<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
PRIME HOSPITALITY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7011 22-2640625
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
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700 ROUTE 46 EAST, FAIRFIELD, NEW JERSEY 07007-2700, (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 07007-2700
(201) 882-1010
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
with a copy to:
WILLIAM N. DYE, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 821-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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=========================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE OFFERING PRICE REGISTRATION FEE
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- ---------------------------------------------------------------------------------------------------------
9 3/4% Senior Subordinated Notes Due
2007............................... $200,000,000 100% $200,000,000 $60,607
=========================================================================================================
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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 APRIL 2, 1997
PROSPECTUS
[PRIME HOSPITALITY CORP. LOGO]
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF 9 3/4% SERIES B SENIOR
SUBORDINATED NOTES DUE 2007 FOR EACH $1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING
9 3/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2007
------------------------
Prime Hospitality Corp., a Delaware company (the "Company"), hereby offers
to exchange (the "Exchange Offer") up to $200,000,000 in aggregate principal
amount of its 9 3/4% Series B Senior Subordinated Notes Due 2007 (the "Exchange
Notes") for up to $200,000,000 in aggregate principal amount of its outstanding
9 3/4% Series A Senior Subordinated Notes Due 2007 issued and sold in reliance
upon an exemption from registration under the Securities Act of 1933, as amended
(the "Original Notes" and, together with the Exchange Notes, the "Notes").
The terms of the Exchange Notes will be substantially identical in all
respects (including principal amount, interest rate, maturity and ranking) to
the terms of the Original Notes for which they may be exchanged pursuant to the
Exchange Offer, except that (i) the Exchange Notes will be freely transferable
by holders thereof (except as provided below) and (ii) the Exchange Notes will
be issued without any covenant of the Company regarding registration. The
Exchange Notes will be issued under the indenture governing the Original Notes.
The Exchange Notes will be general unsecured obligations of the Company and will
be subordinated in right of payment to all existing and future Senior Debt (as
defined) of the Company. None of the Company's subsidiaries is presently
required to guarantee the Notes, although under certain future circumstances,
the Company may be required to cause one or more Restricted Subsidiaries (as
defined) to guarantee the Notes on a subordinated basis. As of March 31, 1997,
the Company had approximately $155.0 million of Senior Debt outstanding, and, in
addition, subsidiaries of the Company had approximately $21.8 million of
Indebtedness (as defined) outstanding. Upon a Change of Control (as defined),
each holder of the Notes will have the right to require the Company to
repurchase all or a portion of such holder's Notes then outstanding at a
purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase. The Company's ability to
repurchase the Notes may be limited by, among other things, the Company's
financial resources at the time of repurchase. For a complete description of the
terms of the Exchange Notes, including provisions relating to the ability of the
Company and its Restricted Subsidiaries to create indebtedness that is senior or
pari passu to the Exchange Notes, see "Description of Notes." There will be no
cash proceeds to the Company from the Exchange Offer.
The Notes bear interest from and including their respective dates of
issuance. Holders whose Original Notes are accepted for exchange will receive
accrued interest thereon to, but not including, the date of issuance of the
Exchange Notes, such interest to be payable with the first interest payment on
the Exchange Notes, but will not receive any payment in respect of interest on
the Original Notes accrued after the issuance of the Exchange Notes.
The Original Notes were originally issued and sold on March 26, 1997 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption provided in Section 4(2) of
the Securities Act and Rule 144A of the Securities Act (the "Initial Offering").
Accordingly, the Original Notes may not be reoffered, resold or otherwise
pledged, hypothecated or transferred in the United States unless so registered
or unless an applicable exemption from the registration requirements of the
Securities Act is available. Based upon interpretations by the Staff (the
"Staff") of the Securities and Exchange Commission (the "Commission") issued to
third parties, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Original Notes directly from
the Compay or (iii) a broker-dealer who acquired Original Notes as a result of
market making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes. Each broker-dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. Broker-dealers who
acquired Original Notes as a result of market making or other trading activities
may use this Prospectus, as supplemented or amended, in connection with resales
of the Exchange Notes. The Company has agreed that, for a period not to exceed
180 days after the Exchange Date (as defined), it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. Any
holder that cannot rely upon such interpretations must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
The Original Notes and the Exchange Notes constitute new issues of
securities with no established trading market. Any Original Notes not tendered
and accepted in the Exchange Offer will remain outstanding. To the extent that
Original Notes are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered, and tendered but unaccepted, Original Notes could be
adversely affected. Following consummation of the Exchange Offer, the holders of
Original Notes will continue to be subject to the existing restrictions on
transfer thereof and the Company will have no further obligation to such holders
to provide for the registration under the Securities Act of the Original Notes
except under certain limited circumstances. (See "Original Notes Registration
Rights.") No assurance can be given as to the liquidity of the trading market
for either the Original Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1997, unless extended (the
"Expiration Date"). The date of acceptance for exchange of the Original Notes
(the "Exchange Date") will be the first business day following the Expiration
Date, upon surrender of the Original Notes. Original Notes tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date;
otherwise such tenders are irrevocable.
------------------------
SEE "RISK FACTORS" ON PAGE 12 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
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.
------------------------
The date of this Prospectus is , 1997
<PAGE> 3
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
Certain statements in this Prospectus under the captions "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" and elsewhere constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance or achievements of the Company, or industry results, to differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such risks, uncertainties and other
important factors include, among others: general economic and business
conditions; industry trends; expansion and construction costs; competition;
changes in business strategy or development plans; availability, terms and
deployment of capital; availability of qualified personnel; changes in, or the
failure or inability to comply with, government regulation, including, without
limitation, environmental regulations; and other factors referenced in this
Prospectus. See "Risk Factors." These forward-looking statements speak only as
of the date of this Prospectus. The Company expressly disclaims any obligation
or undertaking to disseminate any updates or revisions to any forward-looking
statement contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based.
i
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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SUMMARY........................................ 1
RISK FACTORS................................... 12
Consequences of Failure to Exchange.......... 12
Substantial Leverage and Debt Service
Obligations.................................. 12
Subordination of Notes; Asset Encumbrance.... 13
AmeriSuites Expansion Risks.................. 14
Risks of the Lodging Industry; Competition... 14
Hotel Acquisition Risks...................... 15
Geographic Concentration of Hotels........... 15
Employment and Other Government Regulation... 16
Environmental Regulation..................... 16
Importance of Franchisor Relationships....... 16
Dependence on Key Employees.................. 16
Change of Control............................ 17
Absence of Public Market for the Notes....... 17
USE OF PROCEEDS................................ 18
THE EXCHANGE OFFER............................. 19
Purpose of the Exchange Offer................ 19
Terms of the Exchange........................ 19
Expiration Date; Extensions; Termination;
Amendments................................. 20
How to Tender................................ 20
Terms and Conditions of the Letter of
Transmittal.................................. 22
Withdrawal Rights............................ 23
Acceptance of Original Notes for Exchange;
Delivery of Exchange Notes................. 23
Conditions to the Exchange Offer............. 23
Exchange Agent............................... 24
Solicitation of Tenders; Expenses............ 24
Appraisal Rights............................. 25
Federal Income Tax Consequences.............. 25
Other........................................ 25
CAPITALIZATION................................. 26
RECENT SELECTED CONSOLIDATED FINANCIAL AND
OTHER DATA................................... 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................... 30
SELECTED CONSOLIDATED FINANCIAL DATA OF THE
COMPANY AND ITS PREDECESSOR.................. 40
BUSINESS....................................... 41
The Company.................................. 41
Operating Performance and Internal Growth.... 42
AmeriSuites Expansion........................ 42
Industry Overview............................ 43
Prime's Lodging Operations................... 45
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Operations................................... 51
Refurbishment Program........................ 52
Mortgages and Notes Receivable............... 53
Management Agreements........................ 53
Franchise Agreements......................... 53
Litigation................................... 54
MANAGEMENT..................................... 55
Directors and Executive Officers............. 55
DESCRIPTION OF CERTAIN
INDEBTEDNESS................................. 57
Revolving Credit Facility.................... 57
9 1/4% First Mortgage Notes due 2006......... 57
Other Secured Debt........................... 57
7% Convertible Subordinated Notes due 2002... 58
DESCRIPTION OF NOTES........................... 59
General...................................... 59
Principal, Maturity and Interest............. 59
Optional Redemption.......................... 60
Mandatory Redemption......................... 60
Subordination................................ 60
Repurchase at the Option of Holders.......... 61
Selection and Notice......................... 63
Certain Covenants............................ 64
Subsidiary Guarantees........................ 69
Reports...................................... 70
Events of Default and Remedies............... 71
No Personal Liability of Directors, Officers,
Employees and Stockholders................. 72
Legal Defeasance and Covenant Defeasance..... 72
Satisfaction and Discharge................... 73
Transfer and Exchange........................ 74
Amendment, Supplement and Waiver............. 74
Concerning the Trustee....................... 75
Additional Information....................... 75
Certain Definitions.......................... 75
ORIGINAL NOTES REGISTRATION RIGHTS............. 85
PLAN OF DISTRIBUTION........................... 86
BOOK ENTRY, DELIVERY AND FORM.................. 88
LEGAL MATTERS.................................. 90
EXPERTS........................................ 90
AVAILABLE INFORMATION.......................... 90
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.................................... 90
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS..... F-1
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ii
<PAGE> 5
SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the financial statements, including the notes thereto,
appearing elsewhere in or incorporated by reference in this Prospectus. Unless
the context indicates or requires otherwise, references in this Prospectus to
the "Company" or "Prime" are to Prime Hospitality Corp. and its subsidiaries.
EBITDA represents earnings before extraordinary items, interest expense,
provision for income taxes and depreciation and amortization and excludes
interest income on cash investments and other income. EBITDA is used by the
Company for the purpose of analyzing its operating performance, leverage and
liquidity. Hotel EBITDA represents EBITDA generated from the operations of owned
hotels. Hotel EBITDA excludes management fee income, interest income from
mortgages and notes receivable, general and administrative expenses and other
revenues and expenses which do not directly relate to operations of owned
hotels. EBITDA and Hotel EBITDA are not measures of financial performance under
generally accepted accounting principles and should not be considered as
alternatives to net income as an indicator of the Company's operating
performance or as alternatives to cash flows as a measure of liquidity. Unless
otherwise indicated, hotel and room count data is as of March 31, 1997 and
industry data is based on reports of Smith Travel Research.
THE COMPANY
Prime is a leading national hotel company, with a portfolio of 107 hotels
containing 15,287 rooms located in 25 states and the U.S. Virgin Islands (the
"Portfolio"). Prime controls two high-quality hotel brands -- AmeriSuites(R) and
Wellesley Inns(R) -- as well as a portfolio of upscale full-service hotels. One
of the country's largest hotel owner/operators, Prime has positioned itself to
benefit significantly from favorable lodging industry fundamentals that have
prevailed in recent years. From 1994 to 1996, the Company's EBITDA has grown at
a compound annual rate of 44.0%, from $42.8 million in 1994 to $88.8 million in
1996, while recurring net income has grown at a compound annual rate of 48.7%,
from $12.8 million to $28.3 million over the same period.
The Company's strategy is to capitalize on two lodging industry trends: (i)
favorable industry fundamentals, which are producing strong earnings growth due
to the operating leverage inherent in hotel ownership and (ii) growing consumer
preferences for newer all-suite accommodations with strong brand identities.
Reflecting this strategy, the Company owns and operates 94 of the 107 hotels in
the Portfolio (the "Owned Hotels") and holds financial or equity interests in 8
of the remaining 13 hotels managed by the Company for third parties (the
"Managed Hotels"). Furthermore, more than 85% of the Company's capital spending
in 1995 and 1996 was dedicated to the growth of the Company's proprietary
AmeriSuites and Wellesley Inns brands. Through its focus on hotel equity
ownership, the Company is benefiting from the operating leverage inherent in the
lodging industry. Through its development of proprietary brands, the Company is
positioning itself to generate additional revenue not dependent on investment in
real estate.
Prime's Portfolio is modern and well-maintained, with an average hotel age
of approximately 11 years. Over the past three years, the Company has achieved
rapid growth in the Portfolio, from 5,092 owned rooms at January 1, 1994 to
12,610 owned rooms at March 31, 1997. At the same time, the Company has focused
on brand development, with the number of Owned Hotels operated under Prime's
proprietary AmeriSuites and Wellesley Inns brands increasing from 19 of the 41
Owned Hotels at January 1, 1994 to 69 of the 94 Owned Hotels at March 31, 1997.
The Company's hotels serve three major lodging industry segments: the
all-suites segment, under the Company's proprietary AmeriSuites brand; the
upscale full-service segment, under major national franchises; and the
limited-service segment, primarily under the Company's proprietary Wellesley
Inns brand.
All-Suites: Prime owns and operates 41 all-suite hotels under the
AmeriSuites brand name, and currently has another 45 AmeriSuites under
development, including 27 under construction. AmeriSuites are upper mid-price,
all-suite hotels containing approximately 128 suites and located primarily near
suburban commercial centers, corporate office parks and other travel
destinations, with close proximity to dining, shopping and entertainment
amenities. Since January 1, 1995, AmeriSuites has been one of the fastest
<PAGE> 6
growing domestic hotel chains, expanding from 13 hotels to 41 hotels at March
31, 1997, an increase of 215%. In 1996, AmeriSuites contributed approximately
$26.0 million, or 28.6%, of the Company's Hotel EBITDA, a percentage which the
Company believes will increase significantly in 1997.
Full-Service: Prime operates 31 upscale full-service hotels with food
service and banquet facilities under franchise agreements with national hotel
brands such as Marriott, Radisson, Sheraton, Crowne Plaza, Holiday Inn and
Ramada. In 1996, the Company's full-service hotels contributed approximately
$44.5 million, or 48.9%, of the Company's Hotel EBITDA.
Limited-Service: Prime operates 35 limited-service hotels, 28 of which are
Wellesley Inns. The Company owns all of the Wellesley Inns, which compete
primarily in the mid-price segment with hotels such as Hampton Inns and La
Quinta Inns. The remaining seven limited-service hotels are operated under
franchise agreements with well-known national chains. In accordance with its
brand development strategy, the Company expects to divest a number of these
seven hotels within the next several years. In 1996, the Company's
limited-service hotels contributed approximately $20.5 million, or 22.5%, of the
Company's Hotel EBITDA.
OPERATING PERFORMANCE AND INTERNAL GROWTH
Prime seeks to achieve internal growth through the use of sophisticated
operating, marketing and financial systems at its hotels. Prime has demonstrated
its ability to operate its hotels effectively in each of its three segments,
achieving revenue per available room ("REVPAR") increases in 1996 at its
comparable AmeriSuites, full-service and limited-service hotels of 11.7%, 15.8%
and 5.2%, respectively, versus 1995 results. Management believes that: (i) the
AmeriSuites chain is positioned to benefit from increased critical mass and name
recognition resulting from the chain's rapid growth, expanded marketing
initiatives and product improvements; (ii) the upscale full-service segment,
located principally in the Northeast, is positioned to benefit from strong
regional and segment fundamentals, including significant barriers to entry; and
(iii) the Company's Wellesley Inns are positioned to benefit from a $9.0 million
renovation and reimaging program which was completed in March 1997.
The Company's emphasis on efficient operations has increased operating
margins, thus translating its top-line REVPAR growth into increased earnings for
each of its three industry segments. In 1996, gross operating profit increased
by 17.0%, 25.9% and 10.4%, respectively, for comparable AmeriSuites,
full-service and limited-service hotels, versus 1995 results. The Company
expects to further improve its operating performance in 1997 through the
implementation of a new proprietary yield management system, an enhanced central
reservations system serving the AmeriSuites and Wellesley Inns chains, digital
telecommunications conversions, improved telephone call accounting systems and
significant increases in employee training programs.
AMERISUITES EXPANSION
Prime's external growth focuses on the accelerated expansion of its
AmeriSuites brand through the construction of new AmeriSuites hotels. The
Company believes that AmeriSuites, which offers an excellent guest experience
and desirable suite accommodations at mid-scale prices, is well-positioned to
become a preeminent brand in the rapidly growing all-suites segment. Prime plans
to have 69 AmeriSuites open by the end of 1997 and 100 AmeriSuites open by the
end of 1998. At present, 41 AmeriSuites are open, with an additional 45 hotels
under development, including 27 under construction. At these levels, the Company
believes that it is approaching the critical mass necessary to begin development
of franchising programs, which would further leverage the value of its
proprietary brands.
AmeriSuites are positioned in the upper mid-price segment of the lodging
industry, competing predominantly with other mid-price and upscale brands such
as Courtyard by Marriott and Holiday Inn. The Company markets AmeriSuites as
"America's All-Suite Hotel," emphasizing superior price/value relative to
2
<PAGE> 7
traditional mid-price hotels by focusing on the chain's spacious suites, upscale
facilities and attractive amenity package. The Company is committed to the
expansion of the AmeriSuites brand for the following reasons:
- ATTRACTIVE INVESTMENT RETURNS: AmeriSuites have generated strong
investment returns, due to moderate development costs and high operating profit
margins. In 1996, AmeriSuites which were in operation for at least one year
generated an average EBITDA of $1.26 million, representing an average
unleveraged 18.1% return on total invested capital. In approving new AmeriSuites
for development, the Company seeks a projected unleveraged return on total
invested capital of 14% to 16% per year (although actual results may vary
significantly from projected results).
- RAPID STABILIZATION: Due to the attractiveness of the AmeriSuites
product, careful market analysis and extensive pre-opening sales and marketing
efforts, new AmeriSuites have rapidly attained high revenue and profit levels.
In 1996, the new AmeriSuites hotels which were open for at least three months
but less than 18 months achieved REVPAR levels which were within 8% of the
REVPAR levels achieved by stabilized AmeriSuites hotels which were in operation
for more than 18 months.
- BROAD CUSTOMER APPEAL: The AmeriSuites concept offers the benefits of an
all-suite hotel at a price that appeals to a wide variety of customers. Business
travelers are attracted to the specially designed business suites,
fully-equipped business centers, meeting rooms, convenient locations and in-room
features, including computer data ports and voice mail. Leisure travelers enjoy
the exercise room, complimentary continental breakfast, living room sleeper sofa
and heated swimming pool. In addition, the layout of the AmeriSuites room, each
of which includes a kitchenette, appeals to the fast-growing extended-stay
market segment. The Company believes AmeriSuites offers a level of amenities and
services exceeding those typically found in extended-stay hotels.
- FAST GROWING, FRAGMENTED MARKET: The all-suites segment has seen
above-market demand growth in recent years. From 1992 through 1996, demand for
all-suite hotels grew at more than triple the rate of demand growth experienced
by the lodging industry as a whole, and exceeded all-suites supply growth by
17.7%. Given the fast-growing demand for all-suite accommodations and the
absence of a dominant competitor in the mid-price all-suites market, Prime
believes that it can establish AmeriSuites as a preeminent brand in this market
while continuing to generate attractive returns.
- FAVORABLE OPERATING OUTLOOK: Management expects the AmeriSuites chain to
continue its strong performance, due principally to the following factors:
Increased critical mass: AmeriSuites' historical performance
improvements have been achieved despite the lack of an extensive chain
infrastructure. With more than three times the number of hotels from
January 1995 levels, 28 additional properties expected to be added during
1997 and the addition of an enhanced central reservations system,
AmeriSuites' referral network, name recognition and marketing initiatives
have continued to strengthen. In 1997, Prime plans to double its
AmeriSuites national brand advertising expenditures to further enhance the
chain's market profile.
Upside opportunities vs. key competitors: The Company believes it is
well-positioned to capitalize on the superior price/value characteristics
of the AmeriSuites brand as the chain expands. Despite significant product
advantages over its older, more established non-suite competitors,
AmeriSuites, as a recently established brand in the early stages of
development, has historically generated comparatively lower REVPAR levels.
For example, in 1996 the 296-hotel Courtyard by Marriott chain, a principal
competitor of AmeriSuites, generated an average REVPAR more than 20% higher
than that of AmeriSuites, which management attributes to Courtyard's more
fully developed marketing programs and brand recognition. Management
believes that the growing AmeriSuites infrastructure, consisting of
elements such as improved frequency programs, an enhanced central
reservations system, increased advertising and marketing programs and the
increased visibility from the doubling of the chain's number of hotels in
the past year will permit AmeriSuites to achieve critical mass and
outperform its older, more established competitors.
Impact of product enhancements: Prime continually seeks to refine and
enhance the AmeriSuites product to improve guest satisfaction and economic
returns. In 1996, the Company introduced a larger,
3
<PAGE> 8
more upscale lobby and arrival area, standardized indoor pools in Northern
climates and introduced a new concept for business travelers: Taking Care
of Business Suites ("TCB Suites"). TCB Suites comprise approximately 20% of
AmeriSuites rooms and are included in every hotel, offering guests a well
equipped in-suite office environment with the residential atmosphere
typical of the chain's suites. Management believes that these and other
product improvements will continue to enhance operating performance.
Prime believes that it will have access to sufficient resources to
implement its planned expansion of the AmeriSuites brand, including capital from
the following sources: (i) net proceeds from the Initial Offering; (ii)
borrowings under the Company's $100 million revolving credit facility (the
"Revolving Credit Facility"); and (iii) internally generated free cash flow from
hotel operations. With a significant hotel asset base, Prime also expects to
seek additional debt or equity financing or enter into sale/leaseback agreements
with respect to certain of its properties.
INDUSTRY OVERVIEW
The lodging industry as a whole has experienced five consecutive years in
which the growth in room demand has exceeded the growth in supply. In 1996,
industry-wide percentage growth in demand for hotel rooms exceeded industry-wide
percentage growth in supply of hotel rooms by 34.8% (3.1% versus 2.3%). The
excess of demand growth over supply growth in the past several years has led to
industry-wide increases in occupancy percentages and average daily rate ("ADR"),
with occupancy rising to 65.7% in 1996 from 65.1% in 1995, and average daily
rate ADR increasing 6.7% in 1996 over 1995 levels. Historical industry
performance, however, may not be indicative of future results
------------------------
The Company is a Delaware corporation incorporated in 1985. The principal
office of the Company is located at 700 Route 46 East, Fairfield, New Jersey
07007-2700 and its telephone number is (201) 882-1010.
4
<PAGE> 9
THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering to exchange (the "Exchange
Offer") up to $200,000,000 aggregate principal
amount of 9 3/4% Series B Senior Subordinated Notes
due 2007 (the "Exchange Notes") for up to
$200,000,000 aggregate principal amount of its
outstanding 9 3/4% Series A Senior Subordinated
Notes due 2007 issued and sold in reliance upon an
exemption from registration under the Securities
Act (the "Original Notes"). The terms of the
Exchange Notes will be substantially identical in
all respects (including principal amount, interest
rate, maturity and ranking) to the terms of the
Original Notes for which they may be exchanged
pursuant to the Exchange Offer, except that (i) the
Exchange Notes will be freely transferable by
holders thereof except as provided herein (see "The
Exchange Offer -- Terms of the Exchange" and
"-- Terms and Conditions of the Letter of
Transmittal") and (ii) the Exchange Notes will be
issued without any covenant regarding registration
under the Securities Act.
Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Original Notes may be
offered for resale, resold and otherwise
transferred by holders thereof (other than any
holder which is (i) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities
Act, (ii) a broker-dealer who acquired Original
Notes directly from the Company or (iii)
broker-dealers who acquired Original Notes as a
result of market making or other trading
activities) without compliance with the
registration and prospectus delivery provisions of
the Securities Act provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged
in, and do not intend to engage in, and have no
arrangement or understanding with any person to
participate in, a distribution of such Exchange
Notes.
Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Original
Notes being tendered for exchange.
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1997 unless
extended (the "Expiration Date").
Exchange Date.............. The first date of acceptance for exchange for the
Original Notes will be the first business day
following the Expiration Date.
Conditions to the Exchange
Offer.................... The obligation of the Company to consummate the
Exchange Offer is subject to certain conditions.
See "The Exchange Offer -- Conditions to the
Exchange Offer." The Company reserves the right to
terminate or amend the Exchange Offer at any time
prior to the Expiration Date upon the occurrence of
any such condition.
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to the
Expiration Date. Any Original Notes not accepted
for any reason will be returned without expense to
the tendering holders thereof as promptly as
practicable after the expiration or termination of
the Exchange Offer.
Procedures for Tendering
Original Notes........... See "The Exchange Offer -- How to Tender."
5
<PAGE> 10
Federal Income Tax
Consequences............. The exchange of Original Notes for Exchange Notes
by holders will not be a taxable exchange for
federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest
income as a result of such exchange.
Effect on Holders of
Original Notes............. As a result of the making of this Exchange Offer,
and upon acceptance for exchange of all validly
tendered Original Notes pursuant to the terms of
this Exchange Offer, the Company will have
fulfilled a covenant contained in the terms of the
Original Notes and the Registration Rights
Agreement (the "Registration Rights Agreement")
dated as of March 26, 1997 between the Company and
BT Securities Corporation, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Montgomery Securities
and Smith Barney Inc., as initial purchasers (the
"Initial Purchasers"), and, accordingly, the
holders of the Original Notes will have no further
registration or other rights under the Registration
Rights Agreement, except under certain limited
circumstances. See "Original Notes Registration
Rights." Holders of the Original Notes who do not
tender their Original Notes in the Exchange Offer
will continue to hold such Original Notes and will
be entitled to all the rights and limitations
applicable thereto under the Indenture dated as of
March 26, 1997, between the Company and First Bank
National Association, as Trustee (the "Trustee"),
relating to the Original Notes and the Exchange
Notes (the "Indenture"). All untendered, and
tendered but unaccepted, Original Notes will
continue to be subject to the restrictions on
transfer provided for in the Original Notes and the
Indenture. To the extent that Original Notes are
tendered and accepted in the Exchange Offer, the
trading market, if any, for the Original Notes
could be adversely affected. See "Risk
Factors -- Consequences of Failure to Exchange."
TERMS OF THE NOTES
The Exchange Offer applies to $200,000,000 aggregate principal amount of
the Original Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Original Notes for which they may be exchanged except that
the Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof. The Exchange Notes will
evidence the same debt as the Original Notes and will be entitled to the
benefits of the Indenture. See "Description of Notes."
Notes Offered.............. $200,000,000 aggregate principal amount of 9 3/4%
Senior Subordinated Notes due 2007.
Issuer..................... Prime Hospitality Corp.
Maturity Date.............. April 1, 2007.
Interest Rate and
Payment Dates............ Interest on the Notes will accrue from the
respective dates of issuance and will be payable
semi-annually in arrears on April 1 and October 1
of each year, commencing on October 1, 1997, at the
rate of 9 3/4% per annum.
Ranking.................... The Notes are general unsecured obligations of the
Company, subordinated in right of payment to all
existing and future Senior Debt (as defined) of the
Company. The Notes rank pari passu with any present
and future senior subordinated indebtedness of the
Company and rank
6
<PAGE> 11
senior to all other subordinated indebtedness of
the Company. None of the Company's Subsidiaries (as
defined) is presently required to guarantee the
Notes, although under certain future circumstances,
the Company may be required to cause one or more
Restricted Subsidiaries (as defined) to guarantee
the Notes on a subordinated basis. As of March 31,
1997, the Company had approximately $155.0 million
of Senior Debt outstanding, and, in addition,
Subsidiaries of the Company had approximately $21.8
million of Indebtedness (as defined) outstanding.
See "Description of Notes -- Certain Covenants,"
"-- Subsidiary Guarantees" and "Description of
Certain Indebtedness."
Optional Redemption........ The Notes will be redeemable, in whole or in part,
at the option of the Company on or after April 1,
2002, at the redemption prices set forth herein,
plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption. In
addition, prior to April 1, 2000, the Company, at
its option, may redeem up to 35% of the aggregate
principal amount of the Notes originally issued
with the net cash proceeds of one or more Public
Equity Offerings (as defined) at a redemption price
equal to 109.75% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption;
provided that at least 65% of the aggregate
principal amount of Notes originally issued remains
outstanding immediately after any such redemption.
See "Description of Notes -- Optional Redemption."
Change of Control.......... Upon a Change of Control (as defined) each holder
of the Notes will have the right to require the
Company to purchase such holder's Notes at a price
equal to 101% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages,
if any, to the date of purchase. The Revolving
Credit Facility prohibits the purchase of Notes by
the Company in the event of a Change of Control,
unless and until such time as the Indebtedness
under the Revolving Credit Facility is repaid in
full. See "Description of Notes -- Repurchase at
the Option of Holders -- Change of Control."
Certain Covenants.......... The Indenture contains certain covenants that,
subject to certain exceptions, limit the ability of
the Company and its Subsidiaries to incur
Indebtedness and issue Disqualified Stock (as
defined) or, in the case of Subsidiaries, preferred
stock, and limit the ability of the Company and its
Restricted Subsidiaries to pay dividends or other
distributions, repurchase Equity Interests and
subordinated Indebtedness, or make certain other
restricted payments, consummate certain asset
sales, enter into certain transactions with
affiliates, incur indebtedness that is subordinate
in right of payment to any Senior Debt and senior
in right of payment to the Notes, make investments,
merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets
of the Company. See "Description of
Notes -- Certain Covenants" and "-- Repurchase at
the Option of Holders -- Asset Sales."
For additional information regarding the Notes, see "Description of Notes."
7
<PAGE> 12
ORIGINAL NOTES REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, the Company agreed (i) to
file a registration statement (the "Exchange Offer Registration Statement") on
or prior to 30 days after the Issuance Date of the Original Notes with respect
to the Exchange Offer, (ii) to use its best efforts to cause such Registration
Statement to be declared effective under the Securities Act within 135 days
after the Issuance Date and (iii) upon the Exchange Offer Registration Statement
being declared effective, to offer the Exchange Notes in exchange for surrender
of the Original Notes. In certain circumstances, the Company will be required to
provide a shelf registration statement (the "Shelf Registration Statement) to
cover resales of the Original Notes by the holders thereof. If the Company does
not comply with its obligation under the Registration Rights Agreement, it will
be required to pay Liquidated Damages to holders of the Original Notes under
certain circumstances. See "Original Notes Registration Rights."
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange pursuant to the
Exchange Offer. The net proceeds from the sale of the Original Notes were
approximately $193.5 million after deducting the Initial Purchasers' discount
and estimated expenses related to the Initial Offering. The net proceeds from
the Initial Offering are being used as part of the financing of the Company's
AmeriSuites expansion and were used to repay certain indebtedness. The Company
plans to have 69 AmeriSuites open by the end of 1997 and 100 AmeriSuites open by
the end of 1998. See "Use of Proceeds."
RISK FACTORS
See "Risk Factors" for a description of certain factors that should be
considered by participants in the Exchange Offer.
