business
Day and no interest shall accrue for the period from such redemption date to
such succeeding Business Day. If any Note called for redemption shall not be
so paid upon surrender for redemption because of the failure of the Company to
comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case
at the rate provided in the Notes and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note (accompanied by a
notation of the Note Guarantee duly endorsed by the Guarantors, if applicable)
equal in principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
The Company may redeem all or a portion of the Notes, upon the terms,
at the times, upon the conditions and for the prices set forth in each of the
Notes. Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes prior to the maturity of the
Notes (whether at final maturity or upon acceleration thereof).
SECTION 3.09. OFFERS TO PURCHASE.
(a) In the event that, pursuant to Section 4.10 or Section 4.15
hereof, the Company shall be required to commence an offer to all Holders to
purchase Notes (each, a "Purchase Offer"), it shall follow the procedures
specified in this Section 3.09.
(b) The Purchase Offer shall commence on the date (the "Commencement
Date") specified in Section 4.10 or Section 4.15 hereof, as the case may be,
remain open for a period specified by the Company, which shall be in accordance
with Section 4.10 or Section 4.15 hereof, as the case may be, except to the
extent that a longer period is required by applicable law (the "Offer Period").
No later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 or 4.15 hereof (the "Offer
Amount") or, if less than the Offer Amount has been tendered, all Notes
tendered in response to such Purchase Offer. Payment for any Notes so
purchased shall be made in the same manner as interest payments are made.
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If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest, if
any, shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to such Purchase Offer.
Upon the commencement of a Purchase Offer, the Company shall send, by
first class mail, a notice to each of the Holders, with a copy to the Trustee.
The notice shall contain all instructions and materials necessary to enable
such Holders to tender Notes pursuant to such Purchase Offer. The Purchase
Offer shall be made to all Holders. The notice, which shall govern the terms
of the Purchase Offer, shall state:
(a) that the Purchase Offer is being made pursuant to Section
4.10 or Section 4.15 hereof, as the case may be, the Offer Period, and the
expiration date of the Offer Period;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered and accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment,
any Note accepted for payment pursuant to the Purchase Offer shall cease
to accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to
any Purchase Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Company, a depositary, if appointed by the Company, or a
Paying Agent at the address specified in the notice prior to the close of
the Offer Period;
(g) that Holders shall be entitled to withdraw their election
if the Company, the depositary or the Paying Agent, as the case may be,
receives, not later than the close of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(h) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Notes shall be
selected for purchase pursuant to the terms of Section 3.02 hereof, and
that Holders whose Notes were purchased only in part shall be issued new
Notes (accompanied by a notation of the Note Guarantee duly endorsed by
the Guarantors, if applicable) equal in principal amount to the
unpurchased portion of the Notes surrendered; and
(i) (x) if such Purchase Offer was pursuant to Section 4.15,
the circumstances and material facts regarding such Change of Control,
including but not limited to, information with respect to pro forma and
historical financial information after giving effect to such Change of
Control, and information regarding the Person or Persons acquiring control
and (y) if such Purchase Offer was pursuant to Section 4.10, the
circumstances and material facts regarding the Asset Sale or Asset Sales
giving rise to such Purchase Offer, including but not limited to,
information with respect to pro forma and historical financial information
if material operations of the Company or any Restricted Subsidiary were
divested in such Asset Sale or Asset Sales.
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, pursuant to the terms of Section 3.02 hereof, the
Offer Amount of Notes or portions thereof tendered
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pursuant to the Purchase Offer, or if less than the Offer Amount has been
tendered, all Notes tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were accepted for
payment by the Company in accordance with the terms of this Section 3.09. The
Company, the depositary or the Paying Agent, as the case may be, shall promptly
(but in any case not later than five days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee, upon written request
from the Company shall authenticate and mail or deliver such new Note
(accompanied by a notation of the Note Guarantee duly endorsed by the
Guarantors, if applicable) to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of such Purchase Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof to the extent applicable.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in
the Notes. Other than pursuant to Section 3.05, principal, premium, if any,
and interest shall be considered paid on the date due if the Paying Agent, if
other than the Company or a Guarantor, holds as of Noon Eastern Time on the due
date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due. Such Paying Agent shall return to the Company no later than
two days following the date of payment, any money (including accrued interest)
that exceeds such amount of principal, premium, if any, and interest paid on
the Notes.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company or the Guarantors in respect of the Notes and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee.
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The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
SECTION 4.03. REPORTS.
Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall (i) furnish to the Trustee
and to all Holders all quarterly and annual financial information that would be
required to be contained in a filing with the SEC 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 (ii) file a copy of all such information
with the SEC for public availability (unless the SEC will not accept such a
filing) and file such information with the Trustee and make such information
available to investors and securities analysts who request it in writing. The
Company shall at all times comply with TIA Section 314(a).
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company and each obligor on the Notes and this
Indenture has kept, observed, performed and fulfilled its obligations under
this Indenture (including with respect to any Restricted Payments made during
such year, the basis upon which the calculations required by Section 4.07 were
computed, which calculations may be based on the Company's latest available
financial statements), and further stating, as to each such Officer signing
such certificate, that to the best of his or her knowledge the Company and each
such obligor, has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance
or observance of any of the terms, provisions and conditions of this Indenture
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Company or such Guarantor, as the case may be, is taking or proposes
to take with respect thereto) and that to the best of his or her knowledge no
event has occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Notes is prohibited or
if such event has occurred, a description of the event and what action the
Company or any obligor, as the case may be, is taking or proposes to take with
respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
the provisions contained in Sections 4.01, 4.05, 4.07, 4.09, 4.10, 4.17, 4.18
or 5.01 hereof or (to the extent such provisions relate to accounting matters),
if any such violation has
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occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, within five Business Days upon any Officer becoming
aware of any Default or Event of Default, an Officers' Certificate specifying
such Default or Event of Default and what action the Company is taking or
proposes to take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Restricted
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
Each of the Company and the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and each of
the Company and the Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been
enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (other than: (1) dividends or distributions
payable in Equity Interests of the Person making such dividend or distribution
(other than Disqualified Stock) provided that such dividend or distribution is
paid pro rata to all stockholders of such Person; (2) dividends or
distributions payable to holders (other than the Company or any of its Wholly
Owned Restricted Subsidiaries) provided that such dividend or distribution is
paid pro rata to all stockholders of such Person; or (3) dividends or
distributions payable to the Company or any Wholly Owned Restricted Subsidiary
of the Company); (ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company or any Restricted Subsidiary or other
Affiliate of the Company (other than any such Equity Interests owned by the
Company or any Wholly Owned Restricted Subsidiary of the Company); (iii)
purchase, redeem or otherwise acquire or retire for value any Indebtedness of
the Company or any Restricted Subsidiary (other than the Notes) that is pari
passu with or subordinated to the Notes or any Note Guarantee; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
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(b) 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 Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issuance Date (other than Restricted Payments
permitted by clauses (iii), (v), (vi), (vii), (viii) and (ix) of the next
succeeding paragraph), is less than the sum of (v) 50% of the sum of the
Consolidated Net Income of the Company plus any Consolidated Cash Asset
Sale Gain of the Company and its Restricted Subsidiaries as of such date
for the period (taken as one accounting period) from the beginning of the
first fiscal quarter that begins after the Issuance Date 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 plus such Consolidated Cash Asset Sale Gain
as of such date for such period is a deficit, 100% of such deficit), plus
(w) 100% of the aggregate net cash proceeds received by the Company from
the issue or sale since the Issuance Date of Equity Interests of the
Company or of debt securities of the Company that have been converted or
exchanged into such Equity Interests (other than Equity Interests (or
convertible or exchangeable debt securities) sold to a Restricted
Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted or exchanged into Disqualified Stock),
plus (x) in case any Unrestricted Subsidiary has been redesignated a
Restricted Subsidiary and becomes a Guarantor pursuant to the terms of
this Indenture and provided that no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof, the
lesser of (i) the book value (determined in accordance with GAAP) at the
date of such redesignation of the aggregate Investments made by the
Company and its Restricted Subsidiaries in such Unrestricted Subsidiary
and (ii) the fair market value of such Investments in such Unrestricted
Subsidiary at the time of such redesignation, as determined in good faith
by the Board of Directors of the Company, whose determination shall be
conclusive and evidenced by a resolution of such Board, plus (y) the
amount of Restricted Payments which had been subject to this covenant as a
result of the Company or the applicable Restricted Subsidiary having
previously opted not to become a Guarantor under Section 4.13 hereof, to
the extent such Restricted Subsidiary subsequently becomes a Guarantor
pursuant to the terms of this Indenture, plus (z) $2.0 million.
The foregoing provisions will not prohibit (i) 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 provisions of this
Indenture; (ii) the redemption, purchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of other Equity Interests of the Company (other than any Disqualified
Stock); (iii) the defeasance, redemption, repayment or purchase of pari passu
or subordinated Indebtedness in a Permitted Refinancing; (iv) the purchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company pursuant to any management equity subscription agreement or
stock option agreement in effect as of the Issuance Date; provided, however,
that the aggregate price paid for all such purchased, redeemed, acquired or
retired Equity Interests shall not exceed $250,000 per year on a cumulative
basis since the Issuance Date; (v) the ShoLodge Joint Venture Contribution;
(vi) Restricted Investments made in Hospitality - Related Businesses
outstanding at any time which do not exceed $30 million, provided, however, that
any Restricted Investments made under this clause (vi) which are subsequently
written off shall be deemed to be outstanding under this clause (vi) and any
cash or property received with respect to such Restricted Investment was not
credited in clause (x) or (y) in the preceding paragraph;
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(vii) mortgages or other notes receivable not to exceed $50.0 million
if such mortgages or other notes receivable are secured by a first priority
perfected Lien (which is not pari passu with any other Lien securing
Indebtedness) on the Frenchman's Reef; (viii) mortgages and notes receivable
(other than with respect to the Frenchman's Reef) existing on the Issuance Date
and Permitted Note Exchanges; and (ix) Investments in any Unrestricted
Subsidiary so long as such Unrestricted Subsidiary becomes a Restricted
Subsidiary in compliance with the terms of this Indenture immediately after
such Restricted Payment; provided that, in the case of clauses (ii) through
(ix) above, no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof.
In determining whether any Restricted Payment is permitted by the
foregoing covenant, the Company may allocate or reallocate all or any portion
of such Restricted Payment among the clauses (i) through (ix) of the preceding
paragraph or among such clauses and the first paragraph of this covenant,
provided that at the time of such allocation or reallocation, all such
Restricted Payments, or allocated portions thereof, would be permitted under
the various provisions of the foregoing covenant.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
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 encumbrance or restriction on the ability of any
Restricted Subsidiary to (a)(i) pay dividends or make any other consensual
distributions to the Company or any of its Restricted Subsidiaries (A) on its
Capital Stock or (B) 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 or capital
contributions 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 reasons of (i) Existing Indebtedness as in effect on the Issuance
Date, (ii) this Indenture and the Notes, (iii) applicable law, (iv) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries or of any Person that becomes a
Restricted Subsidiary as in effect at the time of such acquisition or such
Person becoming a Restricted Subsidiary (except to the extent such Indebtedness
was incurred in connection with or, if incurred within one year prior to such
acquisition or such Person becoming a Restricted Subsidiary, in contemplation
of such acquisition or such Person becoming a Restricted Subsidiary), 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 that the Consolidated Cash Flow of such
Person is not taken into account (to the extent of such restriction) in
determining whether such acquisition was permitted by the terms of this
Indenture, (v) any instrument governing Indebtedness or Capital Stock of a
Person who becomes a Guarantor as in effect at the time of becoming a Guarantor
(except to the extent such Indebtedness was incurred in connection with or, if
incurred within one year prior to the time of becoming a Guarantor, in
contemplation of such Guarantee), 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 who became a Guarantor,
(vi) by reason of customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (vii)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (c) above
on the property so acquired, (viii) permitted Refinancing Indebtedness,
provided that the restrictions contained in the agreements governing such
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness
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being refinanced, or (ix) customary restrictions in security agreements or
mortgages securing Indebtedness of a Restricted Subsidiary to the extent such
restrictions restrict the transfer of the property subject to such security
agreements and mortgages.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty
or otherwise become directly or indirectly liable with respect to
(collectively, "incur" and correlatively, an "incurrence" of) any Indebtedness
(including Acquired Debt) and that the Company will not issue any, and will not
permit any of its Restricted Subsidiaries to issue any, shares of Disqualified
Stock; provided, however, that the Company or any of its Restricted
Subsidiaries may incur Indebtedness or issue shares of Disqualified Stock 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 or such Disqualified Stock is issued would have been at least 2.0 to
1.0, determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been incurred,
or the Disqualified Stock had been issued, as the case may be, at the beginning
of such four-quarter period.
The foregoing limitations will not apply to (a) additional
Indebtedness of up to $40.0 million in aggregate principal amount at any one
time outstanding, less the aggregate amount of all proceeds of all sales or
other dispositions of assets that have been applied since the Issuance Date to
permanently reduce the outstanding amount of such Indebtedness pursuant to
Section 4.10 hereof; (b) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness; (c) the incurrence by the Company or
any Subsidiary of Indebtedness represented by the Notes or any Guarantee
thereof; (d) intercompany Indebtedness between or among the Company and any of
its Restricted Subsidiaries; (e) 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 this Indenture to be
outstanding; and (f) the incurrence or the issuance by the Company of
Refinancing Indebtedness or Refinancing Disqualified Stock of the Company or
any Restricted Subsidiary or the incurrence or issuance by a Restricted
Subsidiary of Refinancing Indebtedness or Refinancing Disqualified Stock of
such Restricted Subsidiary, as the case may be; provided, however, that such
Refinancing Indebtedness or Refinancing Disqualified Stock, as the case may be,
is a Permitted Refinancing.
Upon the occurrence of any Unrestricted Subsidiary ceasing to become
an Unrestricted Subsidiary and becoming a Restricted Subsidiary, any
Indebtedness of such Subsidiary shall be deemed to be incurred by such
Restricted Subsidiary upon such date, calculated on a pro forma basis as if
such Unrestricted Subsidiary had become a Subsidiary on the first day of the
fourth full fiscal quarter prior to such date.
SECTION 4.10. ASSET SALES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, conduct an Asset Sale, unless (x) the Company (or the
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 set forth in an Officers' Certificate
delivered to the Trustee; provided, however, that with respect to an Asset Sale
of all or any part of the Frenchman's Reef, the fair market value shall be
evidenced by an opinion as to the fairness of such transaction from a financial
point of view issued by, at the option of the Company, an investment banking
firm of national standing or an
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appraisal firm of national standing with a hospitality business expertise) of
the assets sold or otherwise disposed of and (y) at least 85% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; provided, however, that the principal
amount of the following shall be deemed to be cash for purposes of this
provision: (A) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto), of the Company
or any Restricted Subsidiary (other than liabilities that are by their terms
subordinated or pari passu to the Notes or any Guarantee thereof) that are
assumed by the transferee of any such assets and (B) any notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are converted by the Company or such Restricted Subsidiary into
cash within 90 days of the closing of such Asset Sale (to the extent of the
cash received). Notwithstanding the foregoing, clause (y) above will not apply
with respect to mortgages or other notes receivable received by the Company or
any such Restricted Subsidiary from such transferee to the extent such
mortgages or other notes receivable are Investments permitted to be made by the
Company or such Restricted Subsidiary under Section 4.07 hereof.
Within 365 days of any Asset Sale, the Company or such Restricted
Subsidiary may (a) apply the Net Proceeds from such Asset Sale to permanently
reduce Senior Indebtedness of the Company, Senior Indebtedness of any Guarantor
or Senior Indebtedness of such Restricted Subsidiary or (b) invest the Net
Proceeds from such Asset Sale in property or assets used in a
Hospitality-Related Business; provided that the Company or such Restricted
Subsidiary will have complied with this clause (b) if, within 365 days of such
Asset Sale, the Company or such Restricted Subsidiary shall have commenced and
not completed or abandoned an Investment in compliance with this clause (b) and
shall have segregated such Net Proceeds from the general funds of the Company
and their Subsidiaries for that purpose and such Investment is substantially
completed within 180 days after the first anniversary of such Asset Sale. Any
Net Proceeds from the Asset Sale 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,
the Company shall make an offer to all Holders of Notes to purchase the maximum
principal amount of Notes, that is an integral multiple of $1,000, 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,
if any, to the date of purchase, in accordance with the procedures set forth in
Article 3 hereof. The Company shall commence a Purchase Offer with respect to
Excess Proceeds within 10 Business Days after the date that Excess Proceeds
exceeds $5.0 million by mailing the notice required in Section 3.09 to the
Holders. The Offer Period shall be not less than 20 Business Days and not more
than 45 Business Days, unless a longer period is required by law. The Company
shall 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 such Purchase Offer. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use such deficiency for
general corporate purposes. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero. Pending the final
application of any Net Proceeds from an Asset Sale pursuant to this paragraph,
the Company or any Restricted Subsidiary may temporarily reduce Senior
Indebtedness of the Company or Senior Indebtedness of any Guarantor or
otherwise invest such Net Proceeds in Cash Equivalents.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
any contract, agreement, understanding, loan, advance or Guarantee with, or for
the
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benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (a) such Affiliate Transaction is on terms that 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 on an arm's length basis with an unrelated Person and (b) the
Company delivers to the Trustee (i) with respect to any Affiliate Transaction
involving aggregate payments in excess of $1.0 million, an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (a)
above and such Affiliate Transaction is approved by a majority of the
disinterested members of the Board of Directors and (ii) with respect to any
Affiliate Transaction involving aggregate payments in excess of $5 million, an
opinion as to the fairness to the Company or such Restricted Subsidiary from a
financial point of view issued, at the option of the Company, by an investment
banking firm of national standing or an appraisal firm of national standing
with a hospitality business expertise; provided, however, that the following
shall not be deemed Affiliate Transactions: (i) any employment, deferred
compensation, stock option, noncompetition, consulting or similar 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 Wholly Owned Restricted Subsidiaries or any Guarantor and
(iii) Restricted Payments permitted by Section 4.07 hereof (other than
Restricted Investments permitted pursuant to clause (ix) of the second
paragraph of Section 4.07 hereof).
SECTION 4.12. LIENS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired by the Company or
any Restricted Subsidiary, or any income or profits therefrom or assign or
convey any right to receive income therefrom to secure any Indebtedness (other
than Permitted Liens) unless contemporaneously therewith or prior thereto,
effective provision is made (such effective provision to be evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) whereby the Notes are secured equally and ratably
with such other Indebtedness (or if such other Indebtedness is subordinated to
the Notes, the Notes are secured on a basis with at least as favorable a
relative priority to such other Indebtedness).
SECTION 4.13. ADDITIONAL GUARANTEES.
If the Company or any Guarantor shall transfer or cause to be
transferred, in one or a series of related transactions, any assets,
businesses, divisions, real property or equipment having a book value or fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be conclusive and evidenced by a resolution
of such Board) in excess of $1.0 million to any Restricted Subsidiary that is
not a Guarantor, at the Company's or such Restricted Subsidiary's option, (a)
such transferee Restricted Subsidiary shall execute and deliver to the Trustee
a supplemental indenture pursuant to which such Restricted Subsidiary shall
guarantee all of the obligations of the Company with respect to the Notes on a
senior subordinated basis as provided in Article 10 hereof (a "Note Guarantee")
together with an Opinion of Counsel to the effect that such supplemental
indenture has been duly executed and delivered by such Restricted Subsidiary
and is in compliance with the terms of this Indenture or (b), after giving
effect to such transaction or series of related transactions, such transaction
or series of related transactions constitute a Restricted Payment permitted
pursuant to the provisions of Section 4.07 hereof.
In addition, upon the designation of any Unrestricted Subsidiary as a
Restricted Subsidiary, including by reason of clause (ix) of Section 4.07, such
designation shall be deemed to be a transfer of
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assets to a Restricted Subsidiary for purposes of this Section. In the event
of a sale or other disposition of all or substantially all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) shall
be released and relieved of any obligations under its Guarantee; provided that
the Net Proceeds of such sale or other disposition are applied in accordance
with the applicable provisions of this Indenture.
SECTION 4.14. DESIGNATION OF UNRESTRICTED SUBSIDIARY.
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary, provided, that: (i) at the time of
designation, the Investment by the Company or any of its Restricted
Subsidiaries in such Subsidiary shall be deemed a Restricted Investment (to the
extent not previously included as a Restricted Investment) made on the date of
such designation in the amount of the greater of (a) the total book value of
such Investment and (b) the fair market value of the assets in such Subsidiary
(in each case, less any liabilities from which the Company or any remaining
Restricted Subsidiary shall be relieved that were on the consolidated balance
sheet of the Company and its Restricted Subsidiaries prior to such designation
and for which the Company and its Restricted Subsidiaries will not be liable,
directly or contingently, after such designation), and such Restricted
Investment would be permitted to be made on such date under Section 4.07
hereof; (ii) for so long as such Subsidiary remains an Unrestricted Subsidiary,
such Unrestricted Subsidiary has not acquired any assets from the Company or
any Restricted Subsidiary other than as specifically permitted by the
provisions of this Indenture, including the provisions described under Section
4.07 hereof; (iii) at the time of designation, no Default or Event of Default
has occurred and is continuing or results immediately after such designation;
(iv) at the time of designation and for so long as such Subsidiary remains an
Unrestricted Subsidiary, such Unrestricted Subsidiary has no Indebtedness other
than Non-Recourse Indebtedness of such Subsidiary; and (v) such Subsidiary does
not own any Equity Interests in a Restricted Subsidiary of the Company.
Notwithstanding the foregoing, on the Issuance Date, Suites of America
initially shall be an Unrestricted Subsidiary.
Any such designation by the Board of Directors (other than the
initial designation of Suites of America) shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the resolution of the Board of
Directors of the Company giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.
SECTION 4.15. OFFER TO PURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company shall
make a Purchase Offer to each Holder to purchase all or any part of such
Holder's Notes at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase. Such Purchase Offer shall be made in accordance with the
procedures set forth in Article 3 hereof. The Company shall commence such
Purchase Offer within 10 Business Days following any Change of Control by
mailing the notice set forth in Section 3.09 to the Holders. The Offer Period
shall be not less than 20 Business Days and not more than 45 Business Days,
unless a longer period is required by law. The Company shall 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 such Purchase Offer.
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(b) Prior to making the Change of Control Payment, but in any
event within 90 days following a Change of Control, the Company shall either
repay all outstanding Designated Senior Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Designated Senior
Indebtedness to permit the repurchase of Notes required by this Section 4.15.
The Company shall publicly announce the results of the Change of Control Offer
on or as soon as practicable after the payment date for such Purchase Offer.
Section 4.16. CORPORATE EXISTENCE.
Subject to Article 5 and Article 10 hereof, as the case may be, the
Company and each of the Guarantors shall do or cause to be done all things
necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of their
Subsidiaries, in accordance with the respective organizational documents (as
the same may be amended from time to time) of the Company, any such Guarantor
or any such Subsidiary, as the case may be, and (ii) the rights (charter and
statutory), licenses and franchises of the Company, the Guarantors and their
respective Subsidiaries; provided, however, that the Company and the Guarantors
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of their respective
Subsidiaries, if an officer of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company, the Guarantors and their Subsidiaries, taken as a whole.
SECTION 4.17. LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK BY RESTRICTED SUBSIDIARIES.
The Company will not permit any of its Restricted Subsidiaries that
is not a Guarantor to incur Indebtedness or issue any Preferred Stock, unless
the sum of all outstanding Indebtedness and Preferred Stock (valued at the
greater of liquidation value or redemption value) of all such Restricted
Subsidiaries that are not Guarantors does not exceed 5% of Consolidated Net
Tangible Assets of the Company and its Restricted Subsidiaries at the time of
such incurrence. The test set forth in this paragraph shall be in addition to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof.
SECTION 4.18. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company will not, and will not permit its Restricted Subsidiaries
to, enter, renew or extend, any Sale and Leaseback Transaction, unless (i) the
Company or such Restricted Subsidiary 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 Section 4.09 and (ii) the
Company would have been permitted to enter into such transaction pursuant to
the terms of Section 4.12, had such Sale and Leaseback Transaction been
structured as a mortgage loan rather than a Sale and Leaseback Transaction.
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SECTION 4.19. LINE OF BUSINESS.
The Company will not, and will not permit any of its Subsidiaries to,
engage in any business or activity other than a Hospitality-Related Business.
SECTION 4.20. NO SENIOR SUBORDINATED INDEBTEDNESS.
Notwithstanding the provisions of Section 4.09 hereof, (i) the
Company shall not incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment
to any Senior Indebtedness and senior in any respect in right of payment to the
Notes, and (ii) no Guarantor shall incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to its Senior Indebtedness and senior in any respect in right
of payment to its Note Guarantee.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
(a) The Company shall not consolidate or merge with or into (whether
or not the Company is the surviving Person), 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 Person unless (i) the
Company is the surviving 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 is a
corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
pursuant to a supplemental indenture, under the Notes and this Indenture; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) the Company or any Person formed by or surviving any such consolidation or
merger, or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made (A) shall have Consolidated Net Worth
(immediately after the transaction) equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction and (B) shall,
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 Section 4.09 hereof.
(b)(i) A Guarantor shall not consolidate with or merge with or into
the Company unless the surviving corporation (if other than the Company) shall
expressly assume by supplemental indenture complying with the requirements of
this Indenture, the due and punctual payment of the principal of, premium, if
any, and interest on all of the Notes, and the due and punctual performance and
observance of all the covenants and conditions of this Indenture to be
performed by the Company and (ii) a Guarantor may consolidate with or merge
with or into any other Guarantor.