8
<PAGE> 13
SUMMARY RECENT CONSOLIDATED FINANCIAL AND OTHER DATA
The table below presents summary recent consolidated financial and other
data derived from the Company's historical consolidated financial statements as
of and for the years ended December 31, 1994, 1995 and 1996. 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>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE,
RATIO AND HOTEL DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA(1):
Total revenues........................................... $134,303 $205,628 $268,868
Costs and expenses:
Direct hotel operating expenses....................... 66,620 116,565 145,419
Occupancy and other operating......................... 9,799 11,763 16,833
General and administrative............................ 15,089 15,515 17,813
Depreciation and amortization......................... 9,427 15,974 25,884
Other expense......................................... -- 2,200 --
-------- -------- --------
Total costs and expenses......................... 100,935 162,017 205,949
-------- -------- --------
Operating income......................................... 33,368 43,611 62,919
Interest expense......................................... (13,993) (21,603) (20,312)
Net income:
Income from recurring operations...................... 12,805 17,442 28,330
Other income -- non-recurring(2)...................... 5,453 23 2,584
-------- -------- --------
Income before extraordinary items..................... 18,258 17,465 30,914
Extraordinary items(3)................................ 172 104 202
-------- -------- --------
Net income............................................... $ 18,430 $ 17,569 $ 31,116
======== ======== ========
Fully diluted earnings per common share(4):
Income from recurring operations...................... $ 0.40 $ 0.54 $ 0.74
Other income -- non-recurring......................... 0.17 -- 0.06
-------- -------- --------
Income before extraordinary items..................... 0.57 0.54 0.80
Extraordinary items................................... 0.01 -- --
-------- -------- --------
Fully diluted earnings per common share.................. $ 0.58 $ 0.54 $ 0.80
======== ======== ========
OTHER DATA:
EBITDA(5)................................................ $ 42,795 $ 59,585 $ 88,803
Net cash provided by operating activities................ 28,334 38,628 65,936
Net cash used in investing activities.................... (33,910) (88,704) (240,957)
Net cash provided by (used in) financing activities...... (23,469) 87,085 141,485
Ratio of EBITDA to interest expense(5)(6)................ 3.06x 2.76x 4.37x
Ratio of earnings to fixed charges(7).................... 2.78x 2.02x 2.44x
HOTEL DATA(8):
All-suites:
Number of locations................................... 12 19 35
Number of rooms....................................... 1,494 2,319 4,348
REVPAR(9)............................................. $ 39.50 $ 43.98 $ 47.28
Full-service(8):
Number of locations................................... 30 31 31
Number of rooms....................................... 6,002 6,151 6,151
REVPAR(9)............................................. $ 51.27 $ 53.21 $ 60.77
</TABLE>
9
<PAGE> 14
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Limited-service:
Number of locations................................... 38 38 38
Number of rooms....................................... 3,943 3,943 3,943
REVPAR(9)............................................. $ 34.67 $ 37.54 $ 38.87
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------
ACTUAL AS ADJUSTED(10)
-------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and marketable securities.............. $ 16,235 $ 107,369
Property, equipment and leasehold improvements, net.............. 695,253 758,353
Mortgages and notes receivable, net of current portion........... 24,195 24,195
Total assets..................................................... 786,098 946,832
Current portion of debt.......................................... 3,419 3,023
Long-term debt, net of current portion........................... 298,875 460,005
Total stockholders' equity....................................... 419,895 419,895
</TABLE>
- ---------------
(1) In December 1994, the Company acquired ownership of the Marriott's
Frenchman's Reef Beach Resort (the "Frenchman's Reef") as a result of the
restructuring of a mortgage note receivable, which was secured by the
hotel. This transaction has not had a material impact on operating income
but has affected revenue and operating margins significantly. For the year
ended December 31, 1994, the Company recorded revenues related to the
Frenchman's Reef in the form of interest income and management fees with no
corresponding operating expenses. For the years ended December 31, 1995 and
1996, the Company recorded the operating revenues and operating expenses
related to this hotel.
(2) Other income -- non-recurring consists primarily of income and expenses
related to asset sales and other property transactions and is not
considered part of the Company's recurring operations.
(3) Extraordinary items consist of gains on discharges of indebtedness, net of
income taxes of $120,000 in 1994, $70,000 in 1995 and $135,000 in 1996.
(4) Fully diluted earnings per common share, in addition to the adjustments for
primary earnings per common share, reflects the elimination of interest
expense and the issuance of additional common shares from the assumed
conversion of the 7% Convertible Subordinated Notes due 2002 from their
issuance in April 1995.
(5) EBITDA represents earnings before extraordinary items, interest expense,
provision for income taxes and depreciation and amortization and excludes
interest income on cash investments and other income. EBITDA is used by the
Company for the purpose of analyzing its operating performance, leverage
and liquidity. Such data are not a measure of financial performance under
generally accepted accounting principles and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flows as a measure of liquidity.
(6) The interest expense for the Company, as adjusted to give effect to the
Initial Offering and the use of certain proceeds thereof to repay debt, for
1996 was $36.4 million, based on the interest rate on the Notes of 9 3/4%
per annum. See "Use of Proceeds." The ratio of EBITDA to interest expense
for 1996 as so adjusted was 2.44x.
(7) Earnings used in computing the ratio of earnings to fixed charges consist
of income before income taxes, fixed charges and extraordinary items. Fixed
charges consist of interest expense, including amounts capitalized and the
amortization of deferred financing fees, and that portion of rental expense
representative of interest (deemed to be one third of rental expense).
(8) Hotel data represents operating data for the hotels in the Portfolio at
December 31, 1996. For purposes of showing operating trends, the results of
the Frenchman's Reef have been excluded from Hotel data due to the effect
of hurricane damage on the hotel's operations. For a discussion of the
Frenchman's Reef, see "Business -- Prime's Lodging Operations."
(9) "REVPAR" means revenue per available room, which is equal to total room
revenue divided by the number of rooms available for sale.
(10) As adjusted to reflect additional borrowings of $63.1 million under the
Revolving Credit Facility through March 31, 1997 (which were utilized for
AmeriSuites development), the Initial Offering and the application of the
net proceeds therefrom. See "Use of Proceeds" and "Capitalization."
10
<PAGE> 15
The following table sets forth for the five years ended December 31, 1996,
operating data for the Owned Hotels (hotels owned or leased by Prime) in the
Portfolio at December 31, 1996. Operating data for the Owned Hotels built or
acquired during the period are presented from the dates such hotels commenced
operations or became Owned Hotels. For purposes of showing operating trends, the
results of the Frenchman's Reef have been excluded from the table due to the
effect of hurricane damage on the hotel's operations. For purposes of showing
operating trends, the results of 25 Owned Hotels that were managed by the
Company prior to their acquisition by the Company during the period are
presented as if they had been Owned Hotels from the dates the Company began
managing the hotels.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1992 1993 1994 1995 1996
------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT ADR AND REVPAR)
<S> <C> <C> <C> <C> <C>
Number of locations.................. 55 59 66 74 90
Number of rooms...................... 7,087 7,576 8,642 9,616 11,645
Occupancy............................ 69.2% 71.4% 69.9% 69.6% 69.6%
ADR(1)............................... $ 56.04 $ 57.11 $ 60.59 $ 64.26 $ 70.39
REVPAR............................... $ 38.75 $ 40.77 $ 42.35 $ 44.70 $ 48.97
Room revenues........................ $98,485 $108,810 $121,691 $146,539 $184,606
Gross operating profit(2)............ $47,212 $ 52,629 $ 61,520 $ 74,424 $ 97,152
Gross operating profit
percentage(2)...................... 34.42% 35.34% 37.46% 39.02% 41.91%
</TABLE>
- ---------------
(1) "ADR" means average daily rate, which is equal to total room revenue divided
by number of occupied rooms.
(2) Gross operating profit is defined as total hotel revenues less direct hotel
operating expenses, including room, food and beverage and selling and
general expenses.
For operating data with respect to the Managed Hotels (hotels managed for
third parties) in the Portfolio at December 31, 1996, see "Business -- Prime's
Lodging Operations."
11
<PAGE> 16
RISK FACTORS
In addition to the other information contained in this Prospectus, before
tendering their Original Notes for the Exchange Notes offered hereby, holders of
Original Notes should consider carefully the following factors, which may be
generally applicable to the Original Notes as well as the Exchange Notes. This
Offering Memorandum contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such original Notes as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act and applicable state securities laws, or pursuant to an
exemption therefrom. Except under certain limited circumstances, the Company
does not intend to register the Original Notes under the Securities Act. In
addition, any holder of Original Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes may be deemed
to have received restricted securities and, if so, will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. To the extent Original Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for the
original Notes not tendered could be adversely affected. See "The Exchange
Offer" and "Original Notes Registration Rights."
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
As of March 31, 1997, as adjusted to reflect additional borrowings of $63.1
million under the Revolving Credit Facility since December 31, 1996, the Initial
Offering and the application of a portion of the net proceeds therefrom to repay
Indebtedness, the Company's total consolidated Indebtedness (including current
portion) would have been $463.0 million. The Company expects it will incur
additional Indebtedness, which may include secured Indebtedness, in connection
with the implementation of its growth strategy. See "Description of
Notes -- Certain Covenants -- Incurrence of Indebtedness and Issuance of Certain
Capital Stock."
The degree to which the Company is leveraged, as well as its rent expense,
could have important consequences, including: (i) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired; (ii) a
substantial portion of the Company's cash flow from operations may be dedicated
to the payment of principal and interest on its Indebtedness and rent expense,
thereby reducing the funds available to the Company for its operation; (iii) in
addition to the Notes, certain other agreements governing the Company's
Indebtedness, including the Revolving Credit Facility and the 9 1/4% First
Mortgage Notes due 2006 (the "First Mortgage Notes"), contain financial and
other restrictive covenants, including those restricting the incurrence of
additional Indebtedness, the creation of liens, the payment of dividends and
sales of assets; (iv) the Company may be hindered in its ability to adjust
rapidly to changing market conditions; and (v) the Company's substantial degree
of leverage could make it more vulnerable in the event of a downturn in general
economic conditions or in its business. The Company's ability to satisfy its
obligations, including the Notes, 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
12
<PAGE> 17
SUBORDINATION OF NOTES; ASSET ENCUMBRANCE
At March 31, 1997, after giving effect to the Initial Offering and the
application of the net proceeds therefrom, the Company had approximately $155.0
million of Senior Debt outstanding, and, in addition, Subsidiaries of the
Company had approximately $21.8 million of Indebtedness outstanding. The
Indenture permits the Company to incur additional Senior Debt, subject to
certain conditions. The Notes are subordinated in right of payment to all
existing and future Senior Debt, including the principal, premium (if any) and
interest with respect to the Senior Debt under the Revolving Credit Facility and
the First Mortgage Notes.
The Company may not pay principal of, premium (if any) on, or interest on,
the Notes, or repurchase or redeem or otherwise retire any Notes, if any default
occurs and is continuing in the payment when due of any Senior Debt (except that
Holders of Notes may receive Permitted Junior Securities (as defined in the
Indenture) and payments made from the trust described under "Description of
Notes -- Legal Defeasance and Covenant Defeasance" and " -- Satisfaction and
Discharge"). In addition, if any other event of default exists with respect to
Designated Senior Debt (as defined in the Indenture) and certain other
conditions are satisfied, the Company may not make any payments on the Notes for
up to 179 days (except that Holders of Notes may receive Permitted Junior
Securities and payments made from the trust described under "Description of
Notes -- Legal Defeasance and Covenant Defeasance" and " -- Satisfaction and
Discharge"). Upon any payment or distribution of the assets of the Company in
connection with a total or partial liquidation or dissolution or reorganization
of or similar proceeding relating to the Company, the holders of Senior Debt
will be entitled to receive payment in full before the holders of the Notes are
entitled to receive any payment. See "Description of Notes -- Subordination."
The Notes are also unsecured and thus, in effect, rank junior to any
secured Indebtedness of the Company. The Indebtedness outstanding under the
Revolving Credit Facility and the First Mortgage Notes is secured by certain of
the Company's hotels, with recourse to the Company. The Revolving Credit
Facility and the First Mortgage Notes include certain covenants that, among
other things, restrict: (i) the making of investments, loans and advances and
the paying of dividends, payments of certain indebtedness and other restricted
payments; (ii) the incurrence of additional indebtedness; (iii) the granting of
liens, other that liens created pursuant to the Revolving Credit Facility and
the First Mortgage Notes and certain permitted liens; (iv) mergers,
consolidations and sales of all or a substantial part of the Company's business
or property; and (v) the sale of assets. The Revolving Credit Facility also
requires the Company to maintain certain financial ratios, including interest
coverage and leverage ratios, and to maintain a minimum level of stockholders'
equity and market capitalization. The ability of the Company to comply with
these and other provisions may be affected by events beyond the Company's
control. The breach of any of these covenants could result in a default under
the Revolving Credit Facility and the First Mortgage Notes, in which case the
lenders and the trustee, respectively, or their successors or assignees, could
elect to declare the entire principal amount under the Revolving Credit Facility
and the First Mortgage Notes, together with accrued interest, to be due and
payable, and the Company could be prohibited from making payments of interest
and principal on the Notes until the default is cured or all Senior Debt is paid
or satisfied in full. If the Company were unable to repay such amounts, such
lenders and the trustee, respectively, could proceed against their collateral.
If the Indebtedness under the Revolving Credit Facility or the First Mortgage
Notes were to be accelerated, there can be no assurance that the assets of the
Company would be sufficient to repay in full such Indebtedness and the other
Indebtedness of the Company, including the Notes. See "Description of
Notes -- Subordination."
For purposes of the Indenture, the Company's Subsidiaries (as defined) are
divided into two categories -- Restricted Subsidiaries, which generally are
subject to the restrictive covenants set forth in the Indenture, and
Unrestricted Subsidiaries, which generally are not. As of March 31, 1997, after
giving effect to the Initial Offering and the application of net proceeds
therefrom, Subsidiaries of the Company had approximately $21.8 million of
Indebtedness outstanding, to which the Notes are effectively subordinated. Under
certain future circumstances, the Company may be required to cause one or more
Restricted Subsidiaries to guarantee the Notes, although none of the Company's
Restricted Subsidiaries is presently required to guarantee the Notes. Any such
guarantee will be subordinated on the same basis to Senior Debt of the
Restricted Subsidiary providing such guarantee as the Notes are subordinated to
Senior Debt of the
13
<PAGE> 18
Company. Any such guarantee may also be subject to challenge under applicable
fraudulent conveyance or other bankruptcy laws. See "Description of
Notes -- Subsidiary Guarantees."
AMERISUITES EXPANSION RISKS
The Company is committed to expanding its AmeriSuites hotel brand to meet
growing demand in the all-suite hotel segment. The Company will be required to
expend significant management and financial resources to expand the AmeriSuites
hotel brand and develop brand name identification. The Company competes with
other companies in the all-suites segment, some of which have greater brand
recognition and financial resources than the Company. As a result, there is no
assurance that the Company can successfully expand the AmeriSuites hotel brand
or compete effectively with these other franchises. The Company will be
expanding into hotel markets where it does not currently operate. There can be
no assurance that the Company will anticipate all of the changing demands that
expanding operations will impose on its management and management information
system or its reservation service. The failure to adapt its systems and
procedures could have a material adverse effect on the Company's business.
The expansion of the AmeriSuites brand will require significant capital.
The Company believes that the proceeds of the Initial Offering, the availability
under the Revolving Credit Facility and cash flow from operations will be
sufficient to fund the near term growth of AmeriSuites. However, there can be no
assurance that the Company will be able to obtain financing to fund the growth
of AmeriSuites beyond the near term. If the Company is unable to obtain
additional financing, the growth prospects for AmeriSuites and the financial
results of the Company would be adversely affected.
The Company's growth strategy of developing new AmeriSuites hotels will
subject the Company to pre-opening and pre-stabilization costs. As the Company
opens additional AmeriSuites hotels, such 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. While the Company has in
the past successfully opened new AmeriSuites hotels, there can be no assurance
that the Company will be able to continue to do so successfully. Construction of
hotels involves certain risks, including the possibility of construction cost
overruns and delays, site acquisition cost and availability, uncertainties as to
market potential, market deterioration after commencement of the development and
possible unavailability of financing on favorable terms. Although the Company
seeks to manage its construction activities so as to minimize such risks, there
can be no assurance that the AmeriSuites expansion will perform in accordance
with the Company's expectations.
The opening of the new AmeriSuites hotels will be contingent upon, among
other things, receipt of all required licenses, permits and authorizations. The
scope of the approvals required for a new hotel is extensive, including, without
limitation, state and local land-use permits, building and zoning permits and
health and safety permits. In addition, unexpected changes or concessions
required by local, regulatory and state authorities could involve significant
additional costs and could delay or prevent the completion of construction or
the opening of a new AmeriSuites hotel. There can be no assurance that the
necessary permits, licenses and approvals for the construction and operation of
the new AmeriSuites hotels will be obtained, or that such permits, licenses and
approvals will be obtained within the anticipated time frame.
Of the Company's 41 AmeriSuites, 19, or 46.3%, have been open less than one
year and 28, or 68.3%, have been open less than two years. Consequently, the
results achieved by these hotels to date may not be indicative of future results
for these hotels or for other new hotels. Although the revenue and profitability
of the AmeriSuites have improved as the hotels have matured, there can be no
assurance that future hotels will experience similar results.
RISKS OF THE LODGING INDUSTRY; COMPETITION
The Company's business is subject to all of the risks inherent in the
lodging industry. These risks include, among other things, adverse effects of
general and local economic conditions, changes in local market conditions,
oversupply of hotel space, a reduction in local demand for hotel rooms, changes
in travel patterns, changes in governmental regulations that influence or
determine wages, prices or construction costs, changes
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in interest rates, the availability of credit and changes in real estate taxes
and other operating expenses. 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. Due in part to the strong correlation between the lodging industry's
performance and economic conditions, the lodging industry is subject to cyclical
changes in revenues and profits.
The lodging industry is highly competitive. During the 1980s, construction
of lodging facilities in the United States resulted in an excess supply of
available rooms. This oversupply had an adverse effect on occupancy levels and
room rates in the industry, although the oversupply has since largely been
absorbed. Competitive factors in the industry include reasonableness of room
rates, quality of accommodations, brand recognition, service levels and
convenience of locations. The Company's hotels generally operate in areas that
contain numerous other competitors. There can be no assurance that demographic,
economic or other changes in markets will not adversely affect the convenience
or desirability of the sites in which the Company's hotels are located.
Furthermore, there can be no assurance that, in the markets in which the
Company's hotels operate, competing hotels will not pose greater competition for
guests than presently exists, or that new hotels will not enter such locales.
See "Business -- Industry Overview."
HOTEL ACQUISITION RISKS
The Company from time to time makes selective acquisitions of hotels with
repositioning potential, notably in the full-service segment and in locations
where the Company presently operates. There can be no assurance that hotel
acquisitions can be consummated successfully or that acquired hotels can be
operated profitably or integrated successfully into the Company's operations.
Hotel acquisition entails certain risks that the acquired hotels could be
subject to unanticipated business uncertainties or legal liabilities.
GEOGRAPHIC CONCENTRATION OF HOTELS
Many of the Company's hotels open or under development are located in
Florida, New Jersey, New York, Georgia, Texas and Illinois, and such geographic
concentration exposes the Company's operating results to events or conditions
which specifically affect those areas, such as local and regional economic,
weather and other conditions. Adverse developments which specifically affect
those areas may have a material adverse effect on the results of operations of
the Company. While the Company's AmeriSuites expansion is expected to reduce
these risks, the Company will remain subject to certain risks associated with
geographic concentration.
In addition, the Company owns the Marriott's Frenchman's Reef Beach Resort
(the "Frenchman's Reef") in St. Thomas, U.S. Virgin Islands. The Company
obtained ownership and control of this hotel in December 1994 pursuant to the
restructuring of a note receivable. The Frenchman's Reef accounted for
approximately 12.9% of the Company's EBITDA for the year ended December 31,
1996. The Frenchman's Reef's operating results have been adversely affected in
recent years by hurricanes and a disruption in airline service. As a resort
hotel primarily operated for leisure travelers, operating results at the
Frenchman's Reef also are subject to adverse developments in general economic
conditions and changes in travel patterns. Adverse developments with respect to
the Frenchman's Reef may have a material adverse effect on the results of
operations of the Company.
In September 1995, the Frenchman's Reef suffered hurricane damage when
Hurricane Marilyn struck the U.S. Virgin Islands. The Company and its insurance
carrier settled the Company's property and business interruption insurance claim
for $25.0 million. Due to this insurance coverage, the Company's liquidity was
affected only to the extent of its insurance deductibles, for which the Company
provided a reserve of $2.2 million in 1995. In July 1996, Hurricane Bertha
struck the island and caused further damage to the hotel. The Company is
currently reviewing its claim for property damage with its insurance carrier and
is in the process of preparing a claim under its business interruption insurance
with respect to the damage caused by Hurricane Bertha. Although the Company has
continued to operate the hotel, the impact of the hurricanes has caused
operating profits to decline. The Company is currently underway with plans to
refurbish and upgrade the Frenchman's Reef. The Company estimates that the cost
of refurbishment will be approximately $30.0 million. Due to the extent of the
renovations and the additional damage caused by Hurricane Bertha, the
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<PAGE> 20
Company closed the hotel in April 1997 and plans to reopen the hotel in December
1997, although there can be no assurance that the Frenchman's Reef will reopen
at such time or that the cost of refurbishment will not exceed the Company's
estimate. The Company does not believe the closing of the Frenchman's Reef will
have a material impact on its cash flow due to the seasonality of the hotel's
operations and its business interruption insurance coverage.
EMPLOYMENT AND OTHER GOVERNMENT REGULATION
The lodging industry is subject to numerous federal, state and local
government regulations, including those relating to the preparation and sale of
food and beverage (such as health and liquor license laws) and building and
zoning requirements. Also, the Company is subject to laws governing its
relationship with employees, including minimum wage requirements, overtime,
working conditions and work permits requirements. The failure to obtain or
retain liquor licenses or an increase in the minimum wage rate, employee benefit
costs or other costs associated with employees, could adversely affect the
Company. Both at the federal and state level, there are proposals under
consideration to increase the minimum wage and introduce a system of mandated
health insurance. Under the Americans with Disabilities Act of 1990 (the "ADA"),
all public accommodations are required to meet certain federal requirements
related to access and use by disabled persons. While the Company believes its
hotels are substantially in compliance with these requirements, a determination
that the Company is not in compliance with the ADA could result in the
imposition of fines or an award of damages to private litigants. These and other
initiatives could adversely affect the Company as well as the lodging industry
in general.
ENVIRONMENTAL REGULATION
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws often impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. Certain environmental laws and common law
principles could be used to impose liability for release of asbestos-containing
materials ("ACMs") into the air, and third parties may seek recovery from owners
or operators of real properties for personal injury associated with exposure to
released ACMs. Environmental laws also may impose restrictions on the manner in
which property may be used or businesses may be operated, and these restrictions
may require expenditures. In connection with the ownership or operation of
hotels, the Company may be potentially liable for any such costs. Although the
Company is currently not aware of any material environmental claims pending or
threatened against it, no assurance can be given that a material environmental
claim will not be asserted against the Company or against the Company and its
Managed Hotels. The cost of defending against claims of liability or of
remediating a contaminated property could have a material adverse effect on the
results of operations of the Company.
IMPORTANCE OF FRANCHISOR RELATIONSHIPS
The Company currently enjoys good relationships with its major franchisors,
Marriott, Radisson, Sheraton, Crowne Plaza, Holiday Inn, Ramada and Howard
Johnson, and the Company has no reason to believe that such relationships will
not continue. However, under the applicable franchise agreements, the franchisor
can terminate the agreement if, among other things, its quality standards are
not maintained or if payments due are not made in a timely fashion. If any of
the franchise agreements were terminated by the franchisor, the Company could
explore entering into a franchise agreement with another franchisor. There can
be no assurance, however, that a desirable replacement relationship would be
available.
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."
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CHANGE OF CONTROL
A Change of Control (as defined) could require the Company to refinance
substantial amounts of indebtedness. Upon the occurrence of a Change of Control,
the holders of the Notes would be entitled to require the Company to purchase
the Notes at a purchase price equal to 101% of the principal amount of such
Notes, plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase. The Change of Control may also constitute a change of control
or event of default under other Indebtedness of the Company, including the
Revolving Credit Facility and the indenture with respect to the First Mortgage
Notes. The Revolving Credit Facility prohibits the purchase of the Notes by the
Company in the event of a Change of Control, unless and until such time as the
Indebtedness under the Revolving Credit Facility is repaid in full, and the
First Mortgage Notes indenture requires that the Company offer to purchase the
First Mortgage Notes in the event of a change of control (as defined therein).
The Company's failure to purchase the Notes would result in a default under the
Indenture, the Revolving Credit Facility and the First Mortgage Notes indenture.
The inability to repay the Indebtedness under the Revolving Credit Facility and
the First Mortgage Notes indenture, if accelerated, would also constitute an
event of default under the Indenture, which could have adverse consequences to
the Company and the holders of the Notes. In the event of a Change of Control,
there can be no assurance that the Company would have sufficient assets to
satisfy all of its obligations under the Revolving Credit Facility, the Notes
and the First Mortgage Notes. See "Description of Notes -- Repurchase at the
Option of Holders -- Change of Control."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to (i) the
liquidity of any such market that may develop, (ii) the ability of holders of
Exchange Notes to sell their Exchange Notes or (iii) the price at which the
holders of Exchange Notes would be able to sell their Exchange Notes. If such a
market were to exist, the Exchange Notes could trade at prices that may be
higher or lower than their principal amount or purchase price, depending on many
factors, including prevailing interest rates, the market for similar notes and
the financial performance of the Company and its subsidiaries. The Company has
been advised by the Initial Purchasers that they presently intend to make a
market in the Exchange Notes. However, they are not obligated to do so, and any
market-making activity with respect to the Exchange Notes may be discontinued at
any time without notice. In addition, such market-making activity will be
subject to the limits imposed by the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
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USE OF PROCEEDS
There will be no proceeds to the Company from the exchange pursuant to the
Exchange Offer. The net proceeds from the sale of the Original Notes were
approximately $193.5 million after deducting the Initial Purchasers' discount
and estimated expenses related to the Initial Offering. The net proceeds from
the Initial Offering are being used as part of the financing of the Company's
AmeriSuites expansion and were used to repay amounts outstanding under the
Revolving Credit Facility and certain other secured indebtedness. The Company
plans to have 69 AmeriSuites open by the end of 1997 and 100 AmeriSuites open by
the end of 1998.
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<PAGE> 23
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Original Notes were originally issued and sold on March 26, 1997. Such
sales were not registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act and Rule 144A of the
Securities Act. Pursuant to the Registration Rights Agreement, the Company
agreed (i) to file a registration statement (the "Exchange Offer Registration
Statement") on or prior to 30 days after the Issuance Date of the Original Notes
with respect to the Exchange Offer, (ii) to use its best efforts to cause such
Registration Statement to be declared effective under the Securities Act within
135 days after the Issuance Date and (iii) upon the Exchange Offer Registration
Statement being declared effective, to offer the Exchange Notes in exchange for
surrender of the Original Notes. In certain circumstances, the Company will be
required to provide a shelf registration statement (the "Shelf Registration
Statement) to cover resales of the Original Notes by the holders thereof. If the
Company does not comply with its obligation under the Registration Rights
Agreement, it will be required to pay Liquidated Damages to holders of the
Original Notes under certain circumstances. See "Original Notes Registration
Rights."
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company with respect to the Registration Rights Agreement.
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Prospectus (the "Letter of Transmittal"), $1,000 in principal amount of Exchange
Notes for each $1,000 in principal amount of the Original Notes. The terms of
the Exchange Notes are identical in all respects to the terms of the Original
Notes for which they may be exchanged pursuant to this Exchange Offer, except
that the Exchange Notes will generally be freely transferable by holders
thereof, and the holders of the Exchange Notes (as well as remaining holders of
any Original Notes) will not be entitled to registration rights under the
Registration Rights Agreement. See "Original Notes Registration Rights." The
Exchange Notes will evidence the same debt as the Original Notes and will be
entitled to the benefits of the Indenture. See "Description of Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Original Notes being tendered for exchange.
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Original Notes directly from
the Company or (iii) broker-dealers who acquired Original Notes as a result of
market making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes. Each broker-dealer that receives Exchange
Notes pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging, and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Broker-dealers who acquired Original Notes as a
result of market making or other trading activities may use this Prospectus, as
supplemented or amended, in connection with resales of the Exchange Notes. The
Company has agreed that, for a period not to exceed 180 days after the Exchange
Date, it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. Any holder that cannot rely upon such
interpretations must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction.
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Tendering holders of Original Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Original Notes
pursuant to the Exchange Offer.
The Exchange Notes will bear interest from and including their respective
dates of issuance. Holders whose Original Notes are accepted for exchange will
receive accrued interest thereon to, but not including, the date of issuance of
the Exchange Notes, such interest to be payable with the first interest payment
on the Exchange Notes, but will not receive any payment in respect of interest
on the Original Notes accrued after the issuance of the Exchange Notes.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer expires on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1997, unless
the Company in its sole discretion extends the period during which the Exchange
Offer is open, in which event the term "Expiration Date" means the latest time
and date on which the Exchange Offer, as so extended by the Company, expires.
The Company reserves the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to First Bank
National Association (the "Exchange Agent") and by timely public announcement
communicated, unless otherwise required by applicable law or regulation, by
making a release to the Dow Jones News Service. During any extension of the
Exchange Offer, all Original Notes previously tendered pursuant to the Exchange
Offer will remain subject to the Exchange Offer.
The initial Exchange Date will be the first business day following the
Expiration Date. The Issuers expressly reserves the right to (i) terminate the
Exchange Offer and not accept for exchange any Original Notes for any reason,
including if any of the events set forth below under "-- Conditions to the
Exchange Offer" shall have occurred and shall not have been waived by the
Company and (ii) amend the terms of the Exchange Offer in any manner, whether
before or after any tender of the Original Notes. If any such termination or
amendment occurs, the Company will notify the Exchange Agent in writing and will
either issue a press release or give written notice to the holders of the
Original Notes as promptly as practicable. Unless the Company terminates the
Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date,
the Company will exchange the Exchange Notes for the Original Notes on the
Exchange Date.
If the Company waives any material condition to the Exchange Offer, or
amends the Exchange Offer in any other material respect, and if at the time that
notice of such waiver or amendment is first published, sent or given to holders
of Original Notes in the manner specified above, the Exchange Offer is scheduled
to expire at any time earlier than the expiration of a period ending on the
fifth business day from, and including, the date that such notice is first so
published, sent or given, then the Exchange Offer will be extended until the
expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Original Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Original Notes.
HOW TO TENDER
The tender to the Company of Original Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
General Procedures. A holder of an Original Note may tender the same by
(i) properly completing and signing the Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall be
deemed to include a facsimile thereof) and delivering the same, together with
the certificate or certificates representing the Original Notes being tendered
and any required signature guarantees (or a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") pursuant to the procedure
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<PAGE> 25
described below), to the Exchange Agent at its address set forth on the back
cover of this Prospectus on or prior to the Expiration Date or (ii) complying
with the guaranteed delivery procedures described below.
If tendered Original Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Original Notes are to be reissued) in the
name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Original Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Company and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a firm (an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program (an "Eligible Program") within the meaning of Rule 17Ad-15 under the
Exchange Act. If the Exchange Notes and/or Original Notes not exchanged are to
be delivered to an address other than that of the registered holder appearing on
the note register for the Original Notes, the signature on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Original Notes should contact such holder promptly and instruct such
holder to tender Original Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Original Notes himself, such beneficial
owner must, prior to completing and executing the Letter of Transmittal and
delivering such Original Notes, either make appropriate arrangements to register
ownership of the Original Notes in such beneficial owner's name or follow the
procedures described in the immediately preceding paragraph. The transfer of
record ownership may take considerable time.
Book-Entry Transfer. The Exchange Agent will make a request to establish
an account with respect to the Original Notes at The Depository Trust Company
(the "Book-Entry Transfer Facility") for purposes of the Exchange Offer within
two business days after receipt of this Prospectus, and any financial
institution that is a participant in the Book-Entry Transfer Facility's systems
may make book-entry delivery of Original Notes by causing the Book-Entry
Transfer Facility to transfer such Original Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Original Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address specified on the back cover
page of this Prospectus on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND ALL OTHER DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE BE
OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE
TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE.
Unless an exemption applies under the applicable law and regulations
concerning "backup withholding" of federal income tax, the Exchange Agent will
be required to withhold, and will withhold, 31% of the gross proceeds otherwise
payable to a holder pursuant to the Exchange Offer if the holder does not
provide its taxpayer identification number (social security number or employer
identification number) and certify that such number is correct. Each tendering
holder should complete and sign the main signature form and the Substitute Form
W-9 included as part of the Letter of Transmittal, so as to provide the
information and certification necessary to avoid backup withholding, unless an
applicable exemption exists and is proved in a manner satisfactory to the
Company and the Exchange Agent.
Guaranteed Delivery Procedures. If a holder desires to accept the Exchange
Offer and time will not permit a Letter of Transmittal or Original Notes to
reach the Exchange Agent before the Expiration Date, a tender may be effected if
the Exchange Agent has received at its office listed on the back cover hereof on
or prior to the Expiration Date a letter, telegram or facsimile transmission
from an Eligible Institution setting forth the name and address of the tendering
holder, the names in which the Original Notes are registered and, if possible,
the certificate numbers of the Original Notes to be tendered, and stating that
the tender is being made thereby and guaranteeing that within five New York
Stock Exchange trading days after the date of
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execution of such letter, telegram or facsimile transmission by the Eligible
Institution, the Original Notes, in proper form for transfer, will be delivered
by such Eligible Institution together with a properly completed and duly
executed Letter of Transmittal (and any other required documents). Unless
Original Notes being tendered by the above-described method (or a timely
Book-Entry Confirmation) are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), the Company may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery which may
be used by Eligible Institutions for the purposes described in this paragraph
are being delivered with this Prospectus and the related Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Original Notes (or a timely Book-Entry Confirmation) is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Original Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Original Notes
(or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Original Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Company, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. None of the Company, the
Exchange Agent or any other person will be under any duty to give notification
of any defects or irregularities in tenders or shall incur any liability for
failure to give any such notification. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Original Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Original Notes to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Original Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Original
Notes and to acquire Exchange Notes issuable upon the exchange of such tendered
Original Notes, and that, when the same are accepted for exchange, the Company
will acquire good and unencumbered title to the tendered Original Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Company to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Original Notes. The Transferor further agrees that acceptance of any
tendered Original Notes by the Company and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Company of its
obligations under the Registration Rights Agreement and that the Company shall
have no further obligations or liabilities thereunder (except in certain limited
circumstances). All authority conferred by the Transferor will survive the death
or incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
By tendering Original Notes, the Transferor certifies (a) that it is not an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act, that it is not a broker-dealer that owns Original Notes acquired directly
from the Company or an affiliate of the Company, that it is acquiring the
Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes or (b) that it is an
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"affiliate" (as so defined) of the Company or of the initial purchasers in the
original offering of the Original Notes, and that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable to it.
WITHDRAWAL RIGHTS
Original Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the back cover of this Prospectus. Any such notice of
withdrawal must specify the person named in the Letter of Transmittal as having
tendered Original Notes to be withdrawn, the certificate numbers of Original
Notes to be withdrawn, the principal amount of Original Notes to be withdrawn
(which must be an authorized denomination), a statement that such holder is
withdrawing his election to have such Original Notes exchanged, and the name of
the registered holder of such Original Notes, and must be signed by the holder
in the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Company that the person withdrawing the tender has succeeded
to the beneficial ownership of the Original Notes being withdrawn. The Exchange
Agent will return the properly withdrawn Original Notes promptly following
receipt of notice of withdrawal. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by the Company, and
such determination will be final and binding on all parties.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Original Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Company shall be deemed to have accepted for
exchange validly tendered Original Notes when, as and if the Company has given
written notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Original
Notes for the purposes of receiving Exchange Notes from the Company and causing
the Original Notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the Exchange Offer, delivery of Exchange Notes to
be issued in exchange for accepted Original Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Original Notes. Original Notes
not accepted for exchange by the Company will be returned without expense to the
tendering holders (or in the case of Original Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the procedures described above, such non-exchanged Original Notes
will be credited to an account maintained with such Book-Entry Transfer
Facility) promptly following the Expiration Date or, if the Company terminates
the Exchange Offer prior to the Expiration Date, promptly after the Exchange
Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange Notes
in respect of any properly tendered Original Notes not previously accepted and
may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service) or, at its option, modify or otherwise amend the Exchange Offer, if (a)
there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any court
or governmental agency or other governmental regulatory or administrative agency
or commission, (i) seeking to restrain or prohibit the making or consummation of
the Exchange Offer or any other transaction contemplated by the Exchange Offer,
(ii) assessing or seeking any damages as a result thereof, or (iii) resulting in
a material delay in the ability of the Company to accept for exchange or
exchange some or all of the Original Notes pursuant to the Exchange
23
<PAGE> 28
Offer; (b) any statute, rule, regulation, order or injunction shall be sought,
proposed, introduced, enacted, promulgated or deemed applicable to the Exchange
Offer or any of the transactions contemplated by the Exchange Offer by any
government or governmental authority, domestic or foreign, or any action shall
have been taken, proposed or threatened, by any government, governmental
authority, agency or court, domestic or foreign, that in the sole judgment of
the Company might directly or indirectly result in any of the consequences
referred to in clauses (a)(i) or (ii) above or, in the sole judgment of the
Company, might result in the holders of Exchange Notes having obligations with
respect to resales and transfers of Exchange Notes which are greater than those
described in the interpretations of the Commission referred to on the cover page
of this Prospectus, or would otherwise make it inadvisable to proceed with the
Exchange Offer; or (c) a material adverse change shall have occurred in the
business, condition (financial or otherwise), operations, or prospects of the
Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by them with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in whole
or in part at any time or from time to time in their sole discretion. The
failure by the Company at any time to exercise any of the foregoing rights will
not be deemed a waiver of any such right, and each right will be deemed an
ongoing right which may be asserted at any time or from time to time. In
addition, the Company has reserved the right, notwithstanding the satisfaction
of each of the foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or
non-fulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Original Notes
tendered and no Exchange Notes will be issued in exchange for any such Original
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or qualification of the Indenture under the Trust Indenture Act of 1939
(the "Trust Indenture Act").
EXCHANGE AGENT
First Bank National Association has been appointed as the Exchange Agent
for the Exchange Offer. Letters of Transmittal must be addressed to the Exchange
Agent at its address set forth on the back cover page of this Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers. The expenses to be
incurred in connection with the Exchange Offer, including the fees and expenses
of the Exchange Agent and printing, accounting and legal fees, will be paid by
the Company and are estimated at approximately $250,000.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Original Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance
24
<PAGE> 29
thereof would not be in compliance with the laws of such jurisdiction. However,
the Company may, at its discretion, take such action as it may deem necessary to
make the Exchange Offer in any such jurisdiction and extend the Exchange Offer
to holders of Original Notes in such jurisdiction. In any jurisdiction the
securities laws or blue sky laws of which require the Exchange Offer to be made
by a licensed broker or dealer, the Exchange Offer is being made on behalf of
the Company by one or more registered brokers or dealers which are licensed
under the laws of such jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF ORIGINAL NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL
RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The exchange of Original Notes for Exchange Notes by holders will not be a
taxable exchange for federal income tax purposes, and holders should not
recognize any taxable gain or loss or any interest income as a result of such
exchange.
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Original Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Original Notes pursuant to the terms of this Exchange Offer,
the Company will have fulfilled a covenant contained in the terms of the
Original Notes and the Registration Rights Agreement. Holders of the Original
Notes who do not tender their certificates in the Exchange Offer will continue
to hold such certificates and will be entitled to all the rights, and
limitations applicable thereto, under the Indenture, except for any such rights
under the Registration Rights Agreement which by their terms terminate or cease
to have further effect as a result of the making of this Exchange Offer. See
"Description of Notes." All untendered Original Notes will continue to be
subject to the restriction on transfer set forth in the Indenture. To the extent
that Original Notes are tendered and accepted in the Exchange Offer, the trading
market, if any, for the Original Notes could be adversely affected. See "Risk
Factors -- Consequences of Failure to Exchange."
The Company may in the future seek to acquire untendered Original Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company has no present plan to acquire any Original
Notes which are not tendered in the Exchange Offer.
25
<PAGE> 30
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company as of December 31, 1996 and as adjusted to give effect to the
Initial Offering and the application of the net proceeds therefrom. 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>
DECEMBER 31, 1996
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
Current portion of debt(2)......................................... $ 3,419 $ 3,023
======== ========
Long-term debt:
Revolving Credit Facility(3)..................................... 12,500 --
9 1/4% First Mortgage Notes due 2006............................. 120,000 120,000
Secured Debt, less current portion(2)............................ 80,125 53,755
9 3/4% Senior Subordinated Notes due 2007........................ -- 200,000
7% Convertible Subordinated Notes due 2002....................... 86,250 86,250
-------- --------
Total long-term debt..................................... 298,875 460,005
Stockholders' equity:
Preferred stock, par value $.10 per share; 20,000,000 shares
authorized; none issued....................................... -- --
Common stock, par value $.01 per share; 75,000,000 shares
authorized; 39,822,144 shares issued and outstanding.......... 398 398
Capital in excess of par value................................... 338,825 338,825
Retained earnings................................................ 80,672 80,672
-------- --------
Total stockholders' equity............................... 419,895 419,895
-------- --------
Total capitalization..................................... $718,770 $879,900
======== ========
</TABLE>
- ---------------
(1) As adjusted to reflect additional borrowings of $63.1 million under the
Revolving Credit Facility through March 31, 1997, the Initial Offering and
the application of the net proceeds therefrom.
(2) See Note 8 of Notes to Consolidated Financial Statements as to interest
rates and maturities on long-term debt, including current portion.
(3) The Revolving Credit Facility provides for availability of funds up to the
lesser of $100.0 million and a borrowing base determined under the
agreement. As of March 31, 1997, the Company had no borrowings under the
Revolving Credit Facility and had borrowing availability of $100.0 million.
26
<PAGE> 31
RECENT SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The table below presents recent selected consolidated financial and other
data derived from the Company's historical consolidated financial statements as
of and for the years ended December 31, 1994, 1995 and 1996. 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>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues:
Lodging............................................. $ 88,753 $146,184 $198,947
Food and beverage................................... 18,090 37,955 41,437
Management and other fees........................... 10,021 8,115 6,729
Interest on mortgages and notes receivable.......... 15,867 11,895 6,090
Business interruption insurance..................... -- -- 13,562
Rental and other.................................... 1,572 1,479 2,103
-------- -------- --------
Total revenues................................. 134,303 205,628 268,868
-------- -------- --------
Costs and expenses:
Direct hotel operating expenses:
Lodging........................................... 25,490 38,383 51,577
Food and beverage................................. 13,886 28,429 32,053
Selling and general............................... 27,244 49,753 61,789
Occupancy and other operating....................... 9,799 11,763 16,833
General and administrative.......................... 15,089 15,515 17,813
Depreciation and amortization....................... 9,427 15,974 25,884
Other expense....................................... -- 2,200 --
-------- -------- --------
Total costs and expenses....................... 100,935 162,017 205,949
-------- -------- --------
Operating income....................................... 33,368 43,611 62,919
Investment income...................................... 1,966 4,861 4,610
Interest expense....................................... (13,993) (21,603) (20,312)
Other income........................................... 9,089 2,239 4,306
-------- -------- --------
Income before income taxes and extraordinary items..... 30,430 29,108 51,523
Provision for income taxes............................. 12,172 11,643 20,609
-------- -------- --------
Income before extraordinary items...................... 18,258 17,465 30,914
Extraordinary items(2)................................. 172 104 202
-------- -------- --------
Net income............................................. $ 18,430 $ 17,569 $ 31,116
======== ======== ========
Earnings per common share(3):
Primary:
Income before extraordinary items................. $ 0.57 $ 0.54 $ 0.85
Extraordinary items............................... 0.01 -- --
-------- -------- --------
Earnings per common share........................... $ 0.58 $ 0.54 0.85
======== ======== ========
Fully diluted:
Income before extraordinary items................. $ 0.57 $ 0.54 $ 0.80
Extraordinary items............................... 0.01 -- --
-------- -------- --------
Earnings per common share........................... $ 0.58 $ 0.54 $ 0.80
======== ======== ========
</TABLE>
27
<PAGE> 32
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1994 1995 1996
-------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT HOTEL
DATA)
<S> <C> <C> <C>
OTHER DATA:
EBITDA(4)............................................. $ 42,795 $ 59,585 $ 88,803
Net cash provided by operating activities............. 28,334 38,628 65,936
Net cash used in investing activities................. (33,910) (88,704) (240,957)
Net cash provided by (used in) financing activities... (23,469) 87,085 141,485
Ratio of EBITDA to interest expense (4)(5)............ 3.06x 2.76x 4.37x
Ratio of earnings to fixed charges(6)................. 2.78x 2.02x 2.44x
HOTEL DATA(7):
All-suites:
Number of locations................................. 12 19 35
Number of rooms..................................... 1,494 2,319 4,348
REVPAR.............................................. $ 39.50 $ 43.98 $ 47.28
Full-service(7):
Number of locations................................. 30 31 31
Number of rooms..................................... 6,002 6,151 6,151
REVPAR.............................................. $ 51.27 $ 53.21 $ 60.77
Limited-service:
Number of locations................................. 38 38 38
Number of rooms..................................... 3,943 3,943 3,943
REVPAR.............................................. $ 34.67 $ 37.54 $ 38.87
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1995 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and marketable $ 13,641 $ 61,462 $ 16,235
securities........................................
Property, equipment and leasehold improvements, 299,291 398,201 695,253
net...............................................
Mortgages and notes receivable, net of current 81,260 64,962 24,195
portion...........................................
Total assets......................................... 434,932 573,241 786,098
Current portion of debt.............................. 5,284 5,731 3,419
Long-term debt, net of current portion............... 178,545 276,920 298,875
Total stockholders' equity........................... 204,065 232,916 419,895
</TABLE>
- ---------------
(1) In December 1994, the Company acquired ownership of the Frenchman's Reef as
a result of the restructuring of a mortgage note receivable, which was
secured by the hotel. This transaction has not had a material impact on
operating income but has affected revenue and operating margins
significantly. For the year ended December 31, 1994, the Company recorded
revenues related to the Frenchman's Reef in the form of interest income and
management fees with no corresponding operating expenses. For the years
ended December 31, 1995 and 1996, the Company recorded the operating
revenues and operating expenses related to this hotel.
(2) Extraordinary items consist of gains on discharges of indebtedness, net of
income taxes of $120,000 in 1994, $70,000 in 1995 and $135,000 in 1996.
(3) Primary earnings per common share was computed based on the weighted average
number of common shares and common share equivalents (dilutive stock options
and warrants) outstanding during each period. The weighted average number of
common shares used in computing primary earnings per common share was
32,022,000, 32,461,000 and 36,501,000 for the years ended December 31, 1994,
1995 and 1996 respectively. Fully diluted earnings per common share, in
addition to the adjustments for primary earnings per common share, reflects
the elimination of interest expense and the issuance of additional common
shares from the assumed conversion of the 7% Convertible Subordinated Notes
due 2002 from their issuance in April 1995. The weighted average number of
common shares used in computing fully diluted earnings per common share was
37,423,000 and 43,794,000 for the years ended December 31, 1995 and 1996,
respectively.
(4) EBITDA represents earnings before extraordinary items, interest expense,
provision for income taxes and depreciation and amortization and excludes
interest income on cash investments and other income. EBITDA is used by the
Company for the purpose
28
<PAGE> 33
of analyzing its operating performance, leverage and liquidity. Such data
are not a measure of financial performance under generally accepted
accounting principles and should not be considered as an alternative to net
income as an indicator of the Company's operating performance or as an
alternative to cash flows as a measure of liquidity.
(5) The interest expense for the Company, as adjusted to give effect to the
Initial Offering and the use of certain proceeds thereof to repay debt, for
1996 was $36.4 million, based on the interest rate on the Notes of 9 3/4%
per annum. See "Use of Proceeds." The ratio of EBITDA to interest expense
for 1996 as so adjusted was 2.44x.
(6) Earnings used in computing the ratio of earnings to fixed charges consist of
income before income taxes, fixed charges and extraordinary items. Fixed
charges consist of interest expense, including amounts capitalized and the
amortization of deferred financing fees, and that portion of rental expense
representative of interest (deemed to be one third of rental expense).
(7) Hotel data represents operating data for the hotels in the Portfolio at
December 31, 1996. For purposes of showing operating trends, the results of
the Frenchman's Reef have been excluded from Hotel data due to the effect of
hurricane damage on the hotel's operations. For a discussion of the
Frenchman's Reef, see "Business -- Prime's Lodging Operations."
29
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a leading hotel owner/operator which, as of March 31, 1997,
owned or leased 94 hotels and managed 13 hotels for third parties. The Company
has a financial interest in the form of mortgages or profit participations
(primarily incentive management fees) in 8 of the Managed Hotels. The Company
consolidates the results of operations of its Owned Hotels and records
management fees (including incentive management fees) and interest income, where
applicable, on the Managed Hotels.
The Company's strategy is to capitalize on two lodging industry trends: (i)
favorable industry fundamentals, which are producing strong earnings growth due
to the operating leverage inherent in hotel ownership and (ii) growing consumer
preferences for newer all-suite accommodations with strong brand identities.
Through its focus on hotel equity ownership, the Company is benefiting from the
operating leverage inherent in the lodging industry. Through its development of
proprietary brands, the Company is positioning itself to generate additional
revenue not dependent on investment in real estate. The Company seeks to achieve
internal growth through the use of sophisticated operating, marketing and
financial systems at its hotels. The Company's external growth focuses on the
accelerated expansion of its proprietary AmeriSuites brand through new
construction. Although future results of operations may be adversely affected in
the short term by the costs associated with the construction and acquisition of
new hotels, it is expected that this impact will be offset, after an initial
period, by revenues generated by such new hotels.
In 1996, earnings from recurring operations increased by 62.4%, reflecting
a 12.0% REVPAR increase at comparable hotels, the addition of 44 hotels
primarily through acquisition or construction over the past two years and the
impact of increased operating leverage. The Company's EBITDA increased by $29.2
million, or 49.1%, from $59.6 million in 1995 to $88.8 million in 1996, and
Hotel EBITDA increased by $35.1 million, or 62.9%, from $55.8 million in 1995 to
$90.9 million in 1996. EBITDA represents earnings before interest, taxes,
depreciation and amortization. Hotel EBITDA represents EBITDA generated from the
operations of Owned Hotels. Hotel EBITDA excludes management fee income,
interest income from mortgages and notes receivable, general and administrative
expenses and other revenues and expenses which do not directly relate to the
operations of Owned Hotels. The Company's hotels operate in three segments of
the industry: the all-suites segment, under the Company's proprietary
AmeriSuites brand; the upscale full-service segment, under major national
franchises; and the midprice limited-service segment, primarily under the
Company's proprietary Wellesley Inns brand. The following table illustrates the
Hotel EBITDA contribution from each segment (in thousands):
<TABLE>
<CAPTION>
1995 1996
----------------------- -----------------------
AMOUNT % OF TOTAL AMOUNT % OF TOTAL
------- ----------- ------- -----------
<S> <C> <C> <C> <C>
All-suites............................... $13,663 24.5% $25,987 28.6%
Full-service............................. 30,286 54.3 44,460 48.9
Limited-service.......................... 11,840 21.2 20,452 22.5
------- ------ ------- ------
Total.......................... $55,789 100.0% $90,899 100.0%
======= ====== ======= ======
</TABLE>
Hotel EBITDA for 1996 reflects the shifting mix in the Company's hotel
portfolio toward its proprietary brand AmeriSuites and the acquisition of 16
Wellesley Inns in March 1996.
30
<PAGE> 35
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996
COMPARED TO THE YEAR ENDED DECEMBER 31, 1995
The following table presents the components of operating income, operating
expense margins and other data for the Company and the Company's comparable
Owned Hotels for the years ended December 31, 1995 and 1996. The results of the
four hotels divested during 1995 and 1996 are not material to an understanding
of the results of the Company's operations in such periods and, therefore, are
not separately discussed.
<TABLE>
<CAPTION>
COMPARABLE OWNED
TOTAL HOTELS(1)
--------------------- ---------------------
1995 1996 1995 1996
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT ADR AND REVPAR)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Lodging....................................... $146,184 $198,947 $110,565 $124,164
Food and Beverage............................. 37,955 41,437 25,867 28,636
Management and Other Fees..................... 8,115 6,729
Interest on Mortgages and Notes Receivable.... 11,895 6,090
Business Interruption Insurance............... -- 13,562
Rental and Other.............................. 1,479 2,103
-------- --------
Total Revenues........................ 205,628 268,868
Direct Hotel Operating Expenses:
Lodging....................................... 38,383 51,577 29,877 31,731
Food and Beverage............................. 28,429 32,053 19,296 21,090
Selling and General........................... 49,753 61,789 34,938 37,352
Occupancy and Other Operating................... 11,763 16,833
General and Administrative...................... 15,515 17,813
Depreciation and Amortization................... 15,974 25,884
Other Expense................................... 2,200 --
Operating Income................................ 43,611 62,919
OPERATING EXPENSE MARGINS:
Direct Hotel Operating Expenses:
Lodging, as a percentage of lodging revenue... 26.3% 25.9% 27.0% 25.6%
Food and Beverage, as a percentage of food and
beverage revenue........................... 74.9% 77.4% 74.6% 73.6%
Selling and General, as a percentage of
lodging and food and beverage revenue...... 27.0% 25.7% 25.6% 24.4%
Occupancy and Other Operating, as a percentage
of
lodging and food and beverage revenue......... 6.4% 7.0%
General and Administrative, as a percentage of
total revenue................................. 7.5% 6.6%
OTHER DATA(1):
Occupancy....................................... 69.0% 69.7% 69.9% 71.9%
ADR............................................. $ 65.77 $ 70.22 $ 65.40 $ 71.14
REVPAR.......................................... $ 45.41 $ 48.95 $ 45.68 $ 51.16
Gross Operating Profit.......................... $ 67,574 $ 94,965 $ 52,321 $ 62,627
</TABLE>
- ---------------
(1) For purposes of showing operating trends, the results of the Frenchman's
Reef, which were impacted by hurricane damage, and four hotels disposed of
in 1995 and 1996 have been excluded from the Other Data section of the
table. Comparable Owned Hotels refers to 46 Owned Hotels that were owned or
leased by the Company during all of 1995 and 1996 (excluding the Frenchman's
Reef).
31
<PAGE> 36
Lodging revenues, which include room revenues and other related revenues
such as telephone and vending, increased by $52.7 million, or 36.1%, from $146.2
million in 1995 to $198.9 million in 1996. Lodging revenues increased due to
incremental revenues of $52.6 million from the 44 new hotels added during 1995
and 1996 and higher revenues for comparable Owned Hotels, which increased by
$13.6 million, or 12.3%, in 1996 as compared to 1995. The revenue gains were
offset by a decrease of $13.8 million at the Frenchman's Reef attributable to
hurricane-related damage.
The Company operates in three major segments of the industry: all-suites,
full-service and limited-service. The following table sets forth the growth in
REVPAR at the comparable Owned Hotels for 1996, as compared to 1995, by industry
segment:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
All-suites................................... 11.7%
Full-service................................. 15.8%
Limited-service.............................. 5.2%
Total.............................. 12.0%
</TABLE>
The REVPAR growth at comparable Owned Hotels reflects strong results in
each of the Company's industry segments. The REVPAR increases reflect the
results of several repositionings and continued favorable industry trends in the
full-service segment, and growing recognition of the AmeriSuites brand in the
fast-growing all-suites segment. The improvements in REVPAR were generated by
increases in ADR, which rose by 8.8% and gains in occupancy of 2.9%.
Food and beverage revenues increased by $3.4 million, or 9.2%, from $38.0
million in 1995 to $41.4 million in 1996. The increase was primarily due to the
strong growth at comparable hotels and additional revenues from four new hotels
in 1996. The increases were partially offset by lower food and beverage revenues
at the Frenchman's Reef, which declined by $5.1 million due to the hurricane
damage. Food and beverage revenues for comparable Owned Hotels increased by $2.8
million, or 10.7%, due to increased banquet business.
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. ("MSI"). Management and other fees decreased by $1.4 million, or
17.1%, from $8.1 million in 1995 to $6.7 million in 1996, primarily due to the
conversions of Managed Hotels into Owned Hotels. Partially offsetting these
decreased management fees were increased base and incentive management fees
associated with the remaining Managed Hotels and increased revenues generated by
MSI.
Interest on mortgages and notes receivable primarily relate to mortgages
secured by certain Managed Hotels. Interest on mortgages and notes receivable
decreased by $5.8 million, or 48.8%, from $11.9 million in 1995 to $6.1 million
in 1996, primarily due to conversions of notes receivable into operating hotel
assets or cash in 1995 and 1996.
Business interruption insurance revenue of $13.6 million in 1996 is based
on the settlement of the Company's claim related to the hurricane damage caused
by Hurricane Marilyn in September 1995 at the Frenchman's Reef. The Company is
currently preparing a claim under its business interruption insurance with
respect to Hurricane Bertha, which caused damage to the hotel in July 1996.
Direct lodging expenses increased by $13.2 million, or 34.4%, from $38.4
million in 1995 to $51.6 million in 1996, due primarily to the addition of new
hotels. Direct lodging expenses, as a percentage of lodging revenue, decreased
from 26.3% in 1995 to 25.9% in 1996. This decrease was primarily due to
increases in ADR which had minimal corresponding increases in expenses. For
comparable Owned Hotels, direct lodging expenses as a percentage of lodging
revenues decreased from 27.0% in 1995 to 25.6% in 1996.
Direct food and beverage expenses increased by $3.7 million, or 12.7%, from
$28.4 million in 1995 to $32.1 million in 1996, due to the increased revenues at
comparable hotels and the addition of four full-service
32
<PAGE> 37
hotels in 1996. As a percentage of food and beverage revenues, direct food and
beverage expenses increased from 74.9% in 1995 to 77.4% in 1996, due to lower
margins at the Frenchman's Reef attributable to the hurricane damage. For
comparable Owned Hotels, direct food and beverage expenses as a percentage of
food and beverage revenue decreased from 74.6% in 1995 to 73.6% in 1996,
primarily due to the higher margins associated with the increased banquet
business.
Direct hotel selling and general expenses consist primarily of hotel
expenses for Owned Hotels which are not specifically allocated to rooms or food
and beverage activities, such as administration, selling and advertising,
utilities, repairs and maintenance. Direct hotel selling and general expenses
increased by $12.0 million, or 24.2%, from $49.8 million in 1995 to $61.8
million in 1996, due primarily to the addition of new hotels. As a percentage of
hotel revenues (defined as lodging and food and beverage revenues), direct hotel
selling and general expenses decreased from 27.0% in 1995 to 25.7% in 1996 due
primarily to the impact of the increases in ADR. For comparable Owned Hotels,
direct selling and general expenses as a percentage of revenues decreased from
25.6% in 1995 to 24.4% in 1996 due primarily to the ADR increases.
Occupancy and other operating expenses consist primarily of insurance, real
estate and other taxes and rent expense. Occupancy and other operating expenses
increased by $5.0 million, or 43.1%, from $11.8 million in 1995 to $16.8 million
in 1996 due to the addition of new hotels, including several leased hotels.
Occupancy and other operating expenses as a percentage of hotel revenues
increased from 6.4% in 1995 to 7.0% in 1996 due to rent expense associated with
the new leased hotels.
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 Hotels and
Managed Hotels and general corporate expenses. General and administrative
expenses increased by $2.3 million, or 14.8%, from $15.5 million in 1995 to
$17.8 million in 1996, due to increased advertising, personnel and training
costs associated with opening the new AmeriSuites hotels. As a percentage of
total revenues, general and administrative expenses decreased from 7.5% in 1995
to 6.6% in 1996 due to operating leverage.
Depreciation and amortization expense increased by $9.9 million, or 62.0%,
from $16.0 million in 1995 to $25.9 million in 1996, due to the impact of new
hotel properties and refurbishment efforts at several hotels.
Other expense of $2.2 million for 1995 consisted of a reserve for insurance
deductibles related to hurricane damage caused by Hurricane Marilyn at the
Frenchman's Reef hotel in St. Thomas, U.S. Virgin Islands.
Investment income decreased by $251,000, or 5.2%, from $4.9 million in 1995
to $4.6 million in 1996, due to lower weighted average cash balances in 1996.
Interest expense decreased by $1.3 million, or 6.0%, from $21.6 million in
1995 to $20.3 million in 1996, primarily due to capitalized interest related to
new AmeriSuites construction. Capitalized interest increased by $4.9 million
from $2.6 million in 1995 to $7.5 million in 1996. The decrease in interest
expense was partially offset by interest associated with higher average
borrowings in 1996.