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SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the
assets of the Company or the Company and its Subsidiaries on a consolidated
basis in accordance with Section 5.01 hereof, the successor Person formed by
such consolidation or into or with which the Company is merged or to which such
sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" or the "Guarantor," as
the case may be, shall refer instead to the successor corporation and not to
the Company or the Guarantor, as the case may be), and may exercise every right
and power of the Company or the Guarantors, as the case may be, under this
Indenture with the same effect as if such successor Person had been named as
the Company or Guarantor, as the case may be, herein; provided, however, that
the predecessor Company and the predecessor Subsidiaries that are Guarantors
shall not be relieved from the obligation to pay the principal of and interest
on the Notes except in the case of a sale of all of the Company's assets that
meets the requirements of Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company or the Guarantors default in the payment when
due of interest on the Notes (whether or not prohibited by the
subordination provisions of Article 10 or Article 11 hereof, as the
case may be) and such default continues for a period of 30 days;
(b) the Company or the Guarantors default in the payment when
due of principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of Article 10 or Article
11 hereof, as the case may be) when the same becomes due and payable
at maturity, upon redemption (including in connection with an offer
to purchase) or otherwise;
(c) the Company fails to comply with any of the provisions of
Section 4.15 or 5.01 hereof;
(d) the Company or the Guarantors fail to observe or perform any
other covenant, representation, warranty or other agreement in this
Indenture or the Notes for 60 days after notice to the Company by the
Trustee or to the Company and the Trustee from Holders of at least
25% in principal amount of the Notes then outstanding;
(e) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be issued or by
which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the Issuance Date, which default results
in the acceleration of such Indebtedness (other than Non-Recourse
Indebtedness secured by (1) assets or property acquired after the
Issuance Date or (2) assets or property which were securing
Non-Recourse Indebtedness on the Issuance Date) prior to its express
maturity or shall
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constitute a default in the payment of such issue of Indebtedness at
final maturity of such issue and, in each case, the principal amount
of any such Indebtedness, together with the principal amount of any
other such Indebtedness the maturity of which has been so accelerated
or which has not been paid at final maturity, aggregates $5 million
or more;
(f) a final judgment or final judgments (other than judgment
liens without recourse to any assets or property of the Company or
any of its Restricted Subsidiaries other than assets or property
securing Non-Recourse Indebtedness) for the payment of money are
entered by a court or courts of competent jurisdiction against the
Company or any of its Restricted Subsidiaries and such judgments are
not paid, discharged or stayed for a period of 90 days (other than
any judgments as to which a reputable insurance company has accepted
full liability), provided that the aggregate of all such undischarged
judgments exceeds $5 million;
(g) except as permitted by this Indenture, any Guarantee with
respect to the Notes shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full
force and effect or any Guarantor (or its successors or assigns), or
any Person acting on behalf of such Guarantor (or its successors or
assigns), shall deny or disaffirm its obligations or shall fail to
comply with any obligations under its Guarantee;
(h) the Company, any of its Restricted Subsidiaries or any
Guarantor pursuant to or within the meaning of Bankruptcy Law:
(1) commences a voluntary case,
(2) consents to the entry of an order for relief against
it in an involuntary case,
(3) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(4) makes a general assignment for the benefit of its
creditors, or
(5) generally is not paying its debts as they become due;
or
(i) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(1) is for relief against the Company, any of its
Restricted Subsidiaries or any Guarantor in an
involuntary case;
(2) appoints a Custodian of the Company, any of its
Restricted Subsidiaries or any Guarantor or for all or
substantially all of the property of the Company, any
of its Restricted Subsidiaries or any Guarantor; or
(3) orders the liquidation of the Company, any of its
Restricted Subsidiaries or any Guarantor;
and the order or decree remains unstayed and in effect for 60
consecutive days.
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SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section 6.01 hereof with respect to the Company, any of
its Restricted Subsidiaries or any Guarantor) 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 case an Event of Default specified in clause
(h) or (i) of Section 6.01 hereof occurs with respect to the Company, any of
its Restricted Subsidiaries or any Guarantor, all outstanding Notes will become
due and payable without further action or notice. Under certain circumstances,
the Holders of a majority in principal amount of the outstanding Notes may
rescind any acceleration with respect to the Notes and its consequences.
Holders may not enforce this Indenture or the Notes except as provided herein.
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 notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
If an Event of Default occurs by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the Notes pursuant to Section
3.07 hereof, then, upon acceleration of the Notes, an equivalent premium shall
also become and be immediately due and payable, to the extent permitted by law,
anything in this Indenture or in the Notes to the contrary notwithstanding. If
an Event of Default occurs prior to ________ __, 1999 by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
______________, then, upon acceleration of the Notes, an additional premium
shall also become and be immediately due and payable in an amount, for each of
the years beginning on ______ of the years set forth below, as set forth below
(expressed as a percentage of the principal amount that would otherwise be due
but for the provisions of this sentence):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _______%
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _______%
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _______%
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _______%
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _______%
</TABLE>
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision
of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
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SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than 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 an existing Default or Event of Default and
its consequences hereunder, except a continuing Default or Event of Default in
the payment of the principal of, premium, if any, or interest on, the Notes
(including in connection with an offer to purchase) (provided, however, that
the Holders of a majority in aggregate principal amount of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration). Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default or the Trustee receives such notice from the
Company;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request; provided, however, that such provision does
not effect the right of a Holder of a Note to sue for enforcement of any
overdue payment thereon.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest on the Note, on or after the respective due
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dates expressed in the Note (including in connection with a Purchase Offer), or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder[, except that, as described in TIA Section 316(A)(2)].
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders allowed in any judicial proceedings relative to the Company (or
any other obligor upon the Notes, including the Guarantors), its creditors or
its property and shall be entitled and empowered to collect, receive and
distribute any money or other property payable or deliverable on any such
claims and any custodian in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 7.07 hereof. To the extent
that the payment of any such compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.07 hereof out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties that the Holders may be entitled to receive in such
proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf
of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof;
Second: to the holders of Senior Indebtedness of the Company or the
Guarantors, as the case may be, to the extent required by Article 10 or Article
11 hereof, as applicable;
Third: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium, if any, and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Notes for
principal, premium, if any, and interest, respectively; and
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Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph (c) does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
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(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(g) The Trustee shall not be responsible for having knowledge of any
defaults, except for monetary defaults, unless specifically notified in writing
by the Holders.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company, the
Guarantors, if any, or any Affiliate of the Company or
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<PAGE> 46
the Guarantors, if any, with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes
or any other document in connection with the sale of the Notes or pursuant to
this Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of
the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of, premium, if
any, or interest on any Note, the Trustee may withhold the notice if and so
long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders a brief report dated as of such reporting
date that complies with TIA Section 313(a) (but if no event described in TIA
Section 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
Section 313(b)(2). The Trustee shall also transmit by mail all reports as
required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA Section 313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company and the Guarantors, if any, shall pay to the Trustee from
time to time reasonable compensation for its acceptance of this Indenture and
services hereunder. The Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Company and the
Guarantors, if any, shall reimburse the Trustee promptly upon request for all
reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
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The Company and the Guarantors, if any, shall indemnify the Trustee
and its directors, officers and employees against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company and the
Guarantors, if any (including this Section 7.07), and defending itself against
any claim (whether asserted by the Company, any Guarantor or any Holder or any
other person) or liability in connection with the exercise or performance of
any of its powers or duties hereunder, except to the extent any such loss,
liability or expense may be attributable to its negligence, willful misconduct,
bad faith or breach of its duties under this Indenture. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
Unless the position of the Company or the Guarantors is prejudiced by such
failure, failure by the Trustee to so notify the Company shall not relieve the
Company and the Guarantors, if any, of their obligations hereunder. The
Company and the Guarantors, if any, shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel if the
Trustee shall have been reasonably advised by such counsel that there may be
one or more legal defenses available to it that are different from or
additional to those available to the Company and in the reasonable judgment of
such counsel it is advisable for the Trustee to employ separate counsel, and
the Company and the Guarantors, if any, shall pay the reasonable fees and
expenses of such counsel. The Company and the Guarantors, if any, need not pay
for any settlement made without their consent, which consent shall not be
unreasonably withheld.
The obligations of the Company and the Guarantors, if any, under this
Section 7.07 shall survive the satisfaction and discharge of this Indenture.
To secure the Company's and the Guarantors', if any, payment
obligations in this Section, the Trustee shall have a Lien prior to the Notes
on all money or property held or collected by the Trustee, except that held in
trust to pay principal and interest on particular Notes. Such Lien shall
survive the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2)
to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of
a majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company
may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
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(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, any
Guarantor, or the Holders of Notes of at least 10% in principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's and the Guarantors', if any,
obligations under Section 7.07 hereof shall continue for the benefit of the
retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee; provided such corporation shall be otherwise eligible and
qualified under this Article.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or
state authorities and that has a combined capital and surplus of at least $100
million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
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SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate delivered to the Trustee, at
any time, elect to have either Section 8.02 or 8.03 hereof be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, each of the Company and the Guarantors, if
any, shall, subject to the satisfaction of the conditions set forth in Section
8.04 hereof, be deemed to have been discharged from its obligations with
respect to all outstanding Notes and Note Guarantees on the date the conditions
set forth below are satisfied (hereinafter, "Legal Defeasance"). For this
purpose, Legal Defeasance means that the Company shall be deemed to have paid
and discharged the entire Indebtedness represented by the outstanding Notes,
which shall thereafter be deemed to be "outstanding" only for the purposes of
Section 8.05 hereof and the other Sections of this Indenture referred to in (a)
and (b) below, and to have satisfied all its other obligations under such Notes
and this Indenture (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to
receive solely from the trust fund described in Section 8.04 hereof, and as
more fully set forth in such Section, payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due, (b) the
Company's and Guarantors' obligations with respect to such Notes under Article
2 (except those obligations set forth in Sections 2.08, 2.09 and 2.12 hereof)
and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and the Company's and the Guarantors' obligations in
connection therewith and (d) this Article Eight. Subject to compliance with
this Article Eight, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, each of the Company and the Guarantors, if
any, shall, subject to the satisfaction of the conditions set forth in Section
8.04 hereof, be released from its obligations under the covenants contained in
Sections 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17,
4.18, 4.19 and 4.20 and Articles 5, 10 and 11 hereof with respect to the
outstanding Notes and Note Guarantees on and after the date the conditions set
forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes
shall thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall
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continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture, such
Notes and the Note Guarantees, if any, shall be unaffected thereby. In
addition, upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03 hereof, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(h)
hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders, cash in United States
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, premium, if any, and interest on the outstanding
Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be, of such principal or installment
of principal of, premium, if any, or interest on the outstanding
Notes;
(b) in the case of an election under Section 8.02 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
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 Issuance 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;
(c) in the case of an election under Section 8.03 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
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 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;
(d) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit or insofar as Sections
6.01(h) or 6.01(i) hereof is concerned, at any time in the period
ending on the 91st day after the date of deposit (or greater period
of time in which any such deposit of trust funds may remain subject
to Bankruptcy Law insofar as those apply to the deposit by the
Company);
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(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under,
any material agreement or instrument (other than this Indenture) to
which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or the Guarantors, if any, or with the
intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or the Guarantors, if any; and
(g) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent
required by law.
The Company and the Guarantors, if any, shall pay and indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against the
cash or non-callable Government Securities deposited pursuant to Section 8.04
hereof or the principal and interest received in respect thereof other than any
such tax, fee or other charge which by law is for the account of the Holders of
the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest, if any, on any Note and remaining unclaimed for two years
after such principal, and premium, if any, or interest, if any, have become due
and payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying
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Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and
The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such notification or publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02
or 8.03 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Company's and the Guarantors', if any, obligations
under this Indenture, the Notes and the Note Guarantees shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
hereof until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.02 or 8.03 hereof, as the case may be;
provided, however, that, if the Company and the Guarantors, if any, make any
payment of principal of, premium, if any, or interest, if any, on any Note
following the reinstatement of its obligations, the Company and the Guarantors,
if any, shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors, if any, and the Trustee may amend or supplement this Indenture or
the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(c) to provide for the assumption of the Company's or any
Guarantor's obligations to the Holders in the case of a merger or
consolidation pursuant to Article Five or Article 10 hereof, as the case
may be;
(d) to make any change that would provide any additional rights or
benefits to the Holders (including providing for Note Guarantees pursuant
to Section 4.13 hereof) or that does not adversely affect the legal rights
hereunder of any Holder of the Note; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the
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Trustee of the documents described in Section 9.06 hereof, the Trustee shall
join with the Company and the Guarantors, if any, in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company, the
Guarantors, if any, and the Trustee may amend or supplement this Indenture or
the Notes with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding (including consents obtained in connection
with a tender offer or exchange offer for the Notes), and, subject to Sections
6.04 and 6.07 hereof, any existing Default or Event of Default (other than a
Default or Event of Default in the payment of the principal of, premium, if
any, or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
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 the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 9.06 hereof, the Trustee shall join with the Company and the
Guarantors, if any, in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of
a majority in aggregate principal amount of the Notes then outstanding may
waive compliance in a particular instance by the Company or any Guarantor with
any provision of this Indenture, the Note or the Note Guarantees, if any.
However, 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 or waive any of the provisions with respect to the
redemption of the Notes;
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
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(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except
[(i)] a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the then
outstanding Notes and a waiver of the payment default that resulted
from such acceleration[ and (ii) a postponement of an interest
payment by authorization of not less than 75% in principal amount of
the then outstanding Notes for a period not exceeding three years
from its due date]);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating
to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on
the Notes;
(g) waive a redemption payment with respect to any Note;
(h) make any change to the subordination provisions of Section
10.02 or Article 11 hereof that adversely affects Holders;
(i) except pursuant to Article 8 and Article 10 hereof, release
any Guarantor from its obligations under its Note Guarantee, or
change any Note Guarantee in any manner that would adversely affect
the Holders; or
(j) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
In addition, without the consent of at least 66-2/3% in principal
amount of the Notes then outstanding, an amendment or waiver may not (with
respect to any Notes held by a non-consenting Holder) make any change to
Section 4.15 hereof.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of this Indenture (and the obligations of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirements that such Holder shall have been the Holder of
record of any Notes with respect to which such consent is required to be sought
as of a date identified by the Trustee in a notice furnished to Holders in
accordance with the terms of this Indenture.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental Indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
(accompanied by a notation of the Note Guarantee duly endorsed by the
Guarantors) that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. The Company and the Guarantors, if any, may not sign an amendment or
supplemental Indenture until the Board of Directors of the Company approves it.
In executing any amended or supplemental indenture, the Trustee shall be
entitled to receive and (subject to Section 7.01) shall be fully protected in
relying upon, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10
NOTE GUARANTEES
SECTION 10.01. NOTE GUARANTEE.
Each Subsidiary of the Company which in accordance with Section 4.13
hereof is required to guarantee the obligations of the Company under the Notes
(each, a "Guarantor") upon execution of a counterpart of this Indenture, hereby
jointly and severally unconditionally guarantees (each such guarantee being a
"Note Guarantee") to each Holder of a Note authenticated and delivered by the
Trustee irrespective of the validity or enforceability of this Indenture, the
Notes or the obligations of the Company under this Indenture or the Notes,
that: (i) the principal of and interest on the Notes will be paid in full when
due, whether at the maturity or interest payment or mandatory redemption date,
by acceleration, call for redemption or otherwise, and interest on the overdue
principal of and interest, if any, is lawful on the Notes and all other
obligations of the Company to the Holders or the Trustee under this Indenture
or the Notes will be promptly paid in full or performed, all in accordance with
the terms of this Indenture and the Notes; and (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, they
will be paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed for whatever reason, each
Guarantor will be obligated to pay the same whether or not such failure to pay
has become an Event of Default which could cause acceleration pursuant to
Section 6.02 hereof. Each Guarantor agrees that this is a guarantee of payment
not a guarantee of collection.
Each Guarantor hereby agrees that its obligations with regard to this
Note Guarantee shall be joint and several, unconditional, irrespective of the
validity or enforceability of the Notes or the obligations of the Company under
this Indenture, the absence of any action to enforce the same, the recovery of
any judgment against the Company or any other obligor with respect to this
Indenture, the Notes or the obligations of the Company under this Indenture or
the Notes, any action to enforce the
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same or any other circumstances (other than complete performance) which might
otherwise constitute a legal or equitable discharge or defense of a Guarantor.
Each Guarantor further, to the extent permitted by law, waives and relinquishes
all claims, rights and remedies accorded by applicable law to guarantors and
agrees not to assert or take advantage of any such claims, rights or remedies,
including but not limited to: (a) any right to require the Trustee, the Holders
or the Company (each, a "Benefitted Party") to proceed against the Company or
any other Person or to proceed against or exhaust any security held by a
Benefitted Party at any time or to pursue any other remedy in any Benefitted
Party's power before proceeding against such Guarantor; (b) the defense of the
statute of limitations in any action hereunder or in any action for the
collection of any Indebtedness or the performance of any obligation hereby
guaranteed; (c) any defense that may arise by reason of the incapacity, lack of
authority, death or disability of any other Person or the failure of a
Benefitted Party to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of any other Person; (d)
demand, protest and notice of any kind including but not limited to notice of
the existence, creation or incurring of any new or additional Indebtedness or
obligation or of any action or non-action on the part of such Guarantor, the
Company, any Benefitted Party, any creditor of such Guarantor, the Company or
on the part of any other Person whomsoever in connection with any Indebtedness
or obligations hereby guaranteed; (e) any defense based upon an election of
remedies by a Benefitted Party, including but not limited to an election to
proceed against such Guarantor for reimbursement; (f) any defense based upon
any statute or rule of law which provides that the obligation of a surety must
be neither larger in amount nor in other respects more burdensome than that of
the principal; (g) any defense arising because of a Benefitted Party's
election, in any proceeding instituted under the Federal Bankruptcy Code, of
the application of Section 1111(b)(2) of the Federal Bankruptcy Code; or (h)
any defense based on any borrowing or grant of a security interest under
Section 364 of the Federal Bankruptcy Code. Each Guarantor hereby covenants
that its Note Guarantee will not be discharged except by complete performance
of the obligations contained in its Note Guarantee and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to either the Company or any Guarantor, or any Custodian acting in
relation to either the Company or such Guarantor, any amount paid by the
Company or such Guarantor to the Trustee or such Holder, the applicable Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor agrees that it will not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between such Guarantor, on the
one hand, and the Holders and the Trustee, on the other hand, (i) the maturity
of the obligations guaranteed hereby may be accelerated as provided in Section
6.02 hereof for the purposes of this Note Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration as to the Company
or any other obligor on the Notes of the obligations guaranteed hereby, and
(ii) in the event of any declaration of acceleration of those obligations as
provided in Section 6.02 hereof, those obligations (whether or not due and
payable) will forthwith become due and payable by such Guarantor for the
purpose of this Note Guarantee.
SECTION 10.02. SUBORDINATION.
Each Guarantor, the Trustee, and each Holder by accepting a Note
agrees, that the obligations of such Guarantor hereunder shall be subordinated
in right of payment to the prior irrevocable and indefeasible payment in full
of all Obligations of every type whatsoever, contingent or otherwise due in
respect of Senior Indebtedness of such Guarantor and of the Company (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed).
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SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of any Guarantor in a liquidation
or dissolution of such Guarantor or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to such Guarantor or
its property, in an assignment for the benefit of creditors or any marshaling
of such Guarantor's assets and liabilities:
(1) holders of Senior Indebtedness of such Guarantor shall be
entitled to receive payment in full of all Obligations due in respect of
such Senior Indebtedness of such Guarantor (including interest after the
commencement of any such proceeding at the rate specified in the
applicable Senior Indebtedness of such Guarantor) before the Trustee or
any Holder shall be entitled to receive any payment from the Guarantor
under or pursuant to this Note Guarantee with respect to the Notes; and
(2) until all Obligations with respect to Senior Indebtedness of such
Guarantor (as provided in subsection (1) above) are paid in full, any
distribution to which the Trustee or any Holder would be entitled but for
this Article shall be made to holders of Senior Indebtedness of such
Guarantor (except that Holders may receive securities that are
subordinated in right and priority of payment to at least the same extent
as the Note Guarantee to (a) Senior Indebtedness of such Guarantor and (b)
any securities issued in exchange for Senior Indebtedness of such
Guarantor).
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS OF THE GUARANTOR.
No Guarantor shall make any payment or distribution to the Trustee or
any Holder upon or in respect of its Note Guarantee or the Notes, or any
Obligation with respect thereto, and no Guarantor shall acquire or purchase
from the Trustee or any Holder any Notes for cash or property (other than
securities that are subordinated in right and priority of payment to at least
the same extent as its Note Guarantee to (a) Senior Indebtedness of such
Guarantor and (b) any securities issued in exchange for Senior Indebtedness of
such Guarantor) until all principal and other Obligations with respect to the
Senior Indebtedness of such Guarantor have been paid in full if:
(i) a default in the payment when due, whether upon acceleration or
otherwise, of any principal, premium, if any, or interest on Senior
Indebtedness of such Guarantor occurs and is continuing beyond any
applicable grace period; or
(ii) any other default on Designated Senior Indebtedness of such
Guarantor occurs and is continuing and the Trustee receives a notice of
the default from such Guarantor, or the holders of any such Designated
Senior Indebtedness of such Guarantor, stating that such Guarantor or
holders are invoking a payment blockage under this Section 10.04(ii) (a
"Guarantor Payment Blockage Notice"). If the Trustee receives any such
notice, a subsequent notice received within 365 days thereafter shall not
be effective for purposes of this Section.
Each Guarantor may and shall resume payments on and distributions in
respect of its Note Guarantee and all Obligations with respect thereto, and may
acquire Obligations for value when:
(1) in the case of a payment default as described in (i) above, upon
the date on which such default is cured or waived, and
(2) in the case of a nonpayment default as described in (ii) above,
on the earlier of the date on which such nonpayment default is cured or
waived or 179 days after the date on which a Guarantor
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Payment Blockage Notice is received if the maturity of such Designated
Senior Indebtedness of such Guarantor has not been accelerated, and this
Article otherwise permits the payment at the time of such payment.
SECTION 10.05. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of
Default, each Guarantor shall promptly notify the Representative of the holders
of Senior Indebtedness of such Guarantor of the acceleration.
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives from a Guarantor
any payment of any Obligations with respect to the Notes or any other
obligation guaranteed hereby at a time when the Trustee or such Holder has
actual knowledge that such payment is prohibited by Section 10.03 or Section
10.04 hereof, such payment shall be held by the Trustee or such Holder, in
trust for the benefit of, and shall be paid forthwith over and delivered, upon
written request, to, the holders of Senior Indebtedness of such Guarantor (to
the extent necessary to pay in full all such Senior Indebtedness, whether or
not due) as their interests may appear, or their Representative under the
indenture or other agreement (if any) pursuant to which Senior Indebtedness of
such Guarantor may have been issued, as their respective interests may appear,
for application to the payment of all Obligations with respect to Senior
Indebtedness of such Guarantor remaining unpaid to the extent necessary to pay
such Obligations in full in accordance with their terms, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness of such Guarantor.
If a distribution is made to the Trustee or any Holder that because
of this Article 10 should not have been made to it at a time when the Trustee
or such Holder has actual knowledge that such distribution should not have been
made to it, the Trustee or such Holder who receives the distribution shall hold
it in trust for the benefit of, and, upon written request, pay it over to, the
holders of Senior Indebtedness of such Guarantor as their interests may appear,
or their Representative under the indenture or other agreement (if any)
pursuant to which Senior Indebtedness of such Guarantor may have been issued,
as their respective interests may appear, for application to the payment of all
Obligations with respect to Senior Indebtedness of such Guarantor remaining
unpaid to the extent necessary to pay such Obligations in full in accordance
with their terms, after giving effect to any concurrent payment or distribution
to or for the holders of Senior Indebtedness of such Guarantor.
With respect to the holders of Senior Indebtedness of any Guarantor,
the Trustee undertakes to perform only such obligations on the part of the
Trustee as are specifically set forth in this Article 10, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness of
any such Guarantor shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness of such Guarantor, and shall not be liable to any such holders if
the Trustee shall pay over or distribute to or on behalf of Holders or the
Company or any other Person money or assets to which any holders of Senior
Indebtedness of such Guarantor shall be entitled by virtue of this Article 10,
except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
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SECTION 10.07. NOTICE BY A GUARANTOR.
Each Guarantor shall promptly notify the Trustee and the Paying Agent
of any facts known to such Guarantor that would cause a payment of any
Obligations with respect to the Notes or its Note Guarantee to violate this
Article, but failure to give such notice shall not affect the subordination of
its Note Guarantee or of the Notes to the Senior Indebtedness of such Guarantor
as provided in this Article.
SECTION 10.08. SUBROGATION.
With respect to any Guarantor, after all Senior Indebtedness of such
Guarantor is paid in full (whether or not due) and until the Notes are paid in
full, Holders shall, without duplication, be subrogated to the rights of
holders of Senior Indebtedness of such Guarantor to receive distributions
applicable to Senior Indebtedness of such Guarantor to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Indebtedness of such Guarantor. A distribution made under this
Article to holders of Senior Indebtedness of such Guarantor that otherwise
would have been made to Holders is not, as between such Guarantor and Holders,
a payment by such Guarantor on the Senior Indebtedness of such Guarantor.
SECTION 10.09. RELATIVE RIGHTS.
This Article defines the relative rights of Holders and holders of
Senior Indebtedness of such Guarantor. Nothing in this Indenture shall:
(1) impair, as between such Guarantor and the Holders, the
obligation of such Guarantor, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of such
Guarantor other than their rights in relation to holders of Senior
Indebtedness of such Guarantor; or
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders of Senior Indebtedness of such Guarantor set forth herein to
receive distributions and payments otherwise payable to Holders.
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY ANY GUARANTOR.
With respect to any Guarantor, no right of any holder of Senior
Indebtedness of such Guarantor to enforce the subordination of the Note
Guarantee shall be impaired by any act or failure to act by such Guarantor or
any Holder or by failure of such Guarantor or any Holder to comply with this
Indenture.
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
With respect to any Guarantor, whenever a distribution is to be made
or a notice given to holders of Senior Indebtedness of such Guarantor, the
distribution may be made and the notice given to their Representative.
Upon any payment or distribution of assets referred to in this
Article 10, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person
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making any distribution for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of the Senior Indebtedness of
such Guarantor, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article 10.
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Note Guarantee to violate this Article. Only a Guarantor,
the Company, the holder of any Senior Indebtedness of such Guarantor, or the
Representative of holders of Senior Indebtedness of such Guarantor may give the
notice. Nothing in this Article 10 shall impair the claims of, or payments to,
the Trustee under or pursuant to Section 7.07 hereof.
With respect to any Guarantor, the Trustee in its individual or any
other capacity may hold Senior Indebtedness of such Guarantor with the same
rights it would have if it were not Trustee.
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee the Holder's attorney-in-fact for any and
all such purposes. If the Trustee does not file a proper proof of claim or
proof of debt in the form required in any proceeding relative to any Guarantor
referred to in Section 6.09 hereof at least 30 days before the expiration of
the time to file such claim, the holders (or their Representative) of Senior
Indebtedness of each Guarantor are hereby authorized to file an appropriate
claim for and on behalf of the Holders.
SECTION 10.14. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and by its acceptance hereof, each beneficiary hereof,
hereby confirm that it is its intention that the Note Guarantee by such
Guarantor not constitute a fraudulent transfer or conveyance for purposes of
the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar federal or state law to the extent
applicable to any Note Guarantees. To effectuate the foregoing intention, each
such person hereby irrevocably agrees that the obligation of such Guarantor
under its Note Guarantee under this Article 10 shall be limited to the maximum
amount as will, after giving effect to such maximum amount and all other
(contingent or otherwise) liabilities of such Guarantor that are relevant under
such laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under this Article 10,
result in the obligations of such Guarantor in respect of such maximum amount
not constituting a fraudulent conveyance. Each beneficiary under the Note
Guarantees, by accepting the benefits hereof, confirms its intention that, in
the event of a bankruptcy, reorganization or other similar proceeding of the
Company or any Guarantor in which concurrent claims are made upon such
Guarantor hereunder, to the extent such claims will not be fully satisfied,
each such claimant with a valid claim against the Company shall be entitled to
a ratable share of all payments by such Guarantor in respect of such concurrent
claims.
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SECTION 10.15. RELEASES FOLLOWING SALE OF ASSETS.
Upon (i) a sale or other disposition of all or substantially all of
the assets of any Guarantor, by way of merger, consolidation or otherwise, (ii)
a sale or other disposition of all of the capital stock of any Guarantor
pursuant to the provisions of this Indenture or (iii) a Guarantor becoming an
Unrestricted Subsidiary pursuant to the terms of this Indenture, then such
Guarantor (in the event of a sale or other disposition, by way of such a
merger, consolidation or otherwise, of all of the capital stock of such
Guarantor) or the corporation acquiring the property (in the event of a sale or
other disposition of all or substantially all of the assets of such Guarantor)
shall be released and relieved of its obligations under its Note Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with Section 4.10 hereof.