Other income consists of items which are not part of the Company's
recurring operations. For 1996, other income consisted of gains on the sales of
land and hotel properties of $2.5 million and a gain on the settlement of a note
receivable of $1.8 million. Other income for 1995 consisted of a gain on the
settlement of a note receivable of $822,000 and gains on property sales of $1.4
million.
Pretax extraordinary gains of approximately $174,000 and $337,000 for 1995
and 1996 relate to the retirement of debt.
33
<PAGE> 38
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
COMPARED TO THE YEAR ENDED DECEMBER 31, 1994
The following table presents the components of operating income, operating
expense margins and other data for the Company and the Company's comparable
Owned Hotels for the years ended December 31, 1995 and 1994. The results of the
four hotels divested during 1994 and 1995 are not material to an understanding
of the results of the Company's operations in such periods and, therefore, are
not separately discussed.
<TABLE>
<CAPTION>
COMPARABLE OWNED
TOTAL HOTELS(1)
--------------------- ---------------------
1994 1995 1994 1995
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT ADR AND REVPAR)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Lodging....................................... $ 88,753 $146,184 $ 76,604 $ 83,190
Food and Beverage............................. 18,090 37,955 13,601 13,299
Management and Other Fees..................... 10,021 8,115
Interest on Mortgages and Notes Receivable.... 15,867 11,895
Rental and Other.............................. 1,572 1,479
-------- --------
Total Revenues........................ 134,303 205,628
Direct Hotel Operating Expenses:
Lodging....................................... 25,490 38,383 20,722 21,908
Food and Beverage............................. 13,886 28,429 10,634 10,467
Selling and General........................... 27,244 49,753 23,009 24,338
Occupancy and Other Operating................... 9,799 11,763
General and Administrative...................... 15,089 15,515
Depreciation and Amortization................... 9,427 15,974
Other Expense................................... -- 2,200
Operating Income................................ 33,368 43,611
OPERATING EXPENSE MARGINS:
Direct Hotel Operating Expenses:
Lodging, as a percentage of lodging revenue... 28.7% 26.3% 27.1% 26.3%
Food and Beverage, as a percentage of food and
beverage revenue........................... 76.8% 74.9% 78.2% 78.7%
Selling and General, as a percentage of
lodging and food and beverage revenue...... 25.5% 27.0% 25.5% 25.2%
Occupancy and Other Operating, as a percentage
of
lodging and food and beverage revenue......... 9.2% 6.4%
General and Administrative, as a percentage of
total revenue.............................. 11.2% 7.5%
OTHER DATA:
Occupancy....................................... 68.0% 69.2% 70.4% 72.3%
ADR............................................. $ 60.36 $ 73.28 $ 59.92 $ 63.97
REVPAR.......................................... $ 41.04 $ 50.71 $ 42.21 $ 46.22
Gross Operating Profit.......................... $ 40,223 $ 67,605 $ 35,824 $ 39,926
</TABLE>
- ---------------
(1) For purposes of this discussion of results of operations, comparable Owned
Hotels refers to the 37 Owned Hotels that were owned or leased by the
Company during all of 1994 and 1995.
34
<PAGE> 39
Lodging revenues, which include room revenues and other related revenues
such as telephone and vending, increased by $57.4 million, or 64.7%, from $88.8
million in 1994 to $146.2 million in 1995. The increase was due to $52.1 million
of lodging revenues generated by the conversion of the Company's interest in the
Frenchman's Reef from a mortgage note receivable to a hotel asset and the 19 new
hotels added during 1994 and 1995, with the balance coming from growth in
revenues at comparable Owned Hotels. Lodging revenues for comparable Owned
Hotels increased by $6.6 million, or 8.6%, in 1995 as compared to 1994.
The Company operates in three major segments of the industry: all-suites,
full-service and limited-service. The following table sets forth the growth in
REVPAR at the comparable Owned Hotels for 1995, as compared to 1994, by industry
segment:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
All-suites................................... 11.9%
Full-service................................. 8.7%
Limited-service.............................. 9.2%
Total.............................. 9.5%
</TABLE>
The REVPAR growth at comparable Owned Hotels reflects strong results in
each of the Company's industry segments. Repositioning efforts at both
full-service and limited-service hotels also contributed to the REVPAR
increases. The improvements in REVPAR were generated by increases in ADR, which
rose by 6.8% and gains in occupancy of 2.7%.
Food and beverage revenues increased by $19.9 million, or 109.8%, from
$18.1 million in 1994 to $38.0 million in 1995. The increase was primarily due
to the additional food and beverage operations related to the Frenchman's Reef
and six other full-service hotels acquired since January 1, 1994. Food and
beverage revenues for comparable Owned Hotels decreased by $302,000 in 1995
compared to 1994. The decrease was primarily due to decreased banquet business
and lower beverage revenues at the Company's sports lounges.
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, MSI.
Management and other fees decreased by $1.9 million, or 19.0%, from $10.0
million in 1994 to $8.1 million in 1995. The decrease was primarily due to the
loss of management fees on five Managed Hotels acquired by the Company during
1994 and 1995 and six additional hotels which were sold by a third party hotel
owner in 1994. Partially offsetting these decreased management fees were
increased base and incentive management fees associated with the remaining
Managed Hotels and increased revenues generated by MSI.
Interest on mortgages and notes receivable primarily relate to mortgages
secured by certain Managed Hotels. Interest on mortgages and notes receivable
decreased by $4.0 million, or 25.0%, from $15.9 million in 1994 to $11.9 million
in 1995, primarily due to the Company's conversion of a $50.0 million note
receivable secured by the Frenchman's Reef into an operating hotel asset in
December 1994. Partially offsetting the decrease was interest income related to
the purchase of $17.4 million of first mortgages secured by two hotels for $12.7
million in June 1995.
Direct lodging expenses increased by $12.9 million, or 50.6%, from $25.5
million in 1994 to $38.4 million in 1995, due primarily to the addition of new
hotels. Direct lodging expenses, as a percentage of lodging revenue, decreased
from 28.7% in 1994 to 26.3% in 1995. This decrease was primarily due to
increases in ADR which had minimal corresponding increases in expenses. For
comparable Owned Hotels, direct lodging expenses as a percentage of lodging
revenues decreased from 27.1% in 1994 to 26.3% in 1995.
Direct food and beverage expenses increased by $14.5 million, or 104.7%,
from $13.9 million in 1994 to $28.4 million in 1995, primarily due to the
addition of seven new full-service hotels. As a percentage of food and beverage
revenues, direct food and beverage expenses decreased from 76.8% in 1994 to
74.9% in 1995. The decrease was primarily due to increased revenues in higher
margin areas such as banquet departments at the new hotels. For comparable Owned
Hotels, direct food and beverage expenses as a percentage of food and beverage
revenue increased slightly from 78.2% in 1994 to 78.7% in 1995.
35
<PAGE> 40
Direct hotel selling and general expenses consist primarily of hotel
expenses for Owned Hotels which are not specifically allocated to rooms or food
and beverage activities, such as administration, selling and advertising,
utilities, repairs and maintenance. Direct hotel selling and general expenses
increased by $22.6 million, or 82.6%, from $27.2 million in 1994 to $49.8
million in 1995, due primarily to the addition of new hotels. As a percentage of
hotel revenues (defined as lodging and food and beverage revenues), direct hotel
selling and general expenses increased from 25.5% in 1994 to 27.0% in 1995 due
to the addition of new full-service properties which generally require higher
levels of unallocated expenses. For comparable Owned Hotels, direct selling and
general expenses as a percentage of revenues decreased slightly from 25.5% in
1994 to 25.2% in 1995.
Occupancy and other operating expenses consist primarily of insurance, real
estate and other taxes and rent expense. Occupancy and other operating expenses
increased by $2.0 million, or 20.0%, from $9.8 million in 1994 to $11.8 million
in 1995 as the additional costs associated with the new hotels were offset by
real estate tax refunds of approximately $600,000 during the year. As a
percentage of hotel revenues, occupancy and other operating expenses decreased
from 9.2% in 1994 to 6.4% in 1995, primarily due to operating leverage.
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 Hotels and
Managed Hotels and general corporate expenses. General and administrative
expenses increased by $426,000, or 2.8%, from $15.1 million in 1994 to $15.5
million in 1995, due to ordinary inflationary increases which were partially
offset by central office payroll reductions. As a percentage of total revenues,
general and administrative expenses decreased from 11.2% in 1994 to 7.5% in 1995
due to operating leverage.
Other expense of $2.2 million for the year ended December 31, 1995 consists
of a reserve for insurance deductibles related to damage caused by Hurricane
Marilyn at the Frenchman's Reef.
Depreciation and amortization expense increased by $6.6 million, or 69.4%,
from $9.4 million in 1994 to $16.0 million in 1995, due to the impact of new
hotel properties acquired in the past year and refurbishment efforts at several
hotels.
Interest expense increased by $7.6 million, or 54.4%, from $14.0 million in
1994 to $21.6 million in 1995, primarily due to new mortgage borrowings of $39.0
million incurred in February 1995 and $86.3 million of 7% Convertible
Subordinated Notes due 2002 (the "Convertible Notes") issued in April 1995.
Investment income increased by $2.9 million from $2.0 million in 1994 to $4.9
million in 1995 primarily due to higher average cash balances generated by the
new borrowings.
Other income consists of items which are not part of the Company's
recurring operations. For the year ended December 31, 1995, other income
consisted of a gain on the settlement of a note receivable of $822,000 and gains
on the sale of land parcels of $1.4 million. Other income for the year ended
December 31, 1994 consisted primarily of a gain on the settlement of the Rose
and Cohen note receivable of $6.4 million, gains on property sales of $1.1
million and rebates of prior years' insurance premiums of $1.6 million.
Pretax extraordinary gains of approximately $174,000 for the year ended
December 31, 1995 relate to the retirement of secured notes with a face value of
$22.2 million. Pretax extraordinary gains of approximately $292,000 for the year
ended December 31, 1994 relate to the retirement of debt with a face value of
$8.3 million.
LIQUIDITY AND CAPITAL RESOURCES
Prime's external growth focuses on the accelerated expansion of its
AmeriSuites brand through new construction. As of March 31, 1997, Prime had 41
AmeriSuites in operation and plans to have 69 AmeriSuites hotels open by the end
of 1997 and 100 AmeriSuites open by the end of 1998.
Prime believes that it will have access to sufficient resources to
implement its planned expansion of the AmeriSuites brand, including capital from
the following sources: (i) net proceeds from the Initial Offering; (ii)
borrowings under the Company's $100 million Revolving Credit Facility; and (iii)
internally generated
36
<PAGE> 41
free cash flow from hotel operations. With a significant hotel asset base, Prime
also expects to seek additional debt or equity financing or enter into
sale/leaseback agreements with respect to certain of its properties.
The Company's major sources of cash for 1996 were net proceeds of
approximately $115.5 million from the issuance of the $120.0 million First
Mortgage Notes in January 1996, gross borrowings under the Revolving Credit
Facility of $52.5 million, net proceeds of $141.4 million from the issuance of
8.3 million shares of Common Stock and cash flow from operations of $65.9
million. The Company's major uses of cash during the period were capital
expenditures relating primarily to acquisitions and development of $286.5
million and debt repayments of $184.7 million, including repayments of $40.0
million under the Revolving Credit Facility.
Cash flow from operations was $65.9 million in 1996 as compared to $38.6
million in 1995. Cash flow from operations was positively impacted by the
utilization of net operating loss carryforwards ("NOLs") and other tax basis
differences of $11.8 million in 1996 and $9.5 million in 1995, respectively. At
December 31, 1996, the Company had federal NOLs relating to its predecessor,
Prime Motor Inns, Inc. ("PMI"), of approximately $90.7 million which are subject
to annual utilization limitations and expire beginning in 2005 and continuing
through 2007.
Common Stock. On August 2, 1996, the Company sold 8.3 million shares of
Common Stock at a price of $18 per share. The Company utilized the net proceeds
from the offering of approximately $141.4 million to fund AmeriSuites
development, to reduce indebtedness of $40.0 million under the Revolving Credit
Facility and to repay certain other indebtedness of $26.7 million, thereby
increasing availability for further AmeriSuites development.
Debt. On June 28, 1996, the Company established a Revolving Credit
Facility with a group of financial institutions providing for availability of
funds up to the lesser of $100.0 million or a borrowing base determined under
the agreement. The Revolving Credit Facility is secured by certain of the
Company's hotels with recourse to the Company. Additional hotels may be added or
substituted subject to the approval of the lenders. The Revolving Credit
Facility bears interest at LIBOR plus 2.25% and is available through June 2001.
The Revolving Credit Facility contains covenants requiring the Company to
maintain certain financial ratios and also contains covenants which limit the
incurrence and payment of debt, liens, dividend payments, stock repurchases,
certain investments, transactions with affiliates, asset sales, mergers and
consolidations and any change of control of the Company. The aggregate amount of
the Revolving Credit Facility will be reduced to $87.0 million on June 28, 1999
and $75.0 million on June 28, 2000. On June 28, 1996, the Company borrowed $40.0
million under the Revolving Credit Facility and the proceeds were used to retire
$20.0 million of interim financing with the remainder utilized principally for
the development of AmeriSuites hotels. On August 5, 1996, the Company repaid the
full amount of this borrowing under the Revolving Credit Facility with the
proceeds from the issuance of Common Stock. As of December 31, 1996, the Company
had borrowed $12.5 million under the Revolving Credit Facility. The Company
borrowed an additional $63.1 million through March 31, 1997 and subsequently
retired all borrowings under the Revolving Credit Facility with a portion of the
net proceeds from the Initial Offering. As of March 31, 1997, the Company had
$100.0 million available under the Revolving Credit Facility.
On August 2, 1996, the Company prepaid in full $26.7 million of debt
secured by 10 hotels with the proceeds from the issuance of Common Stock. The
loans were due in February 2000 and bore interest at LIBOR plus 4.25%. The
hotels formerly used as collateral for this debt were added to the collateral
for the Revolving Credit Facility.
In May 1996, the Company borrowed $20.0 million from a financial
institution with interest at LIBOR plus 2.25%. Proceeds were utilized for the
development of AmeriSuites hotels. The borrowing was subsequently repaid with
the proceeds from the Revolving Credit Facility.
In January 1996, the Company issued $120.0 million of 9 1/4% First Mortgage
Notes due 2006. Interest on the First Mortgage Notes is payable semi-annually on
January 15 and July 15. The Notes are secured by 15 hotels and contain certain
covenants including limitations on the incurrence of debt, liens, dividend
payments, certain investments, transactions with affiliates, asset sales and
mergers and consolidations. The Notes are redeemable, in whole or in part, at
the option of the Company on or after January 15, 2001 at premiums to principal
which decline on each anniversary date thereafter. The Company utilized a
portion of
37
<PAGE> 42
the proceeds to pay down approximately $51.6 million of indebtedness, with the
remainder of the proceeds used to finance the purchase of the Wellesley Inns
described below and the development of AmeriSuites hotels.
During 1996, the Company prepaid and retired $1.4 million of its 10% Senior
Secured Notes resulting in pre-tax extraordinary gains of $151,000. The Company
also retired $2.4 million of mortgage debt in conjunction with the sale of a
hotel which resulted in a pre-tax extraordinary gain of $186,000.
In March 1997, the Company retired all of its 10% Senior Secured Notes with
a portion of the net proceeds from the Initial Offering.
As of December 31, 1996, the Company had $13.9 million of debt related to
the Frenchman's Reef which was originally scheduled to mature in December 1996.
The Company and the lender entered into an agreement to extend the maturity of
the loan to January 1998. The amended loan bore interest at the same rate
currently in effect and principal payments were waived until maturity. All other
terms and conditions of the loan remained in effect. The Company repaid this
debt with a portion of the net proceeds of the Initial Offering. The Company is
currently in negotiation to obtain new financing in connection with the
refurbishment plans at the Frenchman's Reef.
In October 1996, the Company entered into a six-month interest rate
contract with a major financial institution to hedge its interest rate exposure
on the anticipated financing of its development program in 1997. Under the
agreement, the Company effectively fixed interest rates for approximately seven
years at a Treasury yield of 6.4% on a $98.4 million notional principal amount.
Capital Investments. The Company's capital spending in 1996 was focused on
the development of its AmeriSuites hotel chain and the consolidation of
ownership of its Wellesley Inns chain. In 1996, the Company spent $184.6 million
on new construction and $69.4 million on acquisitions funded primarily by
existing cash balances, internally generated cash flow, the issuance of Common
Stock and proceeds from borrowings under the Revolving Credit Facility and the
issuance of the First Mortgage Notes.
The Company intends to rapidly expand its AmeriSuites chain through new
construction. The Company has opened 22 new AmeriSuites hotels since January 1,
1996 bringing the total to 41 hotels as of March 31, 1997. The Company plans to
have 69 AmeriSuites open by the end of 1997 and 100 AmeriSuites open by the end
of 1998. As of March 31, 1997, the Company had 45 AmeriSuites hotels under
development, including 27 under construction. The Company expects to spend a
total of approximately $300 million on development of new AmeriSuites hotels in
each of 1997 and 1998.
On March 6, 1996, the Company acquired 18 hotels consisting of 16 Wellesley
Inns and two other limited service hotels for approximately $65.1 million in
cash. Subsequently, the Company sold two of the Wellesley Inns, which were
converted to another brand affiliation, and the two other limited-service
hotels, which were not consistent with the Company's strategy, for aggregate
proceeds of $11.4 million. The acquisition enabled the Company to establish full
control over its proprietary Wellesley Inns brand with all 28 Wellesley Inns
owned and operated by the Company. In order to ensure consistent quality and
enhance the value of its brand, the Company refurbished five of these acquired
hotels in 1996 and completed the renovation of nine other acquired Wellesley
Inns hotels in March 1997 at a total renovation cost for 1996 and 1997 of
approximately $9.0 million.
In September 1996, the Company acquired the Ramada Plaza Suite Hotel in
Secaucus, NJ, which was repositioned as a Radisson Suite Hotel. The acquisition
price of $16.5 million included the assumption of $12.2 million of debt. In
February 1997, the Company acquired a Holiday Inn in Monroe Township, NJ for
$11.2 million in cash. The Company may from time to time acquire full-service
hotels having operating synergies with other Company hotels, although no such
acquisitions are currently pending.
During 1996, the Company spent approximately $30.8 million on capital
improvements at its Owned Hotels, of which approximately $16.8 million related
to refurbishments and repositionings of recently acquired hotels. In 1996, the
Company completed the refurbishment and repositioning of the Hasbrouck Heights,
NJ, Crowne Plaza, the Las Vegas St. Tropez Hotel and five of the recently
acquired Wellesley Inns. The Company intends to spend approximately $7.0 million
in 1997 relating to the refurbishing of nine other recently acquired Wellesley
Inns and the Monroe Township Holiday Inn.
38
<PAGE> 43
In September 1995, the Frenchman's Reef in St. Thomas U.S. Virgin Islands
suffered damage when Hurricane Marilyn struck the island. The Company and its
insurance carrier settled the Company's property and business interruption
insurance claim with respect to Hurricane Marilyn for $25.0 million. In July
1996, the Company received the final installment under its settlement, bringing
the net proceeds to $22.8 million, net of deductibles, for which the Company
provided a reserve of $2.2 million in 1995. The Company utilized all insurance
proceeds to reduce the Frenchman's Reef mortgage loan to $13.9 million. In
addition, in July 1996, Hurricane Bertha struck the island and caused further
damage to the hotel. The Company is currently reviewing its claim for property
damage with its insurance carrier and is in the process of preparing a claim
under its business interruption insurance.
The Company is currently underway with plans to refurbish and upgrade the
Frenchman's Reef. In addition to hurricane-related renovations, the plan
provides for structural enhancements, redesigned guestrooms, increased banquet
and meeting space and new landscaping. The Company estimates that the cost of
refurbishment will be approximately $30.0 million. The Company has continued to
operate the hotel. However, due to the extent of the renovations and the
additional damage caused by Hurricane Bertha, the Company closed the hotel in
April 1997 and plans to reopen the hotel in December 1997, although there can be
no assurance that the Frenchman's Reef will reopen at such time or that the cost
of refurbishment will not exceed the Company's estimate. The Company does not
believe the closing of the Frenchman's Reef will have a material impact on its
cash flow due to the seasonality of the hotel's operations and its business
interruption insurance coverage.
In order to facilitate future tax-free exchanges of hotel properties, the
Company from time to time enters into arrangements with an unaffiliated third
party pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended.
As of March 31, 1997, the Company had advanced approximately $27.3 million to
such third party, which advances are classified as property, equipment and
leasehold improvements.
Asset Realizations. The Company has pursued a strategy of converting
mortgage notes receivable and other assets into cash or operating hotel assets.
The Company has also sold certain hotel assets which are not consistent with the
Company's development strategy. During 1996, the Company received $7.9 million
in cash in settlement of notes receivable and $13.0 million in cash on sales of
properties resulting in gains of $4.3 million. In 1996, the Company obtained
control of the 210-room Howard Johnson Hotel in Cocoa Beach, FL and the 204-room
Radisson Hotel in Fairfield, NJ by converting its mortgage notes receivable into
operating hotel assets. Through March 31, 1997, the Company received $15.1
million in cash from the sale of four hotels, including the Cocoa Beach Howard
Johnson Hotel.
39
<PAGE> 44
SELECTED CONSOLIDATED FINANCIAL DATA
OF THE COMPANY AND ITS PREDECESSOR
The Company is the successor in interest to the Company's predecessor,
Prime Motor Inns, Inc. ("PMI"), which emerged from chapter 11 reorganization on
July 31, 1992 (the "Effective Date"). PMI had filed for protection under chapter
11 of the United States Bankruptcy Code in September 1990. 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 for 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 years ended December 31, 1993,
1994, 1995 and 1996, (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 the year ended June 30, 1992. 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>
POST-REORGANIZATION
PRE-REORGANIZATION ------------------------------------------------------------------
---------------------- AS OF AND
AS OF AND FOR THE FOR THE
FOR THE ONE MONTH FIVE MONTHS AS OF AND FOR THE YEAR ENDED
YEAR ENDED ENDED AS OF ENDED DECEMBER 31,
JUNE 30, JULY 31, JULY 31, DEC. 31, -----------------------------------------
1992(1) 1992(1) 1992(1) 1992 1993 1994 1995 1996
---------- --------- -------- ----------- -------- -------- -------- --------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of operations data:
Total revenues.................... $ 134,190 $ 8,793 -- $ 41,334 $108,860 $134,303 $205,628 $268,868
Valuation writedowns and
reserves........................ (62,123) (13,000) -- -- -- -- -- --
Reorganization items................ (23,194) 1,796 -- -- -- -- -- --
Other income........................ -- -- -- -- 3,809 9,089 2,239 4,306
Income (loss) from continuing
operations before extraordinary
items(2).......................... (71,965) (10,274) -- 1,393 8,175 18,258 17,465 30,914
Extraordinary items-gains on
discharge of indebtedness (net of
income taxes)..................... -- 249,600 -- -- 3,989 172 104 202
Net income (loss)................... (71,965) 239,326 -- 1,393 12,164 18,430 17,569 31,116
Balance sheet data:
Total assets........................ $ 554,118 -- $468,650 $ 403,314 $410,685 $434,932 $573,241 $786,098
Long-term debt, net of current
portion........................... 8,921 -- 204,438 192,913 168,618 178,545 276,920 298,875
Stockholders' equity (deficiency)... (229,292) -- 135,600 137,782 171,364 204,065 232,916 419,895
</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 Hotels or Managed Hotels, $135.6 million of
stockholders' equity and $266.4 million of total debt.
(2) Approximately $2.3 million and $28.0 million of contractual interest expense
during the one month ended July 31, 1992 and for the fiscal year ended June
30, 1992, respectively, was not accrued and was not paid due to the chapter
11 proceeding.
40
<PAGE> 45
BUSINESS
THE COMPANY
Prime is a leading national hotel company, with a portfolio of 107 hotels
containing 15,287 rooms located in 25 states and the U.S. Virgin Islands (the
"Portfolio"). Prime controls two high-quality hotel brands -- AmeriSuites(R) and
Wellesley Inns(R) -- as well as a portfolio of upscale full-service hotels. One
of the country's largest hotel owner/operators, Prime has positioned itself to
benefit significantly from favorable lodging industry fundamentals that have
prevailed in recent years. From 1994 to 1996, the Company's EBITDA has grown at
a compound annual rate of 44.0%, from $42.8 million in 1994 to $88.8 million in
1996, while recurring net income has grown at a compound annual rate of 48.7%,
from $12.8 million to $28.3 million over the same period.
The Company's strategy is to capitalize on two lodging industry trends: (i)
favorable industry fundamentals, which are producing strong earnings growth due
to the operating leverage inherent in hotel ownership and (ii) growing consumer
preferences for newer all-suite accommodations with strong brand identities.
Reflecting this strategy, the Company owns and operates 94 of the 107 hotels in
the Portfolio and holds financial or equity interests in 8 of the remaining 13
hotels managed by the Company for third parties. Furthermore, more than 85% of
the Company's capital spending in 1995 and 1996 was dedicated to the growth of
the Company's proprietary AmeriSuites and Wellesley Inns brands. Through its
focus on hotel equity ownership, the Company is benefiting from the operating
leverage inherent in the lodging industry. Through its development of
proprietary brands, the Company is positioning itself to generate additional
revenue not dependent on investment in real estate.
Prime's Portfolio is modern and well-maintained, with an average hotel age
of approximately 11 years. Over the past three years, the Company has achieved
rapid growth in the Portfolio, from 5,092 owned rooms at January 1, 1994 to
12,610 owned rooms at March 31, 1997. At the same time, the Company has focused
on brand development, with the number of Owned Hotels operated under Prime's
proprietary AmeriSuites and Wellesley Inns brands increasing from 19 of the 41
Owned Hotels at January 1, 1994 to 69 of the 94 Owned Hotels at March 31, 1997.
The Company's hotels serve three major lodging industry segments: the
all-suites segment, under the Company's proprietary AmeriSuites brand; the
upscale full-service segment, under major national franchises; and the
limited-service segment, primarily under the Company's proprietary Wellesley
Inns brand.
All-Suites: Prime owns and operates 41 all-suite hotels under the
AmeriSuites brand name, and currently has another 45 AmeriSuites under
development, including 27 under construction. AmeriSuites are upper mid-price,
all-suite hotels containing approximately 128 suites and located primarily near
suburban commercial centers, corporate office parks and other travel
destinations, with close proximity to dining, shopping and entertainment
amenities. Since January 1, 1995, AmeriSuites has been one of the fastest
growing domestic hotel chains, expanding from 13 hotels to 41 hotels at March
31, 1997, an increase of 215%. In 1996, AmeriSuites contributed approximately
$26.0 million, or 28.6%, of the Company's Hotel EBITDA, a percentage which the
Company believes will increase significantly in 1997.
Full-Service: Prime operates 31 upscale full-service hotels with food
service and banquet facilities under franchise agreements with national hotel
brands such as Marriott, Radisson, Sheraton, Crowne Plaza, Holiday Inn and
Ramada. In 1996, the Company's full-service hotels contributed approximately
$44.5 million, or 48.9%, of the Company's Hotel EBITDA.
Limited-Service: Prime operates 35 limited-service hotels, 28 of which are
Wellesley Inns. The Company owns all of the Wellesley Inns, which compete
primarily in the mid-price segment with hotels such as Hampton Inns and La
Quinta Inns. The remaining seven limited-service hotels are operated under
franchise agreements with well-known national chains. In accordance with its
brand development strategy, the Company expects to divest a number of these
seven hotels within the next several years. In 1996, the Company's
limited-service hotels contributed approximately $20.5 million, or 22.5%, of the
Company's Hotel EBITDA.
41
<PAGE> 46
OPERATING PERFORMANCE AND INTERNAL GROWTH
Prime seeks to achieve internal growth through the use of sophisticated
operating, marketing and financial systems at its hotels. Prime has demonstrated
its ability to operate its hotels effectively in each of its three segments,
achieving REVPAR increases in 1996 at its comparable AmeriSuites, full-service
and limited-service hotels of 11.7%, 15.8% and 5.2%, respectively, versus 1995
results. Management believes that: (i) the AmeriSuites chain is positioned to
benefit from increased critical mass and name recognition resulting from the
chain's rapid growth, expanded marketing initiatives and product improvements;
(ii) the upscale full-service segment, located principally in the Northeast, is
positioned to benefit from strong regional and segment fundamentals, including
significant barriers to entry; and (iii) the Company's Wellesley Inns are
positioned to benefit from a $9.0 million renovation and reimaging program which
was completed in March 1997.
The Company's emphasis on efficient operations has increased operating
margins, thus translating its top-line REVPAR growth into increased earnings for
each of its three industry segments. In 1996, gross operating profit increased
by 17.0%, 25.9% and 10.4%, respectively, for comparable AmeriSuites,
full-service and limited-service hotels, versus 1995 results. The Company
expects to further improve its operating performance in 1997 through the
implementation of a new proprietary yield management system, an enhanced central
reservations system serving the AmeriSuites and Wellesley Inns chains, digital
telecommunications conversions, improved telephone call accounting systems and
significant increases in employee training programs.
AMERISUITES EXPANSION
Prime's external growth focuses on the accelerated expansion of its
AmeriSuites brand through the construction of new AmeriSuites hotels. The
Company believes that AmeriSuites, which offers an excellent guest experience
and desirable suite accommodations at mid-scale prices, is well-positioned to
become a preeminent brand in the rapidly growing all-suites segment. Prime plans
to have 69 AmeriSuites open by the end of 1997 and 100 AmeriSuites open by the
end of 1998. At present, 41 AmeriSuites are open, with an additional 45 hotels
under development, including 27 under construction. At these levels, the Company
believes that it is approaching the critical mass necessary to begin development
of franchising programs, which would further leverage the value of its
proprietary brands.
AmeriSuites are positioned in the upper mid-price segment of the lodging
industry, competing predominantly with other mid-price and upscale brands such
as Courtyard by Marriott and Holiday Inn. The Company markets AmeriSuites as
"America's All-Suite Hotel," emphasizing superior price/value relative to
traditional mid-price hotels by focusing on the chain's spacious suites, upscale
facilities and attractive amenity package. The Company is committed to the
expansion of the AmeriSuites brand for the following reasons:
- ATTRACTIVE INVESTMENT RETURNS: AmeriSuites have generated strong
investment returns, due to moderate development costs and high operating profit
margins. In 1996, AmeriSuites which were in operation for at least one year
generated an average EBITDA of $1.26 million, representing an average
unleveraged 18.1% return on total invested capital. In approving new AmeriSuites
for development, the Company seeks a projected unleveraged return on total
invested capital of 14% to 16% per year (although actual results may vary
significantly from projected results).
- RAPID STABILIZATION: Due to the attractiveness of the AmeriSuites
product, careful market analysis and extensive pre-opening sales and marketing
efforts, new AmeriSuites have rapidly attained high revenue and profit levels.
In 1996, the new AmeriSuites hotels which were open for at least three months
but less than 18 months achieved REVPAR levels which were within 8% of the
REVPAR levels achieved by stabilized AmeriSuites hotels which were in operation
for more than 18 months.
- BROAD CUSTOMER APPEAL: The AmeriSuites concept offers the benefits of an
all-suite hotel at a price that appeals to a wide variety of customers. Business
travelers are attracted to the specially designed business suites,
fully-equipped business centers, meeting rooms, convenient locations and in-room
features, including computer data ports and voice mail. Leisure travelers enjoy
the exercise room, complimentary continental breakfast, living room sleeper sofa
and heated swimming pool. In addition, the layout of the AmeriSuites
42
<PAGE> 47
room, each of which includes a kitchenette, appeals to the fast-growing
extended-stay market segment. The Company believes AmeriSuites offers a level of
amenities and services exceeding those typically found in extended-stay hotels.
- FAST GROWING, FRAGMENTED MARKET: The all-suites segment has seen
above-market demand growth in recent years. From 1992 through 1996, demand for
all-suite hotels grew at more than triple the rate of demand growth experienced
by the lodging industry as a whole, and exceeded all-suites supply growth by
17.7%. Given the fast-growing demand for all-suite accommodations and the
absence of a dominant competitor in the mid-price all-suites market, Prime
believes that it can establish AmeriSuites as a preeminent brand in this market
while continuing to generate attractive returns.
- FAVORABLE OPERATING OUTLOOK: Management expects the AmeriSuites chain to
continue its strong performance, due principally to the following factors:
Increased critical mass: AmeriSuites' historical performance
improvements have been achieved despite the lack of an extensive chain
infrastructure. With more than three times the number of hotels from
January 1995 levels, 28 additional properties expected to be added during
1997 and the addition of an enhanced central reservations system,
AmeriSuites' referral network, name recognition and marketing initiatives
have continued to strengthen. In 1997, Prime plans to double its
AmeriSuites national brand advertising expenditures to further enhance the
chain's market profile.
Upside opportunities vs. key competitors: The Company believes it is
well-positioned to capitalize on the superior price/value characteristics
of the AmeriSuites brand as the chain expands. Despite significant product
advantages over its older, more established non-suite competitors,
AmeriSuites, as a recently established brand in the early stages of
development, has historically generated comparatively lower REVPAR levels.
For example, in 1996 the 296-hotel Courtyard by Marriott chain, a principal
competitor of AmeriSuites, generated an average REVPAR more than 20% higher
than that of AmeriSuites, which management attributes to Courtyard's more
fully developed marketing programs and brand recognition. Management
believes that the growing AmeriSuites infrastructure, consisting of
elements such as improved frequency programs, an enhanced central
reservations system, increased advertising and marketing programs and the
increased visibility from the doubling of the chain's number of hotels in
the past year will permit AmeriSuites to achieve critical mass and
outperform its older, more established competitors.
Impact of product enhancements: Prime continually seeks to refine and
enhance the AmeriSuites product to improve guest satisfaction and economic
returns. In 1996, the Company introduced a larger, more upscale lobby and
arrival area, standardized indoor pools in Northern climates and introduced
a new concept for business travelers: Taking Care of Business Suites ("TCB
Suites"). TCB Suites comprise approximately 20% of AmeriSuites rooms and
are included in every hotel, offering guests a well equipped in-suite
office environment with the residential atmosphere typical of the chain's
suites. Management believes that these and other product improvements will
continue to enhance operating performance.
Prime believes that it will have access to sufficient resources to
implement its planned expansion of the AmeriSuites brand, including capital from
the following sources: (i) net proceeds from the Initial Offering; (ii)
borrowings under the Company's $100 million Revolving Credit Facility; and (iii)
internally generated free cash flow from hotel operations. With a significant
hotel asset base, Prime also expects to seek additional debt or equity financing
or enter into sale/leaseback agreements with respect to certain of its
properties.
INDUSTRY OVERVIEW
The lodging industry as a whole has experienced five consecutive years in
which the growth in room demand has exceeded the growth in supply. In 1996,
industry-wide percentage growth in demand for hotel rooms exceeded industry-wide
percentage growth in supply of hotel rooms by 34.8% (3.1% versus 2.3%). The
excess of demand growth over supply growth in the past several years has led to
industry-wide increases in occupancy percentages and ADR, with occupancy rising
to 65.7% in 1996 from 65.1% in 1995, and ADR
43
<PAGE> 48
increasing 6.7% in 1996 over 1995 levels. Historical industry performance,
however, may not be indicative of future results.
The following table was compiled from industry operating data as reported
by Smith Travel Research and highlights industry data for the United States and
the regions in which most of the Company's hotels are located: the Middle
Atlantic region, which is comprised of New Jersey, New York and Pennsylvania;
and the South Atlantic region, which is comprised of Florida, Georgia, South
Carolina, North Carolina, Virginia, West Virginia, Maryland and Delaware. The
table also includes operating data concerning the three price levels (of the
five price levels classified by Smith Travel Research) in which the Company
competes: upscale, mid-price and economy. REVPAR data was calculated by the
Company based on occupancy and ADR data supplied by Smith Travel Research.
<TABLE>
<CAPTION>
% CHANGE IN:
---------------------------------------------------------------------------------------
ROOM SUPPLY ROOM DEMAND REVPAR
--------------------------- --------------------------- ---------------------------
1994 V. 1995 V. 1996 V. 1994 V. 1995 V. 1996 V. 1994 V. 1995 V. 1996 V.
1993 1994 1995 1993 1994 1995 1993 1994 1995
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States.................. 1.4% 1.6% 2.3% 4.7% 3.0% 3.1% 7.3% 6.1% 7.8%
BY REGION:
Middle Atlantic................ 0.4 1.1 1.0 4.0 1.2 3.3 10.5 5.8 10.1
South Atlantic................. 1.1 1.3 2.0 3.2 3.6 3.3 4.9 6.9 7.9
BY SERVICE (PRICE LEVEL):
Upscale........................ 2.0 1.9 3.4 3.8 2.6 3.4 5.0 4.7 5.4
Mid-Price...................... 2.0 2.4 3.3 4.2 3.8 3.3 5.5 5.9 6.7
Economy........................ 1.1 2.0 2.3 2.6 3.0 2.4 5.0 6.2 6.7
</TABLE>
44
<PAGE> 49
PRIME'S LODGING OPERATIONS
The following table sets forth information with respect to the Owned Hotels
and Managed Hotels as of March 31, 1997:
<TABLE>
<CAPTION>
MANAGED WITH
FINANCIAL
OWNED(1) INTEREST(2) OTHER MANAGED TOTAL
---------------- --------------- --------------- ----------------
HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS
------ ------ ------ ----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
All-Suites:
AmeriSuites........................... 41 5,140 0 0 0 0 41 5,140
Full-Service:
Marriott.............................. 1 517 0 0 1 525 2 1,042
Radisson.............................. 3 627 0 0 0 0 3 627
Sheraton.............................. 3 589 0 0 0 0 3 589
Crowne Plaza.......................... 3 717 0 0 0 0 3 717
Holiday Inn........................... 2 390 3 690 0 0 5 1,080
Ramada................................ 8 1,256 3 672 1 125 12 2,053
Howard Johnson........................ 0 0 1 116 1 115 2 231
Independent........................... 1 149 0 0 0 0 1 149
-- ------ -- ----- -- ----- --- ------
Total Full-Service............ 21 4,245 7 1,478 3 765 31 6,488
Limited-Service:
Wellesley Inn......................... 28 2,817 0 0 0 0 28 2,817
Howard Johnson........................ 3 268 1 149 2 285 6 702
Other................................. 1 140 0 0 0 0 1 140
-- ------ -- ----- -- ----- --- ------
Total Limited-Service......... 32 3,225 1 149 2 285 35 3,659
-- ------ -- ----- -- ----- --- ------
Total.................... 94 12,610 8 1,627 5 1,050 107 15,287
== ====== == ===== == ===== === ======
</TABLE>
- ---------------
(1) Of the 94 Owned Hotels, 13 are operated under lease agreements. 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.
(2) Eight Managed Hotels in which the Company holds a mortgage or profit
participation on the property.
45
<PAGE> 50
The following table sets forth the location of the Company's hotels as of
March 31, 1997:
<TABLE>
<CAPTION>
MANAGED WITH
FINANCIAL
OWNED INTEREST OTHER MANAGED TOTAL
----------------- ---------------- ---------------- -----------------
HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS
------ ------ ------ ----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arizona................... 1 118 -- -- -- -- 1 118
Arkansas.................. 1 130 -- -- -- -- 1 130
California................ -- -- -- -- 1 96 1 96
Connecticut............... 4 589 -- -- -- -- 4 589
Florida................... 22 2,341 -- -- 1 115 23 2,456
Georgia................... 6 803 -- -- 1 189 7 992
Illinois.................. 3 369 -- -- -- -- 3 369
Indiana................... 1 126 -- -- -- -- 1 126
Kansas.................... 1 126 -- -- -- -- 1 126
Kentucky.................. 1 123 -- -- -- -- 1 123
Maryland.................. 1 128 -- -- 1 525 2 653
Michigan.................. 1 128 -- -- -- -- 1 128
Minnesota................. 1 128 -- -- -- -- 1 128
Nevada.................... 2 350 -- -- -- -- 2 350
New Jersey................ 16 2,569 7 1,489 1 125 24 4,183
New York.................. 8 938 -- -- -- -- 8 938
North Carolina............ 2 254 -- -- -- -- 2 254
Ohio...................... 4 508 -- -- -- -- 4 508
Oklahoma.................. 1 128 -- -- -- -- 1 128
Oregon.................... 1 161 -- -- -- -- 1 161
Pennsylvania.............. 2 376 1 138 -- -- 3 514
South Carolina............ 1 111 -- -- -- -- 1 111
Tennessee................. 4 507 -- -- -- -- 4 507
Texas..................... 5 640 -- -- -- -- 5 640
U.S. Virgin Islands....... 1 517 -- -- -- -- 1 517
Virginia.................. 4 442 -- -- -- -- 4 442
-- ------ -- ----- -- ----- --- ------
Total........... 94 12,610 8 1,627 5 1,050 107 15,287
== ====== == ===== == ===== === ======
</TABLE>
46
<PAGE> 51
The following table sets forth for the five years ended December 31, 1996
operating data for the hotels in the Company's portfolio as of December 31,
1996. Operating data for the Owned Hotels built or acquired during the period
are presented from the dates such hotels commenced operations or became Owned
Hotels. For purposes of showing operating trends, the results of the Frenchman's
Reef, which were impacted by hurricane damage, have been excluded from the
table. For purposes of showing operating trends, the results of 25 Owned Hotels
that were managed by the Company prior to their acquisition by the Company are
presented as if they had been Owned Hotels from the dates the Company began
managing the hotels.
<TABLE>
<CAPTION>
MANAGED WITH
OWNED FINANCIAL INTEREST OTHER MANAGED TOTAL
--------------------------- --------------------------- --------------------------- ---------
HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS HOTELS
--------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992.................. 55 7,087 9 1,747 2 650 66
1993.................. 59 7,576 9 1,747 3 765 71
1994.................. 66 8,642 9 1,747 5 1,050 80
1995.................. 74 9,616 9 1,747 5 1,050 88
1996.................. 90 11,645 9 1,747 5 1,050 104
<CAPTION>
ROOMS
------
<S> <C> <C>
1992.................. 9,484
1993.................. 10,088
1994.................. 11,439
1995.................. 12,413
1996.................. 14,442
</TABLE>
<TABLE>
<CAPTION>
OCCUPANCY ADR REVPAR OCCUPANCY ADR REVPAR OCCUPANCY ADR REVPAR OCCUPANCY
--------- ------ ------ --------- ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992.................. 69.2% $56.04 $38.75 70.7% $58.50 $41.33 64.9% $87.81 $56.96 69.2%
1993.................. 71.4 57.11 40.77 72.9 60.72 44.26 64.9 86.91 56.41 71.2
1994.................. 69.9 60.59 42.35 72.1 66.42 47.88 68.2 73.66 50.27 70.1
1995.................. 69.6 64.26 44.70 73.5 69.55 51.09 70.5 77.58 54.71 70.2
1996.................. 69.6 70.39 48.97 75.6 73.92 55.88 76.9 83.06 63.83 71.0
<CAPTION>
ADR REVPAR
------ ------
<S> <C> <C>
1992.................. $58.58 $40.51
1993.................. 59.63 42.48
1994.................. 62.84 44.05
1995.................. 66.28 46.54
1996.................. 71.99 51.08
</TABLE>
All-Suite Hotels
The Company currently owns 41 AmeriSuites hotels and has 45 AmeriSuites
hotels under development, including 27 under construction. Prime plans to have
69 AmeriSuites open by the end of 1997 and 100 AmeriSuites open by the end of
1998. AmeriSuites are all-suites, upper mid-price hotels which offer guests an
attractively designed suite with a complimentary continental breakfast in a
spacious lobby cafe, remote-control cable television, fully-equipped business
centers, fitness centers and pool facilities. The hotels provide group meeting
space, but do not include restaurant or lounge facilities. AmeriSuites attract
customers principally because of the quality of the guest suites, which offer
distinct living, sleeping and kitchen areas and the consistency of product
quality. AmeriSuites hotels also offer business suites marketed under the name
"TCB (Taking Care of Business) Suites." TCB Suites were developed specifically
for the business traveler and feature a well-equipped in-suite office including
an oversized desk with executive chair, dual phone lines, easy chair and
ottoman, in addition to voice mail, data ports and other amenities. Each
AmeriSuites contains approximately 128 suites, including 24 TCB Suites, and two
to four meeting rooms. AmeriSuites are primarily located near suburban
commercial centers, corporate office parks and other travel destinations, with
close proximity to dining, shopping and entertainment amenities. The target
customer is primarily the business traveler, with an average length of stay of
two to three nights, and leisure or weekend travelers. AmeriSuites are marketed
primarily through direct sales, national marketing programs and a central
reservation system.
On January 31, 1997, the Company converted its central reservation system
for its AmeriSuites and Wellesley Inns brands to a new system developed and
operated by Anasazi Travel Resources, Inc. The new reservation system will
broaden access to travel agents through additional global distribution systems
and immediately increased the number of agent terminals by 23%. Through a
real-time interface connecting the hotels with the central reservation system
and global distribution systems, the Company will be able to swiftly implement
marketing and yield management strategies. Additionally, the system will provide
the Company with detailed guest history data for new marketing initiatives such
as frequent traveler programs. The system also has the capability to provide
automatic linkage with other reservation systems which may facilitate new
marketing alliances with strategic partners.
The Company believes it has outlined a comprehensive strategy for the rapid
development of the AmeriSuites brand while maintaining control of the
development process.
47
<PAGE> 52
Detailed Site Selection. The Company undertakes an extensive review
process in selecting sites for new AmeriSuites. Key factors in the selection of
sites include close proximity to demand generators, superior visibility, ease of
access and nearby guest amenities. Sites are initially identified with the
assistance of a nationwide network of brokers. Once identified, the Company
qualifies the sites before entering into a letter of intent. After a letter of
intent is signed, the Company assesses the feasibility of the sites, which
includes extensive reconnaissance by the Company's operations and sales and
marketing staffs as well as independent consultants. Upon satisfactory
completion of economic feasibility, the Company will enter into a contract for
the site and commence legal, engineering and environmental due diligence. The
entire process, from site selection to completion of construction and opening,
takes approximately 18 months.
Suburban Market Focus. The Company believes that suburban markets offer a
number of features which permit the rapid expansion of AmeriSuites. As opposed
to major metropolitan markets, suburban markets offer ample land to construct
new hotels. More importantly, the Company believes that suburban locations
appeal to multiple demand generators. In addition to the business traveler, who
is the target customer for AmeriSuites, the weekend/leisure traveler is
attracted by the close proximity to nearby dining, shopping and entertainment
amenities.
Cluster Strategy. The Company intends to expand into new regions by first
developing hotels in cities which it has targeted as "key" cities. The Company
will then add additional hotels in that region in cities which are logical
destinations from the "key" cities. This strategy permits the Company to quickly
build brand recognition of AmeriSuites in a particular region. Key cities where
AmeriSuites are open or under development include Atlanta (7), Dallas/Ft. Worth
(7), Chicago (6), Miami/Ft. Lauderdale (4) and Denver (3).
The following table sets forth for the five years ended December 31, 1996
certain data with respect to AmeriSuites hotels, all of which are owned by the
Company. Operating data for the hotels built during the period are presented
from the dates such hotels commenced operations. For purposes of showing
operating trends, comparable data has also been presented for the AmeriSuites
hotels which have been in operation for all of 1995 and 1996.
<TABLE>
<CAPTION>
COMPARABLE TOTAL
------------------------------- -------------------------------
HOTELS ROOMS HOTELS ROOMS
--------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
1992......... 6 749 6 749
1993......... 8 993 8 993
1994......... 12 1,494 12 1,494
1995......... 12 1,494 19 2,319
1996......... 12 1,494 35 4,348
</TABLE>
<TABLE>
<CAPTION>
OCCUPANCY ADR REVPAR OCCUPANCY ADR REVPAR
--------- ------ ------ --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
1992......... 60.0% $54.99 $32.97 60.0% $54.99 $32.97
1993......... 64.1 56.21 36.01 64.1 56.21 36.01
1994......... 65.9 59.90 39.50 65.9 59.90 39.50
1995......... 68.5 65.70 45.03 67.2 65.45 43.98
1996......... 70.9 70.90 50.28 65.6 72.12 47.28
</TABLE>
The Company believes that the all-suites segment will continue to be a high
growth segment of the industry. During the 1992-1996 period, demand for
all-suites rooms grew at more than triple the rate of demand growth experienced
by the lodging industry as a whole, and exceeded all-suites supply growth by
17.7%. The operating performance of the AmeriSuites hotels is benefiting from
this favorable trend. For the 12 owned AmeriSuites hotels which were open for
all of 1996 and 1995, REVPAR increased by 11.7% during 1996.
The Company plans to develop the AmeriSuites brand primarily through new
construction to assure product consistency and quality. The average age of the
AmeriSuites hotels as of March 31, 1997 was approximately three years. The
Company believes that AmeriSuites provide attractive investment returns due to
their reasonable cost and rapid stabilization rate. In 1996, AmeriSuites which
were in operation for at least
48
<PAGE> 53
one year generated an average EBITDA of $1.26 million, representing an average
unleveraged 18.1% return on total invested capital. The Company believes that
returns from AmeriSuites development have generally equaled or exceeded those
prevalent in the hotel acquisition markets. Since January 1, 1996 the Company
has opened 22 new AmeriSuites hotels, bringing the number of AmeriSuites owned
and operated by the Company to 41.
Full-Service Hotels
The Company operates 31 upscale full-service hotels with food service and
banquet facilities under franchise agreements with Marriott, Radisson, Sheraton,
Crowne Plaza, Holiday Inn, Ramada and Howard Johnson. The full-service hotels
are concentrated in the Northeast. 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 full-service hotels consists primarily of business travelers.
Consequently, 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. In addition,
the Company's sales force actively markets meeting and banquet services to
groups and individuals for seminars, business meetings, holiday parties and
weddings. The hotels are also marketed through national franchisor programs and
central reservation systems.
The Company's full-service hotels generally have between 150 and 300 rooms
and pool, restaurant, lounge, banquet and meeting facilities. Other amenities
include fitness rooms, room service, remote-control cable television and
facsimile services. In order to enhance guest satisfaction, the Company also has
theme concept lounges in a number of its hotels. In recent years, the Company
has received recognition from various franchisors and associations for its hotel
quality and service.
The Company owns and operates one resort hotel, the 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 system. Certain of these facilities suffered hurricane damage as
described in the following paragraph. 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 market includes tour groups,
corporate meetings, conventions and individual vacationers.
In September 1995, the Frenchman's Reef suffered hurricane damage when
Hurricane Marilyn struck the U.S. Virgin Islands. In 1996, the Company and its
insurance carrier settled the Company's property and business interruption
insurance claim for $25.0 million. In addition, in July 1996, Hurricane Bertha
struck the island and caused further damage to the island. The Company is
currently reviewing its claim for property damage with its insurance carrier.
The Company is currently underway with plans to refurbish and upgrade the
Frenchman's Reef. In addition to hurricane-related renovations, the plan
provides for structural enhancements, redesigned guestrooms, increased banquet
and meeting space and new landscaping. The Company estimates that the cost of
refurbishment will be approximately $30.0 million. The Company has continued to
operate the hotel. However, due to the extent of the renovations and the
additional damage caused by Hurricane Bertha, the Company closed the hotel in
April 1997 and plans to reopen the hotel in December 1997, although there can be
no assurance that the Frenchman's Reef will reopen at such time or that the cost
of refurbishment will not exceed the Company's estimate. The Company does not
believe that the closing of the Frenchman's Reef will have a material impact on
its cash flow due to the seasonality of the hotel's operations and its business
interruption insurance.
The following table sets forth for the five years ended December 31, 1996,
operating data for the full-service hotels in the Company's portfolio as of
December 31, 1996. For purposes of showing operating trends, the results of the
Frenchman's Reef, which were impacted by hurricane damage, have been excluded
from the table. Operating data for the hotels built or acquired during the
period are presented from the dates such hotels commenced operations or became
Owned Hotels. For purposes of showing operating trends, the results of nine
Owned Hotels that were managed by the Company prior to their acquisition by the
Company during
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the five-year period are presented as if they had been Owned Hotels from the
dates the Company began managing the hotels.
<TABLE>
<CAPTION>
OWNED TOTAL
------------------------------- -------------------------------
HOTELS ROOMS HOTELS ROOMS
--------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
1992......... 18 3,284 28 5,532
1993......... 18 3,284 29 5,647
1994......... 19 3,639 30 6,002
1995......... 20 3,788 31 6,151
1996......... 20 3,788 31 6,151
</TABLE>
<TABLE>
<CAPTION>
OCCUPANCY ADR REVPAR OCCUPANCY ADR REVPAR
--------- ------ ------ --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
1992......... 66.1% $67.58 $44.64 67.5% $67.29 $45.45
1993......... 68.0 69.57 47.29 69.4 69.04 47.90
1994......... 67.2 75.31 50.64 69.0 74.31 51.27
1995......... 65.9 78.06 51.46 68.7 77.49 53.21
1996......... 69.9 85.74 59.93 72.4 83.89 60.77
</TABLE>
The Company has taken advantage of opportunities for acquisitions of
full-service hotels at attractive multiples of cash flow or at significant
discounts to replacement values. In 1996, the Company acquired the 151 room
Ramada Plaza Suites in Secaucus, NJ and repositioned the hotel as a Radisson
Suite hotel. In February 1997, the Company acquired the 150-room Holiday Inn in
Monroe Township, NJ.
The majority of the Company's repositioning efforts have been performed at
the full-service hotels. Since 1994, the Company successfully completed the
repositioning of 13 of its full-service hotels which included changing the
franchise affiliations of 6 such hotels. The Company recently completed the
repositioning of the Hasbrouck Heights, NJ Sheraton Hotel to a Crowne Plaza.
Limited-Service Hotels
The Company's limited-service hotels consist of 28 Wellesley Inns and seven
other hotels operated under franchise agreements, primarily with Howard Johnson.
On March 6, 1996, the Company acquired 18 hotels consisting of 16 Wellesley Inns
and two other limited-service hotels for approximately $65.1 million in cash.
The acquisition enabled the Company to establish full control over its
proprietary Wellesley Inns brand with all 28 Wellesley Inns owned and operated
by the Company. The acquisition provides the Company with significant new
opportunities to maximize the value of its brand.
Of the Company's 28 Wellesley Inns, 18 are located in Florida and the
remainder in the Middle Atlantic and Northeast United States. The prototypical
Wellesley Inn has 105 rooms and is distinguished by its classic stucco exterior,
spacious lobby and amenities such as pool facilities, complimentary continental
breakfast, remote control cable television and facsimile services. In connection
with the acquisition of the 16 Wellesley Inns, the Company has refurbished five
of these hotels and completed renovations on nine other hotels in March 1997 to
ensure consistent product quality throughout the chain. Marketing efforts for
the Wellesley Inns chain will continue to rely heavily on direct marketing and
billboard advertising. In addition, the Wellesley Inns, along with the Company's
AmeriSuites, are marketed under the new reservation system developed by Anasazi
Travel Resources, Inc. In Florida, where the population has grown rapidly and
development opportunities continue to exist, the Company has built a
geographically concentrated group of Wellesley Inns, thereby developing regional
brand name recognition in Florida. The majority of the Florida Wellesley Inns
were constructed within the past five years.
The Company's other limited-service hotels 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. In accordance with its strategy, the
Company expects to divest a number of these hotels within the next several
years.
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The following table sets forth for the five years ended December 31, 1996
operating data for the limited-service hotels as of December 31, 1996. Operating
data for the Owned Hotels built or acquired during the period are presented from
the dates such hotels commenced operations or became Owned Hotels. For purposes
of showing operating trends, the results of 16 Owned Hotels that were managed by
the Company prior to their acquisition by the Company are presented as if they
had been Owned Hotels from the dates the Company began managing the hotels.
<TABLE>
<CAPTION>
OWNED TOTAL
------------------------------- -------------------------------
HOTELS ROOMS HOTELS ROOMS
--------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
1992......... 31 3,054 32 3,203
1993......... 33 3,299 34 3,448
1994......... 35 3,509 38 3,943
1995......... 35 3,509 38 3,943
1996......... 35 3,509 38 3,943
</TABLE>
<TABLE>
<CAPTION>
OCCUPANCY ADR REVPAR OCCUPANCY ADR REVPAR
--------- ------ ------ --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
1992......... 74.7% $44.83 $33.49 74.0% $44.86 $33.21
1993......... 77.1 45.69 35.22 76.4 45.71 34.90
1994......... 73.8 47.77 35.27 73.0 47.47 34.67
1995......... 74.6 51.01 38.04 74.0 50.73 37.54
1996......... 72.6 53.13 38.59 72.7 53.43 38.87
</TABLE>
OPERATIONS
As a leading domestic hotel operating company, the Company enjoys a number
of operating advantages over other lodging companies. With 107 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 averages for 1995,
the most current data available from industry sources, by approximately 3% for
all-suites hotels, 16% for full-service hotels and 4% for limited-service
hotels.
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. The on-site hotel management teams
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 a fair value. 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 is located in Fairfield, New Jersey, with an
AmeriSuites office in Atlanta, Georgia. Central management 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 to 30 hotels. They are supported by training, food and beverage
and human resources departments, each staffed full-time by specialized
professionals. The cornerstone of
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<PAGE> 56
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 central management has 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 the hotels that it has acquired.
Sales and Marketing Management. 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
national sales group, Market Segments, Inc. ("MSI"). In cooperation with the
regional marketing staff, on-site sales management develops and implements
shortand 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. The Company is in the process of
initiating a new internally developed proprietary yield management system which
will be implemented in all of the Company's hotels. 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
develops 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 hotels 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.
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.
The technical support staff is currently implementing digital telecommunications
conversions and call accounting system upgrades in all of the Company's hotels.
Additionally, the Company directs safety/risk management activities and provides
central legal services.
REFURBISHMENT PROGRAM
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 five years old or less. The Company recommends the
refurbishment and repair projects on its Managed Hotels although spending
amounts vary based on the plans of such hotels' owners and the significance of
the Company's interest as a mortgagee.
In addition to making normal capital improvements, the Company reviews on
an on-going basis each hotel's competitive position in the local market in order
to decide the types of product that will best meet the market's demand
characteristics. During the past three years, the Company has implemented a
program of
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<PAGE> 57
repositioning its Owned Hotels. Repositioning a hotel generally requires
renovation and refurbishment of the exterior and interior of the building and
may result in a change of brand name. In 1994, 1995 and 1996, the Company spent
$8.9 million, $13.7 million and $16.8 million respectively, on the repositioning
of 34 of its Owned Hotels, which included changing the franchise affiliation of
12 of such hotels. In 1996, the Company completed the repositioning of the
Hasbrouck Heights Crowne Plaza and five of the recently acquired Wellesley Inns.
The Company intends to spend approximately $7.0 million in 1997 relating to the
refurbishing of nine other recently acquired Wellesley Inns and the Monroe
Township Holiday Inn.
MORTGAGES AND NOTES RECEIVABLE
As of December 31, 1996, mortgages and notes receivable totaled $25.5
million (including the current portion) and consisted primarily of an aggregate
principal amount of $8.6 million of mortgages and notes secured by Managed
Hotels and $13.6 million of mortgages secured by hotels that are leased by the
Company from third parties. The Company has pursued a strategy of converting its
mortgage and notes receivable into cash or operating hotel assets and has
received $54.8 million in cash and added five operating hotel assets through
note settlements over the past three years. In 1996, the Company obtained
control of the 210-room Howard Johnson Hotel in Cocoa Beach, FL and the 204-room
Radisson Hotel in Fairfield, NJ by converting these mortgage notes receivable
into operating hotel assets. See Note 6 to Consolidated Financial Statements.
MANAGEMENT AGREEMENTS
As of March 31, 1997, the Company provided hotel management services to
third party hotel owners of 13 Managed Hotels. Management fees are based on
fixed percentages of the property's total revenues and incentive payments based
on certain measures of hotel income. Additional fees are also generated from the
rendering of specific services such as accounting services, construction
services, design services and sales commissions. The Company's fixed management
fee percentages range from 2.0% to 5.0% and average 3.5% of total revenues
before giving consideration to performance related incentive payments. The base
and incentive fees comprised 58.5%, or $3.9 million, of the total management and
other fees for 1996. Terms of the management agreements vary but the majority
are short-term and, therefore, there are risks associated with termination of
these agreements. Although management agreements may be terminated in connection
with a change in ownership of the underlying hotels, such risks may be limited
due to the Company's other financial interests in these hotels. The Company
holds financial interests in the form of mortgages or profit participations in 8
of the 13 Managed Hotels.