ARTICLE 11
SUBORDINATION
SECTION 11.01. SUBORDINATION.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes shall be subordinated in right of
payment to the prior irrevocable and indefeasible payment in full of all
Obligations of every type whatsoever, contingent or otherwise due in respect of
Senior Indebtedness of the Company (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed).
SECTION 11.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
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 marshalling of the Company's
assets and liabilities:
(1) holders of Senior Indebtedness of the Company shall be entitled
to receive payment in full of all Obligations due in respect of such
Senior Indebtedness of the Company (including interest after the
commencement of any such proceeding at the rate specified in the
applicable Senior Indebtedness of the Company) before the Holders shall be
entitled to receive any payment with respect to the Notes; and
(2) until all Obligations with respect to Senior Indebtedness of the
Company (as provided in subsection (1) above) are paid in full, any
distribution to which Holders would be entitled but for this Article shall
be made to holders of Senior Indebtedness of the Company (except that
Holders may receive securities that are subordinated in right and priority
of payment to at least the same extent as the Notes to (a) Senior
Indebtedness of the Company and (b) any securities issued in exchange for
any such Senior Indebtedness of the Company).
SECTION 11.03. DEFAULT ON SENIOR INDEBTEDNESS.
The Company may not make any payment or distribution to the Trustee
or any Holder upon or in respect of the Notes, or any Obligation with respect
thereto, and may not acquire or purchase from the Trustee or any Holder any
Notes for cash or property (other than securities that are subordinated in
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right and priority of payment to at least the same extent as the Notes to (a)
Senior Indebtedness of the Company and (b) any securities issued in exchange
for Senior Indebtedness of the Company) until all principal and other
Obligations with respect to the Senior Indebtedness of the Company have been
paid in full if:
(i) a default in the payment when due, whether upon acceleration or
otherwise, of any principal, premium, if any, or interest on Senior
Indebtedness of the Company occurs and is continuing beyond any applicable
grace period; or
(ii) any other default on Designated Senior Indebtedness of the
Company occurs and is continuing and the Trustee receives a notice of the
default from the Company, or the holders of any such Designated Senior
Indebtedness of the Company, stating that it is or such holders are
invoking a payment blockage under this Section 11.03(ii) (a "Payment
Blockage Notice"). If the Trustee receives any such notice, a subsequent
notice received within 365 days thereafter shall not be effective for
purposes of this Section.
The Company may and shall resume payments on and distributions in
respect of the Notes, and all Obligations with respect thereto, and may acquire
them when:
(1) in the case of a payment default as described in (i) above, upon
the date on which such default is cured or waived, and
(2) in the case of a nonpayment default as described in (ii) above,
on the earlier of the date on which such nonpayment default is cured or
waived or 179 days after the date on which the applicable Payment Blockage
Notice is received, unless the maturity of any such Designated Senior
Indebtedness of the Company has been accelerated, and this Article
otherwise permits the payment at the time of such payment.
SECTION 11.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify the Representative of the holders of
Senior Indebtedness of the Company of the acceleration.
SECTION 11.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder has actual knowledge that such payment is prohibited by Section 11.02 or
Section 11.03 hereof, such payment shall be held by the Trustee or such Holder,
in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Indebtedness of the Company (to
the extent necessary to pay in full all such Senior Indebtedness, whether or
not due) as their interests may appear, or their Representative under the
indenture or other agreement (if any) pursuant to which Senior Indebtedness of
the Company may have been issued, as their respective interests may appear, for
application to the payment of all Obligations with respect to Senior
Indebtedness of the Company remaining unpaid to the extent necessary to pay
such Obligations in full in accordance with their terms, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness of the Company.
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If a distribution is made to the Trustee or any Holder that because
of this Article 11 should not have been made to it at a time when the Trustee
or such Holder has actual knowledge that such distribution should not have been
made to it, the Trustee or such Holder who receives the distribution shall hold
it in trust for the benefit of, and, upon written request, pay it over to, the
holders of Senior Indebtedness of the Company as their interests may appear, or
their Representative under the indenture or other agreement (if any) pursuant
to which Senior Indebtedness of the Company may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Indebtedness of the Company remaining unpaid
to the extent necessary to pay such Obligations in full in accordance with
their terms, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness of the Company.
With respect to the holders of Senior Indebtedness of the Company,
the Trustee undertakes to perform only such obligations on the part of the
Trustee as are specifically set forth in this Article 11, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness of
the Company shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness of the Company, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Indebtedness
of the Company shall be entitled by virtue of this Article 11, except if such
payment is made as a result of the willful misconduct or gross negligence of
the Trustee.
SECTION 11.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article, but failure to give such
notice shall not affect the subordination of the Notes to the Senior
Indebtedness of the Company as provided in this Article.
SECTION 11.07. SUBROGATION.
After all Senior Indebtedness of the Company is paid in full (whether
or not due) and until the Notes are paid in full, Holders shall, without
duplication, be subrogated to the rights of holders of Senior Indebtedness of
the Company to receive distributions applicable to Senior Indebtedness of the
Company to the extent that distributions otherwise payable to the Holders have
been applied to the payment of Senior Indebtedness of the Company. A
distribution made under this Article to holders of Senior Indebtedness of the
Company that otherwise would have been made to Holders is not, as between the
Company and Holders, a payment by the Company on Senior Indebtedness of the
Company.
SECTION 11.08. RELATIVE RIGHTS.
This Article defines the relative rights of Holders and holders of
Senior Indebtedness of the Company. Nothing in this Indenture shall:
(1) impair, as between the Company and the Holders, the obligation
of the Company, which is absolute and unconditional, to pay principal of
and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior
Indebtedness of the Company; or
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(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders of Senior Indebtedness of the Company set forth herein to receive
distributions and payments otherwise payable to Holders.
If the Company fails because of this Article to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
SECTION 11.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness of the Company to
enforce the subordination of the Indebtedness with respect to the Notes shall
be impaired by any act or failure to act by the Company or any Holder or by
failure of the Company or any Holder to comply with this Indenture.
SECTION 11.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness of the Company, the distribution may be made and the notice
given to their Representative.
Upon any payment or distribution of assets referred to in this
Article 11, the Trustee and the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution for the purpose of ascertaining the
Persons entitled to participate in such distribution, the holders of the Senior
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 11.
SECTION 11.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 11 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article. Only the Company, the
holder of any Senior Indebtedness of the Company, or the Representative of
holders of Senior Indebtedness of the Company may give the notice. Nothing in
this Article 11 shall impair the claims of, or payments to, the Trustee under
or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Company with the same rights it would have if it were not
Trustee.
SECTION 11.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 11, and appoints the Trustee the Holder's attorney-in-fact for any and
all such purposes. If the Trustee does not file a proper proof of claim or
proof of debt in the form required in any proceeding referred to in Section
6.09 hereof at least 30 days before the expiration
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of the time to file such claim, the holders (or their Representative) of Senior
Indebtedness of the Company are hereby authorized to file an appropriate claim
for and on behalf of the Holders.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA Section 318(c), the imposed duties shall
control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company, the Guarantors, if any,
or the Trustee to the others is duly given if in writing and delivered in
Person or mailed by first class mail (registered or certified, return receipt
requested), telex, telecopier or overnight air courier guaranteeing next day
delivery, to the others' address:
If to the Company or any Guarantor:
Prime Hospitality Corp.
700 Route 46 East
P.O. Box 2700
Fairfield, New Jersey 07007-2700
Telecopier No.: (201) 882-8577
Attention: Joseph Bernadino, Esq.
With a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Telecopier No.: (212) 821-8111
Attention: William N. Dye, Esq.
If to the Trustee:
Bank One, Columbus, N.A.
100 E. Broad Street, 8th Floor
Columbus, Ohio 43271-0181
Telecopier No.: (614) 248-5195
Attention: Corporate Trust Administration
The Company, the Guarantors, if any, or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices
or communications.
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All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company or any Guarantor mails a notice or communication to
Holders, it shall mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, if any, the Trustee, the Registrar and anyone else
shall have the protection of TIA Section 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or the Guarantors, if
any, to the Trustee to take any action under this Indenture, the Company or the
Guarantors, if any, shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions
of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
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(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company or any Guarantor, or any successor Person as
such, shall have any liability for any obligations of the Company or any
Guarantor under the Notes, the Note Guarantees, this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note and the Note Guarantees, if any, waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES, IF ANY.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Company and the Guarantors, if any, in this
Indenture and the Notes and the Note Guarantees, as the case may be, shall bind
their respective successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture, in the Notes or in the Note
Guarantees, if any, shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
61
<PAGE> 68
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
62
<PAGE> 69
SIGNATURES
Dated as of ______, 1994 PRIME HOSPITALITY CORP.
By:
-------------------------------
Name:
Title:
Attest:
- -------------------------------------- (SEAL)
Dated as of ______, 1994
Bank
One, Columbus, N.A.
Trustee
By:
--------------------------------
Name: Stephen W. Braughton
Title: Authorized Signatory
Attest:
- -------------------------------------- (SEAL)
63
<PAGE> 70
EXHIBIT A
(Face of Note)
____% Senior Subordinated Notes due 2004
No. $
----------
PRIME HOSPITALITY CORP.
promises to pay to
or registered assigns,
the principal sum of
Dollars on _________ __, 2004.
Interest Payment Dates: ________ __, and ________ __
Record Dates: ________ __, and ________ __
Dated: _______________ __, 1994
PRIME HOSPITALITY CORP.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
This is one of the Notes
referred to in the
within-mentioned Indenture:
Bank One, Columbus, N.A.,
as Trustee
By:
----------------------------------
A-1
<PAGE> 71
(Back of Security)
__% SENIOR SUBORDINATED NOTE
DUE ________, 2004
Capitalized terms used herein have the meanings assigned to
them in the Indenture (as defined below) unless otherwise indicated.
1. Interest. Prime Hospitality Corp., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount
of this Note at the rate and in the manner specified below.
The Company shall pay interest on the principal amount of this
Note at the rate per annum of __%. The Company will pay interest semi-annually
on _______ and _______ of each year, or if any such day is not a Business Day
(as defined in the Indenture), on the next succeeding Business Day (each an
"Interest Payment Date").
Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Interest shall accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of the original issuance of the Notes. To the extent lawful, the Company
shall pay interest on overdue principal at the rate of 1% per annum in excess
of the then applicable interest rate on the Notes; it shall pay interest on
overdue installments of interest (without regard to any applicable grace
periods) at the same rate to the extent lawful.
2. Method of Payment. The Company will pay interest on
the Notes (except defaulted interest) to the Persons who are registered Holders
of Notes at the close of business on the record date next preceding the
Interest Payment Date, even if such Notes are cancelled after such record date
and on or before such Interest Payment Date. The Holder hereof must surrender
this Note to a Paying Agent to collect principal payments. The Company will
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. The Company,
however, may pay principal, premium, if any, and interest by check payable in
such money. It may mail an interest check to a Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee
will act as Paying Agent and Registrar. The Company may change any Paying
Agent, Registrar or co-registrar without notice to any Holder. The Company or
any Guarantor may act in any such capacity.
4. Indenture. The Company issued the Notes under an
Indenture dated as of _________, 1994 (the "Indenture") between the Company and
the Trustee. 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 (15 U.S. Code Section Section 77aaa-77bbbb) as in effect on the date of
the Indenture. The Notes are subject to all such terms, and Holders are
referred to the Indenture and such act for a statement of such terms. The
terms of the Indenture shall govern any inconsistencies between the Indenture
and the Notes. The Notes are unsecured general obligations of the Company
limited to $100,000,000 in aggregate principal amount.
5. Optional Redemption. Except as set forth below, the
Company shall not have the option to redeem the Notes pursuant to Section 3.07
of the Indenture prior to ____________, 1999.
A-2
<PAGE> 72
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, at the redemption prices (expressed as percentages of the principal
amount) set forth below, plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the 12 month period beginning on
__________ of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999 %
2000 %
2001 %
2002 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to __________
__, 1997, the Company may redeem up to 25% of the initial principal amount of
the Notes originally issued with the net proceeds of one or more Public
Offerings at a redemption price equal to ___% of the principal amount thereof
plus accrued and unpaid interest thereon, if any, to the redemption date;
provided that at least 75% of the principal amount of the Notes originally
issued remain outstanding immediately after the occurrence of any such
redemption and that such redemption occurs within 90 days following the closing
of any such Public Offering.
6. Mandatory Redemption. The Company shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
7. Redemption or Repurchase at Option of Holder. (a)
If there is a Change of Control (as defined in the Indenture), the Company
shall be required to offer to purchase all Notes at 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase. Holders of Notes that are subject to an offer to purchase will
receive an offer to purchase from the Company prior to any related purchase
date, and may elect to have such Notes purchased by completing the form
entitled "Option of Holder to Elect Purchase" appearing below.
(b) When the aggregate amount of Excess Proceeds from Asset
Sales (as defined in the Indenture) exceeds $5 million, the Company shall be
required to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds at 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date fixed for the closing of
such offer. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Notes to be redeemed shall
be selected pursuant to the terms of Section 3.02 of the Indenture (with such
adjustments as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be purchased).
To the extent that the aggregate amount of Notes tendered by Holders thereof is
less than the Excess Proceeds, the Company may use such deficiency for general
corporate purposes. Holders of Notes which are the subject of an offer to
purchase will receive an offer to purchase from the Company prior to any
related purchase date, and may elect to have such Notes purchased by completing
the form entitled "Option of Holder to Elect Purchase" appearing below.
8. Notice of Redemption. Notice of redemption shall be
mailed at least 30 days but not more than 60 days before the redemption date to
each Holder of Notes to be redeemed at its registered address. Notes may be
redeemed in part but only in whole multiples of $1,000, unless all of the Notes
held by a Holder are to be redeemed. On and after the redemption date,
interest ceases to accrue on Notes or portions of them called for redemption.
A-3
<PAGE> 73
9. Subordination. The Notes are subordinated to Senior
Indebtedness (as defined in the Indenture) (whether outstanding on the date of
the Indenture or thereafter created, incurred, assumed or guaranteed) and all
Obligations (as defined in the Indenture) with respect thereto. To the extent
provided in the Indenture, Senior Indebtedness must be paid before the Notes
may be paid. The Company agrees, and each Holder by accepting a Note agrees,
to the subordination and authorizes the Trustee to give it effect.
10. Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not exchange or register the transfer of
any Note or portion of a Note selected for redemption. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed, during the period between a record date and
the corresponding Interest Payment Date.
11. Persons Deemed Owners. Prior to due presentment to
the Trustee for registration of the transfer of this Note, the Trustee, any
Agent, the Company and the Guarantors, if any, may deem and treat the Person in
whose name this Note is registered as its absolute owner for the purpose of
receiving payment of principal of and interest on this Note and for all other
purposes whatsoever, whether or not this Note is overdue, and neither the
Trustee, any Agent, the Company nor any Guarantor shall be affected by notice
to the contrary. The registered holder of a Note shall be treated as its owner
for all purposes.
12. Amendments and Waivers. Subject to certain
exceptions, the Indenture or the Notes may be amended with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes (including consents obtained in connection with a 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 any Holder, the Indenture or the
Notes may be amended to cure any ambiguity, defect or inconsistency, to provide
for uncertificated Notes in addition to or in place of certificated Notes, to
provide for assumption of the Company's obligations to Holders in the case of a
merger or consolidation or to make any change that would provide any additional
rights or benefits to the Holders (including providing for Note Guarantees
pursuant to Section 4.13 hereof) or that does not adversely affect the rights
of any Holder under the Indenture or to comply with the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
13. Defaults and Remedies. Events of Default include:
default for 30 days in the payment when due of interest on the Notes (whether
or not prohibited by the subordination provisions of the Indenture); default in
payment when due of principal of or premium, if any, on the Notes (whether or
not prohibited by the subordination provisions of the Indenture); failure by
the Company to comply with Sections 4.07, 4.09, 4.10 or 4.14 of the Indenture;
failure by the Company or the Guarantors for 60 days after notice to comply
with any of its other agreements in the Indenture or the Notes; default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Subsidiaries or Holding (or the payment of which is
guaranteed by the Company or any of its Subsidiaries or Holding) whether such
Indebtedness or Guarantee now exists, or is created after the Issuance Date,
which default (a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness (a "Payment Default") or (b) results
A-4
<PAGE> 74
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates $2
million or more; failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $2 million, which judgments are not paid,
discharged or stayed for a period of 60 days; except as permitted by the
Indenture, any Note Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations or shall fail to comply with any obligations
under its Note Guarantee; and certain events of bankruptcy or insolvency with
respect to the Company, any Guarantor or any of their respective Subsidiaries.
If any Event of 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; except, that if any Indebtedness
is outstanding pursuant to the New Revolving Credit Facility, upon a
declaration of acceleration, the principal and interest on the Notes shall be
payable upon the earlier of (1) the day which is five business days after
notice of acceleration is given to the Company and the lender under the New
Revolving Credit Facility or (2) the date of acceleration of the Indebtedness
under the New Revolving Credit Facility and except that in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, with
respect to the Company or any of its Subsidiaries, all outstanding Notes will
become due and payable without further action or notice. Holders 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 notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. The Company must furnish an annual compliance certificate
to the Trustee.
14. Guarantees. Under certain circumstances the Company
or any Guarantor may be required to cause a Restricted Subsidiary to execute
and deliver to the Trustee a supplemental indenture pursuant to which such
Restricted Subsidiary shall unconditionally guarantee all of the Company's
obligations under the Notes pursuant to a Note Guarantee on the terms and
conditions set forth in Exhibit B to the Indenture.
15. Trustee Dealings with Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company, any Guarantor or their
respective Affiliates, and may otherwise deal with the Company, any Guarantor
or their respective Affiliates, as if it were not Trustee.
16. No Recourse Against Others. No past, present or
future director, officer, employee, incorporator or stockholder, as such, of
the Company, any Guarantor, as such, shall have any liability for any
obligations of the Company or any Guarantor under the Notes, the Note
Guarantees or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a Note
and the Note Guarantees, if any, waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
17. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
18. Abbreviations. Customary abbreviations may be used
in the name of a Holder or an assignee, such as: TEN COM (= tenants in
common), TEN ENT (= tenants by the entireties),
A-5
<PAGE> 75
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
19. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes and has directed
the Trustee to use CUSIP numbers in notices of redemption as a convenience to
Holders. No representation is made as to the accuracy of such numbers either
as printed on the Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
20. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE NOTE
GUARANTEES, IF ANY.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Request may be made to:
Prime Hospitality Corp.
700 Route 46 East
P.O. Box 2700
Fairfield, New Jersey 07007-2700
Attention: Chief Financial Officer
A-6
<PAGE> 76
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:
--------------------
Your Signature:
---------------------------
(Sign exactly as your name appears
on the face of this Note)
Signature Guarantee.
A-7
<PAGE> 77
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
-------------------------- -------------------------
(Sign exactly as your name
appears on the Note)
Tax Identification No.:
-----------------
Signature Guarantee.
A-8
<PAGE> 78
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, between __________________ (the "Guarantor"), a subsidiary of
Prime Hospitality Corp. (or its successor), a Delaware corporation (the
"Company"), and _______________, a national banking association, as trustee
under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, Prime Hospitality Corp., a Delaware corporation has
heretofore executed and delivered to the Trustee an indenture (the
"Indenture"), dated as of _______ __, 1994, providing for the issuance of an
aggregate principal amount of $100,000,000 of ______% Senior Subordinated Notes
due 2004 (the "Notes");
WHEREAS, Section 4.13 of the Indenture provides that under certain
circumstances the Company is required to cause the Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the Guarantor
shall unconditionally guarantee all of the Company's obligations under the
Notes pursuant to a Note Guarantee on the terms and conditions set forth
herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guarantor hereby agrees that its
obligations to the Holder and the Trustee pursuant to this Note Guarantee shall
be as expressly set forth in Article 10 of the Indenture and in such other
provisions of the Indenture as are applicable to Guarantors, and reference is
made to the Indenture for the precise terms of this Supplemental Indenture.
The terms of Article 10 of the Indenture and such other provisions of the
Indenture as are applicable to Guarantors are incorporated herein by reference.
3. EXECUTION AND DELIVERY OF NOTE GUARANTEES.
(a) The Guarantor hereby agrees that its Note Guarantee set forth
herein shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Note Guarantee.
(b) If an Officer whose signature is on this Supplemental Indenture
or on the Note Guarantee no longer holds that office at the time the
Trustee authenticates the Note on which a Note Guarantee is endorsed, the
Note Guarantee shall be valid nevertheless.
B-1
<PAGE> 79
(c) The delivery of any Note by the Trustee, after the
authentication thereof under the Indenture, shall constitute due delivery
of the Note Guarantee set forth in this Supplemental Indenture on behalf
of the Guarantor.
4. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder of the Guarantor, as such, shall
have any liability for any obligations of the Company or any Guarantor under
the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of the 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.
5. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture and the Note
Guarantee.
6. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
7. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: ____________ ___, ____ [Guarantor]
By:
---------------------------
Name:
Title:
Dated: _____________ ___, ____ ---------------------------------,
as Trustee
By:
---------------------------
Name:
Title:
B-2
<PAGE> 1
EXHIBIT 12.1
PRIME HOSPITALITY CORP.
STATEMENT RE: COMPUTATION OF
THE RATIO OF EARNINGS FOR FIXED CHARGES
(S-K SECTION 503(d))
<TABLE>
<CAPTION>
Pre-Reorganization Post Reorganization
------------------------------------------------------------------ ------------------------
For the
----------------------------
One Month Five Months For the Year
For the Year Ended June 30, Ended Ended Ended
------------------------------- July 31, December 31, December 31,
1989 1990 1991 1992 1992 1992 1993
---- ---- ---- ---- --------- ------------ ------------
Computation of earnings: (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income (loss) from
continuing operations $10,630 $(290,392) $(260,456) $(70,965) $(10,274) $2,321 $13,856
======= ========== ========== ========= ========= ====== =======
Computation of fixed charges:
For interest $40,347 $56,811 $19,331 $8,245 $779 $7,718 $16,116
For interest on rentals 17,636 17,855 8,091 2,540 189 703 1,924
------ ------ ------ ----- --- ------ ------
Total fixed charges $57,983 $74,666 $27,422 $10,785 $968 $8,421 $18,040
======= ========== ========== ========= ========= ====== =======
Total earnings and fixed
charges $68,613 $(215,726) $(233,034) $(60,180) $(9,306) $10,742 $31,896
======= ========== ========== ========= ========= ====== =======
Ratio 1.18 - - - - 1.28 1.77
==== ==== ==== ==== ==== ==== ====
</TABLE>
<PAGE> 1
EXHIBIT 23.2(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Prime Hospitality Corp.
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated March 17, 1994
and March 10, 1993 included in Prime Hospitality Corp.'s Form 10-K for the year
ended December 31, 1993, and our report dated March 17, 1994 covering the
consolidated financial statements and schedules of Prime Hospitality Corp. for
the year ended December 31, 1993 and the five months ended December 31, 1992,
included in this registration statement and to all references to our Firm
included in this Registration Statement.
ARTHUR ANDERSEN & CO.
Roseland, New Jersey
March 17, 1994
<PAGE> 1
EXHIBIT 23.2(b)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Prime Hospitality Corp.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of Prime Hospitality Corp. and subsidiaries
included in this registration statement and have issued our report thereon
dated March 17, 1994. Our audit was made for the purpose of forming an opinion
on the basic consolidated financial statements taken as a whole. The schedules
listed under "Item 16(b)" are the responsibility of the Company's management
and are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN & CO.
Roseland, New Jersey
March 17, 1994
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 being filed by Prime Hospitality Corp. (formerly Prime Motor Inns,
Inc.) of our report dated September 24, 1992 (appearing in the Annual Report
on Form 10-K for the fiscal year ended December 31, 1993 of Prime Hospitality
Corp.) on the consolidated financial statements and the financial statement
schedules of Prime Motor Inns, Inc. and subsidiaries (Debtors-in-Possession).
J. H. COHN & COMPANY
Roseland, New Jersey
March 17, 1994
<PAGE> 1
EXHIBIT 25.1
Registration No.
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, COLUMBUS, N.A.
------------------------
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code)
executive offices)
Stephen W. Boughton
c/o Bank One Ohio Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-5948
(Name, address and telephone number of agent for service)
------------------------
PRIME HOSPITALITY CORP.
(Exact name of obligor as specified in its charter)
Delaware 22-2640625
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
700 Route 46 East 07004
Fairfield, New Jersey (Zip Code)
(Address of principal executive
offices)
PRIME HOSPITALITY CORP. % SENIOR SUBORDINATED NOTES DUE 2004
---
(Title of the Indenture securities)
- -------------------------------------------------------------------------------
<PAGE> 2
GENERAL
<TABLE>
<S> <C>
1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
The obligor is not an affiliate of the trustee.
16. LIST OF EXHIBITS
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY AND QUALIFICATION. (EXHIBITS IDENTIFIED IN
PARENTHESES, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS EXHIBITS HERETO.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence business, see Exhibit 2 to Form T-1, filed in
connection with Form S-3 relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003, Securities and Exchange
Commission File No. 33-50709.
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate trust powers, see Exhibit 3 to Form T-1, filed in
connection with Form S-3 relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003, Securities and Exchange
Commission File No. 33-50709.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business on December 31, 1993, published pursuant to the
requirements of the Comptroller of the Company.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which requires responses to Item 1, 2 and 16 only, if the
obligor is not in default.
</TABLE>
2
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bank One, Columbus, NA, a national banking association
organized under the National Banking Act, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in Columbus, Ohio, on March 16, 1994.
<TABLE>
<S> <C>
Bank One, Columbus, NA
By: /S/ STEPHEN W. BOUGHTON
-------------------------
Stephen W. Boughton
Authorized Signer
</TABLE>
3
<PAGE> 4
Exhibit 1
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business of
banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS,
NATIONAL ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus, County
of Franklin, State of Ohio. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined
from time-to-time by resolution of the shareholders at any annual or special
meeting thereof, provided, however, that the Board of Directors, by resolution
of a majority thereof, shall be authorized to increase the number of its
members by not more than two between regular meetings of the shareholders.
Each Director, during the full term of his directorship, shall own, as
qualifying shares, the minimum number of shares of either this Association or
of its parent bank holding company in accordance with the provisions of
applicable law. Unless otherwise provided
-1-
<PAGE> 5
by the laws of the United States, any vacancy in the Board of Directors for any
reason, including an increase in the number thereof, may be filled by action of
the Board of Directors.
FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office of this Association or such other
place as the Board of Directors may designate, on the day of each year
specified therefor in the By-Laws, but if no election is held on that day, it
may be held on any subsequent business day according to the provisions of law;
and all elections shall be held according to such lawful regulations as may be
prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association shall
be 2,073,750 shares of common stock of the par value of Ten Dollars ($10) each;
but said capital stock may be increased or decreased from time-to-time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the
Association shall have the preemptive or preferential right of subscription to
any share of any class of stock of this Association, whether now or hereafter
authorized or to any obligations convertible into stock of this Association,
issued or sold, nor any right of subscription to any thereof other than such,
if any, as the Board of Directors, in its discretion, may from time-to-time
determine and at such price as the Board of Directors may from time-to-time
fix.