FRANCHISE AGREEMENTS
The Company enters into non-exclusive franchise licensing agreements with
franchisors, which agreements typically have a ten year term and allow the
Company to benefit from franchise brand recognition and loyalty. The
nonexclusive 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. This
flexibility also plays an important role in the Company's repositioning
strategy, which emphasizes proper positioning of its properties within their
respective markets to maximize their return on investment. Over the past three
years, the Company has repositioned several hotels. These repositionings include
the Portland, Oregon Crowne Plaza (formerly Howard Johnson), the Las Vegas,
Nevada Crowne Plaza (formerly Howard Johnson), the Fairfield, New Jersey
Radisson (formerly Sheraton), the Orlando, Florida Shoney's Inn (formerly Howard
Johnson), the Trevose, Pennsylvania Radisson (formerly Ramada), the Princeton,
New Jersey Holiday Inn (formerly Ramada) and the Hasbrouck Heights Crowne Plaza
(formerly Sheraton) and the Secaucus, New Jersey Radisson Suite hotel (formerly
Ramada Plaza). The Company believes its relationships with numerous nationally
recognized franchisors provides significant benefits for both its existing hotel
portfolio and prospective hotel acquisitions. While the Company currently enjoys
good relationships 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.
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
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<PAGE> 58
redecorating. The payment of annual fees, which typically total 7% to 8% of room
revenues, cover royalties and the costs of marketing and reservation services
provided by the franchisors. Franchise agreements, when initiated, generally
provide for an initial fee in addition to annual fees payable to the franchisor.
LITIGATION
The Company currently and from time to time is involved in litigation
arising in the ordinary course of its business. The Company does not believe
that it is involved in any litigation that will, individually or in the
aggregate, have a material adverse effect on its financial condition or results
of operations or cash flows.
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<PAGE> 59
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 POSITIONS
--------------------------- --- ------------------------------------------------------
<S> <C> <C>
David A. Simon............. 44 President, Chief Executive Officer and Chairman of the
Board of Directors
John M. Elwood............. 42 Executive Vice President, Chief Financial Officer and
Director
Howard M. Lorber(1)........ 48 Director
Herbert Lust, II(1)........ 70 Director
Jack H. Nusbaum............ 56 Director
Allen J. Ostroff(1)........ 60 Director
A.F. Petrocelli(1)......... 53 Director
Paul H. Hower.............. 62 Executive Vice President
Timothy E. Aho............. 53 Senior Vice President/Development
Denis W. Driscoll.......... 52 Senior Vice President/Human Resources
John H. Leavitt............ 44 Senior Vice President/Sales and Marketing
Joseph Bernadino........... 50 Senior Vice President, Secretary and General Counsel
Richard T. Szymanski....... 39 Vice President and Corporate Controller
Douglas W. Vicari.......... 37 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 Directors of the Company since 1993. Mr.
Simon was Chief Executive Officer and a director of PMI during 1992.
John M. Elwood has been a Director and Executive Vice President of the
Company since 1992 and Chief Financial Officer since 1993. Mr. Elwood was the
Director of Reorganization of PMI during 1992.
Howard M. Lorber has been a Director and a member of the Compensation and
Audit Committee since 1994. Mr. Lorber is Chairman of the Board of Directors of
Nathan's Famous, Inc. and Hallman & Lorber Associates, Inc. and a director of
New Valley Corporation, United Capital Corp. and Alpine Lace Brands, Inc. Mr.
Lorber has been Chief Executive Officer of Hallman & Lorber Associates, Inc. for
more than the past five years, President and Chief Operating Officer of New
Valley Corporation since 1994 and Chief Executive Officer of Nathan's Famous,
Inc. since 1993. Mr. Lorber has also been a general partner or shareholder of a
corporate general partner of various limited partnerships organized to acquire
and operate real estate properties.
Herbert Lust, II has been a Director since 1992 and Chairman of the
Compensation and Audit Committee of the Company since 1993. Mr. Lust was a
member of the Committee of Unsecured Creditors of PMI through 1992. Mr. Lust has
been a private investor and President of Private Water Supply Inc. for more than
the past five years. Mr. Lust is a director of BRT Realty Trust.
Jack H. Nusbaum has been a Director since 1994. Mr. Nusbaum is the Chairman
of the law firm of Willkie Farr & Gallagher, where he has been a partner for
more than the past twenty-five years. He also is a director of Pioneer
Companies, Inc., W.R. Berkley Corporation, Strategic Distribution, Inc., The
Topps Company, Inc. and Fine Host Corporation.
Allen J. Ostroff has been a Director since 1992 and a member of the
Compensation and Audit Committee since 1993. Mr. Ostroff has been a Managing
Director of the Prudential Realty Group, a
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<PAGE> 60
subsidiary of The Prudential Insurance Company of America, since June 1994 and
was a Senior Vice President of the Prudential Realty Group from 1992 to June
1994.
A.F. Petrocelli has been a Director since 1992 and a member of the
Compensation and Audit Committee since 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. He is also a director of Nathan's
Famous, Inc.
Paul H. Hower has been an Executive Vice President of the Company since
1993. Mr. Hower was President of Integrity Hospitality Services from 1991 to
1993 and prior to such time was Vice President and Hotel Division Manager of
B.F. Saul Co.
Timothy E. Aho has been a Senior Vice President of the Company since 1994.
Mr. Aho was a Senior Vice President of Development for Boykin Management Company
from 1993 to 1994 and Vice President of Development for Interstate Hotels
Corporation from 1992 to 1993.
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 1992 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 during 1992 and a Senior Vice
President of Medallion Hotel corporation prior to such time.
Joseph Bernadino has been Senior Vice President, Secretary and General
Counsel of the Company since 1992. Mr. Bernadino was an Assistant Secretary and
Assistant General Counsel of PMI during 1992.
Richard T. Szymanski has been a Vice President and Corporate Controller of
the Company since 1992. Mr. Szymanski was Corporate Controller of PMI during
1992.
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.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
REVOLVING CREDIT FACILITY
On June 28, 1996, the Company established a Revolving Credit Facility with
a group of financial institutions providing for availability of funds up to the
lesser of $100.0 million or a borrowing base determined under the agreement. The
Revolving Credit Facility is secured by certain of the Company's hotels with
recourse to the Company. Additional hotels may be added or substituted subject
to the approval of the lenders. The Revolving Credit Facility bears interest at
LIBOR plus 2.25% and is available through June 2001. The Revolving Credit
Facility contains covenants requiring the Company to maintain certain financial
ratios and also contains covenants which limit the incurrence and payment of
debt, liens, dividend payments, stock repurchases, certain investments,
transactions with affiliates, asset sales, mergers and consolidations and any
change of control of the Company. The aggregate amount of the Revolving Credit
Facility will be reduced to $87.0 million on June 28, 1999 and $75.0 million on
June 28, 2000. On June 28, 1996, the Company borrowed $40.0 million under the
Revolving Credit Facility and the proceeds were used to retire $20.0 million of
interim financing with the remainder utilized principally for the development of
AmeriSuites hotels. On August 5, 1996, the Company repaid the full amount of
this borrowing under the Revolving Credit Facility with the proceeds from the
issuance of Common Stock. As of December 31, 1996, the Company had borrowed
$12.5 million under the Revolving Credit Facility. The Company borrowed an
additional $63.1 million through March 31, 1997 and subsequently retired all
borrowings under the Revolving Credit Facility with a portion of the net
proceeds from the Initial Offering. As of March 31, 1997, the Company had $100.0
million available under the Revolving Credit Facility.
9 1/4% FIRST MORTGAGE NOTES DUE 2006
In January 1996, the Company issued $120.0 million of First Mortgage Notes
due January 15, 2006. Under certain circumstances, the Company may issue up to
an additional $80.0 million of First Mortgage Notes, although the Company has no
present intention to do so. The First Mortgage Notes bear interest at 9.25% per
annum with interest payment dates on January 15 and July 15. The First Mortgage
Notes are secured by 15 of the Company's hotels and related real and personal
property. The First Mortgage Notes are redeemable, in whole or in part, at the
option of the Company on or after January 15, 2001 at redemption prices
(expressed as a percentage of the principal amount) declining annually over a
three-year period from 104.625% to 100.000%, together with accrued and unpaid
interest, if any, to the redemption date. In addition, prior to January 15,
1999, the Company may redeem, on any one or more occasions, with the net cash
proceeds of any public offering of its common stock, up to $30.0 million in
aggregate principal amount of the First Mortgage Notes at a redemption price
equal to 109.25% of the principal amount of such First Mortgage Notes plus
accrued and unpaid interest thereon, if any, to the redemption date; provided,
however, that at least $100.0 million in principal amount of the First Mortgage
Notes must remain outstanding immediately following any such redemption. If a
Change of Control (as defined in the indenture with respect to the First
Mortgage Notes) occurs, the holder of a First Mortgage Note will have the right
to require the Company to repurchase all outstanding First Mortgage Notes, in
whole or in part, owned by such holder at 101% of their principal amount plus
accrued and unpaid interest, if any, to the date of repurchase. The First
Mortgage Notes rank pari passu in right of payment to all existing and future
senior indebtedness of the Company and rank senior in right of payment to all
subordinated indebtedness of the Company. The First Mortgage Notes are not
guaranteed by any of the Company's subsidiaries. The indenture governing the
First Mortgage Notes contains certain covenants, including limitations on the
incurrence of debt, dividend payments, certain investments, transactions with
affiliates, asset sales and mergers and consolidations.
OTHER SECURED DEBT
As of March 31, 1997, as adjusted for the Initial Offering, the Company has
mortgage notes payable of approximately $56.8 million that are secured by
mortgage notes receivable and hotel properties with a book value of $87.3
million. Principal and interest on these mortgages and notes are generally paid
monthly. At March 31, 1997 these notes bear interest at rates ranging from 6.40%
to 10.50% per annum and mature from
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<PAGE> 62
1998 through 2008. Included in the Company's debt at March 31, 1997 is debt of
the Company's subsidiaries of approximately $21.8 million at rates ranging from
10.20% to 10.50% and maturing from 2000 through 2004.
7% CONVERTIBLE SUBORDINATED NOTES DUE 2002
In April 1995, the Company issued $86.3 million of 7% Convertible
Subordinated Notes due April 15, 2002. The Convertible Notes bear interest at 7%
per annum with interest payment dates on April 15 and October 15. The
Convertible Notes are convertible into common stock of the Company at any time
prior to maturity at a conversion price of $12.00 per share, subject to
adjustment in certain events. The Convertible Notes are redeemable, in whole or
in part, at the option of the Company on or after April 17, 1998 at redemption
prices (expressed as a percentage of the principal amount) declining annually
over a three-year period from 104.0% to 101.0%, together with accrued interest
to the redemption date. If a Risk Event (as defined in the indenture with
respect to the Convertible Notes) occurs, the holder of a Convertible Note will
have the right to require the Company to offer to repurchase all outstanding
Convertible Notes, in whole or in part, owned by such holder at 100% of their
principal amount plus accrued interest, if any, to the date of repurchase. The
Convertible Notes are subordinated to all existing and future senior
indebtedness of the Company, including the Notes. The Convertible Notes are not
guaranteed by any of the Company's subsidiaries. The indenture governing the
Convertible Notes does not restrict the ability of the Company or its
subsidiaries to incur additional indebtedness, including senior indebtedness.
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DESCRIPTION OF NOTES
GENERAL
The Original Notes were issued pursuant to an Indenture (the "Indenture")
dated as of March 26, 1997 between the Company and First Bank National
Association, as trustee (the "Trustee"), in a private transaction that was not
subject to the registration requirements of the Securities Act. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The Notes are subject to all such terms, and 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 and
those terms made a part of the Indenture by reference to the Trust Indenture Act
as in effect on the date of the Indenture. A copy of the Indenture and
Registration Rights Agreement may be obtained from the Company. See
"-- Additional Information." The definitions of certain terms used in the
following summary are set forth below under "-- Certain Definitions." For
purposes of this section, references to the "Company" refer only to Prime
Hospitality Corp. without including any of its Subsidiaries.
The Notes are unsecured obligations of the Company, ranking subordinate in
right of payment to all Senior Debt of the Company. See "-- Subordination." As
of March 31, 1997, after giving effect to the Initial Offering and the
application of the net proceeds therefrom, the Company had approximately $155.0
million of Senior Debt outstanding, and, in addition, Restricted Subsidiaries of
the Company had approximately $21.8 million of Indebtedness. The Indenture
permits the incurrence of additional Senior Debt in the future.
For purposes of the Indenture, the Company's Subsidiaries are divided into
two categories -- Restricted Subsidiaries, which generally are subject to the
restrictive covenants set forth in the Indenture, and Unrestricted Subsidiaries,
which generally are not. On the date of the Indenture, none of the Company's
Subsidiaries were designated as an Unrestricted Subsidiary. None of the
Company's Restricted Subsidiaries is presently required to guarantee the Notes,
although under certain future circumstances the Company may be required to cause
one or more Restricted Subsidiaries to guarantee the Notes on a subordinated
basis. See "-- Subsidiary Guarantees." Subsidiaries that are properly designated
and maintained as Unrestricted Subsidiaries by the Company will not be required
to guarantee the Notes under any circumstances.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $200,000,000, and
will mature on April 1, 2007. Interest on the Notes accrues from the respective
date of issuance and is payable semi-annually in arrears in cash on April 1 and
October 1 of each year, commencing on October 1, 1997, at the rate of 9 3/4% per
annum to Holders of record on the immediately preceding March 15 and September
15. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the respective
date of issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal of and premium, interest and
Liquidated Damages, if any, on the Notes will be payable at the office or agency
of the Company maintained for such purpose or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holder of Notes; provided that all payments with respect to Notes the Holders of
which have given wire transfer instructions to the Company will be required to
be made by wire transfer of immediately available funds to the accounts
specified by the Holders thereof. Until otherwise designated by the Company, the
Company's office or agency will be the office of the Trustee maintained for such
purpose. The Notes are issued in denominations of $1,000 and integral multiples
thereof.
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OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to April 1,
2002. 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 and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on April 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---------------------------------------- ----------
<S> <C>
2002.................................... 104.875%
2003.................................... 103.250%
2004.................................... 101.625%
2005 and thereafter..................... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to April 1, 2000, the Company may
redeem, on any one or more occasions, with the net cash proceeds of one or more
public offerings of its common equity (a "Public Equity Offering") (within 60
days of the consummation of any such Public Equity Offering), up to 35% of the
aggregate principal amount of the Notes at a redemption price equal to 109.75%
of the principal amount of such Notes plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the redemption date; provided, however,
that at least 65% of the aggregate principal amount of Notes originally issued
remains outstanding immediately after any such redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full in cash or
Cash Equivalents of all Obligations on Senior Debt, whether outstanding on the
Issuance Date or thereafter incurred. Upon any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors or marshalling of assets
of the Company or in a bankruptcy, reorganization, insolvency, receivership or
other similar proceeding relating to the Company or its property, whether
voluntary or involuntary, all Obligations due upon all Senior Debt shall first
be paid in full in cash or Cash Equivalents, or such payment shall be duly
provided for to the satisfaction of the holders of Senior Debt, before any
payment or distribution of any kind or character is made on account of any
Obligations on the Notes, or for the acquisition by the Company or any of its
Subsidiaries of any of the Notes for cash or property or otherwise, and, until
all Obligations with respect to Senior Debt are paid in full in cash or Cash
Equivalents, any distribution to which the Holders would be entitled shall be
made to the holders of Senior Debt (except that Holders of Notes may receive
Permitted Junior Securities and payments made from the trust described under
"-- Legal Defeasance and Covenant Defeasance" and "-- Satisfaction and
Discharge").
If any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any Senior Debt, no payment of any kind
or character shall be made by or on behalf of the Company or any other Person on
its behalf with respect to any Obligations on the Notes or to acquire any of the
Notes for cash or property or otherwise (except that Holders of Notes may
receive Permitted Junior Securities and payments made from the trust described
under "-- Legal Defeasance and Covenant Defeasance" and "-- Satisfaction and
Discharge"). In addition, if any other event of default occurs and is continuing
with respect to any Designated Senior Debt, as such event of default is defined
in the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default
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to the Trustee (a "Default Notice"), then, unless and until all events of
default have been cured or waived or have ceased to exist or the Trustee
receives notice from the Representative for the respective issue of Designated
Senior Debt terminating the Blockage Period (as defined below), during the 179
days after the delivery of such Default Notice (the "Blockage Period"), neither
the Company nor any of its Subsidiaries shall (x) make any payment of any kind
or character with respect to any Obligations on the Notes (except that Holders
of Notes may receive Permitted Junior Securities and payments made from the
trust described under "-- Legal Defeasance and Covenant Defeasance" and
"-- Satisfaction and Discharge") or (y) acquire any of the Notes for cash or
property or otherwise. Notwithstanding anything herein to the contrary, in no
event will a Blockage Period extend beyond 179 days from the date the payment on
the Notes was due and only one such Blockage Period may be commenced within any
365 consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Designated
Senior Debt shall be, or be made, the basis for commencement of a second
Blockage Period by the Representative of such Designated Senior Debt whether or
not within a period of 365 consecutive days, unless such event of default shall
have been cured or waived for a period of not less than 90 consecutive days (it
being acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously existed or
was continuing shall constitute a new event of default for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the Holders of the Notes, may recover less ratably than holders of Senior Debt.
As of March 31, 1997, after giving effect to the Offering and the application of
the net proceeds therefrom, the Company had approximately $155.0 million of
Senior Debt outstanding.
None of the Company's Subsidiaries is presently required to guarantee the
Notes, although under certain future circumstances the Company may be required
to cause one or more Restricted Subsidiaries to guarantee the Notes on a
subordinated basis. The Indebtedness represented by any such Guarantee (i.e.,
the payment of Obligations on the Notes) will be subordinated on the same basis
to Senior Debt of the Guarantor as the Notes are subordinated to Senior Debt of
the Company.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
The Indenture provides that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
to the date of purchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Debt the terms of
which require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit Agreement and
all other such Senior Debt and to repay the Indebtedness owed to each lender or
holder of Senior Debt which has accepted such offer or (ii) obtain the requisite
consents under the Credit Agreement and all other Senior Debt to permit the
repurchase of the Notes as provided below. The Company shall first comply with
the covenant in the immediately preceding sentence before it shall be required
to repurchase Notes pursuant to the provisions described below and the Company's
failure to comply with the covenant described in the immediately preceding
sentence shall constitute an Event of Default described in clause (iii) and not
in clause (ii) under "-- Events of Default" below.
Within 30 days following the date upon which the Change of Control
occurred, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required
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by law (the "Change of Control Payment Date"). Holders electing to have a Note
purchased pursuant to a Change of Control Offer will 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 Trustee or Paying Agent, if any, at the
address specified in the notice prior to the close of business on the third
business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. The Credit Agreement prohibits the purchase
of Notes by the Company in the event of a Change of Control, unless and until
such time as the Indebtedness under the Credit Agreement is repaid in full, and
the First Mortgage Notes indenture requires that the Company offer to repurchase
the First Mortgage Notes in the event of a change of control (as defined
therein). See "Risk Factors -- Change of Control." 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.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder s right to require purchase of its Notes upon a
Change of Control and the Change of Control purchase feature of the Notes may
not be amended or waived without the consent of at least 66 2/3% in principal
amount of the Notes then outstanding. Restrictions in the Indenture described
herein on the ability of the Company and its Restricted Subsidiaries to incur
additional Indebtedness, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or purchase of the
Notes, and there can be no assurance that the Company or the acquiring party
will have sufficient financial resources to effect such redemption or purchase.
Such restrictions and the restrictions on transactions with Affiliates may, in
certain circumstances, make more difficult or discourage any leveraged buyout of
the Company or any of its Subsidiaries by the management of the Company. While
such restrictions cover a wide variety of arrangements which have traditionally
been used to effect highly leveraged transactions, the Indenture may not afford
the Holders of Notes protection in all circumstances from the adverse aspects of
a highly leveraged transaction, reorganization, restructuring, merger or similar
transaction.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Notes to require the Company to repurchase such Notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of the Company to another person may be uncertain.
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
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
Asset Sales
The Indenture provides 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 of the assets
sold or otherwise disposed of (evidenced by a resolution of the Board of
Directors set forth in an officers certificate delivered to the Trustee) and (y)
at least 75% 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
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or any Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes or any Guarantee thereof) that are assumed or forgiven
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, the restriction in clause (y) above will not
apply with respect to mortgages or other notes receivable received by the
Company or any Restricted Subsidiary from a transferee of any assets to the
extent such mortgages or other notes receivable are Restricted 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 prepay any
Indebtedness that ranks by its terms senior to the Notes (or any Guarantee
thereof) and, in the case of any Indebtedness under a revolving Credit Facility,
to effect a permanent reduction in the amount of Indebtedness that may be
incurred pursuant to clause (ii) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Certain Capital Stock," 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 its 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 an 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 $20.0 million,
the Company shall make an offer, to all Holders of Notes and other Indebtedness
that ranks by its terms pari passu in right of payment with the Notes and the
terms of which contain substantially similar requirements with respect to the
application of net proceeds from asset sales as are contained in the Indenture
(an "Asset Sale Offer") to purchase on a pro rata basis 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 and Liquidated
Damages thereon, 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 and other such Indebtedness 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 available for purchase
thereof, the Trustee shall select the Notes to be purchased in the manner
described under the caption "-- Selection and Notice" below. 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
Indebtedness of the Company or a Restricted Subsidiary that is a Guarantor that
ranks by its terms senior to the Notes (or any Guarantee thereof) or otherwise
invest such Net Proceeds in Cash Equivalents. The Credit Agreement generally
prohibits the purchase of Notes by the Company in the circumstances described
above unless and until such time as the indebtedness under the Credit Agreement
is repaid in full.
The Company will comply, to the extent applicable, with the requirements of
Rule 14e-1 under the Exchange Act and other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with any offer to purchase and the purchase of Notes as described above. To the
extent that the provisions of any securities laws or regulations conflict with
the "Asset Sale" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
SELECTION AND NOTICE
In the event that 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
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appropriate, provided that no Notes of a principal amount of $1,000 or less
shall be redeemed in part, provided, further, that if a partial redemption is
made with the proceeds of a public offering by the Company of common equity
securities, selection of the Notes or portions thereof for redemption shall be
made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as
is practicable (subject to procedures of The Depository Trust Company), unless
such method is otherwise prohibited.
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 as long as the Company has deposited
with the Trustee funds in satisfaction of the applicable redemption price
pursuant to the Indenture.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Restricted Payments. The Indenture provides 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 (other than
Disqualified Stock) of the Company; or (2) dividends or distributions by a
Restricted Subsidiary of the Company, provided that to the extent that a portion
of such dividend or distribution is paid to a holder of Equity Interests of a
Restricted Subsidiary other than the Company or a Restricted Subsidiary, such
portion of such dividend or distribution is not greater than such holder's pro
rata aggregate common equity interest in such Restricted Subsidiary); (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 (A) any Equity Interests owned by the Company or any Wholly Owned
Restricted Subsidiary of the Company and (B) pursuant to transactions otherwise
constituting Permitted Investments hereunder); (iii) purchase, redeem or
otherwise acquire or retire for value any Indebtedness of the Company or any
Restricted Subsidiary that is subordinated or junior in right of payment, by its
terms, to the Notes or any Guarantee thereof prior to the scheduled final
maturity or sinking fund payment dates for payment of principal and interest in
accordance with the original documentation for such subordinated or junior
Indebtedness; 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 Charge Coverage Ratio test set forth in the covenant described
under the caption "-- Incurrence of Indebtedness and Issuance of Certain
Capital"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv) and (v) of the next succeeding paragraph), is
less than the sum, without duplication, of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period) from
January 1, 1996 to the end of the Company's most recently ended fiscal
quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by the Company from the issue or sale,
in either case, since January 23, 1996, of either (A) Equity Interests of
the Company or of (B) debt securities of
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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 (iii) in case any Unrestricted Subsidiary
has been redesignated a Restricted Subsidiary and becomes a Guarantor
pursuant to the terms of the Indenture or has been merged, consolidated or
amalgamated with or into, or transfers or conveys assets to, or is
liquidated into, the Company or a Restricted Subsidiary that is a
Guarantor, 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 (A) the book value (determined in accordance with GAAP) at the
date of such redesignation, combination or transfer of the aggregate
Investments made by the Company and its Restricted Subsidiaries in such
Unrestricted Subsidiary (or of the assets transferred or conveyed, as
applicable) and (B) the fair market value of such Investment in such
Unrestricted Subsidiary at the time of such redesignation, combination or
transfer (or of the assets transferred or conveyed, as applicable), in each
case 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 and, in each case, after deducting any Indebtedness associated
with the Unrestricted Subsidiary so designated or combined or with the
assets so transferred or conveyed, plus (iv) 100% of any dividends or
interest actually received in cash by the Company or a Restricted
Subsidiary that is a Guarantor after the Issuance Date from (A) a
Restricted Subsidiary the Net Income of which has been excluded from the
computation of Consolidated Net Income, (B) an Unrestricted Subsidiary, (C)
a Person that is not a Subsidiary or (D) a Person that is accounted for on
the equity method plus (v) $25.0 million, minus (vi) the aggregate amount
of all Restricted Payments made by the Company and its Restricted
Subsidiaries from and after January 23, 1996 and on or before the Issuance
Date. To the extent that any Restricted Investment made since January 23,
1996 is sold for cash or Cash Equivalents or otherwise liquidated or repaid
for cash after the Issuance Date, the lesser of (A) the cash return of
capital with respect to such Restricted Investment less the cost of
disposition, if any, and (B) the aggregate amount of the Investment made by
the Company or a Restricted Subsidiary in such Restricted Investment shall
not, following such sale, liquidation or repayment, be counted in the
calculation of the aggregate amount of Restricted Payments made by the
Company or its Restricted Subsidiaries for purposes of this clause (c).
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); provided that the amount of any proceeds that is utilized for such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (c) (ii) of the preceding paragraph, (iii) the defeasance, redemption,
repayment or purchase of Indebtedness of the Company or any Restricted
Subsidiary that is subordinated or junior in right of payment, by its terms, to
the Notes or any Guarantee thereof in a Permitted Refinancing; (iv) the
defeasance, redemption, repayment or purchase of Indebtedness of the Company or
any Restricted Subsidiary that is subordinated or junior in right of payment, by
its terms, to the Notes or any Guarantee thereof with the proceeds of a
substantially concurrent sale (other than to a Subsidiary of the Company) of
Equity Interests (other than Disqualified Stock) of the Company; provided that
the amount of any proceeds that is utilized for such defeasance, redemption,
repayment or purchase shall be excluded from clause (c) (ii) of the preceding
paragraph; and (v) 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 January
1, 1996; provided, however, that the aggregate price paid for all such
purchased, redeemed, acquired or retired Equity Interests shall not exceed
$1,000,000 per year on a cumulative basis since January 1, 1996; provided that,
in the case of clauses (ii) through (v) 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 (v) of
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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.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors of the Company
set forth in an officers certificate delivered to the Trustee) on the date of
the Restricted Payment of the asset(s) proposed to be transferred by the Company
or such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an officers certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this covenant were computed, which calculations may be
based upon the Company's latest available financial statements.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default or Event
of Default. For purposes of making the determination as to whether such
designation would cause a Default or Event of Default, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greatest of (x) the net book value of such Investments at the time
of such designation, (y) the fair market value of such Investments at the time
of such designation and (z) the original fair market value of such Investments
at the time they were made. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
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 Certain Capital Stock. The
Indenture provides that the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to (collectively,
"incur" and correlatively, an "incurrence" of) any Indebtedness (including
Acquired Debt), that the Company will not issue, and will not permit any of its
Restricted Subsidiaries to issue, any shares of Disqualified Stock and that the
Company will not permit any of its Restricted Subsidiaries to issue any
Preferred Stock; provided, however, that the Company or any of its Restricted
Subsidiaries may incur Indebtedness or issue shares of Disqualified Stock and
its Restricted Subsidiaries may issue Preferred 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 or Preferred Stock is issued would have been at least 2.0 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 or Preferred Stock had been issued, as the case may be, at
the beginning of such four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Indebtedness; provided, however, that if any such Indebtedness
ceases to be Non-Recourse Indebtedness of an Unrestricted Subsidiary, such
event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of the Company;
(ii) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness pursuant to the Credit Agreement in an aggregate principal
amount not to exceed $100.0 million at any one time outstanding, plus up to
an additional $50.0 million in aggregate principal amount of Indebtedness
at any one time outstanding that may be incurred from time to time,
pursuant to one or more Credit Facilities, minus the aggregate amount of
all proceeds of all sales or other dispositions of assets that have been
applied to permanently reduce the outstanding amount of such Indebtedness
pursuant to clause (a) of
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the second paragraph of the covenant described under the caption
"-- Repurchase at the Option of Holders -- Asset Sales;"
(iii) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(iv) 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 or required by the terms of the Credit Agreement to be
outstanding;
(v) 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;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly Owned Restricted Subsidiaries; provided, however, that
(a) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than a Wholly Owned
Restricted Subsidiary and (b) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Wholly Owned
Restricted Subsidiary shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;
(vii) the incurrence of Indebtedness represented by the Notes and any
Guarantee thereof;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries, in the ordinary course of business and consistent with past
practice, of Indebtedness to secure performance bonds not to exceed $15.0
million at any one time outstanding; or
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any
other clause of this paragraph) in an aggregate principal amount at any
time outstanding not to exceed $10.0 million; provided that the net
proceeds of such Indebtedness are used to finance the renovation or
refurbishment of properties owned by the Company or a Restricted Subsidiary
which are employed in a Hospitality-Related Business.
In the event any Restricted Subsidiary of the Company becomes a guarantor
of Indebtedness of the Company pursuant to any provisions of such Indebtedness
causing such Guarantee to arise subsequent to incurrence of the underlying
Indebtedness in a manner similar to that provided for in the Indenture, such
Guarantee shall not be deemed a separate incurrence of the underlying
Indebtedness, provided that the underlying Indebtedness is either (i) Existing
Indebtedness or (ii) permitted to be incurred under the terms of the Indenture
when first incurred.
Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides 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
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) sell, lease or 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
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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 this clause (c) 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.
Prohibition on Incurrence of Senior Subordinated Debt. The Indenture
provides that (i) the Company will not incur, issue, assume or otherwise become
liable for any Indebtedness that is senior in right of payment to the Notes and
subordinate or junior in right of payment to any other Indebtedness of the
Company and (ii) no Guarantor will incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is senior in right of payment
to the Guarantee by such Guarantor of the Notes and subordinate or junior in
right of payment to any other Indebtedness of the Guarantor.
Merger, Consolidation or Sale of Assets. The Indenture provides 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 described under the caption "-- Incurrence of Indebtedness
and Issuance of Certain Capital Stock."