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<PAGE> 6
This Association, at any time and from time-to-time, may authorize
and issue debt obligations, whether or not subordinated, without the approval
of the shareholders.
SIXTH. The Board of Directors shall appoint one of its members President
of the Association, who shall be Chairman of the Board, unless the Board
appoints another director to be the Chairman. The Board of Directors shall
have the power to appoint one or more Vice Presidents and to appoint a
Secretary and such other officers and employees as may be required to transact
the business of this Association.
The Board of Directors shall have the power to define the duties
of the officers and employees of this Association; to fix the salaries to be
paid to them; to dismiss them; to require bonds from them and to fix the
penalty thereof; to regulate the manner in which any increase of the capital of
this Association shall be made; to manage and administer the business and
affairs of this Association; to make all By-Laws that it may be lawful for them
to make; and generally to do and perform all acts that it may be legal for a
Board of Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Columbus, Ohio, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of this Association
to any other
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<PAGE> 7
location, without the approval of the shareholders but subject to the approval
of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 10 percent of the stock of
this Association, may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place and purpose of every annual and special meeting of the shareholders
shall be given by first-class mail, postage prepaid, mailed at least ten days
prior to the date of such meeting to each shareholder of record at his address
as shown upon the books of this Association.
TENTH. Every person who is or was a Director, officer or employee of the
Association or of any other corporation which he served as a Director, officer
or employee at the request of the Association as part of his regularly assigned
duties may be indemnified by the Association in accordance with the provisions
of this paragraph against all liability (including, without limitation,
judgments, fines, penalties and settlements) and all reasonable expenses
(including, without limitation, attorneys' fees and investigative expenses)
that may be incurred or paid by him in connection with any claim, action, suit
or proceeding, whether civil, criminal or administrative (all referred to
hereafter in
-4-
<PAGE> 8
this paragraphs as "Claims") or in connection with any appeal relating thereto
in which he may become involved as a party or otherwise or with which he may be
threatened by reason of his being or having been a Director, officer or
employee of the Association or such other corporation, or by reason of any
action taken or omitted by him in his capacity as such Director, officer or
employee, whether or not he continues to be such at the time such liability or
expenses are incurred, provided that nothing contained in this paragraph shall
be construed to permit indemnification of any such person who is adjudged
guilty of, or liable for, willful misconduct, gross neglect of duty or criminal
acts, unless, at the time such indemnification is sought, such indemnification
in such instance is permissible under applicable law and regulations, including
published rulings of the Comptroller of the Currency or other appropriate
supervisory or regulatory authority, and provided further that there shall be
no indemnification of directors, officers, or employees against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by an appropriate regulatory agency which proceeding or action
results in a final order assessing civil money penalties or requiring
affirmative action by an individual or individuals in the form of payments to
the Association. Every person who may be indemnified under the provisions of
this paragraph and who has been wholly successful on the merits with respect to
any Claim shall be entitled to indemnification as of right. Except as provided
in the preceding sentence, any indemnification under this paragraph shall be at
the sole discretion of the Board of Directors and shall be made only if the
Board of Directors or the Executive Committee acting by a quorum consisting of
Directors who are not parties to
-5-
<PAGE> 9
such Claim shall find or if independent legal counsel (who may be the regular
counsel of the Association) selected by the Board of Directors or Executive
Committee whether or not a disinterested quorum exists shall render their
opinion that in view of all of the circumstances then surrounding the Claim,
such indemnification is equitable and in the best interests of the Association.
Among the circumstances to be taken into consideration in arriving at such a
finding or opinion is the existence or non-existence of a contract of insurance
or indemnity under which the Association would be wholly or partially
reimbursed for such indemnification, but the existence or non-existence of such
insurance is not the sole circumstance to be considered nor shall it be wholly
determinative of whether such indemnification shall be made. In addition to
such finding or opinion, no indemnification under this paragraph shall be made
unless the Board of Directors or the Executive Committee acting by a quorum
consisting of Directors who are not parties to such Claim shall find or if
independent legal counsel (who may be the regular counsel of the Association)
selected by the Board of Directors or Executive Committee whether or not a
disinterested quorum exists shall render their opinion that the Director,
officer or employee acted in good faith in what he reasonably believed to be
the best interests of the Association or such other corporation and further in
the case of any criminal action or proceeding, that the Director, officer or
employee reasonably believed his conduct to be lawful. Determination of any
Claim by judgment adverse to a Director, officer or employee by settlement with
or without Court approval or conviction upon a plea of guilty or of
nolocontendere or its equivalent shall not create a presumption that a
Director, officer or employee failed to meet the standards of conduct set
-6-
<PAGE> 10
forth in this paragraph. Expenses incurred with respect to any Claim may be
advanced by the Association prior to the final disposition thereof upon receipt
of an undertaking satisfactory to the Association by or on behalf of the
recipient to repay such amount unless it is ultimately determined that he is
entitled to indemnification under this paragraph. The rights of
indemnification provided in this paragraph shall be in addition to any rights
to which any Director, officer or employee may otherwise be entitled by
contract or as a matter of law. Every person who shall act as a Director,
officer or employee of this Association shall be conclusively presumed to be
doing so in reliance upon the right of indemnification provided for in this
paragraph.
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
As amended September 13, 1991 -- Article Tenth (Indemnification)
SEC332
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<PAGE> 11
Exhibit 4
BY-LAWS
OF
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the Shareholders
of the Bank for the election of Directors and for the transaction of such
business as may properly come before the meeting shall be held at its main
banking house, or other convenient place duly authorized by the Board of
Directors, on the third Monday of January of each year, or on the next
succeeding banking day, if the day fixed falls on a legal holiday. If from any
cause, an election of directors is not made on the day fixed for the regular
meeting of shareholders or, in the event of a legal holiday, on the next
succeeding banking day, the Board of Directors shall order the election to be
held on some subsequent day, as soon thereafter as practicable, according to
the provisions of law; and notice thereof shall be given in the manner herein
provided for the annual meeting. Notice of such annual meeting shall be given
by or under the direction of the Secretary or such other officer as may be
designated by the Chief Executive Officer by first-class mail, postage prepaid,
to all shareholders of record of the Bank at their respective addresses as
shown upon the books of the Bank mailed not less than ten days prior to the
date fixed for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of this
Bank may be called at any time by the Board of
- 1 -
<PAGE> 12
Directors or by any three or more shareholders owning, in the aggregate, not
less than ten percent of the stock of this Bank. The notice of any special
meeting of the shareholders called by the Board of Directors, stating the time,
place and purpose of the meeting, shall be given by or under the direction of
the Secretary, or such other officer as is designated by the Chief Executive
Officer, by first-class mail, postage prepaid, to all shareholders of record of
the Bank at their respective addresses as shown upon the books of the Bank,
mailed not less than ten days prior to the date fixed for such meeting.
Any special meeting of shareholders shall be conducted and its
proceedings recorded in the manner prescribed in these By-Laws for annual
meetings of shareholders.
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors may
designate a person to be the Secretary of the meetings of shareholders. In the
absence of a presiding officer, as designated in these By-Laws, the Board of
Directors may designate a person to act as the presiding officer. In the event
the Board of Directors fails to designate a person to preside at a meeting of
shareholders and a Secretary of such meeting, the shareholders present or
represented shall elect a person to preside and a person to serve as Secretary
of the meeting.
The Secretary of the meetings of shareholders shall cause the returns
made by the judges and election and other proceedings to be recorded in the
minute book of the Bank. The presiding officer shall notify the
directors-elect of their election and to meet forthwith for the organization of
the new board.
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<PAGE> 13
The minutes of the meeting shall be signed by the presiding officer
and the Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many
as three shareholders to be judges of the election, who shall hold and conduct
the same, and who shall, after the election has been held, notify, in writing
over their signatures, the secretary of the shareholders' meeting of the result
thereof and the names of the Directors elected; provided, however, that upon
failure for any reason of any judge or judges of election, so appointed by the
directors, to serve, the presiding officer of the meeting shall appoint other
shareholders or their proxies to fill the vacancies. The judges of election at
the request of the chairman of the meeting, shall act as tellers of any other
vote by ballot taken at such meeting, and shall notify, in writing over their
signatures, the secretary of the Board of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
record, who is qualified to vote under the provisions of Federal Law, shall
have the right to vote the number of shares of record in his name for as many
persons as there are Directors to be elected, or to cumulate such shares as
provided by Federal Law. In deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each share of
stock of record in his name. Shareholders may vote by proxy duly authorized in
writing. All proxies used at the annual meeting shall be secured for that
meeting only, or any adjournment thereof, and shall be dated, and if not dated
by the
- 3 -
<PAGE> 14
shareholder, shall be dated as of the date of receipt thereof. No officer or
employee of this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
capital stock of the Bank, eligible to be voted, present either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of shareholders, but shareholders present at any meeting and consti- tuting
less than a quorum may, without further notice, adjourn the meeting from time
to time until a quorum is obtained. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
ARTICLE II
DIRECTORS
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be
managed by the Board of Directors. Each director of the Bank shall be the
beneficial owner of a substantial number of shares of BANC ONE CORPORATION and
shall be employed either in the position of Chief Executive Officer or active
leadership within his or her business, professional or community interest which
shall be located within the geographic area in which the Bank operates, or as
an executive officer of the Bank. A director shall not be eligible for
nomination and re-election as a director of the Bank if such person's executive
or leadership position within his or her business, professional or community
interests which qualifies such person as a director of Bank terminates. The
age of 70 is the
- 4 -
<PAGE> 15
mandatory retirement age as a director of the Bank. When a person's
eligibility as director of the Bank terminates, whether because of change in
share ownership, position, residency or age, within 30 days after such
termination, such person shall submit his resignation as a director to be
effective at the pleasure of the Board provided, however, that in no event
shall such person be nominated or elected as a director. Provided, however,
following a person's retirement or resignation as a director because of the age
limitations herein set forth with respect to election or re-election as a
director, such person may, in special or unusual circumstances, and at the
discretion of the Board, be elected by the directors as a Director Emeritus of
the Bank for a limited period of time. A Director Emeritus shall have the
right to participate in board meetings but shall be without the power to vote
and shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
prescribed by law. No person elected a director may exercise any of the powers
of his office until he has taken the oath of such office.
SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office until
the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to his prior
death, resignation, or removal from office. Whenever any vacancy shall occur
among the directors, the remaining directors shall constitute the directors of
the Bank
- 5 -
<PAGE> 16
until such vacancy is filled by the remaining directors, and any director so
appointed shall hold office for the unexpired term of his or her successor.
Notwithstanding the foregoing, each director shall hold office and serve at the
pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share-
holders shall meet for organization of the new board at the time fixed by the
presiding officer of the annual meeting. If at the time fixed for such meeting
there is no quorum present, the Directors in attendance may adjourn from time
to time until a quorum is obtained. A majority of the number of Directors
elected by the shareholders shall constitute a quorum for the transaction of
business.
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of
Directors shall be held on the third Monday of each calendar month excluding
March and July, which meeting will be held at 4:00 p.m. When any regular
meeting of the Board falls on a holiday, the meeting shall be held on such
other day as the Board may previously designate or should the Board fail to so
designate, on such day as the Chairman of the Board of President may fix.
Whenever a quorum is not present, the directors in attendance shall adjourn the
meeting to a time not later than the date fixed by the Bylaws for the next
succeeding regular meeting of the Board.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held at the call of the Chairman of the Board or President, or at the
request of two or more Directors. Any special meeting may be held at such
place in Franklin County, Ohio, and at
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<PAGE> 17
such time as may be fixed in the call. Written or oral notice shall be given
to each Director not later than the day next preceding the day on which special
meeting is to be held, which notice may be waived in writing. The presence of
a Director at any meeting of the Board shall be deemed a waiver of notice
thereof by him. Whenever a quorum is not present the Directors in attendance
shall adjourn the special meeting from day to day until a quorum is obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a quorum
at any meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time-to-time, and the meeting may be held, as
adjourned, without further notice. When, however, less than a quorum as herein
defined, but at least one-third and not less than two of the authorized number
of Directors are present at a meeting of the Directors, business of the Bank
may be transacted and matters before the Board approved or disapproved by the
unanimous vote of the Directors present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall
receive such fees for, and transportation expenses incident to, attendance at
Board and Board Committee Meetings and such fees for service as a Director
irrespective of meeting attendance as from time to time are fixed by resolution
of the Board; provided, however, that payment hereunder shall not be made to a
Director for meetings attended and/or Board service which are not for the
Bank's sole benefit and which are concurrent and duplicative with meetings
attended or board service for an affiliate of the Bank for which
- 7 -
<PAGE> 18
the Director receives payment; and provided further, that payment hereunder
shall not be made in the case of any Director in the regular employment of the
Bank or of one of its affiliates.
SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of the
Board of Directors known as the Executive Committee which shall possess and
exercise, when the Board is not in session, all powers of the Board that may
lawfully be delegated. The Executive Committee shall also exercise the powers
of the Board of Directors in accordance with the Provisions of the "Employees
Retirement Plan" and the "Agreement and Declaration of Trust" as the same now
exist or may be amended hereafter. The Executive Committee shall consist of
not fewer than four board members, including the Chairman of the Board and
President of the Bank, one of whom, as hereinafter required by these By-laws,
shall be the Chief Executive Officer. The other members of the Committee shall
be appointed by the Chairman of the Board or by the President, with the
approval of the Board and shall continue as members of the Executive Committee
until their successors are appointed, provided, however, that any member of the
Executive Committee may be removed by the Board upon a majority vote thereof at
any regular or special meeting of the Board. The Chairman or President shall
fill any vacancy in the Committee by the appointment of another Director,
subject to the approval of the Board of Directors. The regular meetings of the
Executive Committee shall be held on a regular basis as scheduled by the Board
of Directors. Special meetings of the Executive Committee shall be held at the
call of the Chairman or President or any two members thereof at such time or
times as may be designated. In the event of the absence of any member or
- 8 -
<PAGE> 19
members of the Committee, the presiding member may appoint a member or members
of the Board to fill the place or places of such absent member or members to
serve during such absence. Not fewer than three members of the Committee must
be present at any meeting of the Executive Committee to constitute a quorum,
provided, however that with regard to any matters on which the Executive
Committee shall vote, a majority of the Committee members present at the
meeting at which a vote is to be taken shall not be officers of the Bank and,
provided further, that if, at any meeting at which the Chairman of the Board
and President are both present, Committee members who are not officers are not
in the majority, then the Chairman of the Board or President, which ever of
such officers is not also the Chief Executive Officer, shall not be eligible to
vote at such meeting and shall not be recognized for purposes of determining if
a quorum is present at such meeting. When neither the Chairman of the Board
nor President are present, the Committee shall appoint a presiding officer.
The Executive Committee shall keep a record of its proceedings and report its
proceedings and the action taken by it to the Board of Directors.
SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE.
There shall be a standing committee of the Board of Directors known as the
Community Reinvestment Act and Compliance Policy Committee the duties of which
shall be, at least once in each calendar year, to review, develop and recommend
policies and programs related to the Bank's Community Reinvestment Act
Compliance and regulatory compliance with all existing statutes, rules and
regulations affecting the Bank under state and federal law. Such Committee
shall provide and promptly make a full report
- 9 -
<PAGE> 20
of such review of current Bank policies with regard to Community Reinvestment
Act and regulatory compliance in writing to the Board, with recommendations, if
any, which may be necessary to correct any unsatisfactory conditions. Such
Committee may, in its discretion, in fulfilling its duties, utilize the
Community Reinvestment Act officers of the Bank, Banc One Ohio Corporation and
Banc One Corporation and may engage outside Community Reinvestment Act experts,
as approved by the Board, to review, develop and recommend policies and
programs as herein required. The Community Reinvestment Act and regulatory
compliance policies and procedures established and the recommendations made
shall be consistent with, and shall supplement, the Community Reinvestment Act
and regulatory compliance programs, policies and procedures of Banc One
Corporation and Banc One Ohio Corporation. The Community Reinvestment Act and
Compliance Policy Committee shall consist of not fewer than four board members,
one of whom shall be the Chief Executive Officer and a majority of whom are not
officers of the Bank. Not fewer than three members of the Committee, a
majority of whom are not officers of the Bank, must be present to constitute a
quorum. The Chairman of the Board or President of the Bank, whichever is not
the Chief Executive Officer, shall be an ex officio member of the Community
Reinvestment Act and Compliance Policy Committee. The Community Reinvestment
Act and Compliance Policy Committee, whose chairman shall be appointed by the
Board, shall keep a record of its proceedings and report its proceedings and
the action taken by it to the Board of Directors.
SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees known
as the Trust Management Committee and the Trust Examination Committee appointed
as hereinafter provided.
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<PAGE> 21
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such
special committees from time to time as are in its judgment necessary in the
interest of the Bank.
ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
(a) The officers of the Bank shall include a President, Secretary
and Security Officer and may include a Chairman of the Board, one or
more Vice Chairmen, one or more Vice Presidents (which may include one
or more Executive Vice Presidents and/or Senior Vice Presidents) and
one or more Assistant Secretaries, all of whom shall be elected by the
Board. All other officers may be elected by the Board or appointed in
writing by the Chief Executive Officer. The salaries of all officers
elected by the Board shall be fixed by the Board. The Board from
time-to-time shall designate the President or Chairman of the Board to
serve as the Bank's Chief Executive Officer.
(b) The Chairman of the Board, if any, and the President shall be
elected by the Board from their own number. The President and
Chairman of the Board shall be re-elected by the Board annually at the
organizational meeting of the Board of Directors following the Annual
Meeting of Shareholders. Such officers as the Board shall elect from
their own number shall hold office from the date of their election as
officers until
- 11 -
<PAGE> 22
the organization meeting of the Board of Directors following the next
Annual Meeting of Shareholders, provided, however, that such officers
may be relieved of their duties at any time by action of the Board in
which event all the powers incident to their office shall immediately
terminate.
(c) Except as provided in the case of the elected officers
who are members of the Board, all officers, whether elected
or appointed, shall hold office at the pleasure of the Board.
Except as otherwise limited by law or these By-laws, the Board
assigns to Chief Executive Officer and/or his designees the
authority to appoint and dismiss any elected or appointed
officer or other member of the Bank's management staff and
other employees of the Bank, as the person in charge of and
responsible for any branch office, department, section,
operation, function, assignment or duty in the Bank.
(d) The management staff of the Bank shall include officers elected
by the Board, officers appointed by the Chief Executive Officer, and
such other persons in the employment of the Bank who, pursuant to
written appointment and authorization by a duly authorized officer of
the Bank, perform management functions and have management responsi-
bilities. Any two or more offices may be held by the same person
except that no person shall hold the office of Chairman of the Board
and/or President and at the same time also hold the office of
Secretary.
(e) The Chief Executive Officer of the Bank and any other
- 12 -
<PAGE> 23
officer of the Bank, to the extent that such officer is authorized in
writing by the Chief Executive Officer, may appoint persons other than
officers who are in the employment of the Bank to serve in management
positions and in connection therewith, the appointing officer may
assign such title, salary, responsibilities and functions as are
deemed appropriate by him, provided, however, that nothing contained
herein shall be construed as placing any limitation on the authority
of the Chief Executive Officer as provided in this and other sections
of these By-Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Bank shall have general and active management of the business of the Bank and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. Except as otherwise prescribed or limited by these By-Laws, the
Chief Executive Officer shall have full right, authority and power to control
all personnel, including elected and appointed officers, of the Bank, to employ
or direct the employment of such personnel and officers as he may deem
necessary, including the fixing of salaries and the dismissal of them at
pleasure, and to define and prescribe the duties and responsibility of all
Officers of the Bank, subject to such further limitations and directions as he
may from time-to-time deem proper. The Chief Executive Officer shall perform
all duties incident to his office and such other and further duties, as may,
from time-to-time, be required of him by the Board of Directors or the
shareholders. The specification of authority in these By-Laws wherever and to
whomever granted shall not be construed to limit in any manner the general
powers of
- 13 -
<PAGE> 24
delegation granted to the Chief Executive Officer in conducting the business of
the Bank. The Chief Executive Officer or, in his absence, the Chairman of the
Board or President of the Bank, as designated by the Chief Executive Officer,
shall preside at all meetings of shareholders and meetings of the Board. In
the absence of the Chief Executive Officer, such officer as is designated by
the Chief Executive Officer shall be vested with all the powers and perform all
the duties of the Chief Executive Officer as defined by these By-Laws. When
designating an officer to serve in his absence, the Chief Executive Officer
shall select an officer who is a member of the Board of Directors whenever such
officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive
Officer, the Chairman of the Board, the President, and those officers so
designated and authorized by the Chief Executive Officer are authorized for an
on behalf of the Bank, and to the extent permitted by law, to make loans and
discounts; to purchase or acquire drafts, notes, stock, bonds, and other
securities for investment of funds held by the Bank; to execute and purchase
acceptances; to appoint, empower and direct all necessary agents and attor-
neys; to sign and give any notice required to be given; to demand payment
and/or to declare due for any default any debt or obligation due or payable to
the Bank upon demand or authorized to be declared due; to foreclose any mort-
gages, to exercise any option, privilege or election to forfeit, terminate,
extend or renew any lease; to authorize and direct any proceedings for the
collection of any money or for the enforcement of any right or obligation; to
adjust, settle and compromise all claims of every
- 14 -
<PAGE> 25
kind and description in favor of or against the Bank, and to give receipts,
releases and discharges therefor; to borrow money and in connection therewith
to make, execute and deliver notes, bonds or other evidences of indebtedness;
to pledge or hypothe- cate any securities or any stocks, bonds, notes or any
property real or personal held or owned by the Bank, or to rediscount any notes
or other obli- gations held or owned by the Bank, to employ or direct the
employment of all personnel, including elected and appointed officers, and the
dismissal of them at pleasure, and in furtherance of and in addition to the
powers hereinabove set forth to do all such acts and to take all such
proceedings as in his judgment are necessary and incidental to the operation of
the Bank.
Other persons in the employment of the Bank, including but not limited
to officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
chief Executive Officer, to perform the powers set forth above, subject, how-
ever, to such limitations and conditions as are set forth in the authorization
given to such persons.
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and control of
the records of the Bank and, subject to the direction of the Chief Executive
Officer, shall undertake other duties and functions usually performed by a
corporate secretary. Other officers may be designated by the Chief Executive
Officer or the Board of Directors as Assistant Secretary to perform the duties
of the Secretary.
- 15 -
<PAGE> 26
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman
of the Board, President, any officer being a member of the Bank's management
staff who is also a person in charge of and responsible for any department
within the Bank and any other officer to the extent such officer is so
designated and authorized by the Chief Executive Officer, the Chairman of the
Board, the President, or any other officer who is a member of the Bank's
management staff who is in charge of and responsible for any department within
the Bank, are hereby authorized on behalf of the Bank to sell, assign, lease,
mortgage, transfer, deliver and convey any real or personal property now or
hereafter owned by or standing in the name of the Bank or its nominee, or held
by this Bank as collateral security, and to execute and deliver such deeds,
contracts, leases, assignments, bills of sale, transfers or other papers or
documents as may be appropriate in the circumstances; to execute any loan
agreement, security agreement, commitment letters and financing statements and
other documents on behalf of the Bank as a lender; to execute purchase orders,
documents and agreements entered into by the Bank in the ordinary course of
business, relating to purchase, sale, exchange or lease of services, tangible
personal property, materials and equipment for the use of the Bank; to execute
powers of attorney to perform specific or general functions in the name of or
on behalf of the Bank; to execute promissory notes or other instruments
evidencing debt of the Bank; to execute instruments pledging or releasing
securities for public funds, documents submitting public fund bids on behalf of
the Bank and public fund contracts; to purchase and acquire any real or
personal property including loan portfolios and to execute and deliver such
agreements, contracts or other papers or documents as
- 16 -
<PAGE> 27
may be appropriate in the circumstances; to execute any indemnity and fidelity
bonds, proxies or other papers or documents of like or different character
necessary, desirable or incidental to the conduct of its banking business; to
execute and deliver settlement agreements or other papers or documents as may
be appropriate in connection with a dismissal authorized by Section 3.01(c) of
these By-laws; to execute agreements, instruments, documents, contracts or
other papers of like or difference character necessary, desirable or incidental
to the conduct of its banking business; and to execute and deliver partial
releases from and discharges or assignments of mortgages, financing statements
and assignments or surrender of insurance policies, now or hereafter held by
this Bank.
The Chief Executive Officer, Chairman of the Board, President, any
officer being a member of the Bank's management staff who is also a person in
charge of and responsible for any department within the Bank, and any other
officer of the Bank so designated and authorized by the Chief Executive
Officer, Chairman of the Board, President or any officer who is a member of the
Bank's management staff who is in charge of and responsible for any department
within the Bank are authorized for and on behalf of the Bank to sign and issue
checks, drafts, and certificates of deposit; to sign and endorse bills of
exchange, to sign and countersign foreign and domestic letters of credit, to
receive and receipt for payments of principal, interest, dividends, rents, fees
and payments of every kind and description paid to the Bank, to sign receipts
for property acquired by or entrusted to the Bank, to guarantee the genuineness
of signatures on assignments of stocks,
- 17 -
<PAGE> 28
bonds or other securities, to sign certifications of checks, to endorse and
deliver checks, drafts, warrants, bills, notes, certificates of deposit and
acceptances in all business transactions of the Bank.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management
staff, may be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and conditions
as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall
be bonded for the honest and faithful performance of their duties for such
amount as may be prescribed by the Board of Directors.
ARTICLE IV
TRUST DEPARTMENT
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to
this Bank under the provisions of Federal Law and Regulations of the Comp-
troller of the Currency, there shall be maintained a separate Trust Department
of the Bank, which shall be operated in the manner specified herein.
- 18 -
<PAGE> 29
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing Committee
known as the Trust Management Committee, consisting of at least five members, a
majority of whom shall not be officers of the Bank. The Committee shall
consist of the Chairman of the Board who shall be Chairman of the Com- mittee,
the President, and at least three other Directors appointed by the Board of
Directors and who shall continue as members of the Committee until their
successors are appointed. Any vacancy in the Trust Management Committee may be
filled by the Board at any regular or special meeting. In the event of the
absence of any member or members, such Committee may, in its discretion,
appoint members of the Board to fill the place of such absent members to serve
during such absence. Three members of the Committee shall constitute a quorum.
Any member of the Committee may be removed by the Board by a majority vote at
any regular or special meeting of the Board. The Committee shall meet at such
times as it may determine or at the call of the Chairman, or President or any
two members thereof.
The Trust Management Committee, under the general direction of the
Board of Directors, shall supervise the policy of the Trust Department which
shall be formulated and executed in accordance with Law, Regulations of the
Comp- troller of the Currency, and sound fiduciary principles.
SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing Commit-
tee known as the Trust Examination Committee, consisting of three directors
appointed by the Board of Directors and who shall continue as members of the
committee until their
- 19 -
<PAGE> 30
successors are appointed. Such members shall not be active officers of the
Bank. Two members of the Committee shall constitute a quorum. Any member of
the Committee may be removed by the Board by a majority vote at any regular or
special meeting of the Board. The Committee shall meet at such times as it may
determine or at the call of two members thereof.
This Committee shall, at least once during each calendar year and
within fifteen months of the last such audit, or at such other time(s) as may
be required by Regulations of the Comptroller of the Currency, make suitable
audits of the Trust Department or cause suitable audits to be made by auditors
responsible only to the Board of Directors, and at such time shall ascertain
whether the Department has been administered in accordance with Law, Regula-
tions of the Comptroller of the Currency and sound fiduciary principles.
The Committee shall promptly make a full report of such audits in
writing to the Board of Directors of the Bank, together with a recommendation
as to what action, if any, may be necessary to correct any unsatisfactory
condition. A report of the audits together with the action taken thereon shall
be noted in the Minutes of the Board of Directors and such report shall be a
part of the records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the management
and supervision of an officer of the Bank or of the trust affiliate of the
Bank designated by and subject to the advice and direction of the Chief
Executive Officer. Such officer having supervisory responsibility over the
Trust Department shall do or
- 20 -
<PAGE> 31
cause to be done all things necessary or proper in carrying on the business of
the Trust Department in accordance with provi- sions of law and applicable
regulations.
SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department may
be carried in the name of the Bank in its fiduciary capacity, in the name of
Bank, or in the name of a nominee or nominees.
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary
capacity awaiting investment or distribution shall not be held uninvested or
undistributed any longer than is reasonable for the proper management of the
account and shall be invested in accordance with the instrument establishing a
fiduciary relationship and local law. Where such instrument does not specify
the character or class of investments to be made and does not vest in the Bank
any discretion in the matter, funds held pursuant to such instrument shall be
invested in any investment which corporate fiduciaries may invest under local
law.
The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint custody
or control of not less than two of the officers or employees of the Bank or of
the trust affiliate of the Bank designated for the purpose by the Trust
Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman
of the Board, President, any officer of the Trust Department, and such other
officers of the trust affiliate of the
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<PAGE> 32
Bank as are specifically designated and authorized by the Chief Executive
Officer, the President, or the officer in charge of the Trust Department, are
hereby authorized, on behalf of this Bank, to sell, assign, lease, mortgage,
transfer, deliver and convey any real property or personal property and to
purchase and acquire any real or personal property and to execute and deliver
such agreements, contracts, or other papers and documents as may be appropriate
in the circumstances for property now or hereafter owned by or standing in the
name of this Bank, or its nominee, in any fiduciary capacity, or in the name of
any principal for whom this Bank may now or hereafter be acting under a power
of attorney, or as agent and to execute and deliver partial releases from any
discharges or assignments or mortgages and assignments or surrender of
insurance policies, to execute and deliver deeds, contracts, leases,
assignments, bills of sale, transfers or such other papers or documents as may
be appropriate in the circumstances for property now or hereafter held by this
Bank in any fiduciary capacity or owned by any principal for whom this Bank may
now or hereafter be acting under a power of attorney or as agent; to execute
and deliver settlement agreements or other papers or documents as may be
appropriate in connection with a dismissal authorized by Section 3.01(c) of
these By-laws; provided that the signature of any such person shall be attested
in each case by any officer of the Trust Department or by any other person who
is specifically authorized by the Chief Executive Officer, the President or the
officer in charge of the Trust Department.
The Chief Executive Officer, Chairman of the Board, President, any
officer of the Trust Department and such other officers of the
- 22 -
<PAGE> 33
trust affiliate of the Bank as are specifically designated and authorized by
the Chief Executive Officer, the President, or the officer in charge of the
Trust Department, or any other person or corporation as is specifically
authorized by the Chief Executive Officer, the President or the officer in
charge of the Trust Department, are hereby authorized on behalf of this Bank,
to sign any and all pleadings and papers in probate and other court
proceedings, to execute any indemnity and fidelity bonds, trust agreements,
proxies or other papers or documents of like or different character necessary,
desirable or incidental to the appointment of the Bank in any fiduciary
capacity and the conduct of its business in any fiduciary capacity; also to
foreclose any mortgage, to execute and deliver receipts for payments of
principal, interest, dividends, rents, fees and payments of every kind and
description paid to the Bank; to sign receipts for property acquired or
entrusted to the Bank; also to sign stock or bond certificates on behalf of
this Bank in any fiduciary capacity and on behalf of this Bank as transfer
agent or registrar; to guarantee the genuineness of signatures on assignments
of stocks, bonds or other securities, and to authenticate bonds, debentures,
land or lease trust certificates or other forms of security issued pursuant to
any indenture under which this Bank now or hereafter is acting as Trustee. Any
such person, as well as such other persons as are specifically authorized by
the Chief Executive Officer or the officer in charge of the Trust Department,
may sign checks, drafts and orders for the payment of money executed by the
Trust Department in the course of its business.
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board,
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<PAGE> 34
President, any officer of the Trust Department, any officer of the trust
affiliate of the Bank and such other persons as may be specifically authorized
by Resolution of the Trust Management Committee or the Board of Directors, may
vote shares of stock of a corporation of record on the books of the issuing
company in the name of the Bank or in the name of the Bank as fiduciary, or may
grant proxies for the voting of such stock of the granting if same is permitted
by the instrument under which the Bank is acting in a fiduciary capacity, or by
the law applicable to such fiduciary account. In the case of shares of stock
which are held by a nominee of the Bank, such shares may be voted by such
person(s) authorized by such nominee.
ARTICLE V
STOCKS AND STOCK CERTIFICATES
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
evidenced by certificates which shall bear the signature of the Chairman of the
Board, the President, or a Vice President (which signature may be engraved,
printed or impressed), and shall be signed manually by the Secretary, or any
other officer appointed by the Chief Executive Officer for that purpose.
In case any such officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its fact
that the
- 24 -
<PAGE> 35
stock represented thereby is transferable only upon the books of the Bank
properly endorsed and shall recite such other information as is required by law
and deemed appropriate by the Board. The corporate seal may be facsimile
engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall
be transferable only upon the stock transfer books of the Bank and except as
hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of any affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory to the Chairman of the
Board, the President, or a Vice President. The Board of Directors, or the
Chief Executive Officer, may authorize the issuance of a new certificate
therefor without the furnishing of indemnity. Stock Transfer Books, in which
all transfers of stock shall be recorded, shall be provided.
The stock transfer books may be closed for a reasonable period and
under such conditions as the Board of Directors may at any time determine for
any meeting of shareholders, the payment of dividends or any other lawful
purpose. In lieu of closing the transfer books, the Board may, in its
discretion, fix a record date and hour constituting a reasonable period prior
to the day designated for the holding of any meeting of the shareholders or the
day appointed for the payment of any dividend or for any other purpose at the
time as of which shareholders entitled to notice of and to vote at
- 25 -
<PAGE> 36
any such meeting or to receive such dividend or to be treated as shareholders
for such other purpose shall be determined, and only shareholders of record at
such time shall be entitled to notice of or to vote at such meeting or to
receive such dividends or to be treated as shareholders for such other purpose.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. SEAL. The impression made below is an impression of the seal
adopted by the Board of Directors of BANK ONE, COLUMBUS, NATIONAL ASSOCIATION.
The Seal may be affixed by any officer of the Bank to any document executed by
an authorized officer on behalf of the Bank, and any officer may certify any
act, proceedings, record, instrument or authority of the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
Committee, the Bank and each of its Branches shall be open for business on such
days and during such hours as the Chief Executive Officer of the Bank shall,
from time to time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the Articles
of Association, the returns of the judges of elections, the By-Laws and any
amendments thereto, the proceedings of all regular and special meetings of the
shareholders and of the Board of Directors, and reports of the committees of
the Board of Directors shall be recorded in the minute book of the Bank. The
minutes of each such meeting shall be signed by the presiding officer and
attested by the secretary of the meetings.
- 26 -
<PAGE> 37
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of a
majority of the Directors.
- 27 -
<PAGE> 38
As amended January 18, 1983 - Section 2.04. (Regular Meetings).
As amended August 13, 1984 - Section 3.05 (Execution of Documents).
As amended February 18, 1991 - Section 1.01 (Annual Meeting)
Section 2.04 (Regular Meetings)
Section 2.06 (Director's Quorum)
Section 2.08 (Executive Committee)
Section 2.09 (Audit Committee)
Section 2.10 (Credit Policy Committee)
Section 2.11 (Community Reinvestment
Act and Compliance Policy Committee)
Section 2.12 (Trust Committees)
Section 2.13 (Other Committees)
Section 3.01 (Officers and Management
Staff)
Section 3.02 (Chief Executive Officer)
Section 3.03 (Powers of Officers and
Management Staff
Section 3.04 (Secretary)
Section 3.05 (Execution of Documents)
Section 4.03 (Trust Examination
Committee)
Sections 4.04-4.09 (Former 4.04
deleted; all Sections renumbered)
Section 5.01 (Stock Certificates)
As amended April 15, 1991 --Section 2.09 (Audit Committee)
As amended March 16, 1992 --Section 3.01(a) (Vice Chairmen)
As amended July 16, 1992 --Section 3.05 (Execution of Documents)
Section 4.07 (Trust-Execution of Documents)
As amended January 19, 1993-Former Section 2.09 (Audit Committee) deleted and
following Article II sections renumbered
As amended September 20, 1993-Added Section 2.01, Management of the Bank
-Amended Section 2.02, Term of Office/Vacancies
-Amended Section 2.04, Regular Meetings
-Renumbered all sections of Article II (Directors)
- 28 -
<PAGE> 39
As amended January 18, 1994 - Former Section 2.10 (Credit Policy Committee)
deleted and following Article II sections
renumbered
SEC333
- 29 -
<PAGE> 40
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
The undersigned, designated to act as Trustee under the Indenture for Prime
Hospitality Corp., described in the attached Statement of Eligibility and
Qualification, does hereby consent that reports of examinations by Federal,
State, Territorial, or District Authorities may be furnished by such
authorities to the Commission upon the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.
<TABLE>
<S> <C> <C>
Bank One, Columbus, NA
Dated: March 16, 1993 By: /S/ STEPHEN W. BOUGHTON
---------------------------
Stephen W. Boughton
Authorized Signer
</TABLE>
<PAGE> 41
EXHIBIT 7
<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires February 28, 1995
Please refer to page i, 1
LOGO Table of Contents, for
the required disclosure
of estimated burden.
</TABLE>
______________________________________________________________________________
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC OFFICES AND FOREIGN OFFICES
- -- FFIEC 031
<TABLE>
<S> <C>
(931231)
--------
REPORT AT THE CLOSE OF BUSINESS DECEMBER 31, 1993 (RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 This report form is to be filed by banks with branches
(State member banks); 12 U.S.C. Section 1817 (State and consolidated subsidiaries in U.S. territories and
nonmember banks); and 12 U.S.C. Section 161 (National possessions, Edge or Agreement subsidiaries, foreign branches,
banks). consolidated foreign subsidiaries, or International Banking
Facilities.
____________________________________________________________________________________________________________________________________
NOTE: The Reports of Condition and Income must be signed The Reports of Condition and Income are to be prepared in
by an authorized officer and the Report of Condition must accordance with Federal regulatory authority instructions.
be attested to by not less than two directors (trustees) NOTE: These instructions may in some cases differ from
for State nonmember banks and three directors for State generally accepted accounting principles.
member and National banks.
We, the undersigned directors (trustees), attest to the
I, Elizabeth G. Gilliland, Assistant Vice-President correctness of this Report of Condition (including the
- ---------------------------------------------------- supporting schedules) and declare that it has been examined
Name and Title of Officer Authorized to Sign Report by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the
of the named bank do hereby declare that these Reports of appropriate Federal regulatory authority and is true and
Condition and Income (including the supporting schedules) correct.
have been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and
are true to the best of my knowledge and belief. /s/ Michael J. McMennamin
----------------------------------------------------
Director (Trustee)
/s/ William M. Bennett
/s/ Elizabeth G. Gilliland ----------------------------------------------------
- ---------------------------------------------------- Director (Trustee)
Signature of Officer Authorized to Sign Report
/s/ Robert G. Davis
July 27, 1993 ----------------------------------------------------
- ---------------------------------------------------- Director (Trustee)
Date of Signature Michael J. McMennamin
William M. Bennett
Robert G. Davis
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to NATIONAL BANKS: Return the original only in the special
the appropriate Federal Reserve District Bank. return address envelope provided. If express mail is used
in lieu of the special return address envelope, return the
STATE NONMEMBER BANKS: Return the original only in the original only to the FDIC, c/o Quality Data Systems, 2139
special return address envelope provided. If express mail Espey Court, Crofton, MD 21114.
is used in lieu of the special return address envelope,
return the original only to the FDIC, c/o Quality Data
Systems, 2139 Espey Court, Crofton, MD 21114.
____________________________________________________________________________________________________________________________________
</TABLE>
<TABLE>
<S> <C> <C>
FDIC Certificate Number | | | | | | CALL NO. 186 31 12-31-93
-----------
(RCRI 9050) CERT: 06559 00080 STBK 369-1580
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
100 EAST BROAD STREET
COLUMBUS, OH 43271
</TABLE>
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE> 42
<TABLE>
<S> <C>
Page i
Consolidated Reports of Condition and Income for 2
A Bank With Domestic and Foreign Offices
</TABLE>
<TABLE>
__________________________________________________________________________________________________________________________
<S> <C>
TABLE OF CONTENTS
SIGNATURE PAGE Cover REPORT OF CONDITION
REPORT OF INCOME Schedule RC--Balance Sheet . . . . . . . . . . . . RC-1,2
Schedule RI--Income Statement . . . . . . . . . . RI-1,2,3 Schedule RC-A--Cash and Balances Due From
Depository Institutions . . . . . . . . . . . . . RC-3
Schedule RI-A--Changes in Equity Capital . . . . . . RI-3
Schedule RC-B--Securities . . . . . . . . . . . . . RC-4,5
Schedule RI-B--Charge-offs and Recoveries and
Changes in Allowance for Loan and Lease Schedule RC-C--Loans and Lease Financing
Losses . . . . . . . . . . . . . . . . . . . . . RI-4,5 Receivables:
Part I. Loans and Leases . . . . . . . . . . . RC-6,7
Schedule RI-C--Applicable Income Taxes by Part II. Loans to Small Businesses and
Taxing Authority . . . . . . . . . . . . . . . . . RI-5 Small Farms (included in the forms for
Schedule RI-D--Income from International June 30 only) . . . . . . . . . . . . . . . RC-7a,7b
Operations . . . . . . . . . . . . . . . . . . . . RI-6
Schedule RI-E--Explanations . . . . . . . . . . . . RI-7,8 Schedule RC-D--Assets Held in Trading Accounts in Domestic
Offices Only (to be completed only by banks with $1 billion
or more in total assets) . . . . . . . . . . . . . RC-8
Schedule RC-E--Deposit Liabilities . . . . . . . . RC-9,10
Schedule RC-F--Other Assets . . . . . . . . . . . . . RC-11
Schedule RC-G--Other Liabilities . . . . . . . . . . RC-11
Schedule RC-H--Selected Balance Sheet
Items for Domestic Offices . . . . . . . . . . . . RC-12
Schedule RC-I--Selected Assets and
Liabilities of IBFs . . . . . . . . . . . . . . . . RC-12
Schedule RC-K--Quarterly Averages . . . . . . . . . . RC-13
Schedule RC-L--Off-Balance Sheet Items . . . . . RC-14,15
Schedule RC-M--Memoranda . . . . . . . . . . . . RC-16,17
Disclosure of Estimated Burden
Schedule RC-N--Past Due and Nonaccrual
The estimated average burden associated with this Loans, Leases, and Other Assets . . . . . . . . RC-18,19
information collection is 29.2 hours per respondent and is
estimated to vary from 14.6 to 150 hours per response, Schedule RC-O--Other Data for Deposit
depending on individual circumstances. Burden estimates Insurance Assessments . . . . . . . . . . . . . RC-19,20
include the time for reviewing instructions, gathering and
maintaining data in the required form, and completing the Schedule RC-R--Risk-Based Capital . . . . . . . . RC-21,22
information collection, but exclude the time for compiling
and maintaining business records in the normal course of a Optional Narrative Statement Concerning the
respondent's activities. Comments concerning the accuracy Amounts Reported in the Reports of
of this burden estimate and suggestions for reducing this Condition and Income . . . . . . . . . . . . . . . RC-23
burden should be directed to the Office of Information and
Regulatory Affairs, Office of Management and Budget, Special Report (to be completed by all banks)
Washington, D.C. 20503, and to one of the following:
Schedule RC-J--Repricing Opportunities (sent only to
Secretary and to be completed only by savings banks)
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
</TABLE>
For information or assistance, national and state nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE> 43
<TABLE>
<S> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RI-1
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
CONSOLIDATED REPORT OF INCOME
FOR THE PERIOD JANUARY 1, 1993-DECEMBER 31, 1993
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
SCHEDULE RI--INCOME STATEMENT
<TABLE>
<CAPTION>
I480<-
RIAD Bil Mil Thou
<S> <C> Dollar Amounts in Thousands <C> <C>
___________________________________________________________________________________________________________________
1. Interest income: ///////////////
a. Interest and fee income on loans: ///////////////
(1) In domestic offices:
(a) Loans secured by real estate . . . . . . . . . . . . . . . . . . . . . . . . . . 4011 68,196 1.a.(1)(a)
(b) Loans to depository institutions . . . . . . . . . . . . . . . . . . . . . . . . . 4019 0 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers . . . . . . . . 4024 359 1.a.(1)(c)
(d) Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . 4012 45,338 1.a.(1)(d)
(e) Acceptances of other banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4026 0 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures: ///////////////
(1) Credit cards and related plans . . . . . . . . . . . . . . . . . . . . . . . 4054 264,670 1.a.(1)(f)(1)
(2) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4055 127,754 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions . . . . . . . . . . . . . . 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political ///////////////
subdivisions in the U.S.: ///////////////
(1) Taxable obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4503 48 1.a.(1)(h)(1)
(2) Tax-exempt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 4504 2,631 1.a.(1)(h)(2)
(i) All other loans in domestic offices . . . . . . . . . . . . . . . . . . . . . . . . 4058 24,900 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBF's. . . . . . . . . . . . 4059 0 1.a.(2)
b. Income from lease financing receivables: //////////////
(1) Taxable leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4505 42,590 1.b.(1)
(2) Tax-exempt leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4307 614 1.b.(2)
c. Interest income on balances due from depository institutions:(1) //////////////
(1) In domestic offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4105 0 1.c.(1)
(2) In foreign office, Edge and Agreement subsidiaries and IBF's . . . . . . . 4106 0 1.c.(2)
d. Interest and dividend income on securities: //////////////
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations . 4027 11,858 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: //////////////
(a) Taxable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 4506 0 1.d.(2)(a)
(b) Tax-exempt securities . . . . . . . . . . . . . . . . . . . . . . . . . . 4507 7,908 1.d.(2)(b)
(3) Other domestic debt securities . . . . . . . . . . . . . . . . . . . . . . . . . 3657 882 1.d.(3)
(4) Foreign debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3658 112 1.d.(4)
(5) Equity securities (including investments in mutual funds) . . . . . . . . . . . 3659 221 1.d.(5)
e. Interest income from assets held in trading accounts . . . . . . . . . . . . . . . . . . 4069 596 1.e.
</TABLE>
__________
(1) Includes interest income on time certificates of deposit not held in
trading accounts.
3
<PAGE> 44
<TABLE>
<S> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 0321
Address: 100 East Broad Street Page RI-2
City, State Zip: Aolumbus, OH 13271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RI--CONTINUED
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Interest income (continued)
f. Interest income on federal funds sold and securities purchased ///////////////
under agreements to resell in domestic offices of the bank and of //////////////
its Edge and Agreement subsidiaries, and in IBFs . . . . . . . . . 4020 5,404 1.f.
g. Total interest income (sum of items 1.a through 1.f) . . . . . . . 4107 604,081 1.g.
2. Interest expense: //////////////
a. Interest on deposits: //////////////
(1) Interest on deposits in domestic offices: //////////////
(a) Transaction accounts (NOW accounts, ATS accounts, and //////////////
telephone and preauthorized transfer accounts) . . . . . 4508 6,175 2.a.(1)(a)
(b) Nontransaction accounts: //////////////
(1) Money market deposit accounts (MMDAs) . . . . . . . . . . 4509 29,111 2.a.(1)(b)(1)
(2) Other savings deposits . . . . . . . . . . . . . . . . . 4511 22,647 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more 4174 10,327 2.a.(1)(b)(3)
(4) All other time deposits . . . . . . . . . . . . . . . 4512 40,924 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement //////////////
subsidiaries, and in IBFs . . . . . . . . . . . . . . . . . . 4172 7.756 2.a.(2)
b. Expense of federal funds purchased and securities sold under //////////////
agreements to repurchase in domestic offices of the bank //////////////
and of its Edge and Agreement subsidiaries, and in IBFs . . . . . 4180 32,569 2.b.
c. Interest on demand notes issued to the U.S. Treasury and on other //////////////
borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . 4185 4,266 2.c.
d. Interest on mortgage indebtedness and obligations under //////////////
capitalized leases . . . . . . . . . . . . . . . . . . . . . . . 4072 672 2.d.
e. Interest on subordinated notes and debentures . . . . . . . . . . 4200 14,750 2.e.
f. Total interest expense (sum of items 2.a through 2.e) . . . . . . 4073 169,197 2.f.
3. Net interest income (item 1.g minus 2.f) . . . . . . . . . . . . . . ////////////// RIAD 4074 434,884 3.
4. Provisions: //////////////
a. Provision for loan and lease losses . . . . . . . . . . . . . . . ////////////// RIAD 4230 120,220 4.a.
b. Provision for allocated transfer risk . . . . . . . . . . . . . . ////////////// RIAD 4243 0 4.b.
5. Noninterest income: //////////////
a. Income from fiduciary activities . . . . . . . . . . . . . . . . 4070 7,701 5.a.
b. Service charges on deposit accounts in domestic offices . . . . . 4080 25,940 5.b.
c. Trading gains (losses) and fees from foreign exchange //////////////
transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 4075 1,263 5.c.
d. Other foreign transaction gains (losses) . . . . . . . . . . . . 4076 0 5.d.
e. Gains (losses) and fees from assets held in trading accounts . . 4077 0 5.e.
f. Other noninterest income: //////////////
(1) Other fee income . . . . . . . . . . . . . . . . . . . . . . 5407 354,867 5.f.(1)
(2) All other noninterest income* . . . . . . . . . . . . . . . . 5408 55,381 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f) . . . . . ////////////// RIAD 4079 445,152 5.g.
6. Gains (losses) on securities not held in trading accounts . . . . . . ////////////// RIAD 4091 (141) 6.
7. Noninterest expense: //////////////
a. Salaries and employee benefits . . . . . . . . . . . . . . . . . 4135 97,182 7.a.
b. Expenses of premises and fixed assets (net of rental income) //////////////
(excluding salaries and employee benefits and mortgage interest) . 4217 18,517 7.b.
c. Other noninterest expense* . . . . . . . . . . . . . . . . . . . 4092 395,736 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c) . . . . ////////////// RIAD 4093 511,435 7.d.
8. Income (loss) before income taxes and extraordinary items and other //////////////
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6, and 7.d) . ////////////// RIAD 4301 248,522 8.
9. Applicable income taxes (on item 8) . . . . . . . . . . . . . . . . . ////////////// RIAD 4302 82,675 9.
10. Income (loss) before extraordinary items and other adjustments (item //////////////
8 minus 9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ////////////// RIAD 4300 165,847 10.
</TABLE>
__________
*Describe on Schedule RI-E--Explanations.
4
<PAGE> 45
<TABLE>
<S> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC031
Address: 100 EAST BROAD STREET Page RI-3
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RI--CONTINUED
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
11. Extraordinary items and other adjustments: //////////////
a. Extraordinary items and other adjustments, gross of income //////////////
taxes* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4310 0 11.a.
b. Applicable income taxes (on item 11.a)* . . . . . . . . . . . . . 4315 0 11.b.
c. Extraordinary items and other adjustments, net of income taxes //////////////
(item 11.a minus 11.b) . . . . . . . . . . . . . . . . . . . . . . ////////////// RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c . . . . . . . . . . . . . ////////////// RIAD 4340 165,847 12.
</TABLE>
<TABLE>
<CAPTION>
Memoranda Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after ///////////////
August 7, 1986, that is not deductible for federal income tax purposes . . . . . . . . . . . 4513 118 M.1.
2. Not applicable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////////////
3. Estimated foreign tax credit included in applicable income taxes, items 9 and 11.b above . . 4309 0 M.3.
4. To be completed only by banks with $1 billion or more in total assets: ///////////////
Taxable equivalent adjustment to "Income (loss)before income taxes and ///////////////
extraordinary items and other adjustments" (item 8 above) . . . . . . . . . . . . . . . . . . 1244 5.761 M.4.
5. Number of full-time equivalent employees on payroll at end of current period //// Number
(round to nearest whole number) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4150 2,752 M.5.
</TABLE>
SCHEDULE RI-A--CHANGES IN EQUITY CAPITAL
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
I483 <-
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1992, Reports of Condition and ///////////////
Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3215 427,663 1.
2. Equity capital adjustments from amended Reports of Income, net* . . . . . . . . . . . . . . . . . 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) . . . . . . . . . . . . . . 3217 427,663 3.
4. Net income (loss) (must equal Schedule RI, item 12) . . . . . . . . . . . . . . . . . . . . . . . 4340 165,847 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net . . . . . . . . . . . . . . . 4346 0 5.
6. Changes incident to business combinations, net . . . . . . . . . . . . . . . . . . . . . . . . . 4356 0 6.
7. LESS: Cash dividends declared on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . 4470 0 7.
8. LESS: Cash dividends declared on common stock . . . . . . . . . . . . . . . . . . . . . . . . . 4460 107,623 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions for ///////////////
this schedule) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4411 0 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) 4412 0 10.
11. Change in net unrealized loss on marketable equity securities . . . . . . . . . . . . . . . . . . 4413 0 11.
12. Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5, 7, or 8 above). . . . . 4415 0 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal Schedule RC, ///////////////
item 28) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3210 485,887 14.
</TABLE>
__________
*Describe on Schedule RI-E--Explanations.
5
<PAGE> 46
<TABLE>
<S> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RI-4
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RI-B--CHARGE-OFFS AND RECOVERIES AND CHANGES IN
ALLOWANCE FOR LOAN AND LEASE LOSSES
PART I. CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES
<TABLE>
<CAPTION>
Part I excludes charge-offs and recoveries through the I486 <-
allocated transfer risk reserve. (Column A) (Column B)
Charge-offs Recoveries
calendar year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
<S> <C> <C> <C> <C>
1. Loans secured by real estate: //////////////// /////////////////
a. To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . 4651 1,882 4661 2,310 1.a.
b. To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other banks: //////////////// /////////////////
a. To U.S. banks and other U.S. depository institutions . . . . . . . . 4653 0 4663 0 2.a.
b. To foreign banks . . . . . . . . . . . . . . . . . . . . . . . . . . 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers . . . 4655 0 4665 10 3.
4. Commercial and industrial loans: //////////////// /////////////////
a. To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . 4645 5,135 4617 4,517 4.a.
b. To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other personal //////////////// /////////////////
expenditures: //////////////// /////////////////
a. Credit cards and related plans . . . . . . . . . . . . . . . . . . . 4656 81,185 4666 11,268 5.a.
b. Other (includes single payment, installment, and all student loans) . 4657 32,952 4667 16,844 5.b.
6. Loans to foreign governments and official institutions . . . . . . . . . 4643 0 4627 0 6.
7. All other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4644 345 4628 319 7.
8. Lease financing receivables: //////////////// /////////////////
a. Of U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . 4658 2,571 4668 156 8.a.
b. Of non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8) . . . . . . . . . . . . . . . . . . . . 4635 124,070 4605 35,424 9.