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 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 provides 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, (b) the Company delivers to the
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Trustee (i) with respect to any Affiliate Transaction involving aggregate
payments in excess of $5.0 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 nonemployee members
of the Board of Directors and (ii) with respect to any Affiliate Transaction
involving aggregate payments in excess of $10.0 million (other than an Affiliate
Transaction involving the acquisition or disposition of a hotel by the Company
or a Restricted Subsidiary of the Company), 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
a Qualified Appraiser and (c) the Company delivers to the Trustee in the case of
an Affiliate Transaction involving the acquisition or disposition of a hotel by
the Company or a Restricted Subsidiary of the Company and (x) involving
aggregate payments of less than $25.0 million, an appraisal by a Qualified
Appraiser to the effect that the transaction is being undertaken at fair market
value or (y) involving aggregate payments of $25.0 million or more, an opinion
as to the fairness of the transaction to the Company or such Restricted
Subsidiary from a financial point of view issued by an investment banking firm
of national standing; provided, however, that the following shall not be deemed
Affiliate Transactions: (A) 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,
(B) transactions between or among the Company and/or its Wholly Owned Restricted
Subsidiaries or any Guarantor, (C) the incurrence of fees in connection with the
provision of hotel management services, provided that such fees are paid in the
ordinary course of business and are consistent with past practice and (D)
Restricted Payments permitted by the provisions of the Indenture described above
under the covenant described under the caption "-- Restricted Payments."
Line of Business. The Indenture provides that for so long as any Notes are
outstanding, the Company will not, and will not permit any of its Restricted
Subsidiaries to, engage in any business or activity other than a
Hospitality-Related Business.
Payments for Consent. The Indenture provides that neither the Company nor
any of its Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
of any Notes for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid or agreed to be paid to all Holders of the
Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
SUBSIDIARY GUARANTEES
As of the Issuance Date, no Subsidiary of the Company or business entity in
which the Company owns an interest was required to act as a Guarantor in respect
of the Notes. However, the Indenture provides that if (i) the Company or any
Restricted Subsidiary shall transfer or cause to be transferred, in one or a
series of related transactions, any assets (including cash or Cash Equivalents
other than pursuant to clause (e) of the definition of Permitted Investments),
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 $5.0 million to any Restricted Subsidiary that is
not a Guarantor or (ii) if the Company or any of its Restricted Subsidiaries
shall acquire or create after the Issuance Date another Restricted Subsidiary
having total assets with a fair market value in excess of $5.0 million at the
time of such acquisition or creation, the Company will cause such Restricted
Subsidiary to execute and deliver to the Trustee a supplemental indenture
pursuant to which such Restricted Subsidiary shall guarantee, on an unsecured
senior subordinated basis, all of the obligations of the Company with respect to
the Notes together with an opinion of counsel (which counsel may be an employee
of the Company) to the effect that the supplemental indenture has been duly
executed and delivered by such Restricted Subsidiary and is in compliance in all
material respects with the terms of the Indenture. The Indebtedness represented
by any such Guarantee (i.e., the payment of Obligations on the Notes) will be
subordinated on the same basis to Senior Debt of the Guarantor as the Notes are
subordinated to Senior Debt
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of the Company. The Credit Agreement generally prohibits the incurrence of any
such Guarantee unless and until such time as the indebtedness under the Credit
Agreement is repaid in full.
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity, whether or not affiliated with such Guarantor
(other than the Company or another Guarantor), unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee under the Indenture, (ii)
immediately after giving effect to such transaction, no Default or Event of
Default exists and (iii) such Guarantor, or any Person formed by or surviving
any such consolidation or merger, (A) would have Consolidated Net Worth
(immediately after giving effect to such transaction), equal to or greater than
the Consolidated Net Worth of such Guarantor immediately preceding the
transaction and (B) would be permitted by virtue of the Company's Fixed Charge
Coverage Ratio to incur, immediately after giving effect to such transaction, at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio set forth in the covenant described above under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Certain Capital Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, which sale or other disposition is otherwise
in compliance with the terms of the Indenture, 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 of the assets of such Guarantor) will be
automatically and unconditionally released and relieved of any obligations under
its Subsidiary Guarantee.
For purposes of a Guarantee with respect to the Notes, each Guarantor's
liability will be that amount from time to time equal to the aggregate liability
of such Guarantor thereunder, but shall be limited to the least of (i) the
aggregate amount of the obligations of the Company under the Notes and the
Indenture or (ii) the amount, if any, which would not have (A) rendered such
Guarantor "insolvent" (as such term is defined in the Federal Bankruptcy Code
and in the Debtor and Creditor Law of the State of New York) or (B) left it with
unreasonably small capital at the time its Guarantee with respect to the Notes
was entered into, after giving effect to the incurrence of existing Indebtedness
immediately prior to such time; provided that, it shall be a presumption in any
lawsuit or other proceeding in which a Guarantor is a party that the amount
guaranteed pursuant to the Guarantee with respect to the Notes is the amount set
forth in clause (i) above unless any creditor, or representative of creditors of
such Guarantor, or debtor in possession or trustee in bankruptcy of the
Guarantor, otherwise proves in such a lawsuit that the aggregate liability of
the Guarantor is limited to the amount set forth in clause (ii). The Indenture
provides that, in making any determination as to the solvency or sufficiency of
capital of a Guarantor in accordance with the previous sentence, the right of
such Guarantor to contribution from other Guarantors and any other rights such
Guarantor may have, contractual or otherwise, shall be taken into account.
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 submit a copy of all such
information with the Commission for public availability (unless the Commission
will not accept such a submission) and file such information with the Trustee
and make such information available to investors and securities analysts who
request it in writing. In addition, for so long as the Notes are outstanding,
the Company will continue to provide to Holders and to prospective purchasers of
Notes the information required by Rule 144(d)(4).
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EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not such payment shall be
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 at
maturity, upon redemption or otherwise (including the failure to make a payment
to purchase Notes tendered pursuant to a Change of Control Offer or an Asset
Sale Offer) (whether or not such payment shall be prohibited by the
subordination provisions of the Indenture); (iii) failure by the Company or any
Restricted Subsidiary to comply with the covenants described under the captions
"-- Repurchase at the Option of Holders -- Change of Control" (other than a
default provided for in clause (ii) above), "-- Repurchase at the Option of
Holders -- Asset Sales" (other than a default provided for in clause (ii)
above), "-- Certain Covenants -- Restricted Payments," "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Certain Capital Stock,"
"-- Certain Covenants -- Prohibition on Incurrence of Senior Subordinated Debt"
and "-- Certain Covenants -- Merger, Consolidation or Sale of Assets" and under
the penultimate paragraph under the caption "Amendments, Supplements and
Waiver," which failure continues for a period of 30 days 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 Notes then
outstanding; (iv) failure by the Company or any Guarantor 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) the failure to pay at final stated
maturity (giving effect to any applicable grace periods and any extensions
thereof) the principal amount of Non-Recourse Indebtedness of the Company or any
of its Restricted Subsidiaries with an aggregate principal amount in excess of
the lesser of (A) 10% of the total assets of the Company and its Restricted
Subsidiaries measured as of the end of the Company's most recent fiscal quarter
for which internal financial statements are available immediately prior to the
date on which such default occurred, determined on a pro forma basis, and (B)
$100 million, and such failure continues for a period of 10 days or more, or the
acceleration of the final stated maturity of any such Non-Recourse Indebtedness
(which acceleration is not rescinded, annulled or otherwise cured within 10 days
of receipt by the Company or such Restricted Subsidiary of notice of any such
acceleration); (vi) the failure to pay at final stated maturity (giving effect
to any applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness (other than Non-Recourse Indebtedness) of the Company or any
Restricted Subsidiary of the Company and such failure continues for a period of
10 days or more, or the acceleration of the final stated maturity of any such
Indebtedness (which acceleration is not rescinded, annulled or otherwise cured
within 10 days of receipt by the Company or such Restricted Subsidiary of notice
of any such acceleration) if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness
in default for failure to pay principal at final maturity or which has been
accelerated, in each case with respect to which the 10-day period described
above has passed, aggregates $10.0 million or more at any time; (vii) failure by
the Company or any of its Restricted Subsidiaries to pay final judgments
rendered against them (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
$10.0 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); (viii) 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 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; and (ix) certain events of bankruptcy or insolvency with respect to
the Company, any Guarantor or any of the Company's Subsidiaries that would
constitute a Significant Subsidiary or any group of the Company's Subsidiaries
that, taken together, would constitute a Significant Subsidiary.
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, any of its Subsidiary
that would constitute a Significant Subsidiary
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or any group of its Subsidiaries that, taken together, would constitute a
Significant Subsidiary 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 provides 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.
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 covenants described under the caption "-- Certain
Covenants -- 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, any successor Person or any Guarantor, 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 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 and the obligations of any Guarantor 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 and any Guarantor 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
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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 (other than a Default or Event of Default resulting from the
borrowing of funds applied to 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 opinion of counsel to the effect that, as of
the date of such opinion, (A) the trust funds will not be subject to any rights
of holders of Indebtedness other than the Notes and (B) assuming no intervening
bankruptcy of the Company between the date of deposit and the 91st day following
the deposit and assuming no Holder of Notes is an insider of the Company, after
the 91st day following the deposit, the trust funds will not be subject to the
effects of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors rights generally under any applicable United States or state
law; (vii) 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 (viii) 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), each stating, that all conditions precedent provided for
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of Notes)
as to all outstanding Notes when either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes that have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust) have been delivered to the
Trustee for cancellation or (b)(i) all such Notes not theretofore delivered to
the Trustee for cancellation have become due and payable by their terms or shall
have been called for redemption and the Company has irrevocably deposited or
caused to be deposited with the Trustee as trust funds in trust for such purpose
an
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amount of money sufficient to pay and discharge the entire Indebtedness on the
Notes not theretofore delivered to the Trustee for cancellation or redemption,
for the principal amount, premium and Liquidated Damages, if any, and accrued
interest to the date of such deposit; (ii) the Company has paid all other sums
payable by it under the Indenture; and (iii) the Company has delivered
irrevocable instructions to the Trustee to apply the deposited money toward the
payment of the Notes at maturity or on the redemption date, as the case may be.
In addition, the Company must deliver an officers' certificate and an opinion of
counsel stating that all conditions precedent to satisfaction and discharge have
been complied with.
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 three succeeding paragraphs of this
subsection, 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 in the
foregoing amendment and waiver provisions; or (ix) modify or change any
provision of the Indenture or the related definitions affecting the
subordination or ranking of the Notes or any Guarantee thereof in a manner which
adversely affects the Holders in any material respect. 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 covenants described under
the caption "-- Repurchase at the Option of Holders -- Change of Control" or
"Repurchase at the Option of Holders -- Asset Sales."
The Indenture provides that, without the consent of at least 75% in
aggregate principal amount of Notes outstanding, the Company will not amend,
modify or alter the Convertible Note Indenture in any way that will (i) increase
the rate of or change the time for payment of interest on any Convertible Notes,
(ii) increase the principal of, advance the final maturity date of or shorten
the Weighted Average Life to Maturity of any Convertible Notes, (iii) alter the
redemption provision or the price or terms at which the Company is required to
offer to purchase such Convertible Notes or (iv) amend the provisions of Article
Twelve of the Indenture governing the Convertible Notes which relate to
subordination.
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,
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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, consolidation or sale of assets, to release a
Guarantor in accordance with the Indenture, to make any change that would
provide any additional rights or benefits to the Holders of the Notes (including
providing for Guarantees with respect to the Notes pursuant to the covenant
described under the caption "-- 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 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 received this Prospectus may obtain a copy of the Indenture and
the Registration Rights Agreement without charge by writing to Prime Hospitality
Corp., 700 Route 46 East, P.O. Box 2700, Fairfield, New Jersey 07007-2700,
Attention: Joseph Bernadino, Esq., Senior Vice President, Secretary and General
Counsel, (201) 882-1010.
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 beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Asset Sale" means (i) the sale, lease (other than operating leases in
respect of facilities which are ancillary to the operation of the Company s or a
Restricted Subsidiary s hotel properties), 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 and including a disposition by the
Company or a Restricted Subsidiary of Equity
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Interests in an Unrestricted Subsidiary), (ii) the issuance or sale of Equity
Interests of any of the Company's Restricted Subsidiaries or (iii) any Event of
Loss, other than, with respect to clauses (i), (ii) and (iii) above, the
following: (1) the sale or disposition of personal property held for sale in the
ordinary course of business, (2) the sale or disposal of damaged, worn out or
other obsolete property in the ordinary course of business so long as such
property is no longer necessary for the proper conduct of the business of the
Company or such Restricted Subsidiary, as applicable, (3) 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, (4) the exchange of assets held by the Company or a Restricted
Subsidiary of the Company for one or more hotels and/or one or more
Hospitality-Related Businesses of any person or entity owning one or more hotels
and/or one or more Hospitality-Related Businesses; provided, that the Board of
Directors of the Company has determined that the terms of any exchange are fair
and reasonable and that the fair market value of the assets received by the
Company, as set forth in an opinion of a Qualified Appraiser, are equal to or
greater than the fair market value of the assets exchanged by the Company or a
Restricted Subsidiary of the Company, (5) any Restricted Payment, dividend or
purchase or retirement of Equity Interests permitted under the covenant
described under the caption "-- Certain Covenants -- Restricted Payments," (6)
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 captions "-- Repurchase at the Option of
Holders -- Change of Control" and "-- Certain Covenants -- Merger, Consolidation
or Sale of Assets," (7) 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 or (8) 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 $5.0 million or an Event of Loss or related series of Events of Loss
pursuant to which the aggregate value of property or assets involved in such
Event of Loss or Events of Loss is less than $5.0 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.
"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) 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, (ii) 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, (iii)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i) and (ii) entered into with any
financial institution meeting the qualifications specified in clause (ii) above,
(iv) commercial paper or commercial paper Master Notes 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, (v) money market mutual funds
that provide daily purchase and redemption features, and (vi) corporate debt
with maturities of not greater than six months and with a rating of A or the
equivalent thereof by Standard & Poor's Corporation and a rating of A2 or the
equivalent thereof by Moody's Investors Service, Inc.
"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 ownership of the
Company or the voting
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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), (iv) the merger or consolidation of the Company with or into
another corporation or the merger of another corporation into the Company with
the effect that immediately after such transaction the stockholders of the
Company immediately prior to such transaction hold less than 50% of the total
voting power of all securities generally entitled to vote in the election of
directors, managers, or trustees of the Person surviving such merger or
consolidation or (v) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors.
"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, less (e)
other income as reflected on such Person's consolidated financial statements, as
prepared in accordance with GAAP, to the extent such other income was included
in computing Consolidated Net Income. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, the depreciation and
amortization of and the interest expense of, a Restricted Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to such Person by
such Restricted Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders. Any calculation of the Consolidated Cash Flow of
an individual hotel property shall be calculated in a manner consistent with the
foregoing.
"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 Lease Obligations, 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 and
(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; 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 excluded, whether or not distributed to the
Company or one of 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
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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, (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 and (vi) the cumulative effect of change in
accounting principles shall be excluded.
"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 consolidated 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 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.
"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.
"Credit Agreement" means the revolving credit facility dated June 26, 1996
entered into between and among the Company and the lenders party thereto, Credit
Lyonnais New York branch, as documentation agent, and Bankers Trust Company, as
agent, including any related notes, security documentation, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, in each case as amended, modified, supplemental, restructured,
renewed, restated, refunded, replaced or refinanced or extended from time to
time on one or more occasions.
"Credit Facility" means the Credit Agreement and one or more borrowing
arrangements, to be entered into, by and between the Company and/or one or more
Restricted Subsidiaries and a commercial bank or other institutional lender,
including any related notes, security documentation, guarantees, collateral
documents, instruments and agreements executed in connection therewith, in each
case as amended, modified, supplemented, restructured, renewed, restated,
refunded, replaced or refinanced or extended from time to time on one or more
occasions.
"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 Debt" means (i) Indebtedness under or in respect of a
Credit Facility (ii) Indebtedness under or in respect of the Company's 9 1/4%
First Mortgage Notes due 2006, and (ii) any other Indebtedness constituting
Senior Debt which, at the time of determination, has an aggregate principal
amount of at least $25.0 million and is specifically designated in the
instrument evidencing such Senior Debt as "Designated Senior Debt" by the
Company.
"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 April 1,
2007.
"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).
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"Event of Loss" means, with respect to any property or asset (tangible or
intangible, real or personal), any of the following: (A) any loss, destruction
or damage of such property or asset or (B) any actual condemnation, seizure or
taking by the power of eminent domain or otherwise of such property or asset, or
confiscation of such property or asset or the requisition of the use of such
property or asset.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the Issuance Date (after giving effect
to the use of proceeds of the Initial Offering), excluding, for this purpose,
amounts committed for under the Credit Agreement as in effect 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 that provide
working capital in the ordinary course of business) or issues or redeems
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.
"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 obligations
or guarantee 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 such Persons that become a guarantor of the Notes
pursuant to the terms of the Indenture, and each of their respective successors.
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"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, and
convention or meeting facilities, and 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 Restricted 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.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
the Company no longer owns, directly or indirectly, greater than 50% of the
outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Common Stock of such Restricted Subsidiary
not sold or disposed of.
"Issuance Date" means the closing date for the sale and issuance of the
Original 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).
"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
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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 serving as security for
Non-Recourse Indebtedness) pursuant to any undertaking, agreement or instrument
that would constitute Indebtedness, (ii) is directly or indirectly liable (other
than in the form of a Lien on an asset serving as security for Non-Recourse
Indebtedness) 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 Junior Securities" means Equity Interest in the Company or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to a
greater extent than, the Notes are subordinated to Senior Debt pursuant to
Article 10 of the Indenture.
"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 $5.0 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) net cash advances to
Restricted Subsidiaries in the ordinary course of business and consistent with
the Company's past cash management practices in an amount not to exceed $10.0
million at any one time outstanding.
"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 subordinated or junior in
right of payment to the Notes, the Refinancing Indebtedness or Refinancing
Disqualified Stock, as the case may be, is subordinated or junior 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.
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"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.
"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 or Indebtedness permitted to be
issued pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Certain Capital Stock"
or Indebtedness referred to in clauses (iii), (v), (vii) and (ix) of the second
paragraph of such covenant.
"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 described under the caption
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Certain
Capital Stock" or Indebtedness referred to in clauses (iii), (v), (vii) and (ix)
of the second paragraph of the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Certain Capital Stock."
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of Designated Senior Debt; provided, that if, and for
so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means, in the case of the Company or any Guarantor, the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of the Company, whether
outstanding on the Issuance Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall not be senior in right of payment to the
Notes. Without limiting the generality of the foregoing, "Senior Debt" shall
also include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, (x) all Obligations of every nature of the Company under
the Credit Agreement, including, without limitation, obligations to pay
principal and interest, reimbursement obligations under letters of credit, fees,
expenses and indemnities, whether outstanding on the Issuance Date or thereafter
incurred, (y) all Hedging Obligations (including Guarantees thereof), whether
outstanding on the Issuance Date or thereafter incurred and (z) the Company's
9 1/4% First Mortgage Notes due 2006. Notwithstanding the foregoing, "Senior
Debt" shall not include (i) any Indebtedness of the Company or any Guarantor to
a Subsidiary of the Company or any Affiliate of the Company or any of such
Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of the Company or any Subsidiary of
the Company or any Guarantor (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services, (iv) any liability
for federal, state, local or other taxes owed or owing by the Company or any
Guarantor, (v) that portion of Indebtedness incurred in violation of the
Indenture provisions set forth under "-- Certain
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Covenants -- Incurrence of Indebtedness and Issuance of Certain Capital Stock,"
and (vi) any Indebtedness which is, by its express terms, subordinated in right
of payment to any other Indebtedness of the Company or any Guarantor.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"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.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a board
resolution, but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Indebtedness; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the board resolution giving effect to such designation and an
officers certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under the
caption "-- Certain Covenants -- Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Certain Capital Stock,"
the Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary, provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary, and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under the caption "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Certain Capital Stock," and (ii) no Default or Event of Default
would be in existence following such designation.
"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
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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.
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ORIGINAL NOTES REGISTRATION RIGHTS
The Company and the Initial Purchasers entered into the Registration Rights
Agreement on the Closing Date of the Initial Offering. Pursuant to the
Registration Rights Agreement, the Company agreed to file with the Commission
the Exchange Offer Registration Statement on the appropriate form under the
Securities Act with respect to the Exchange Notes. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company will offer to the Holders of
Transfer Restricted Securities (as defined below) pursuant to the Exchange Offer
who are able to make certain representations the opportunity to exchange their
Transfer Restricted Securities for Exchange Notes. If (i) the Company is not
required to file the Exchange Offer Registration Statement or permitted to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy or (ii) any Holder of Transfer Restricted
Securities notifies the Company prior to the 20th day following consummation of
the Exchange Offer that (A) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (B) that it may not resell the Exchange
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales or (C) that it is a
broker-dealer and owns Original Notes acquired directly from the Company or an
affiliate of the Company, the Company will file with the Commission a Shelf
Registration Statement to cover resales of the Original Notes by the Holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the Shelf Registration Statement. The Company will use its
best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Original Note until (i)
the date on which such Original Note has been exchanged by a person other than a
broker-dealer for an Exchange Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of an Original Note for an
Exchange Note, the date on which such Exchange Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy of
the prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Original Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Original Note may be sold pursuant to
Rule 144(k) under the Act.
The Registration Rights Agreement provides that (i) the Company will file
an Exchange Offer Registration Statement with the Commission on or prior to 30
days after the Closing Date, (ii) the Company will use its best efforts to have
the Exchange Offer Registration Statement declared effective by the Commission
on or prior to 135 days after the Closing Date, (iii) unless the Exchange Offer
would not be permitted by applicable law or Commission policy, the Company will
commence the Exchange Offer and use its best efforts to issue on or prior to 30
business days after the date on which the Exchange Offer Registration Statement
is declared effective by the Commission, Exchange Notes in exchange for all
Original Notes tendered prior thereto in the Exchange Offer and (iv) if
obligated to file the Shelf Registration Statement, the Company will use its
best efforts to file the Shelf Registration Statement with the Commission on or
prior to 30 days after such filing obligation arises and to cause the Shelf
Registration to be declared effective by the Commission on or prior to 135 days
after such obligation arises. If (a) the Company fails to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Company fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then Liquidated Damages shall accrue on the principal amount of the Original
Notes at a rate of 0.50% per annum with respect to the first 90-day period
immediately following the occurrence of such Registration Default. The amount of
the Liquidated Damages will increase by an additional 0.50% per annum with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum aggregate amount of Liquidated Damages of 1.0% per
annum on the principal amount of the Original Notes. All accrued Liquidated
Damages will be paid by the Company on each Damages Payment Date in the manner
set forth in
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"Book-Entry, Delivery and Form." Following the cure of all Registration Defaults
with respect to any Original Notes, the accrual of Liquidated Damages on such
Original Notes will cease.
Holders of Original Notes will be required to make certain representations
to the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Original Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer in exchange for the Original Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any holder which
is (i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Original Notes directly from
the Company or (iii) broker-dealers who acquired Original Notes as a result of
market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business, and such holders are not engaged in, and do not intend to engage in,
and have no arrangement or understanding with any person to participate in, a
distribution of such Exchange Notes; provided that broker-dealers
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will be subject to a prospectus delivery requirement with respect to resales of
such Exchange Notes. To date, the Staff has taken the position that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to transactions involving an exchange of securities such as the
exchange pursuant to the Exchange Offer (other than a resale of an unsold
allotment from the sale of the Original Notes to the Initial Purchasers) with
the prospectus contained in the Exchange Offer Registration Statement. Pursuant
to the Registration Rights Agreement, the Company has agreed to permit
Participating Broker-Dealers and other persons, if any, subject to similar
prospectus delivery requirements to use this Prospectus in connection with the
resale of such Exchange Notes. The Company has agreed that, for a period not to
exceed 180 days after the Exchange Date, it will make this Prospectus, and any
amendment or supplement to this Prospectus, available to any broker-dealer that
requests such documents in the Letter of Transmittal.
Each holder of the Original Notes who wishes to exchange its Original Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer -- Terms and
Conditions of the Letter of Transmittal." In addition, each holder who is a
broker-dealer and who receives Exchange Notes for its own account in exchange
for Original Notes that were acquired by it as a result of market-making
activities or other trading activities, will be required to acknowledge that it
will deliver a prospectus in connection with any resale by it of such Exchange
Notes.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such brokerdealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
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The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Original Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
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BOOK-ENTRY, DELIVERY AND FORM
The Exchange Notes initially will be represented by a single permanent
global certificate in definitive, fully registered form (the "Global Note"). The
Global Note will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York ("DTC") and registered in the name of a nominee of
DTC.
The Global Note. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Note, DTC or its
custodian will credit, on its internal system, the principal amount of Exchange
Notes of the individual beneficial interests represented by such Global Note to
the respective accounts of persons who have accounts with such depositary and
(ii) ownership of beneficial interests in the Global Note will be shown on, and
the transfer of such ownership will be effected only through, records maintained
by DTC or its nominee (with respect to interests of participants) and the
records of participants (with respect to interests of persons other than
participants). Ownership of beneficial interests in the Global Note will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants.
So long as DTC, or its nominee, is the registered owner or holder of the
Exchange Notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture. No beneficial owner of an interest in the
Global Note will be able to transfer that interest except in accordance with
DTC's procedures, in addition to those provided for under the Indenture.
Payments of the principal of, premium (if any), and interest on, the Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of the Company, the Trustee or any Paying Agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, and interest on the Global Note, will credit
participants accounts with payments in amounts proportionate to their respective
beneficial interests in the principal amount of the Global Note as shown on the
records of DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in the Global Note held through
such participants will be governed by standing instructions and customary
practice, as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. Such payments will be
the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
certificated security for any reason, including to sell Exchange Notes to
persons in states which require physical delivery of the Exchange Notes, or to
pledge such securities, such holder must transfer its interest in the Global
Note, in accordance with the normal procedures of DTC and with the procedures
set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants to whose account the DTC interests in the Global Note are credited
and only in respect of such portion of the aggregate principal amount of
Exchange Notes as to which such participant or participants has or have given
such direction. However, if there is an Event of Default under the Indenture,
DTC will exchange the Global Note for certificated securities, which it will
distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need
88
<PAGE> 93
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, certificated securities will be issued
in exchange for the Global Note.
89
<PAGE> 94
LEGAL MATTERS
Certain legal matters with respect to the legality of the Exchange Notes
offered hereby will be passed upon for the Company by Willkie Farr & Gallagher,
New York, New York. Jack H. Nusbaum, a Director of the Company who beneficially
owns 10,000 shares of Common Stock and an additional 55,000 shares of Common
Stock underlying stock options, is a partner in the law firm of Willkie Farr &
Gallagher.
EXPERTS
The consolidated financial statements included and incorporated by
reference in this Prospectus, to the extent and for the periods indicated in
their reports, have been audited by Arthur Andersen LLP, independent public
accountants, and are included herein in reliance upon the authority of said firm
as experts in giving said report.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy materials and other
information with the Commission. The reports, proxy materials 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 Citicorp
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 Commission maintains
a Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of such site is http://www.sec.gov. The Company's Common Stock, par
value $.01 per share, 9 1/4% First Mortgage Notes due 2006 and 7% Convertible
Subordinated Notes due 2002 are 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 Indenture requires the Company to file with the
Commission and provide to holders of the Notes the reports and other information
required to be filed with the Commission by the Exchange Act, whether or not the
Company is then subject to such requirements. See "Description of
Notes -- Reports."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from
Prime Hospitality Corp., 700 Route 46 East, P.O. Box 2700, Fairfield, New Jersey
07007-2700, Attention: Joseph Bernadino, Esq., Senior Vice President, Secretary
and General Counsel, (201) 882-1010. In order to ensure timely delivery of the
documents, any request should be made by , 1997 [five business days
prior to Expiration Date].
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996 and the Company's Current Report on Form 8-K dated March 7, 1997,
previously filed by the Company with the Commission, are incorporated herein by
reference.
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 Exchange 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.
90
<PAGE> 95
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, P.O. Box 2700,
Fairfield, New Jersey 07007-2700, Attention: Joseph Bernadino, Esq., Senior Vice
President, Secretary and General Counsel, (201) 882-1010.
91
<PAGE> 96
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Financial Statements:
Balance Sheets at December 31, 1995 and 1996........................................ F-3
Statements of Income for the Years Ended December 31, 1994, 1995 and 1996........... F-4
Statements of Stockholders' Equity for the Years Ended December 31, 1994, 1995 and
1996............................................................................. F-5
Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996....... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
Other schedules are omitted because of the absence of conditions under
which they are required or because the required information is given in the
consolidated financial statements or notes thereto.
Separate financial statements of 50% or less owned entities accounted for
by the equity method have been omitted because such entities considered in the
aggregate as a single subsidiary would not constitute a significant subsidiary.