</TABLE>
<TABLE>
<CAPTION>
Cumulative Cumulative
Charge-offs Recoveries
Jan. 1, 1986 Jan. 1, 1986
Memoranda through through
Dollar Amounts in Thousands Dec. 31, 1989 Report Date
<S> <C> <C> <C>
To be completed by national banks only. RIAD Bil Mil Thou RIAD Bil Mil Thou
1. Charge-offs and recoveries of Special-Category Loans, as defined for //////////////// /////////////////
this Call Report by the Comptroller of the Currency . . . . . . . . . . . //////////////// 4784 349 M.1.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Memorandum items 2 and 3 are to be completed by all banks. Charge-offs Recoveries
2. Loans to finance commercial real estate, construction, and land calendar year-to-date
development activities (not secured by real estate) included in RIAD Bil Mil Thou RIAD Bil Mil Thou
<S> <C> <C> <C> <C>
Schedule RI-B, part I, items 4 and 7, above . . . . . . . . . . . . . . . 5409 0 5410 0 M.2.
3. Loans secured by real estate in domestic offices //////////////// /////////////////
(included in Schedule RI-B, part I, item 1 above): //////////////// /////////////////
a. Construction and land development . . . . . . . . . . . . . . . . . . 3582 0 3583 18 M.3.a.
b. Secured by farmland . . . . . . . . . . . . . . . . . . . . . . . . . 3584 0 3585 748 M.3.b.
c. Secured by 1-4 family residential properties: //////////////// /////////////////
(1) Revolving, open-end loans secured by 1-4 family residential //////////////// /////////////////
properties and extended under lines of credit . . . . . . . . . . 5411 625 5412 154 M.3.c.(1)
(2) All other loans secured by 1-4 family residential properties 5413 608 5414 291 M.3.c.(2)
d. Secured by multifamily (5 or more) residential properties . . . . . . 3588 0 3589 433 M.3.d.
e. Secured by nonfarm nonresidential properties . . . . . . . . . . . . 3590 649 3591 666 M.3.e.
</TABLE>
6
<PAGE> 47
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RI-5
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
SCHEDULE RI-B--CONTINUED
</TABLE>
PART II. CHANGES IN ALLOWANCE FOR LOAN AND
LEASE LOSSES AND IN ALLOCATED TRANSFER
RISK RESERVE
<TABLE>
<CAPTION>
(Column A) (Column B)
Allowance for Allocated
Loan and Lease Transfer Risk
Losses Reserve
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
<S> <C> <C> <C> <C>
1. Balance originally reported in the December 31, 1992, Reports of //////////////// /////////////////
Condition and Income . . . . . . . . . . . . . . . . . . . . . . . . . . 3124 136,471 3131 0 1.
2. Recoveries (column A must equal part I, item 9, column B above) . . . . . 4605 35,424 3132 0 2.
3. LESS: Charge-offs (column A must equal part I, item 9, column A above) . 4635 124,070 3133 0 3.
4. Provision (column A must equal Schedule RI, item 4.a; column B must //////////////// /////////////////
equal Schedule RI, item 4.b) . . . . . . . . . . . . . . . . . . . . . . 4230 120,220 4243 0 4.
5. Adjustments* (see instructions for this schedule) . . . . . . . . . . . . 4815 0 3134 0 5.
6. Balance end of current period (sum of items 1 through 5) (column A must //////////////// /////////////////
equal Schedule RC, item 4.b; column B must equal Schedule RC, //////////////// /////////////////
item 4.c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3123 168,045 3128 0 6.
</TABLE>
__________
*Describe on Schedule RI-E--Explanations.
SCHEDULE RI-C--APPLICABLE INCOME TAXES BY TAXING AUTHORITY
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
I489 <-
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C> <C> <C>
1. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4780 81,736 1.
2. State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4790 939 2.
3. Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4795 0 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b) . . . . . . 4770 82,675 4.
5. Deferred portion of item 4 . . . . . . . . . . . . . . . . . . . . . . RIAD 4772 13,174 //////////////// 5.
</TABLE>
7
<PAGE> 48
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 East Broad Street Page RI-6
City, State Zip: Columbus, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
Schedule RI-D--INCOME FROM INTERNATIONAL OPERATIONS
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS
<TABLE>
<CAPTION>
I492 <-
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, ///////////////////
and IBF's: ///////////////////
a. Interest income booked ................................................................... 4837 N/A 1.a.
b. Interest expense booked .................................................................. 4838 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and IBFs ///////////////////
(item 1.a. minus 1.b.) ................................................................... 4839 N/A 1.c.
2. Adjustments for booking location of international operations: ///////////////////
a. Net interest income attributable to intenational operations booked at domestic offices.... 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign offices .......... 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ..................................... 4842 N/A 2.c.
3. Noninterest income and expense attributable to international operations: ///////////////////
a. Noninterest income attributable to international operations .............................. 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations.............. 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations ....................... 4239 N/A 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a ///////////////////
minus 3.b and 3.c) ....................................................................... 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before capital allocation ///////////////////
adjustment (sum of items 1.c, 2.c, and 3.d) ................................................. 4844 N/A 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect ///////////////////
the effects of equity capital on overall bank funding costs ................................. 4845 N/A 5.
6. Estimated pretax income attributable to international operations after capital allocations ///////////////////
ajustment (sum of itmes 4 and 5) ............................................................ 4846 N/A 6.
7. Income taxes attributable to income from international operations as estimated in item 6..... 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7)............... 4341 N/A 8.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C>
1. Intracompany interest income included in item 1.a above ..................................... 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above .................................... 4848 N/A M.2.
</TABLE>
Part II. Supplemmentary Details on Income from International Operations
Required by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S> <C>
1. Interest income booked at IBFs .............................................................. 4849 N/A 1.
2. Interest expense booked at IBFs ............................................................. 4850 N/A 2.
3. Noninterest income attributable to international operations booked at domestic offices ///////////////////
(excluding IBFs): ///////////////////
a. Gains (losses) and extraordinary items ................................................... 5491 N/A 3.a
b. Fees and other noninterest income ........................................................ 5492 N/A 3.b
4. Provision for loan and lease losses attributable to international operations booked at ///////////////////
domestic offices (excluding IBFs) ........................................................... 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at domestic offices ///////////////////
(excluding IBFs) ............................................................................ 4853 N/A 5.
</TABLE>
8
<PAGE> 49
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RI-7
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RI-E--EXPLANATIONS
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other
noninterest income and other noninterest expense in Schedule RI. (See
instructions for details.)
<TABLE>
<CAPTION>
I495 <-
Year-to-date
Dollar Amounts in Thousands RIAD Bil Mil Thou
<S><C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) ////////////////
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): ////////////////
a. Net gains on other real estate owned . . . . . . . . . . . . . . . . . . . . . . 5415 0 1.a.
b. Net gains on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 5416 0 1.b.
c. Net gains on sales of premises and fixed assets . . . . . . . . . . . . . . . . . 5417 0 1.c.
Itemize and describe the three largest other amounts that exceed 10% of ////////////////
Schedule RI, item 5.f.(2): ////////////////
d. TEXT 4461 Card Processing Income 4461 44,067 1.d.
e. TEXT 4462 4462 1.e.
f. TEXT 4463 4463 1.f.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
2. Other noninterest expense (from Schedule RI, item 7.c): ////////////////
a. Amortization expense of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . 4531 5,769 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c: ////////////////
b. Net losses on other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5418 0 2.b.
c. Net losses on sales of loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5419 0 2.c.
d. Net losses on sales of premises and fixed assets . . . . . . . . . . . . . . . . . . . . . . 5420 0 2.d.
Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, item 7.c: ////////////////
e. TEXT 4464 Card Processing Expense 4464 66,613 2.e.
f. TEXT 4467 Affiliate Revenue Shareing 4467 60,616 2.f.
g. TEXT 4468 4468 2.g.
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and applicable income tax ////////////////
effect (from Schedule RI, item 11.b) (itemize and describe all extraordinary items and other ////////////////
adjustments): ////////////////
a. (1) TEXT 6440 Effect of adopting FASB statement No. 109, "Accounting for Income Taxes" 6440 0 3.a.(1)
(2) Applicable income tax effect RIAD 4486 //////////////// 3.a.(2)
b. (1) TEXT 4487 4487 3.b.(1)
(2) Applicable income tax effect RIAD 4488 //////////////// 3.b.(2)
c. (1) TEXT 4489 4489 3.c.(1)
(2) Applicable income tax effect RIAD 4491 //////////////// 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2) (itemize ////////////////
and describe all adjustments): ////////////////
a. TEXT 4492 4492 4.a.
b. TEXT 4493 4493 4.b.
5. Cumulative effect of changes in accounting principles from prior years (from Schedule RI-A, ////////////////
item 9) (itemize and describe all changes in accounting principles): ////////////////
a. TEXT 4494 4494 5.a.
b. TEXT 4495 4495 5.b.
6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10) (itemize ////////////////
and describe all corrections): ////////////////
a. TEXT 4496 4496 6.a.
b. TEXT 4497 4497 6.b.
</TABLE>
9
<PAGE> 50
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RI-8
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RI-E--CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) (itemize and ////////////////
describe all such transactions): ////////////////
a. TEXT 4498 4498 7.a.
b. TEXT 4499 4499 7.b.
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5) (itemize ////////////////
and describe all adjustments): ////////////////
a. TEXT 4521 4521 8.a.
b. TEXT 4522 4522 8.b.
9. Other explanations (the space below is provided for the bank to briefly describe, at its option, I498 I499 <-
any other significant items affecting the Report of Income):
No comment [ ] (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT) (4769)
</TABLE>
10
<PAGE> 51
<TABLE>
<S> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 0321
Address: 100 EAST BROAD STREET Page RC-2
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC--CONTINUED
<TABLE>
<CAPTION>
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C>
___________________________________________________________________________________________________________________________________
LIABILITIES ///////////////////
13. Deposits: ///////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E part I) . . . . .RCON 2200 3,863,121 13.a.
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . . . RCON 6631 1,151,525 /////////////////// 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . RCON 6636 2,711,596 /////////////////// 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E, ///////////////////
part II) RCFN 2200 587,696 13.b.
(1) Noninterest-bearing . . . . . . . . . . . . . . . . . . . RCFN 6631 0 /////////////////// 13.b.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . . . RCFN 6636 587,696 /////////////////// 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in domestic ///////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: ///////////////////
a. Federal funds purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 0278 785,902 14.a.
b. Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . RCFD 0279 1,079 14.b.
15. Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2840 40,000 15.
16. Other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2850 527,252 16.
17. Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . . . . . . RCFD 2910 4,604 17.
18. Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . . RCFD 2920 6,246 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3200 189,083 19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2930 149,501 20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2948 6,154,484 21.
///////////////////
22. Limited-life preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3282 0 22.
EQUITY CAPITAL ///////////////////
23. Perpetual preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3838 0 23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 20,738 24.
25. Surplus (exclude all surplus related to preferred stock) . . . . . . . . . . . . . . . . . . . . RCFD 3839 102,231 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3632 362,918 26.a.
b. LESS: Net unrealized loss on marketable equity securities . . . . . . . . . . . . . . . . . RCFD 0297 0 26.b.
27. Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3210 485,887 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22, and 28) RCFD 3300 6,640,371 29.
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<S> <C> <C> <C> <C>
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 6724 N/A M.1.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
1 = Independent audit of the bank conducted in 4 = Directors' examination of the bank performed by
accordance with generally accepted auditing other external auditors (may be required by state
standards by a certified public accounting firm chartering authority)
which submits a report on the bank 5 = Review of the bank's financial statements by
2 = Independent audit of the bank's parent holding external auditors
company conducted in accordance with generally 6 = Compilation of the bank's financial statements by
accepted auditing standards by a certified public external auditors
accounting firm which submits a report on the 7 = Other audit procedures (excluding tax preparation
consolidated holding company (but not on the bank work)
separately) 8 = No external audit work
3 = Directors' examination of the bank conducted in
accordance with generally accepted auditing
standards by a certified public accounting firm
(may be required by state chartering authority)
</TABLE>
__________
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
12
<PAGE> 52
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-3
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-A--CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS
Exclude assets held in trading accounts.
<TABLE>
<CAPTION>
C405
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C> <C> <C>
_____________________________________________________________________________________________________________________________
1. Cash items in process of collection, unposted debits, and currency and coin . . 0022 327,743 ////////////////// 1.
a. Cash items in process of collection and unposted debits . . . . . . . . . . ///////////////// 0020 291,368 1.a.
b. Currency and coin . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////////////// 0080 36,375 1.b.
2. Balances due from depository institutions in the U.S. ///////////////// 0082 18,153 2.
a. U.S. branches and agencies of foreign banks (including their IBFs) . . . . 0083 0 ///////////////// 2.a.
b. Other commercial banks in the U.S. and other depository institutions in the ///////////////// /////////////////
U.S. (including their IBFs) . . . . . . . . . . . . . . . . . . . . . . . . 0085 18,153 ///////////////// 2.b.
3. Balances due from banks in foreign countries and foreign central banks . . . . ///////////////// 0070 985 3.
a. Foreign branches of other U.S. banks . . . . . . . . . . . . . . . . . . . 0073 0 ///////////////// 3.a.
b. Other banks in foreign countries and foreign central banks . . . . . . . . 0074 985 ///////////////// 3.b.
4. Balances due from Federal Reserve Banks . . . . . . . . . . . . . . . . . . . 0090 68,332 0090 68,332 4.
5. Total (sum of items 1 through 4) (total of column A must equal Schedule RC, ///////////////// /////////////////
item 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0010 415,213 0010 415,213 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum Dollar Amounts in Thousaands RCON Bil Mil Thou
<S> <C> <C>
______________________________________________________________________________________________________________________________
1. Noninterest-bearing balances due from commercial banks in the U.S. ///////////////////
(included in items 2, column B above) . . . . . . . . . . . . . . . . . . . . . . . . . 0050 18,153 M.1.
</TABLE>
13
<PAGE> 53
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-4
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-B--SECURITIES
Exclude assets held in trading accounts.
<TABLE>
<CAPTION>
<-
(Column A) (Column B)
Book Value Market Value(1)
Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C>
1. U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . 0400 132,237 0401 133,631 1.
2. U.S. Government agency and corporation obligations: //////////////// /////////////////
a. All holdings of U.S. Government-issued or -guaranteed //////////////// /////////////////
certificates of participation in pools of residential //////////////// /////////////////
mortgages: //////////////// /////////////////
(1) Issued by FNMA and FHLMC . . . . . . . . . . . . . 3760 902 3761 957 2.a.(1)
(2) Guaranteed by GNMA (exclude FNMA and FHLMC issues) 3762 0 3763 0 2.a.(2)
b. All other: 0604 108,346 0605 108,868
(1) Collateralized mortgage obligations issued by FNMA //////////////// /////////////////
and FHLMC (include REMICs) . . . . . . . . . . . . //////////////// ///////////////// 2.b.(1)
(2) All other U.S. Government-sponsored agency //////////////// /////////////////
obligations(2) . . . . . . . . . . . . . . . . . . //////////////// ///////////////// 2.b.(2)
(3) All other U.S. Government agency obligations(3) . . //////////////// ///////////////// 2.b.(3)
3. Securities issued by states and political subdivisions in the U.S.: 0402 72,680 0403 82,022
a. General obligations . . . . . . . . . . . . . . . . . . . . //////////////// ///////////////// 3.a.
b. Revenue obligations . . . . . . . . . . . . . . . . . . . . //////////////// ///////////////// 3.b.
c. Industrial development and similar obligations . . . . . . . //////////////// ///////////////// 3.c.
4. Other domestic debt securities: //////////////// /////////////////
a. All holdings of private (i.e., nongovernment-issued or //////////////// /////////////////
- guaranteed) certificates of participation in pools of //////////////// /////////////////
residential mortgages . . . . . . . . . . . . . . . . . . . 0408 10,025 0409 10,169 4.a.
b. All other domestic debt securities: //////////////// /////////////////
(1) Privately-issued collateralized mortgage //////////////// /////////////////
obligations (includes REMICs) . . . . . . . . . . . 5361 345 5362 362 4.b.(1)
(2) All other . . . . . . . . . . . . . . . . . . . . . 5363 2,836 5364 2,952 4.b.(2)
5. Foreign debt securities . . . . . . . . . . . . . . . . . . . . . . 3635 1,750 3636 1,750 5.
6. Equity securities: //////////////// /////////////////
a. Marketable equity securities: //////////////// /////////////////
(1) Investments in mutual funds . . . . . . . . . . . . 3637 0 3638 0 6.a.(1)
(2) Other marketable equity securities . . . . . . . . 3639 1 3640 1 6.a.(2)
(3) LESS: Net unrealized loss on marketable equity //////////////// /////////////////
securities . . . . . . . . . . . . . . . . . . . . 3641 0 ///////////////// 6.a.(3)
b. Other equity securities (includes Federal Reserve stock) . . 3642 3,689 3643 3,689 6.b.
7. Total (sum of items 1 through 6) (total of column A must equal //////////////// /////////////////
Schedule RC, item 2) . . . . . . . . . . . . . . . . . . . . . . . . 0390 332,811 0391 344,383 7.
</TABLE>
<TABLE>
<CAPTION>
C410 <-
(Column C)
Book Value(1)
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C>
1. U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . 0400 132,237 1.
2. U.S. Government agency and corporation obligations: /////////////////
a. All holdings of U.S. Government-issued or -guaranteed /////////////////
certificates of participation in pools of residential /////////////////
mortgages: /////////////////
(1) Issued by FNMA and FHLMC . . . . . . . . . . . . . 3760 902 2.a.(1)
(2) Guaranteed by GNMA (exclude FNMA and FHLMC issues) 3762 0 2.a.(2)
b. All other: /////////////////
(1) Collateralized mortgage obligations issued by FNMA /////////////////
and FHLMC (include REMICs) . . . . . . . . . . . . 3764 37,696 2.b.(1)
(2) All other U.S. Government-sponsored agency /////////////////
obligations(2) . . . . . . . . . . . . . . . . . . 3765 70,650 2.b.(2)
(3) All other U.S. Government agency obligations(3) . . 3766 0 2.b.(3)
3. Securities issued by states and political subdivisions in the U.S.: /////////////////
a. General obligations . . . . . . . . . . . . . . . . . . . . 3767 23,615 3.a.
b. Revenue obligations . . . . . . . . . . . . . . . . . . . . 3768 37,019 3.b.
c. Industrial development and similar obligations . . . . . . . 3769 12,046 3.c.
4. Other domestic debt securities: /////////////////
a. All holdings of private (i.e., nongovernment-issued or /////////////////
- guaranteed) certificates of participation in pools of /////////////////
residential mortgages . . . . . . . . . . . . . . . . . . . 0408 10,025 4.a.
b. All other domestic debt securities: /////////////////
(1) Privately-issued collateralized mortgage /////////////////
obligations (includes REMICs) . . . . . . . . . . . 5361 345 4.b.(1)
(2) All other . . . . . . . . . . . . . . . . . . . . . 5363 2,836 4.b.(2)
5. Foreign debt securities . . . . . . . . . . . . . . . . . . . . . . 3635 0 5.
6. Equity securities: /////////////////
a. Marketable equity securities: /////////////////
(1) Investments in mutual funds . . . . . . . . . . . . 3637 0 6.a.(1)
(2) Other marketable equity securities . . . . . . . . 3639 1 6.a.(2)
(3) LESS: Net unrealized loss on marketable equity /////////////////
securities . . . . . . . . . . . . . . . . . . . . 3641 0 6.a.(3)
b. Other equity securities (includes Federal Reserve stock) . . 3642 3,689 6.b.
7. Total (sum of items 1 through 6) (total of column A must equal /////////////////
Schedule RC, item 2) . . . . . . . . . . . . . . . . . . . . . . . . 0390 331,061 7.
</TABLE>
________________
(1) See discussion in Glossary entry for "market value of securities."
(2) Includes obligations (other than certificates of participation in
pools of residential mortgages, CMOs, and REMICs) issued by the Farm
Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association,
the Financing Corporation, Resolution Funding Corporation, the Student
Loan Marketing Association, and the Tennessee Valley Authority.
(3) Includes Small Business Administration "Guaranteed Loan Pool
Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
14
<PAGE> 54
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-5
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-B--CONTINUED
<TABLE>
<CAPTION>
Consolidated Bank
Memorandum Book Value
RCFD Bil MilThou
Dollar Amounts in Thousands
<S> <S> <C>
1. Pledged securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0416 313,720 M.1.
2. Maturity and repricing data for debt securities(1),(2) (excluding those in nonaccrual //////////////
status): //////////////
a. Fixed rate debt securities with a remaining maturity of: //////////////
(1) Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . 0343 5,126 M.2.a.(1)
(2) Over three months through 12 months . . . . . . . . . . . . . . . . . . . . 0344 7,393 M.2.a.(2)
(3) Over one year through five years . . . . . . . . . . . . . . . . . . . . . 0345 215,914 M.2.a.(3)
(4) Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0346 53,991 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1) through //////////////
2.a.(4)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0347 282,424 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: //////////////
(1) Quarterly or more frequently . . . . . . . . . . . . . . . . . . . . . . . 4544 41,542 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . . . . . . 4545 3,110 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually . . 4551 0 M.2.b.(3)
(4) Less frequently than every five years . . . . . . . . . . . . . . . . . . . 4552 2,045 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) //////////////
through 2.b.(4)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4553 46,697 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal //////////////
total debt securities from Schedule RC-B, sum of items 1 through 5, column A, minus //////////////
nonaccrual debt securities included in Schedule RC-N, item 9, column C) . . . . . . 0393 329,121 M.2.c.
3. Taxable securities issued by states and political subdivisions in the U.S. (included in //////////////
Schedule RC-B, item 3, column A, above) . . . . . . . . . . . . . . . . . . . . . . . . . . 0301 0 M.3.
4. Debt securities restructured and in compliance with modified terms (included in Schedule RC- //////////////
B, items 3 through 5, column A, above) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5365 0 M.4.
5. Debt securities held for sale (included in Schedule RC-B, items 1 through 5, column A, //////////////
above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5366 2,945 M.5.
6. Floating rate debt securities with a remaining maturity of one year or less (included in //////////////
Memorandum item 2.b.(5) above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5519 0 M.6.
</TABLE>
__________
(1) Exclude equity securities, e.g., investments in
mutual funds, Federal Reserve stock, common stock, and preferred
stock.
(2) Memorandum item 2 is not applicable to savings banks that must
complete supplemental Schedule RC-J.
15
<PAGE> 55
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-6
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-C--LOANS AND LEASE FINANCING RECEIVABLES
Part I. Loans and Leases
Do not deduct the allowance for loan and lease losses from amounts reported in
this schedule. Report total loans and leases, net of unearned income. Exclude
assets held in trading accounts.
<TABLE>
<CAPTION>
C415 <-
(Column A) (Column B)
Consolidated Domestic
Bank Offices
--------------- -----------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C>
1. Loans secured by real estate 1410 835,717 ///////////////// 1.
a. Construction and land development . . . . . . . . . . . . . . . . /////////////// 1415 89.046 1.a.
b. Secured by farmland (including farm residential and other /////////////// /////////////////
improvements) . . . . . . . . . . . . . . . . . . . . . . . . . . /////////////// 1420 3.260 1.b.
c. Secured by 1-4 family residential properties: /////////////// /////////////////
(1) Revolving, open-end loans secured by 1-4 family /////////////// /////////////////
residential properties and extended under lines of credit /////////////// 1797 237.858 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: /////////////// /////////////////
(a) Secured by first liens . . . . . . . . . . . . /////////////// 5367 102.599 1.c.(2)(a)
(b) Secured by junior liens . . . . . . . . . . . . /////////////// 5368 84.955 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties . . . . /////////////// 1460 29.780 1.d.
e. Secured by nonfarm nonresidential properties . . . . . . . . . . . /////////////// 1480 288.219 1.e.
2. Loans to depository institutions: /////////////// /////////////////
a. To commercial banks in the U.S. . . . . . . . . . . . . . . . . . /////////////// 1505 159 2.a
(1) To U.S. branches and agencies of foreign banks . . . . . . 1506 0 ///////////////// 2.a.(1)
(2) To other commercial banks in the U.S. . . . . . . . . . . 1507 159 ///////////////// 2.a.(2)
b. To other depository institutions in the U.S. . . . . . . . . . . . 1517 234 1517 234 2.b.
c. To banks in foreign countries . . . . . . . . . . . . . . . . . . /////////////// 1510 0 2.c.
(1) To foreign branches of other U.S. banks . . . . . . . . . 1513 0 ///////////////// 2.c.(1)
(2) To other banks in foreign countries . . . . . . . . . . . 1516 0 ///////////////// 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers . . . 1590 6,163 1590 6.163 3.
4. Commercial and industrial loans: /////////////// /////////////////
a. To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . 1763 642,471 1763 642.471 4.a.
b. To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . 1764 0 1764 0 4.b.
5. Acceptances of other banks: /////////////// /////////////////
a. Of U.S. banks . . . . . . . . . . . . . . . . . . . . . . . . . . 1756 0 1756 0 5.a.
b. Of foreign banks . . . . . . . . . . . . . . . . . . . . . . . . . 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal expenditures /////////////// /////////////////
(i.e., consumer loans) (includes purchased paper) . . . . . . . . . . . . . /////////////// 1975 3.083.549 6.
a. Credit cards and related plans (includes check credit and other /////////////// /////////////////
revolving credit plans) . . . . . . . . . . . . . . . . . . . . . 2008 2,249,425 ///////////////// 6.a
b. Other (includes single payment, installment, and all student /////////////// /////////////////
loans) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011 834,124 ///////////////// 6.b
7. Loans to foreign governments and official institutions (including foreign /////////////// /////////////////
central banks) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2081 0 2081 0 7.
8. Obligations (other than securities and leases) of states and political /////////////// /////////////////
subdivisions in the U.S. (includes nonrated industrial development
obligations): /////////////// /////////////////
a. Taxable obligations . . . . . . . . . . . . . . . . . . . . . . . 2033 1,213 2033 1,213 8.a.
b. Tax-exempt obligations . . . . . . . . . . . . . . . . . . . . . . 2079 28,945 2079 28,945 8.b.
9. Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1563 157,167 ///////////////// 9.
a. Loans for purchasing or carrying securities (secured and unsecured) /////////////// 1545 45,082 9.a
b. All other loans (exclude consumer loans) . . . . . . . . . . . . . /////////////// 1564 112,085 9.b
10. Lease financing receivables (net of unearned income) . . . . . . . . . . . . . /////////////// 2165 601,078 10.
a. Of U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . 2182 601,078 ///////////////// 10.a.
b. Of non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . 2183 0 ///////////////// 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above . . . . . . . 2123 4,001 2123 4,001 11.
12. Total loans and leases, net of unearned income (sum of items 1 through 10 /////////////// /////////////////
minus item 11) (total of column A must equal Schedule RC, item 4.a) . . . . . . 2122 5,352,695 2122 5,352,695 12.
</TABLE>
16
<PAGE> 56
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-7
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-C--CONTINUED
PART I. CONTINUED
Memoranda
<TABLE>
<CAPTION>
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above . . . . . . . . . . . . . . 1496 0 1496 0 M.1.
2. Loans and leases restructured and in compliance with modified terms ///////////////// ////////////
(included in Schedule RC-C, part I, above): ///////////////// ////////////
a. Loans secured by real estate: ///////////////// ////////////
(1) To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . 1687 0 M.2.a.(1)
(2) To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . 1689 0 M.2.a.(2)
b. Loans to finance agricultural production and other loans to farmers . . . . . 1613 0 M.2.b.
c. Commercial and industrial loans: /////////////////
(1) To U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . 1758 0 M.2.c.(1)
(2) To non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . 1759 0 M.2.c.(2)
d. All other loans (exclude loans to individuals for household, family, and /////////////////
other personal expenditures) . . . . . . . . . . . . . . . . . . . . . . . . . 1615 0 M.2.d.
e. Lease financing receivables: /////////////////
(1) Of U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . 1789 0 M.2.e.(1)
(2) Of non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . 1790 0 M.2.e.(2)
f. Total (sum of Memorandum items 2.a through 2.e.) . . . . . . . . . . . . . . . 1616 0 M.2.f.
3. Maturity and repricing data for loans and leases(1) (excluding those in nonaccrual
status): /////////////////
a. Fixed rate loans and leases with a remaining maturity of: /////////////////
(1) Three months or less . . . . . . . . . . . . . . . . . . . . . . . . 0348 138,685 M.3.a.(1)
(2) Over three months through 12 months . . . . . . . . . . . . . . . . . 0349 218,450 M.3.a.(2)
(3) Over one year through five years . . . . . . . . . . . . . . . . . . 0356 1,668,891 M.3.a.(3)
(4) Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . 0357 191,046 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum items 3.a.(1) /////////////////
through 3.a.(4)) . . . . . . . . . . . . . . . . . . . . . . . . . . 0358 2,217,072 M.3.a.(5)
b. Floating rate loans with a repricing frequency of: /////////////////
(1) Quarterly or more frequently . . . . . . . . . . . . . . . . . . . . 4554 3,079,277 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . . . 4555 10,530 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than annually 4561 10,654 M.3.b.(3)
(4) Less frequently than every five years . . . . . . . . . . . . . . . . 4564 0 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) through /////////////////
3.b.(4)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4567 3,100,461 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) /////////////////
(must equal the sum of total loans and leases, net, from /////////////////
Schedule RC-C, part I, item 12, plus unearned income from /////////////////
Schedule RC-C, part I, item 11, minus total nonaccrual loans and /////////////////
Leases from Schedule RC-N, sum of items 1 through 8, column C) . . . . . . . . 1479 5,317,533 M.3.c.
4. Loans to finance commercial real estate, construction, and land /////////////////
development activities (not secured by real estate) included in /////////////////
Schedule RC-C, part I, items 4 and 9., Column A page RC-6(2) . . . . . . . . . . . . . 2746 20,501 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, above) . . . . . . 5369 0 M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family /////////////////
residential properties (included in Schedule RC-C, part I, item 1.c.(2)(a), ///////////////// RCON Bil Mil Thou
Column B, page RC-6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ///////////////// 5370 60,822 M.6.
</TABLE>
__________
(1) Memorandum item 3 is not applicable to savings banks that must
complete supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in Schedule
RC-C, part I, items 1.a through 1.e.
17
<PAGE> 57
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-8
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets.
SCHEDULE RC-D--ASSETS HELD IN TRADING ACCOUNTS IN DOMESTIC OFFICES ONLY
<TABLE>
<CAPTION> C420
Domestic Offices
----------------
Dollar Amounts in Thousands RCON Bil Mil Thou <-
<S> <C> <C> <C> <C>
1. U.S. Treasury securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 1010 25,020 1.
2. U.S. Government agency and corporation obligations . . . . . . . . . . . . . . 1020 0 2.
3. Securities issued by states and political subdivisions in the U.S. . . . . . . 1025 0 3.
4. Other bonds, notes, and debentures . . . . . . . . . . . . . . . . . . . . . . 1045 0 4.
5. Certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . 1026 0 5.
6. Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1027 0 6.
7. Banker's acceptances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1028 0 7.
8. Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1029 0 8.
9. Total (sum of items 1 through 8) . . . . . . . . . . . . . . . . . . . . . . . 2146 25,020 9.
</TABLE>
18
<PAGE> 58
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-9
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
C425 <-
Nontransaction
Transaction Accounts Accounts
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts demand deposits nontransaction
(including total (included in accounts
demand deposits) column A) (including MMDAs)
Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
<S> <C> <C> <C> <C>
Deposits of: /////////////////// ///////////////// /////////////////
1. Individuals, partnerships, and corporations . 2201 1,298,626 2240 958,339 2346 2,279,510 1.
2. U.S. Government . . . . . . . . . . . . . . 2202 13,871 2280 13,871 2520 0 2.
3. States and political subdivisions in the U.S. 2203 85,873 2290 68,387 2530 58,760 3.
4. Commercial banks in the U.S. . . . . . . . . 2206 63,978 2310 63,978 ///////////////// 4.
a. U.S. branches and agencies of foreign /////////////////// ///////////////// /////////////////
banks . . . . . . . . . . . . . . . . . /////////////////// ///////////////// 2347 0 4.a.
b. Other commercial banks in the U.S. . . . /////////////////// ///////////////// 2348 15,553 4.b.
5. Other depository institutions in the U.S. . . 2207 8,453 2312 8,453 2349 0 5.
6. Banks in foreign countries . . . . . . . . . 2213 1,429 2320 1,429 ///////////////// 6.
a. Foreign branches of other U.S. banks /////////////////// ///////////////// 2367 0 6.a.
b. Other banks in foreign countries . . . . /////////////////// ///////////////// 2373 0 6.b.
7. Foreign governments and official institutions /////////////////// ///////////////// /////////////////
(including foreign central banks) . . . . . 2216 0 2300 0 2377 0 7.
8. Certified and official checks . . . . . . . 2330 37,068 2330 37,068 ///////////////// 8.
9. Total (sum of items 1 through 8) (sum of /////////////////// ///////////////// /////////////////
columns A and C must equal Schedule RC, item /////////////////// ///////////////// /////////////////
13.a) . . . . . . . . . . . . . . . . . . . 2215 1,509,298 2210 1,151,525 2385 2,353,823 9.
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RCONBil Mil Thou
<S> <C> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): ////////////////
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts . . . . . . 6835 212,092 M.1.a.
b. Total brokered deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2365 60,561 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): ////////////////
(1) Issued in denominations of less than $100,000 . . . . . . . . . . . . . . 2343 0 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater ////////////////
than $100,000 and participated out by the broker in shares of $100,000 or ///////////////
less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2344 41,512 M.1.c.(2)
d. Total deposits denominated in foreign currencies . . . . . . . . . . . . . . . . 3776 0 M.1.d.
e. Preferred deposits (deposits of states and political subdivisions in the U.S.
reported in item 3 above which are securred or collateralized) . . . . . . . . . 5590 143,082 M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.d must ////////////////
equal item 9, column C, above): ////////////////
a. Savings deposits: ////////////////
(1) Money market deposit accounts (MMDAs) . . . . . . . . . . . . . . . . . . 6810 476,380 M.2.a.
(2) Other savings deposits (excludes MMDAs) . . . . . . . . . . . . . . . . . 0352 932,615 M.2.a.
b. Total time deposits of less than $100,000 . . . . . . . . . . . . . . . . . . . 6648 772,423 M.2.b.
c. Time certificates of deposit of $100,000 or more . . . . . . . . . . . . . . . . 6645 172,405 M.2.c.
d. Open-account time deposits of $100,000 or more . . . . . . . . . . . . . . . . . 6646 0 M.2.d.
3. All NOW accounts (included in column A above) . . . . . . . . . . . . . . . . . . . . 2398 357,773 M.3.
</TABLE>
19
<PAGE> 59
<TABLE>
<S> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-10
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-E--CONTINUED
<TABLE>
<CAPTION>
Memoranda (Continued) Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C>
Deposit Totals for FDIC Insurance Assessments(1)
4. Total deposits in domestic offices (sum of item 9, column A and item 9, column C)
(must equal Schedule RC, item 13.a) . . . . . . . . . . . . . . . . . . . . . . . . 2200 3,863,121 M.4.
////////////////
a. Total demand deposits (must equal item 9, column B) . . . . . . . . . . . . . . . 2210 1,151,525 M.4.a.
b. Total time and savings deposits(2) (must equal item 9, column A plus item 9, ////////////////
column C minus item 9, column B) . . . . . . . . . . . . . . . . . . . . . . . . 2350 2,711,596 M.4.b.
</TABLE>
_____________
(1) An amended Certified Statement should be submitted to the FDIC if the
deposit totals reported in this item are amended after the semiannual
Certified Statement originally covering this report date has been
filed with the FDIC.
(2) For FDIC insurance assessment purposes, "total time and savings
deposits" consists of nontransaction accounts and all transaction
accounts other than demand deposits.
<TABLE>
<S> <C> <C> <C>
5. Time deposits of less than $100,000 and open-account time deposits of $100,000 or more //////////////
(included in Memorandum items 2.b and 2.d above) with a remaining maturity or repricing //////////////
frequency of:(1) //////////////
a. Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0359 109,395 M.5.a.
b. Over three months through 12 months (but not over 12 months) . . . . . . . . . . . . 3644 172,778 M.5.b.
6. Maturity and repricing data for time certificates of deposit of $100,000 or more:(1) /////////////
a. Fixed rate time certificates of deposit of $100,000 or more with a remaining /////////////
maturity of: /////////////
(1) Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . 2761 124,343 M.6.a.(1)
(2) Over three months through 12 months . . . . . . . . . . . . . . . . . . . . 2762 25,604 M.6.a.(2)
(3) Over one year through five years . . . . . . . . . . . . . . . . . . . . . 2763 18,808 M.6.a.(3)
(4) Over five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2765 3,650 M.6.a.(4)
(5) Total fixed rate time certificates of deposit of $100,000 or more (sum of /////////////
Memorandum items 6.a.(1) through 6.a.(4)) . . . . . . . . . . . . . . . . . 2767 172,405 M.6.a.(5)
b. Floating rate time certificates of deposit of $100,000 or more with a repricing /////////////
frequency of: ////////////
(1) Quarterly or more frequently . . . . . . . . . . . . . . . . . . . . . . . 4568 0 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly . . . . . . 4569 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually . . 4571 0 M.6.b.(3)
(4) Less frequently than every five years . . . . . . . . . . . . . . . . . . . 4572 0 M.6.b.(4)
(5) Total floating rate time certificates of deposit of $100,000 or more (sum ////////////
of Memorandum items 6 b.(1) through 6.b.(4)) . . . . . . . . . . . . . . . 4573 0 M.6.b.(5)
c. Total time certificates of deposit of $100,000 or more (sum of Memorandum items /////////////
6.a.(5) and 6.b.(5)) (must equal Memorandum item 2.c. above) . . . . . . . . . . . . 6645 172,405 M.6.c.
</TABLE>
__________
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
20
<PAGE> 60
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-11
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-E--Continued
<TABLE>
Part II. Deposits in Foreign Offices (including Edge and Agreement
subsidiaries and IBF's)
<CAPTION>
Dollar Amounts in Thousands | RCFN Bil Mil Thou |
_______________________________________________________________________________________________________________________________
<S> | <C> <C> |
Deposits of: | //////////////////////|
1. Individuals, partnerships, and corporations . . . . . . . . . . . . . . . . . . . . . . . . . . | 2621 587,696 | 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks . . . . . . . . . . . . . . . . . | 2623 0 | 2.
3. Foreign banks (including U.S. branches and | ///////////////////// |
agencies of foreign banks, inlcuding their IBFs . . . . . . . . . . . . . . . . . . . . . . . | 2625 0 | 3.
4. Foreign governments and official institutions (including foreign central banks) . . . . . . . . | 2650 0 | 4.
5. Certified and official checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2330 0 | 5.
6. All other deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2668 0 | 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, Item 13.b) . . . . . . . . . . . . . | 2200 587,696 | 7.
</TABLE>
SCHEDULE RC-F--OTHER ASSETS
<TABLE>
<CAPTION>
C430 <-
Bil Mil Thou
Dollar Amounts in Thousands
<S> <C> <C> <C> <C>
1. Income earned, not collected on loans . . . . . . . . . . . . . . . . . . . . . . . RCFD 2164 40,613 1.
2. Net deferred tax assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2148 0 2.
3. Excess residential mortgage servicing fees receivable . . . . . . . . . . . . . . . RCFD 5371 0 3.
4. Other (itemize amounts that exceed 25% of this item) . . . . . . . . . . . . . . . . RCFD 2168 261,104 4.
a. TEXT 3549 Cash Surrender Value of Life Insurance RCFD 3549 120,750 ////////////////// 4.a.
b. TEXT 3550 RCFD 3550 ////////////////// 4.b.
c. TEXT 3551 RCFD 3551 ////////////////// 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) . . . . . . . . .RCFD 2160 301,717 5.
</TABLE>
Memorandum
<TABLE>
<CAPTION>
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes. . . . . . . . . . . RCFD 5610 0 M.1.
</TABLE>
SCHEDULE RC-G-OTHER LIABILITIES
<TABLE>
<CAPTION>
C435 <-
Dollar Amounts in Thousands Bil Mil Thou
<S <C> <C> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices (2) . . . . . . . RCFD 3645 18,158 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) . . RCFD 3646 106,773 1.b.
2. Net deferred tax liabilities(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3049 8,899 2.
3. Minority interest in consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . RCFD 3000 0 3.
4. Other (itemize amounts that exceed 25% of this item) . . . . . . . . . . . . . . . . . RCFD 2938 15,671 4.
a. TEXT 3552 Deferred Fees Received on Swaps RCFD 3552 6,321 ///////////////// 4.a.
b. TEXT 3553 RCFD 3553 ///////////////// 4.b.
c. TEXT 3554 RCFD 3554 ///////////////// 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20) . . . . . . . . . RCFD 2930 149,501 5.
</TABLE>
_________________
(1) See discussion of deferred income taxes in Glossary entry on "income
taxes."
(2) For savings banks, includes "dividends" accrued and unpaid on deposits.
21
<PAGE> 61
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-12
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-K--QUARTERLY AVERAGES (1)
<TABLE>
<CAPTION>
C455 <-
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
ASSETS ////////////////
1. Interest-bearing balances due from depository institutions . . . . . . . . . . . . . . . . . RCDF 3381 0 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations . . . . . . RCDF 3382 209,155 2.
3. Securities issued by states and political subdivisions in the U.S. . . . . . . . . . . . . . RCDF 3383 83,897 3.
4. a. Other debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCDF 3647 15,873 4.a.
b. Equity securities (includes investments in mutual funds and Federal Reserve stock) . RCDF 3648 3,686 4.b.
5. Federal funds sold and securities purchased under agreements to resell in domestic ////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs . . . . . . . . RCDF 3365 359,049 5.
6. Loans: ////////////////
a. Loans in domestic offices: ////////////////
(1) Total loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3360 4,628,144 6.a.(1)
(2) Loans secured by real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3385 909,091 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers . . . . . . . . RCON 3386 6,358 6.a.(3)
(4) Commercial and industrial loans . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3387 764,711 6.a.(4)
(5) Loans to individuals for household, family, and other personal expenditures . . . . RCON 3388 2,835,905 6.a.(5)
(6) Obligations (other than securities and leases) of states and political subdivisions ////////////////
in the U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3369 30,726 6.a.(6)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs . . . . . . . . RCFN 3360 0 6.b.
7. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCDF 3401 27,436 7.
8. Lease financing receivables (net of unearned income) . . . . . . . . . . . . . . . . . . . . RCDF 3484 588,437 8.
9. Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCDF 3368 6,537,286 9.
LIABILITIES ////////////////
10. Interest-bearing transaction accounts (NOW accounts, ATS accounts, and telephone and ////////////////
preauthorized transfer accounts) (exclude demand deposits) . . . . . . . . . . . . . . . . . RCON 3485 323,180 10.
11. Nontransaction accounts in domestic offices: ////////////////
a. Money market deposit accounts (MMDAs) . . . . . . . . . . . . . . . . . . . . . . . RCON 3486 793,782 11.a.
b. Other savings deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3487 762,999 11.b.
c. Time certificates of deposit of $100,000 or more . . . . . . . . . . . . . . . . . . RCON 3345 591,710 11.c.
d. All other time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCON 3469 785,896 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, and IBFs. . . RCFN 3404 267,661 12.
13. Federal funds purchased and securities sold under agreements to repurchase in domestic ////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs. . . . . . . . . RCDF 3353 852,611 13.
14. Other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCDF 3355 239,960 14.
</TABLE>
(1) For all items, banks have the option of reporting either (1) an
average of daily figures for the quarter, or (2) an average of weekly
figures (i.e., the Wednesday of each week of the quarter).
23
<PAGE> 62
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-14
City, State Zip: COLUMBUS, OHIO 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-L--OFF-BALANCE SHEET ITEMS
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume indicators
and not necessarily as measures of risk.
<TABLE>
<CAPTION>
C460 <-
Dollar Amounts in Thousands RCFDBil MilThou
<S> <C> <C> <C>
1. Unused commitments: ///////////////
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home ///////////////
equity lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3814 217,991 1.a.
b. Credit card lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3815 11,083,221 1.b.
c. Commercial real estate, construction, and land development: ///////////////
(1) Commitments to fund loans secured by real estate . . . . . . . . . . . . . 3816 79,002 1.c.(1)
(2) Commitments to fund loans not secured by real estate . . . . . . . . . . . 6550 8,759 1.c.(2)
d. Securities underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3817 0 1.d.
e. Other unused commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3818 959,706 1.e.
2. Financial standby letters of credit and foreign office guarantees. . . . . . . . . . . . . . 3819 499,606 2.
a. Amount of financial standby letters of credit conveyed to ///////////////
others RCFD 3820 200,949 /////////////// 2.a.
3. Performance standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 3821 78,963 3.
a. Amount of performance standby letters of credit conveyed to ///////////////
others . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3822 15,230 /////////////// 3.a.
4. Commercial and similar letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . 3411 91,023 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by the ///////////////
reporting bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting ///////////////
(nonaccepting) bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3429 775 6.
7. Securities borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is indemnified ///////////////
against loss by the reporting bank) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3433 0 8.
9. Mortgages transferred (i.e., sold or swapped) with recourse that have been treated as sold ///////////////
for Call Report purposes: ///////////////
a. FNMA and FHLMC residential mortgage loan pools: ///////////////
(1) Outstanding principal balance of mortgages transferred as of the report date 3650 0 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date . . . 3651 0 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: ///////////////
(1) Outstanding principal balance of mortgages transferred as of the report date 3652 0 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date . . . 3653 0 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: ///////////////
(1) Outstanding principal balance of mortgages transferred as of the report date 3654 0 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date . . . 3655 0 9.c.(2)
10. When-issued securities: ///////////////
a. Gross commitments to purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 3434 0 10.a.
b. Gross commitments to sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3435 0 10.b.
11. Interest rate contracts (exclude when-issued securities): ///////////////
a. Notional value of interest rate swaps . . . . . . . . . . . . . . . . . . . . . . . 3450 20,867,437 11.a.
b. Futures and forward contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 3823 0 11.b.
c. Option contracts (e.g., options on Treasuries): //////////////
(1) Written option contracts . . . . . . . . . . . . . . . . . . . . . . . . . 3824 929,688 11.c.(1)
(2) Purchased option contracts . . . . . . . . . . . . . . . . . . . . . . . . 3825 1,130,929 11.c.(2)
12. Foreign exchange rate contracts: //////////////
a. Notional value of exchange swaps (e.g., cross-currency swaps) . . . . . . . . . . . 3826 0 12.a.
b. Commitments to purchase foreign currencies and U.S. dollar exchange (spot, forward, //////////////
and futures) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3415 66,351 12.b.
c. Option contracts (e.g., options on foreign currency): //////////////
(1) Written option contracts . . . . . . . . . . . . . . . . . . . . . . . . . 3827 0 12.c.(1)
(2) Purchased option contracts . . . . . . . . . . . . . . . . . . . . . . . . 3828 0 12.c.(2)
</TABLE>
24
<PAGE> 63
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-15
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-L--CONTINUED
<TABLE>
<CAPTION>
C461 <-
Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
13. Contracts on other commodities and equities: ///////////////
a. Notional value of other swaps (e.g., oil swaps) . . . . . . . . . . . . . . . . . . 3829 0 13.a.
b. Futures and forward contracts (e.g., stock index and commodity--precious metals, ///////////////
wheat, cotton, livestock--contracts) . . . . . . . . . . . . . . . . . . . . . . . . 3830 0 13.b.
c. Option contracts (e.g., options on commodities, individual stocks and stock indexes): ///////////////
(1) Written option contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 3831 0 13.c.(1)
(2) Purchased option contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 3832 0 13.c.(2)
14. All other off-balance sheet liabilities (itemize and describe each component of this ///////////////
item over 25% of Schedule RC, item 28, "Total equity capital") . . . . . . . . . . . . . 3430 0 14.
a. TEXT 3555 RCFD 3555 /////////////// 14.a.
b. TEXT 3556 RCFD 3556 /////////////// 14.b.
c. TEXT 3557 RCFD 3557 /////////////// 14.c.
d. TEXT 3558 RCFD 3558 /////////////// 14.d.
15. All other off-balance sheet assets (itemize and describe each component of this ///////////////
item over 25% of Schedule RC, item 28, "Total equity capital") . . . . . . . . . . . . . 5591 63,516 15.
a. TEXT 5592 RCFD 5592 /////////////// 15.a.
b. TEXT 5593 RCFD 5593 /////////////// 15.b.
c. TEXT 5594 RCFD 5594 /////////////// 15.c.
d. TEXT 5595 RCFD 5595 /////////////// 15.d.
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
<S> <C> <C> <C>
1. Loans originated by the reporting bank that have been sold or participated to others /////////////////
during the calendar quarter ending with the report date (exclude the portions of such /////////////////
loans retained by the reporting bank; see instructions for other exclusions) . . . . 3431 24,631 M.1.
2. Loans purchased by the reporting bank during the calendar quarter ending with the /////////////////
report date (see instructions for exclusions) . . . . . . . . . . . . . . . . . . . 3488 9,716 M.2.
3. Unused commitments with an original maturity exceeding one year that are reported in /////////////////
Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of /////////////////
commitments that are fee paid or otherwise legally binding) . . . . . . . . . . . . 3833 727,158 M.3
a. Participations in commitments with an original maturity /////////////////
exceeding one year conveyed to others . . . . . . . . . . RCFD 3834 46,084 ///////////////// M.3.a.
4. To be completed only by banks with $1 billion or more in total assets: /////////////////
Standby letters of credit and foreign office guarantees (both financial and
performance) issued to non-U.S. addressees (domicile) included in Schedule RC-L, /////////////////
items 2 and 3, above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3377 4,210 M.4.
5. To be completed for the September report only: /////////////////
Installment loans to individuals for household, family, and other personal /////////////////
expenditures that have been securitized and sold without recourse (with servicing /////////////////
retained), amounts outstanding by type of loan: /////////////////
a. Loans to purchase private passenger automobiles . . . . . . . . . . . . . . . . 2741 N/A M.5.a.
b. Credit cards and related plans . . . . . . . . . . . . . . . . . . . . . . . . 2742 N/A M.5.b.
c. All other consumer installment credit (including mobile home loans) . . . . . . 2743 N/A M.5.c.
</TABLE>
25
<PAGE> 64
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-16
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
Schedule RC-M--Memoranda
<TABLE>
<CAPTION>
C465 <-
Dollar Amounts in Thousands RCON Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal /////////////////
shareholders, and their related interests as of the report date: /////////////////
a. Aggregate amount of all extensions of credit to all executive officers, directors, /////////////////
principal shareholders, and their related interests . . . . . . . . . . . . . . . 6164 273,734 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the /////////////////
amount of all extensions of credit by the reporting bank (including extensions of /////////////////
credit to related interests) equals or exceeds the lesser of $500,000 or 5 percent Number /////////////////
of total capital as defined for this purpose in agency RCFD 6165 10 ///////////////// 1.b.
regulations. -------------------------------- /////////////////
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches /////////////////
and agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) . . . . . . 3405 0 2.
3. Not applicable. /////////////////
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for other /////////////////
(include both retained servicing and purchased servicing): /////////////////
a. Mortgages serviced under a GNMA contract . . . . . . . . . . . . . . . . . . . . . . 5500 0 4.a.
b. Mortgages serviced under a FHLMC contract: /////////////////
(1) Serviced with recourse to servicer . . . . . . . . . . . . . . . . . . . . . . 5501 0 4.b.(1)
(2) Serviced without recourse to servicer. . . . . . . . . . . . . . . . . . . . . 5502 0 4.b.(2)
c. Mortgagages serviced under a FNMA contract: /////////////////
(1) Serviced under a regular option contract . . . . . . . . . . . . . . . . . . . 5503 0 4.c.(1)
(2) Serviced under a special option contract . . . . . . . . . . . . . . . . . . . 5504 0 4.c.(2)
d. Mortgages serviced under other servicing contracts . . . . . . . . . . . . . . . . . 5505 0 4.d.
5. To be completed only by banks with $1 billion or more in total assets: /////////////////
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must /////////////////
equal Schedule RC, item 9): /////////////////
a. U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2103 6,246 5.a.
b. Non-U.S. addressees (domicile) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2104 0 5.b.
6. Intangible assets: /////////////////
a. Mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3164 6.a.
b. Other identifiable intangible assets: /////////////////
(1) Purchased credit card relationships. . . . . . . . . . . . . . . . . . . . . . 5506 6,166 6.b.(1)
(2) All other identifiable intangible assets . . . . . . . . . . . . . . . . . . . 5507 4,782 6.b.(2)
c. Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3163 11,955 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10) . . . . . . . 2143 22,903 6.d.
e. Intangible assets that have been grandfathered for regulatory capital purposes . . . 6442 0 6.e.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
7. Does your bank have any mandatory convertible debt that is part of your primary or YES NO
secondary capital? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6167 /// X 7.
--------------------------
If yes, complete items 7.a through 7.e: RCFD Bil Mil Thou
--------------------------
a. Total equity contract notes, gross . . . . . . . . . . . . . . . . . . . . . . . . 3290 N/A 7.a.
b. Common or perpetual preferred stock dedicated to redeem the above notes . . . . . 3291 N/A 7.b.
c. Total equity commitment notes, gross . . . . . . . . . . . . . . . . . . . . . . . 3293 N/A 7.c.
d. Common or perpetual preferred stock dedicated to redeem the above notes . . . . . 3294 N/A 7.d.
e. Total (item 7.a minus 7.b plus 7.c minus 7.d) . . . . . . . . . . . . . . . . . . 3295 N/A 7.e.
</TABLE>
______________
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
26
<PAGE> 65
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 36-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-17
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
Schedule RC-M--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands Bil Mil Thou
<S> <C> <C> <C>
8. a. Other real estate owned: /////////////////
(1) Direct and indirect investments in real estate ventures . . . . . . . . RCDF 5372 0 8.a.(1)
(2) All other real estate owned: /////////////////
(a) Construction and land development in domestic offices. RCDF 5508 1,517 8.a.(2)(a)
(b) Farmland in domestic offices . . . . . . . . . . . . . RCDF 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices. RCDF 5510 235 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties /////////////////
in domestic offices . . . . . . . . . . . . . . . . . RCDF 5511 0 8.a.(2)(d)
(e) Nonfarm nonresidential properties . . . . . . . . . . RCDF 5512 7,746 8.a.(2)(e)
(f) In foreign offices . . . . . . . . . . . . . . . . . . RCDF 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item /////////////////
7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCDF 2150 9,498 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: /////////////////
(1) Direct and indirect investments in real estate ventures . . . . . . . . RCDF 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated
companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCDF 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item
8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCDF 2130 0 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies . . . . . . RCDF 5376 0 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, /////////////////
item 23, "Perpetual preferred stock and related surplus" . . . . . . . . . . . . . . . . RCDF 3778 0 9.
</TABLE>
<TABLE>
<CAPTION>
Memorandum Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C>
1. Interbank holdings of capital instruments (to be completed for the December report
only): ///////////////////
a. Reciprocal holdings of banking organizations' capital instruments . . . . . . . 3836 0 M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments . . . . . . 3837 0 M.1.b.
</TABLE>
27
<PAGE> 66
<TABLE>
<S> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-18
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS, LEASES, AND OTHER ASSETS
<TABLE>
<CAPTION>
The FFIEC regards the information reported in all of
Memorandum item 1, in items 1 through 10, column A,
and in Memorandum items 2 and 3, column A, as
confidential.
C370 <-
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
------------------------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <S> <C> <C> <C>
1. Loans secured by real estate: ///////////////// ///////////////// /////////////////
a. To U.S. addressees (domicile) . . . . 1245 1246 1,515 1247 15,693 1.a.
b. To non-U.S. addressees (domicile). . . 1248 1249 0 1250 0 1.b.
2. Loans to depository institutions and ///////////////// ///////////////// /////////////////
acceptances of other banks: ///////////////// ///////////////// /////////////////
a. To U.S. banks and other U.S. ///////////////// ///////////////// /////////////////
depository institutions. . . . . . . . 5377 5378 0 5379 0 2.a.
b. To foreign banks . . . . . . . . . . . 5380 5381 0 5382 0 2.b.
3. Loans to finance agricultural production and ///////////////// ///////////////// /////////////////
other loans to farmers . . . . . . . . . . . 1594 1597 1583 562 3.
4. Commercial and industrial loans: ///////////////// ///////////////// /////////////////
a. To U.S. addressees (domicile). . . . . 1251 1252 2,902 1253 15,076 4.a.
b. To non-U.S. addressees (domicile). . . 1254 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, ///////////////// ///////////////// /////////////////
and other personal expenditures: ///////////////// ///////////////// /////////////////
a. Credit cards and related plans . . . . 5383 5384 30,209 5385 26 5.a.
b. Other (includes single payment, ///////////////// ///////////////// /////////////////
installment, and all student loans) . . 5386 5387 15,202 5388 5,615 5.b.
6. Loans to foreign governments and official ///////////////// ///////////////// /////////////////
institutions . . . . . . . . . . . . . . . . 5389 5390 0 5391 0 6.
7. All other loans . . . . . . . . . . . . . . 5459 5460 114 5461 639 7.
8. Lease financing receivables: ///////////////// ///////////////// /////////////////
a. Of U.S. addressees (domicile) . . . . 1257 1258 169 1259 1,552 8.a.
b. Of non-U.S. addressees (domicile) . . 1271 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude ///////////////// ///////////////// /////////////////
other real estate owned and other repossessed ///////////////// ///////////////// /////////////////
assets) . . . . . . . . . . . . . . . . . . 3505 3506 0 3507 0 9.
<FN>
===================================================================================================================================
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.
</TABLE>
<TABLE>
<S> <C> <C> <C>
10. Loans and leases reported in items 1 RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
through 8 above which are wholly or partially ///////////////// ///////////////// /////////////////
guaranteed by the U.S. Government . . . . . . 5612 5613 4,187 5614 272 10.
a. Guaranteed portion of loans and ///////////////// ///////////////// /////////////////
leases included in item 10 above . . . . 5615 5616 4,187 5617 206 10.a.
</TABLE>
28
<PAGE> 67
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-19
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-N--CONTINUED
<TABLE>
<CAPTION>
Memoranda C473 <-
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <C> <C> <C> <C>
1. Restructured loans and leases included in ///////////////// ///////////////// /////////////////
Schedule RC-N, items 1 through 8, above . . 1658 1659 1661 M.1.
2. Loans to finance commercial real estate, ///////////////// ///////////////// /////////////////
construction, and land development activities ///////////////// ///////////////// /////////////////
(not secured by real estate) included in ///////////////// ///////////////// /////////////////
Schedule RC-N, items 4 and 7, above . . . . 6558 6559 0 6560 0 M.2.
3. Loans secured by real estate in domestic ///////////////// ///////////////// /////////////////
offices Schedule RC-N, item above): ///////////////// ///////////////// /////////////////
a. Construction and land development . 2759 2769 0 3492 274 M.3.a.
b. Secured by farmland . . . . . . . . 3493 3494 0 3495 5 M.3.b.
c. Secured by 1-4 family residential ///////////////// ///////////////// /////////////////
properties: ///////////////// ///////////////// /////////////////
(1) Revolving, open-end loans ///////////////// ///////////////// /////////////////
secured by 1-4 family ///////////////// ///////////////// /////////////////
residential properties and ///////////////// ///////////////// /////////////////
extended under lines of ///////////////// ///////////////// /////////////////
credit . . . . . . . . . . 5398 5399 475 5400 1,087 M.3.c.(1)
(2) All other loans secured by ///////////////// ///////////////// /////////////////
1-4 family residential ///////////////// ///////////////// /////////////////
properties . . . . . . . . 5401 5402 522 5403 3,442 M.3.c.(2)
d. Secured by multifamily (5 or more) ///////////////// ///////////////// /////////////////
residential properties . . . . . . . 3499 3500 0 3501 563 M.3.d.
e. Secured by nonfarm nonresidential ///////////////// ///////////////// /////////////////
properties . . . . . . . . . . . . . 3502 3503 518 3504 10,322 M.3.e.
</TABLE>
SCHEDULE RC-O--OTHER DATA FOR DEPOSIT INSURANCE ASSESSMENTS
An amended Certified Statement should be submitted to the FDIC if the amounts
reported in items 1 through 9 of this schedule are amended after the semiannual
Certified Statement originally covering this report date has been filed with
the FDIC.
<TABLE>
<CAPTION>
C475 <-
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C> <C>
1. Unposted debits (see instructions): /////////////////
a. Actual amount of all unposted debits . . . . . . . . . . . . . . . . . . . . . . . 0030 N/A 1.a.
OR /////////////////
b. Separate amount of unposted debits: /////////////////
(1) Actual amount of unposted debits to demand deposits . . . . . . . . . . . . . 0031 0 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) . . . . . . . 0032 0 1.b.(2)
2. Unposted credits (see instructions): /////////////////
a. Actual amount of all unposted credits . . . . . . . . . . . . . . . . . . . . . . 3510 N/A 2.a.
OR /////////////////
b. Separate amount of unposted credits: /////////////////
(1) Actual amount of unposted credits to demand deposits . . . . . . . . . . . . . 3512 0 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) . . . . . . 3514 0 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in /////////////////
total deposits in domestic offices). . . . . . . . . . . . . . . . . . . . . . . . . . 3520 0 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in
Puerto Rico and U.S. territories and possessions (not included in total deposits): /////////////////
a. Demand deposits of consolidated subsidiaries . . . . . . . . . . . . . . . . . . . 2211 14,189 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries . . . . . . . . . . . . 2351 10,763 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries . . . . . . . 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions . . . /////////////////
a. Demand deposits in insured branches (included in Schedule RC-E Part II). . . . . . 2229 0 5.a.
b. Time and savings deposits (1) in inasured branches (included in Schedule RC-E,
Part II) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches (included in Schedule
RC-G, item 1.b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5515 0 5.c.
</TABLE>
- ------------------------
(1) For FDIC insurance assessment purposes, "time and savings deposits"
consists of nontransaction accounts and all transaction accounts
other than demand deposits.
29
<PAGE> 68
<TABLE>
<S> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 9-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-20
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-O--CONTINUED
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
<S> <C> <C>
_________________________________________________________________________________________________________________________________
Item 6 is not applicable to state nonmember banks that have not been authorized by the Federal /////////////////
Reserve to act as pass-through correspondents. /////////////////
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on /////////////////
behalf of its respondent depository institutions that are also reflected as deposit /////////////////
liabilities of the reporting bank: /////////////////
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, Memorandum /////////////////
item 4.a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, /////////////////
memorandum item 4.b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) /////////////////
a. Unamortized premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5516 31 7.a.
b. Unamortized discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5517 0 7.b.
_________________________________________________________________________________________________________________________________
8. To be completed by banks with "Oakar deposits."
Total "Adjusted Attributable Deposits" of all institutions acquired under Section /////////////////
5(d)(3) of the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction /////////////////
worksheet(s)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5518 N/A 8.
_________________________________________________________________________________________________________________________________
9. Deposits in lifeline accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5596///////////// 9.
</TABLE>
__________
(1) For FDIC insurance assessment purposes, "time and
savings deposits" consists of nontransaction accounts and all
transaction accounts other than demand deposits.
<TABLE>
<CAPTION>
Memoranda (to be completed each quarter except as noted) Dollar Amounts in Thousands RCON Bil Mil Thou
_________________________________________________________________________________________________________________________________
<S> <C> <C> <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) /////////////////
and 1.b.(1) must equal Schedule RC, item 13.a): /////////////////
a. Deposit accounts of $100,000 or less: /////////////////
(1) Amount of deposit accounts of $100,000 or less . . . . . . . . . . . . 2702 2,136,269 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be Number /////////////////
completed for the June report only) . . RCON 3779 N/A ///////////////// M.1.a.(2)
b. Deposit accounts of more than $100,000: /////////////////
(1) Amount of deposit accounts of more than
$100,000 . . . . . . . . . . . . . . . . . . . Number 2710 1,726,852 M.1.b.(1)
(2) Number of deposit accounts of more than
$100,000 . . . . . . . . . . . . . . . . . . . RCON 2722 3,524 ///////////////// M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying
the number of deposit accounts of more than $100,000 reported in Memorandum item
1.b.(2) above by $100,000 and subtracting the result from the amount of deposit
accounts of more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or YES NO
procedure for determining a better estimate of uninsured deposits than the
estimate described above . . . . . . . . . . . . . . . . . . . . . . . . . . . 6861 /// X M.2.a.
b. If the box marked YES has been checked, report the estimate of uninsured RCON Bil Mil Thou
deposits determined by using your bank's method or procedure . . . . . . . . . 5597 N/A M.2.b.
</TABLE>
<TABLE>
<S> <C> <C>
_________________________________________________________________________________________________________________________________
Person to whom questions about the Reports of Condition and Income should be directed: C477 <-
</TABLE>
<TABLE>
<S> <C>
Elizabeth G. Gilliland - ASSISTANT VICE PRESIDENT (614) 248-8563
- -------------------------------------------------- -------------------------------------------
Name and Title (TEXT 8901) Area code and phone number (TEXT 8902)
</TABLE>
30
<PAGE> 69
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-21
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE RC-R--RISK-BASED CAPITAL
This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1992, must complete items 2 through 9 and Memorandum item 1. Banks with assets of less than $1 billion must
complete items 1 through 3 below or Schedule RC-R in its entirety, depending on their response to item 1 below.
<S> <C> <C> <C> <C> <C>
1. Test for determining the extent to which Schedule RC-R must be completed. To be C480 <-
completed only by banks with total assets of less than $1 billion. Indicate in
the appropriate box at the right whether the bank has total capital greater than or YES NO
equal to eight percent of adjusted total assets . . . . . . . . . . . . . . . . . . . RCFD 6056 /// 1.
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government agency
obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan and lease
losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions). If the box marked YES has
been checked, then the bank only has to complete items 2 and 3 below. If the box marked NO has been checked, the bank
must complete the remainder of this schedule. A NO response to item 1 does not necessarily mean that the bank's actual
risk-based capital ratio is less than eight percent or that the bank is not in compliance with the risk-based capital
guidelines.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Subordinated Debt(1) Other
and Intermediate Limited-
Term Preferred Life Capital
Items 2 and 3 are to be completed by all banks. Stock Instruments
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <S> <C> <C>
2. Subordinated debt(1) and other limited-life capital instruments //////////////////// ////////////////////
(original weighted average maturity of at least five years) with //////////////////// ////////////////////
a remaining maturity of: //////////////////// ////////////////////
a. One year or less. . . . . . . . . . . . . . . . . . . . . . 3780 0 3786 0 2.a.
b. Over one year through two years . . . . . . . . . . . . . . 3781 0 3787 0 2.b.
c. Over two years through three years. . . . . . . . . . . . . 3782 0 3788 0 2.c.
d. Over three years through four years . . . . . . . . . . . . 3783 0 3789 0 2.d.
e. Over four years through five years. . . . . . . . . . . . . 3784 0 3790 0 2.e.
f. Over five years . . . . . . . . . . . . . . . . . . . . . . 3785 189,083 3791 0 2.f.
</TABLE>
<TABLE>
<CAPTION>
RCFD Bil Mil Thou
<S> <C> <C> <C> <C>
3. Total qualifying capital (i.e., Tier 1 and Tier 2 capital) allowable under the risk-
based capital guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3792 739,241 3.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
Items 4-9 and Memorandum item 1 are to be completed on the of Off-Balance
by banks that answered NO to item 1 above and Balance Sheet Sheet Items(2)
by banks with total assets of $1 billion or more. RCFD Bil Mil Thou RCFD Bil Mil Thou
<S> <C> <S> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items
assigned to the Zero percent risk category:
a. Assets recorded on the balance sheet: //////////////////// ////////////////////
(1) Securities issued by, other claims on, and //////////////////// ////////////////////
claims unconditionally guaranteed by, the U.S. //////////////////// ////////////////////
Government and its agencies and other OECD //////////////////// ////////////////////
central governments . . . . . . . . . . . . . . . . 3794 157,257 //////////////////// 4.a.(1)
(2) All other . . . . . . . . . . . . . . . . . . . . . 3795 108,396 //////////////////// 4.a.(2)
b. Credit equivalent amount of off-balance sheet items . . . //////////////////// 3796 0 4.b.
</TABLE>
___________
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item
7.e. "Total."
(2) Do not report in column B the risk-weighted amount of assets reported
in column A.
31
<PAGE> 70
<TABLE>
<S> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 39-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-22
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
SCHEDULE RC-R--CONTINUED
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(1)
------------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
------------------------------------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items //////////////////// ////////////////////
assigned to the 20 percent risk category: //////////////////// ////////////////////
a. Assets recorded on the balance sheet: //////////////////// ////////////////////
(1) Claims conditionally guaranteed by the U.S. //////////////////// ////////////////////
Government and its agencies and other OECD //////////////////// ////////////////////
central governments . . . . . . . . . . . . . . . . . 3798 130,401 //////////////////// 5.a.(1 )
(2) Claims collateralized by securities issued by //////////////////// ////////////////////
the U.S. Government and its agencies and other //////////////////// ////////////////////
OECD central governments; by securities issued //////////////////// ////////////////////
by U.S. Government-sponsored agencies; and by //////////////////// ////////////////////
cash on deposit . . . . . . . . . . . . . . . . . . . 3799 0 //////////////////// 5.a.(2 )
(3) All other . . . . . . . . . . . . . . . . . . . . . . 3800 712,651 //////////////////// 5.a.(3 )
b. Credit equivalent amount of off-balance sheet items . . . . //////////////////// 3801 576,368 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items //////////////////// ////////////////////
assigned to the 50 percent risk category: //////////////////// ////////////////////
a. Assets recorded on the balance sheet . . . . . . . . . . . 3802 141,073 //////////////////// 6.a.
b. Credit equivalent amount of off-balance sheet items . . . . //////////////////// 3803 2,070 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items //////////////////// ////////////////////
assigned to the 100 percent risk category: //////////////////// ////////////////////
a. Assets recorded on the balance sheet . . . . . . . . . . . 3804 5,558,638 //////////////////// 7.a.
b. Credit equivalent amount of off-balance sheet items . . . . //////////////////// 3805 583,273 7.b.
8. On-balance sheet values (or portions thereof) of interest rate, //////////////////// ////////////////////
foreign exchange rate, and commodity contracts which have a //////////////////// ////////////////////
capital assessment for their off-balance sheet exposure under the //////////////////// ////////////////////
risk-based capital guidelines and those contracts (e.g., futures //////////////////// ////////////////////
contracts) excluded from the calculation of the risk-based //////////////////// ////////////////////
capital ratio (exclude margin accounts and accrued receivables //////////////////// ////////////////////
from this item) . . . . . . . . . . . . . . . . . . . . . . . . 3806 0 //////////////////// 8.
9. Total assets recorded on the balance sheet (sum of items 4.a, //////////////////// ////////////////////
5.a, 6.a, 7.a, and 8, column A) (must equal Schedule RC, item 12 //////////////////// ////////////////////
plus items 4.b and 4.c, plus Schedule RC-B, item 6.a.(3), //////////////////// ////////////////////
column A) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3807 6,808,416 //////////////////// 9.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Notional Replacement
Principal Cost
Value (Market Value)
------------------------------------------
Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
------------------------------------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C>
1. Notional principal value and replacement cost of interest rate /////////////////// ///////////////////
and foreign exchange rate contracts (in column B, report only /////////////////// ///////////////////
those contracts with a positive replacement cost): /////////////////// ///////////////////
a. Interest rate contracts (exclude futures contracts) . . . . . . /////////////////// 3808 152,607 M.1.a.
(1) With a remaining maturity of one year or less . . . . . . 3809 688,577 /////////////////// M.1.a.(1)
(2) With a remaining maturity of over one year . . . . . . . 3810 17,246,696 /////////////////// M.1.a.(2)
b. Foreign exchange rate contracts (exclude contracts with /////////////////// ///////////////////
an original maturity of 14 days or less and futures contracts) /////////////////// 3811 561 M.1.b.
(1) With a remaining maturity of one year or less . . . . . . 3812 66,351 /////////////////// M.1.b.(1)
(2) With a remaining maturity of over one year . . . . . . . 3813 0 /////////////////// M.1.b.(2)
</TABLE>
___________
(1) Do not report in column B the risk-weighted amount of assets reported
in column A.
32
<PAGE> 71
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 36-9-1580 FFIEC 031
Address: 100 EAST BROAD STREET Page RC-23
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
</TABLE>
<TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on December 31, 1993
<CAPTION>
BANK ONE, COLUMBUS, NA COLUMBUS , Ohio
----------------------------------------------------------- ------------------------------ ---------------------------
Legal Title of Bank City State
<S> <C>
The management of the reporting bank may, if it wishes, submitting bank and the truncated statement will appear as
submit a brief narrative statement on the amounts reported the bank's statement both on agency computerized records
in the Reports of Condition and Income. This optional and in computer-file releases to the public.
statement will be made available to the public, along with
the publicly available data in the Reports of Condition and All information furnished by the bank in the narrative
Income, in response to any request for individual bank statement must be accurate and not misleading. Appropriate
report data. However, the information reported in column A efforts shall be taken by the submitting bank to ensure the
and in all of Memorandum item 1 of Schedule RC-N is statement's accuracy. The statement must be signed, in the
regarded as confidential and will not be released to the space provided below, by a senior officer of the bank who
public. BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT thereby attests to its accuracy.
SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE NAMES
OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, If, subsequent to the original submission, material changes
REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL are submitted for the data reported in the Reports of
ITEMS IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY Condition and Income, the existing narrative statement will
ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD be deleted from the files, and from disclosure; the bank,
COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing at its option, may replace it with a statement, under
not to make a statement may check the "No comment" box signature, appropriate to the amended data.
below and should make no entries of any kind in the space
provided for the narrative statement; i.e., DO NOT enter in The optional narrative statement will appear in agency
this space such phrases as "No statement," "Not records and in release to the public exactly as submitted
applicable," "N/A," "No comment," and "None". (or amended as described in the preceding paragraph) by the
management of the bank (except for the truncation of
statements exceeding the 750-character limit described
above). THE STATEMENT WILL NOT BE EDITED OR SCREENED IN
The optional statement must be entered on this sheet. The ANY WAY BY THE SUPERVISORY AGENCIES FOR ACCURACY OR
statement should not exceed 100 words. Further, regardless RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY
of the number of words, the statement must not exceed 750 THAT ANY FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR
characters, including punctuation, indentation, and CONFIRMED THE ACCURACY OF THE INFORMATION CONTAINED
standard spacing between words and sentences. If any THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
submission should exceed 750 characters, as defined, it PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE
will be truncated at 750 characters with no notice to the MANAGEMENT OF THE REPORTING BANK.
- ----------------------------------------------------------------------------------------------------------------------------------
No comment [_] (RCON 6979) C471 C472 <-
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980) For regulatory purposes, the Bank defers the recognition of certain
execss service fees relating to securitized loan sales until cash is received.
The effect of this accounting method has increased net income for the current
year $18,412,000 and decreased retained earnings on a cumulative basis
$41,921,000.
</TABLE>
<TABLE>
<S> <C>
/s/ Jeffrey T. Benton 1/28/94
_____________________________________________________ ________________________________
Signature of Executive Officer of Bank Date of Signature
33
</TABLE>
<PAGE> 72
<TABLE>
<S> <C> <C> <C> <C> <C>
Legal Title of Bank: BANK ONE, COLUMBUS, NA Call Date: 12/31/93 ST-BK: 36-9-1580
Address: 100 EAST BROAD STREET
City, State Zip: COLUMBUS, OH 43271-1066
FDIC Certificate No.: |0|6|5|5|9|
-----------
_______________ _______________ _______________ _______________ _______________
</TABLE>
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
<TABLE>
<S> <C> <C>
CALL NO. 186 31 12-31-93D OMB No. For OCC: 1557-0081
CERT: 06559 00088 STBK 39-1580
OMB No. For FDIC: 3064-0052
OMB No. For Federal Reserve: 7100-0036
BANK ONE, COLUMBUS, NA Expiration Date: 2/28/95
100 EAST BROAD STREET
COLUMBUS, OH 43271-1066
SPECIAL REPORT
(Dollar Amounts in Thousands)
</TABLE>
<TABLE>
<S> <C> <C> <C>
CLOSE OF BUSINESS FDIC Certificate Number
DATE C-700 <-
12/31/93 |0|6|5|5|9
----------
</TABLE>
<TABLE>
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
_______________ _______________ _______________ _______________ _______________
The following information is required by Public Laws 90-44 and 102-242, but does not constitute a part of the Report of Condition.
With each Report of Condition, these Laws require all banks to furnish a report of all loans or other extensions of credit to their
executive officers made since the date of the previous Report of Condition. Data regarding individual loans or other extensions of
credit are not required. If no such loans or other extensions of credit were made during the period, insert "none" against subitem
(a). (Exclude the first $5,000 of indebtedness of each executive officer under bank credit card plan.) See Sections 215.2 and 215.3
of Title 12 of the Code of Federal Regulations (Federal Reserve Board Regulation 0) for the definitions of "executive officer" and
"extension of credit," respectively. Exclude loans and other extensions of credit to directors and principal shareholders who are
not executive officers.
_______________ _______________ _______________ _______________ _______________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
a. Number of loans made to executive officers
since the previous Call Report date . . . . . . . RCFD 3561 14 a.
b. Total dollar amount of above loans (in thousands of
dollars) . . . . . . . . . . . . . . . . . . . . RCFD 3562 667 b.
c. Range of interest charged on above loans
(example: 9 3/4% = 9.75) . . . . . . . . . . . . . RCFD 7701 6.25 % to RCFD 7702 17.90 % c.
</TABLE>
<TABLE>
<S> <C>
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT DATE (Month, Day, Year)
/s/ Elizabeth G. Gilliland January 27, 1994
-------------------------- -----------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) AREA CODE/PHONE NUMBER (TEXT 8904)
ELIZABETH G. GILLILAND - ASSISTANT VICE PRESIDENT (614) 248-8563
</TABLE>
FDIC 8040/53 (12-92)
34
<PAGE> 73
This form is for use by National Banks only.It should be used for
publication purposes only, and should not be returned to the FDIC.
- ------------------------------------------------------------------------------
Comptroller of the Currency
Administrator of National Banks
- ------------------------------------------------------------------------------
R E P O R T O F C O N D I T I O N
Consolidating domestic and foreign subsidiaries of the
BANK ONE, COLUMBUS, NA of Columbus in the state of Ohio,
- -------------------------------------------
at the close of business on December 31, 1993, published in response to
a call made by Comptroller of the Currency, under title 12, United
States Code, Section 161, Charter Number 07621 Comptroller of the Currency
Central District.
Statement of Resources and Liabilities
ASSETS
<TABLE>
<CAPTION>
Cash and balances due from depository institutions: Thousand of dollars
<S> <C>
Noninterest-bearing balances and currency and coin . . . . . . . . . . . . . . . . . . . 415,213
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332,811
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285,810
Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . 0
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . . . . . . 5,352,695
LESS: Allowance for loan and lease losses . . . . . . . . 168,045
LESS: Allocated transfer risk reserve . . . . . . . . . . 0
Loans and leases, net of unearned income, allowance, and reserve . . . . . . . . . . . . 5,184,650
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,020
Premises and fixed assets (including capitalized leases) . . . . . . . . . . . . . . . . . . . . 56,503
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,498
Investments in unconsolidated subsidiaries and associated companies . . . . . . . . . . . . . . . 0
Customers' liability to this bank on acceptances outstanding . . . . . . . . . . . . . . . . . . 6,246
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,903
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301,717
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,640,371
</TABLE>
1
<PAGE> 74
LIABILITIES
<TABLE>
<CAPTION>
Deposits:
<S> <C>
In domestic Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,863,121
Noninterest-bearing . . . . . . . . . . . . . . . 1,151,525
Interest-bearing . . . . . . . . . . . . . . . . . 2,711,596
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785,902
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . 1,079
Demand notes issued to the U.S. Treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000
Other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527,252
Mortgage indebtedness and obligations under capitalized leases . . . . . . . . . . . . . . . . . 4,604
Bank's liability on acceptances executed and outstanding . . . . . . . . . . . . . . . . . . . . 6,246
Subordinated notes and debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189,083
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,501
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,154,484
Limited-life preferred stock and related surplus . . . . . . . . . . . . . . . . . . . . . . . . 0
</TABLE>
<TABLE>
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and relates surplus . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,738
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,231
Undivided profits and capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362,918
LESS: Net unrealized loss on marketable equity securities . . . . . . . . . . . . . . . . . . . 0
Cumulative foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . 0
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485,887
Total liabilities, limited-life preferred stock, and equity capital . . . . . . . . . . . . . . . 6,640,371
</TABLE>
I, Elizabeth G. Gillard , of the above-named bank
- -----------------------------------------------------
Name
Assistant Vice President
- -----------------------------------------------------
Title
(Name and title of officer authorized to sign report)
do hereby declare that this Report of Condition is true and correct to the best
of my knowledge and belief.
_____________________________________________________
Signature of officer authorized to sign report
We, the undersigned directors, attest to the correctness of this Statement of
resources and liabilites. We declare that it has been examined by us, and to the
best of our knowledge and belief has been prepared in conformance with the
instructions and is true and correct.
____________________________________________________
____________________________________________________
____________________________________________________
2