F-1
<PAGE> 97
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, 1995 and 1996 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. 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, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 28, 1997
F-2
<PAGE> 98
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 49,533 $ 15,997
Marketable securities available for sale............................. 11,929 238
Restricted cash...................................................... 8,973 2,637
Accounts receivable, net of reserves of $213 and $420
in 1995 and 1996, respectively.................................... 13,139 12,653
Current portion of mortgages and notes receivable.................... 1,533 1,338
Other current assets................................................. 8,070 11,228
-------- --------
Total current assets.............................................. 93,177 44,091
Property, equipment and leasehold improvements, net of accumulated
depreciation and amortization........................................ 398,201 695,253
Mortgages and notes receivable, net of current portion................. 64,962 24,195
Other assets........................................................... 16,901 22,559
-------- --------
Total Assets...................................................... $573,241 $786,098
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt.............................................. $ 5,731 $ 3,419
Other current liabilities............................................ 38,961 45,887
-------- --------
Total current liabilities......................................... 44,692 49,306
Long-term debt, net of current portion................................. 276,920 298,875
Other liabilities...................................................... 18,713 18,022
-------- --------
Total liabilities................................................. 340,325 366,203
-------- --------
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; 75,000,000 shares authorized
31,004,499 and 39,804,917 shares issued and outstanding in 1995
and 1996, respectively............................................ 310 398
Capital in excess of par value....................................... 183,050 338,825
Retained earnings.................................................... 49,556 80,672
-------- --------
Total stockholders' equity........................................ 232,916 419,895
-------- --------
Total Liabilities and Stockholders' Equity................... $573,241 $786,098
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 99
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Lodging.................................................. $88,753.. $146,184 $198,947
Food and beverage........................................ 18,090 37,955 41,437
Management and other fees................................ 10,021 8,115 6,729
Interest on mortgages and notes receivable............... 15,867 11,895 6,090
Business interruption insurance.......................... -- -- 13,562
Rental and other......................................... 1,572 1,479 2,103
-------- -------- --------
Total revenues................................... 134,303 205,628 268,868
-------- -------- --------
Costs and expenses:
Direct hotel operating expenses:
Lodging............................................... 25,490 38,383 51,577
Food and beverage..................................... 13,886 28,429 32,053
Selling and general................................... 27,244 49,753 61,789
Occupancy and other operating............................ 9,799 11,763 16,833
General and administrative............................... 15,089 15,515 17,813
Depreciation and amortization............................ 9,427 15,974 25,884
Other expense............................................ -- 2,200 --
-------- -------- --------
Total costs and expenses......................... 100,935 162,017 205,949
-------- -------- --------
Operating income........................................... 33,368 43,611 62,919
Investment income.......................................... 1,966 4,861 4,610
Interest expense........................................... (13,993) (21,603) (20,312)
Other income............................................... 9,089 2,239 4,306
-------- -------- --------
Income before income taxes and extraordinary items......... 30,430 29,108 51,523
Provision for income taxes................................. 12,172 11,643 20,609
-------- -------- --------
Income before extraordinary items.......................... 18,258 17,465 30,914
Extraordinary items -- gains on discharges of indebtedness
(net of income taxes of $120, $70 and $135 in 1994, 1995
and 1996, respectively).................................. 172 104 202
-------- -------- --------
Net income................................................. $ 18,430 $ 17,569 $ 31,116
======== ======== ========
Earnings per common share:
Primary:
Income before extraordinary items........................ $ .57 $ .54 $ .85
Extraordinary items...................................... .01 -- --
-------- -------- --------
Earnings per common share.................................. $ .58 $ .54 $ .85
======== ======== ========
Fully diluted:
Income before extraordinary items........................ $ .57 $ .54 $ .80
Extraordinary items...................................... .01 -- --
-------- -------- --------
Earnings per common share.................................. $ .58 $ .54 $ .80
======== ======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 100
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
------------------- EXCESS OF RETAINED
SHARES AMOUNT PAR VALUE EARNINGS TOTAL
---------- ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1993..................... 29,988,674 $300 $ 157,507 $ 13,557 $171,364
Net income.................................... -- -- -- 18,430 18,430
Utilization of net operating loss
carryforwards............................... -- -- 5,861 -- 5,861
Amortization of pre-fresh start tax basis
differences................................. -- -- 6,954 -- 6,954
Federal income tax refund..................... -- -- 200 -- 200
Compensation expense related to stock option
plan........................................ -- -- 60 -- 60
Proceeds and tax benefits from exercise of
stock options............................... 216,080 2 640 -- 642
Proceeds from exercise of stock warrants...... 204,617 2 552 -- 554
---------- ---- -------- ------- --------
Balance December 31, 1994..................... 30,409,371 304 171,774 31,987 204,065
Net income.................................... -- -- -- 17,569 17,569
Utilization of net operating loss
carryforwards............................... -- -- 3,370 -- 3,370
Amortization of pre-fresh start tax basis
differences................................. -- -- 6,167 -- 6,167
Compensation expense related to stock option
plan........................................ -- -- 16 -- 16
Proceeds and tax benefits from exercise of
stock options............................... 220,159 2 705 -- 707
Proceeds from exercise of stock warrants...... 374,969 4 1,018 -- 1,022
---------- ---- -------- ------- --------
Balance December 31, 1995..................... 31,004,499 310 183,050 49,556 232,916
Net income.................................... -- -- -- 31,116 31,116
Utilization of net operating loss
carryforwards............................... -- -- 10,590 -- 10,590
Amortization of pre-fresh start tax basis
differences................................. -- -- 1,243 -- 1,243
Compensation expense related to stock option
plan........................................ -- -- 5 -- 5
Proceeds from issuance of stock............... 8,250,000 83 141,337 -- 141,420
Proceeds and tax benefits from exercise of
stock options............................... 148,492 1 1,516 -- 1,517
Proceeds from exercise of stock warrants...... 401,926 4 1,084 -- 1,088
---------- ---- -------- ------- --------
Balance December 31, 1996..................... 39,804,917 $398 $ 338,825 $ 80,672 $419,895
========== ==== ======== ======= ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 101
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................... $ 18,430 $ 17,569 $ 31,116
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 9,427 15,974 25,884
Utilization of net operating loss carryforwards....... 5,861 3,370 10,590
Gains on settlements of notes receivable.............. (6,224) (822) (1,774)
Gains on discharges of indebtedness................... (292) (174) (337)
Gains on sales of assets.............................. (1,099) (1,957) (4,349)
Amortization of pre-fresh start tax basis
differences......................................... 6,954 6,167 1,243
Deferred income taxes................................. (205) 1,557 1,386
Compensation expense related to stock options......... 60 16 5
Increase (decrease) from changes in other operating
assets and liabilities:
Accounts receivable................................... (1,945) (5,320) 486
Other current assets.................................. 127 (887) (3,158)
Other liabilities..................................... (2,760) 3,135 4,844
------- -------- ---------
Net cash provided by operating activities............. 28,334 38,628 65,936
------- -------- ---------
Cash flows from investing activities:
Net proceeds from mortgages and other notes receivable... 36,198 27,603 8,933
Disbursements for mortgages and notes receivable......... (1,100) (12,704) (800)
Proceeds from sales of property, equipment and leasehold
improvements.......................................... 1,480 8,167 12,962
Purchases of property, equipment and leasehold
improvements.......................................... (48,473) (74,758) (101,891)
Construction of new hotels............................... (14,549) (37,518) (184,566)
Decrease in restricted cash.............................. 1,268 752 6,336
Proceeds from insurance settlement....................... -- 7,500 1,500
Proceeds from sales of marketable securities............. 1,116 2,928 15,023
Purchase of marketable securities........................ (5,885) (11,520) --
Other.................................................... (3,965) 846 1,546
------- -------- ---------
Net cash used in investing activities................. (33,910) (88,704) (240,957)
------- -------- ---------
Cash flows from financing activities:
Net proceeds from issuance of debt....................... 19,026 119,360 182,196
Payments of debt......................................... (43,771) (33,961) (184,740)
Proceeds from the exercise of stock options and
warrants.............................................. 1,196 1,729 2,605
Proceeds from issuance of common stock................... -- -- 141,420
Other.................................................... 80 (43) 4
------- -------- ---------
Net cash provided by (used in) financing activities... (23,469) 87,085 141,485
------- -------- ---------
Net increase (decrease) in cash and cash equivalents....... (29,045) 37,009 (33,536)
Cash and cash equivalents at beginning of period........... 41,569 12,524 49,533
------- -------- ---------
Cash and cash equivalents at end of period................. $ 12,524 $ 49,533 $ 15,997
======= ======== =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE> 102
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
NOTE 1 -- BUSINESS OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITIES
Prime Hospitality Corp. (the "Company") is a hotel owner/operator with a
portfolio of hotels, as of March 21, 1997, located in 25 states and the U.
S. Virgin Islands. The Company owns and operates hotels and manages the
remaining hotels for third parties. The Company operates its hotels under its
proprietary AmeriSuites and Wellesley Inns brand names and under franchise
agreements with national hotel chains including Marriott, Radisson, Sheraton,
Crowne Plaza, Holiday Inn, Ramada and Howard Johnson.
BASIS OF PRESENTATION
The Company emerged from the Chapter 11 reorganization proceeding 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.
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.
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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS
Cash equivalents are highly liquid unrestricted investments with a maturity
of three months or less when acquired.
MARKETABLE SECURITIES
Marketable securities consist primarily of commercial paper and other
corporate debt and equity securities which mature or are available for sale
within one year. Marketable securities are valued at current market value, which
approximates cost.
F-7
<PAGE> 103
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RESTRICTED CASH
Restricted cash consists primarily of highly liquid investments that serve
as collateral for debt obligations due within one year.
MORTGAGES AND NOTES RECEIVABLE
Mortgages and 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 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 was substantial doubt that the Company
would recover any value, these mortgages were assigned no value in the Company's
consolidated financial statements when the Company adopted fresh-start reporting
on July 31, 1992. Interest on cash flow mortgages and delinquent loans is
generally recognized when cash is received.
In 1995, the Company adopted Statement of Financial Accounting Standards
("SFAS") 114, "Accounting by Creditors for Impairment of a Loan (SFAS 114)" and
SFAS 118, "Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosures (SFAS 118)." Following these standards, the Company
measures impairment of a loan based on the present value of expected future cash
flows (net of estimated costs to sell) discounted at the loan's effective
interest rate. Impairment can also be measured based on a loan's observable
market price or the fair value of collateral, if the loan is collateral
dependent. If the measure of the impaired loan is less than the recorded
investment in the loan, the Company will establish a valuation allowance, or
adjust existing valuation allowances, with a corresponding charge or credit to
operations. Based upon its evaluation, the Company determined that no impairment
had occurred as of December 31, 1996.
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.
During 1995, the Company adopted SFAS 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of (SFAS 121)".
Following this standard, the Company evaluates whether impairment has occurred
at each of its properties based upon the future cash flows (undiscounted and
before interest charges) as compared to the carrying value of the property.
Based upon its evaluation as of December 31, 1996, the Company has determined
that no impairment has occurred.
OTHER ASSETS
Other assets consist primarily of deferred issuance costs related to the
Company's debt obligations. Deferred issuance costs are amortized over the
respective terms of the loans using the effective interest method.
SELF-INSURANCE PROGRAMS
The Company uses an incurred loss retrospective insurance plan for general
and auto liability and workers' compensation. Predetermined loss limits have
been arranged with insurance companies to limit the Company's per occurrence and
aggregate cash outlay.
F-8
<PAGE> 104
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company maintains a self-insurance program for major medical and
hospitalization coverage for employees and dependents which is partially funded
by payroll deductions. Payments for major medical and hospitalization below
specified aggregate annual amounts are self-insured by the Company. Claims for
benefits in excess of these amounts are covered by insurance purchased by the
Company.
Provisions have been made in the consolidated financial statements which
represent the expected future payments based on the estimated ultimate cost for
incidents incurred through the balance sheet date.
INCOME TAXES
The Company and its subsidiaries file a consolidated Federal income tax
return. For financial reporting purposes, the Company follows SFAS No. 109
"Accounting for Income Taxes". In accordance with SFAS 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.
EARNINGS PER COMMON SHARE
Primary earnings per share is computed based on the weighted average number
of common shares and common share equivalents (dilutive stock options and
warrants) outstanding during each year. The weighted average number of common
shares used in computing primary earnings per share was 32,022,000, 32,461,000
and 36,501,000 for the years ended December 31, 1994, 1995 and 1996,
respectively.
Fully diluted earnings per share, in addition to the adjustments for
primary earnings per share, reflects the elimination of interest expense and the
issuance of additional common shares from the assumed conversion of the 7%
Convertible Subordinated Notes from their issuance in April 1995. The weighted
average number of common shares used in computing fully diluted earnings per
share was 37,423,000 and 43,794,000 for the years ended December 31, 1995 and
1996, respectively.
PRE-OPENING COSTS
Non-capital expenditures incurred prior to opening new or renovated hotels
such as payroll and operating supplies are deferred and expensed within one year
after opening. Pre-opening costs charged to expense were $86,000, $364,000 and
$1.3 million for the years ended December 31, 1994, 1995 and 1996. As of
December 31, 1996, $2.1 million of pre-opening costs are included in other
current assets.
INTEREST RATE AGREEMENTS
The Company has an interest rate swap agreement with a major financial
institution which reduces the Company's exposure to interest rate fluctuations
on its variable rate debt. The accounting treatment for this agreement is to
accrue net interest to be received or to be paid as an adjustment to interest
expense as incurred.
The Company has an interest rate hedge agreement with a major financial
institution which terminates in April 1997 to reduce its interest rate exposure
on the anticipated financing of its development program in 1997. Gains or losses
resulting from this hedge will be deferred and amortized to interest expense
over the life of the anticipated obligation.
RECLASSIFICATIONS
Certain reclassifications have been made to the December 31, 1994 and 1995
consolidated financial statements to conform them to the December 31, 1996
presentation.
F-9
<PAGE> 105
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- HOTEL ACQUISITIONS
On March 6, 1996, the Company acquired 18 hotels consisting of 16 Wellesley
Inns and two other limited-service hotels for approximately $65.1 million in
cash. The acquisition enabled the Company to establish full control over its
proprietary Wellesley Inns brand, with all 28 Wellesley Inns now owned and
operated by the Company. The acquisition price was comprised of approximately
$60.4 million to purchase the first mortgages on the 18 hotels, with a face
value of approximately $70.5 million, and $4.7 million to purchase the interests
of the three partnerships which owned the hotels. Approximately $1.9 million of
the total purchase price was paid to a partnership in which a general partner is
a related party. In connection with the transaction, the Company also terminated
its management agreements and junior subordinated mortgages related to the 18
hotels. In September 1996, the Company acquired the Ramada Plaza Suite in
Secaucus, NJ and repositioned the hotel as a Radisson Suite Hotel. The
acquisition price was $16.5 million, which included the assumption of $12.2
million of debt.
The 1996 acquisitions have been accounted for as purchases and,
accordingly, the revenues and expenses of those hotels have been included in
reported results from the date of acquisition. If these operations had been
included in the consolidated financial statements since January 1, 1996,
reported results would not have been materially different.
In March 1995, the Company acquired the option of ShoLodge, Inc.
("ShoLodge") to purchase a 50% interest in eleven of the Company's AmeriSuites
hotels and also acquired the remaining AmeriSuites hotel not already owned by
the Company. In 1993, the Company and its wholly-owned subsidiary, Suites of
America, Inc. ("SOA") entered into agreements with ShoLodge, a company
controlled by a former director, designed to further the growth of its
AmeriSuites hotels from the six hotels owned by the Company at that time.
Pursuant to these agreements, (I) ShoLodge agreed to build and finance six
additional AmeriSuites hotels and received an option to purchase a 50% interest
in SOA and (ii) the Company received an option pursuant to which it could
require ShoLodge to purchase a 50% interest in SOA. The exercise of the option
by ShoLodge was scheduled to occur in January 1995, when the Company and
ShoLodge began to negotiate the Company's buyout of ShoLodge's option. The
consideration payable by the Company was based upon the fair market value of the
properties. The consideration totaled $19.7 million and was comprised of (I)
$16.1 million in cash, which was paid in 1995, plus (ii) $18.5 million in notes
maturing in 1997, less (iii) $14.9 million of existing debt on five hotels,
which was forgiven at face value. The transaction resulted in a net increase of
approximately $3.6 million of long-term debt. No gain or loss was recorded on
the forgiveness of debt. As a result of this transaction, the Company assumed
management of these hotels.
In August 1995, the Company entered into an agreement to purchase four
Bradbury Suites hotels for $18.7 million. The hotels, comprising 447 rooms, were
subsequently converted to the Company's proprietary AmeriSuites brand. In August
1995, the Company also purchased the 149 room all-suite St. Tropez Hotel and
Shopping Center in Las Vegas for $15.2 million. Revenues and expenses from these
transactions have been included in reported results from the date of
acquisition. If these operations had been included in the consolidated financial
statements for the full year, reported results would not have been materially
different.
NOTE 3 -- CASH AND CASH EQUIVALENTS
Cash and cash equivalents are comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
------- -------
<S> <C> <C>
Cash..................................................... $ 4,312 $ 5,079
Commercial paper and other cash equivalents.............. 45,221 10,918
------- -------
Totals......................................... $49,533 $15,997
======= =======
</TABLE>
F-10
<PAGE> 106
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4 -- MARKETABLE SECURITIES
Marketable securities are comprised of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- ----
<S> <C> <C>
Equity securities.......................................... $ 3,796 $238
Corporate debt securities.................................. 8,133 --
------- ----
Totals........................................... $11,929 $238
======= ====
</TABLE>
During 1996, the Company realized $1.8 million in gains on sales of
marketable securities which is included in investment income.
NOTE 5 -- OTHER CURRENT ASSETS/LIABILITIES
Other current assets consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------ -------
<S> <C> <C>
Hotel inventories......................................... $2,686 $ 4,762
Pre-opening expense....................................... 261 2,088
Accrued interest receivable............................... 2,803 2,082
Prepaid expense........................................... 1,616 1,868
Other..................................................... 704 428
------ -------
Totals.......................................... $8,070 $11,228
====== =======
</TABLE>
Other current liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
------- -------
<S> <C> <C>
Accounts payable......................................... $ 4,717 $ 5,990
Construction payables.................................... 2,223 6,643
Interest................................................. 3,616 7,734
Accrued payroll and related benefits..................... 3,151 4,590
Accrued expenses......................................... 4,303 4,944
Insurance reserves....................................... 6,007 7,146
Hurricane damage reserve................................. 8,718 2,438
Other.................................................... 6,226 6,402
------- -------
Totals......................................... $38,961 $45,887
======= =======
</TABLE>
F-11
<PAGE> 107
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- MORTGAGES AND NOTES RECEIVABLE
Mortgages and notes receivable are comprised of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
------- -------
<S> <C> <C>
Properties operated by the Company(a).................... $57,171 $22,194
Other(b)................................................. 9,324 3,339
------- -------
Total.......................................... 66,495 25,533
Less current portion..................................... (1,533) (1,338)
------- -------
Long-term portion........................................ $64,962 $24,195
======= =======
</TABLE>
- ---------------
(a) At December 31, 1996, the Company is the holder of mortgage notes receivable
with a book value of $8.6 million secured primarily by two hotel properties
operated by the Company under management agreements and $13.6 million in
mortgages secured primarily by four properties operated under lease
agreements. These notes bear interest at rates ranging from 8.0% to 13.5%
and mature through 2015. The mortgages were derived from the sales of hotel
properties.
The loans secured by hotel properties operated under management agreements
pay interest and principal based upon available cash and include a
participation in the future excess cash flow of such hotel properties. One
of these mortgages has been structured to include a "senior portion"
featuring defined payment terms, and a "junior portion" payable annually
based on cash flow.
In addition to the mortgage positions referred to above, the Company holds
junior or cash flow mortgages and subordinated interests on six other hotel
properties operated by the Company under management agreements. Pursuant to
these mortgage agreements, the Company is entitled to receive the majority
of excess cash flow generated by these hotel properties and to participate
in any future sales proceeds. With regard to these properties, third parties
hold significant senior mortgages. The junior mortgages mature on various
dates from 1999 through 2002.
In accordance with the adoption of fresh start reporting under SOP 90-7, no
value was assigned to the junior portions of the notes or the junior
mortgages and subordinated interests on the other hotels as there was
substantial doubt at the time of valuation that the Company would recover
any of their value. As a result, interest income on these junior or cash
flow mortgages is recognized when cash is received. During 1994, 1995 and
1996, the Company recognized $2.0 million, $2.0 million and $2.9 million,
respectively, of interest income related to these mortgages. Future
recognition of interest income on these mortgages is dependent primarily
upon the net cash flow of the underlying hotels after debt service, which is
senior to the Company's junior positions.
(b) Other notes receivable currently bear interest at effective rates ranging
from 4.0% to 10.0%, mature through 2011 and are secured primarily by hotel
properties not currently managed by the Company.
F-12
<PAGE> 108
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- YEARS OF
1995 1996 USEFUL LIFE
-------- -------- -----------
<S> <C> <C> <C>
Land and land leased to others(a).................. $ 69,765 $119,654
Hotels............................................. 246,278 387,631 20 to 40
Furniture, fixtures and autos...................... 67,001 103,899 3 to 10
Leasehold improvements............................. 26,038 58,340 3 to 40
Construction in progress........................... 22,667 78,266
-------- --------
Sub-total..................................... 431,749 747,790
Less accumulated depreciation and amortization..... (33,548) (52,537)
-------- --------
Totals................................... $398,201 $695,253
======== ========
</TABLE>
- ---------------
(a) Included in land at December 31, 1995 and 1996 was $8.9 million and $32.7
million, respectively, of land associated with hotels under construction.
At December 31, 1996, the Company was the lessor of land and certain
restaurant facilities in Company-owned hotels with an approximate aggregate book
value of $5.4 million pursuant to noncancelable operating leases expiring on
various dates through 2013. Minimum future rentals under such leases are $7.4
million, of which $3.7 million is scheduled to be received in the aggregate
during the five-year period ending December 31, 2001.
Depreciation and amortization expense on property, equipment and leasehold
improvements was $9.3 million, $14.8 million and $22.0 million for the years
ended December 31, 1994, 1995 and 1996, respectively.
During the years ended December 31, 1994, 1995 and 1996, the Company
capitalized $.8 million, $2.6 million and $7.5 million, respectively, of
interest related to borrowings used to finance hotel construction.
NOTE 8 -- DEBT
Debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
-------- --------
<S> <C> <C>
9.25% First Mortgage Notes(a).......................... $ -- $120,000
Revolving Credit Facility(b)........................... -- 12,500
7% Convertible Subordinated Notes(c)................... 86,250 86,250
Mortgages and other notes payable(d)................... 158,904 71,414
10% Senior Secured Notes(e)............................ 30,374 10,867
Capitalized lease obligations(f)....................... 7,123 1,263
-------- --------
Total debt............................................. 282,651 302,294
Less current maturities................................ (5,731) (3,419)
-------- --------
Long-Term debt, net of current portion................. $276,920 $298,875
======== ========
</TABLE>
- ---------------
(a) On January 23, 1996, the Company issued $120 million of 9.25% First Mortgage
Notes due 2006. Interest on the notes is payable semi-annually on January 15
and July 15. The notes are secured by 15 hotels and contain certain
covenants including limitations on the incurrence of debt, dividend
payments, certain
F-13
<PAGE> 109
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
investments, transactions with affiliates, asset sales and mergers and
consolidations. These notes are redeemable, in whole or in part, at the
option of the Company after January 15, 2001 at premiums to principal which
decline on each anniversary date. The Company utilized a portion of the
proceeds to pay down $51.6 million of debt.
(b) On June 28, 1996, the Company established a revolving credit facility (the
"Revolving Credit Facility") with a group of financial institutions
providing for availability of funds up to the lesser of $100 million or a
borrowing base determined under the agreement. The Revolving Credit Facility
is secured by certain of the Company's hotels with recourse to the Company.
The Revolving Credit Facility bears interest at LIBOR plus 2.25% and is
available for five years. The Revolving Credit Facility contains covenants
requiring the Company to maintain certain financial ratios and also contains
certain covenants which limit the incurrence of debt, liens, dividend
payments, stock repurchases, certain investments, transactions with
affiliates, asset sales, mergers and consolidations and any change of
control of the Company. The aggregate amount of the Revolving Credit
Facility will be reduced to $87.0 million on June 28, 1999 and $75.0 million
on June 28, 2000. On June 28, 1996, the Company borrowed $40 million under
the Revolving Credit Facility and proceeds were used to retire $20 million
of interim financing with the remainder utilized principally for development
of AmeriSuites hotels. On August 5, 1996, the Company repaid the full amount
of this borrowing under the Revolving Credit Facility with proceeds from the
issuance of Common Stock (see Note 15). As of December 31, 1996, the Company
had borrowed $12.5 million under this facility and had additional borrowing
capacity of $87.5 million.
(c) In 1995, the Company sold $86.3 million of 7% Convertible Subordinated Notes
due 2002. The notes are convertible into common stock at a price of $12 per
share at the option of the holder and mature on April 15, 2002. The notes
are redeemable, in whole or in part, at the option of the Company after
April 17, 1998 at premiums to principal which decline on each anniversary
date.
(d) The Company has mortgage and other notes payable of approximately $71.4
million that are secured by mortgage notes receivable and hotel properties
with a book value of $137.7 million. Principal and interest on these
mortgages and notes are generally paid monthly. At December 31, 1996 these
notes bear interest at rates ranging from 6.4% to 10.5%, with a weighted
average interest rate of 8.4%, and mature from 1998 through 2008.
The Company has $13.9 million of debt secured by the Marriott's Frenchman's
Reef Hotel (the "Frenchman's Reef") in St. Thomas, U.S. Virgin Islands which
was originally scheduled to mature in December 1996. The Company and the
lender have entered into an agreement to extend the maturity of the loan to
January 1998. The loan continues to bear interest at the same rate and
principal payments are waived until maturity. All other terms and conditions
of the loan remain in effect.
Additionally, the Company's debt related to the Frenchman's Reef is further
secured by an assignment of property insurance proceeds related to the
hurricane damage (See Note 11). The Company utilized the net insurance
proceeds of $22.8 million to reduce the Frenchman's Reef mortgage loan to
$13.9 million. The Company is currently in negotiation to obtain new
financing in connection with the refurbishment plans at the Frenchman's
Reef.
On August 2, 1996, the Company prepaid in full $26.7 million of debt secured
by 10 hotels with the proceeds from the issuance of Common Stock (See Note
15). The loans were due in February 2000 and bore interest at LIBOR plus
4.25%. The hotels formerly used as collateral for this loan are now part of
the collateral securing the Revolving Credit Facility described in (b)
above.
(e) The 10% Senior Secured Notes were issued pursuant to the Plan, and mature on
July 31, 1999. The collateral for the 10% Senior Secured Notes consists
primarily of mortgages and notes receivable and real property, net of
related liabilities (the "10% Senior Secured Note Collateral"), with a book
value of $62.2 million as of December 31, 1996.
F-14
<PAGE> 110
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest on the 10% Senior Secured Notes is payable semi-annually. The 10%
Senior Secured Notes require that 85% of the cash proceeds from the 10%
Senior Secured Note Collateral be applied first to interest then to
prepayment of principal. Aggregate principal payments on the 10% Senior
Secured Notes are required in order that one-third of the principal balance
outstanding on December 31, 1996 is paid by July 31, 1998 and all of the
balance is paid by July 31, 1999. To the extent the cash proceeds from the
10% Senior Secured Note Collateral are insufficient to pay interest or
required principal payments on the 10% Senior Secured Notes, the Company
will be obligated to pay any deficiency out of its general corporate funds.
The 10% Senior Secured Notes contain covenants which, among other things,
require the Company to maintain a net worth of at least $100 million, and
preclude cash distributions to stockholders, including dividends and
redemptions, until the 10% Senior Secured Notes have been paid in full. As
of December 31, 1996, the Company was in compliance with all covenants
applicable to the 10% Senior Secured Notes.
The Company has $1.4 million of its 10% Senior Secured Notes which it
repurchased but did not retire due to certain restrictions under the note
agreement. These notes are currently held by a third party agent and are
recorded as investments on the Company's balance sheet. As of December 31,
1996, the Company had unrecognized holding gains of approximately $26,000
related to these securities.
(f) At December 31, 1996, the Company had a capital lease obligation in the
amount of $1.3 million. Principal and interest on this obligation is paid
monthly. This lease matures in 2000 and bears interest at Prime plus 3%.
In August 1995, the Company entered into an interest rate protection
agreement with a major financial institution which reduces the Company's
exposure to fluctuations in interest rates by effectively fixing interest rates
on $40.0 million of variable interest rate debt. Under the agreement, on a
monthly basis the Company pays a fixed rate of interest of 6.18% and receives a
floating interest rate payment equal to the 30 day LIBOR rate on a $40.0 million
notional principal amount. The agreement commenced in October 1995 and expires
in 1999.
In October 1996, the Company entered into a six month interest rate hedge
agreement with a major financial institution to reduce its interest rate
exposure on the anticipated financing of its development program in 1997. Under
the agreement, the Company effectively fixed interest rates at a Treasury yield
of 6.4% for approximately seven years on a $98.4 million notional principal
amount.
Maturities of long-term debt for the next five years ending December 31 are
as follows (in thousands):
<TABLE>
<S> <C>
1997...................................................... $ 3,419
1998...................................................... 17,645
1999...................................................... 25,052
2000...................................................... 12,289
2001...................................................... 14,138
Thereafter................................................ 229,751
--------
Total........................................... $302,294
========
</TABLE>
NOTE 9 -- LEASE COMMITMENTS AND CONTINGENCIES
Leases
The Company leases various hotels under lease agreements with initial terms
expiring at various dates from 1998 through 2061. The Company has options to
renew certain of the leases for periods ranging from 1 to 99 years. Rental
payments are based on minimum rentals plus a percentage of the hotel properties'
revenues in excess of stipulated amounts.
F-15
<PAGE> 111
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1996 (in thousands):
<TABLE>
<S> <C>
1997............................................................... $ 4,833
1998............................................................... 4,787
1999............................................................... 4,828
2000............................................................... 4,717
2001............................................................... 4,326
Thereafter......................................................... 47,023
-------
Total......................................................... $ 70,514
=======
</TABLE>
Rental expense for all operating leases, including those with terms of less
than one year, consist of the following for the years ended December 31, 1994,
1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Rentals.......................................... $4,654 $4,630 $6,652
Contingent rentals............................... 823 745 1,250
------ ------ ------
Rental expense.............................. $5,477 $5,375 $7,902
====== ====== ======
</TABLE>
Employee Benefits
The Company does not provide any material post employment benefits to its
current or former employees.
NOTE 10 -- INCOME TAXES
The provision for income taxes (including amounts applicable to
extraordinary items) consisted of the following for the years ended December 31,
1994, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Current:
Federal..................................... $ 970 $ 320 $ 5,147
State....................................... 28 299 563
------- ------- -------
998 619 5,710
Deferred:
Federal..................................... 9,780 9,929 13,005
State....................................... 1,514 1,165 2,029
------- ------- -------
11,294 11,094 15,034
------- ------- -------
Total............................... $12,292 $11,713 $20,744
======= ======= =======
</TABLE>
Income taxes are provided at the applicable federal and state statutory
rates.
F-16
<PAGE> 112
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of the temporary differences in the areas listed below
resulted in deferred income tax provisions for the years ended December 31,
1994, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Utilization of net operating loss............................. $ 5,861 $ 3,370 $11,714
Amortization of pre-fresh start basis
differences -- properties and notes......................... 5,632 6,167 1,243
Depreciation.................................................. 200 1,400 830
Compensation expense.......................................... -- 604 691
Other......................................................... (399) (447) 556
------- ------- -------
Total............................................... $11,294 $11,094 $15,034
======= ======= =======
</TABLE>
At December 31, 1996, the Company had available federal net operating loss
carryforwards of approximately $90.7 million which will expire beginning in 2005
and continuing through 2007. Of this amount, $87.3 million is subject to an
annual limitation of $8.7 million 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 $5.9 million which will expire during various
periods from 1997 to 2006. Certain of these potential benefits are subject to
annual limitations similar to federal requirements due to factors such 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 SFAS 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 $31.7 million against the deferred tax asset as of
December 31, 1996. To the extent any available carryforwards or other tax
benefits are utilized, the amount of tax benefit realized will be treated as a
contribution to stockholders' equity and will have no effect on the income tax
provision for financial reporting purposes. For the years ended December 31,
1994, 1995 and 1996, the Company recognized $5.9 million, $3.4 million and $10.6
million, respectively, of such benefits as a contribution to stockholders'
equity.
Additionally, the Company recognized $7.0 million, $6.2 million and $1.2
million as a contribution to stockholders' equity for the years ended December
31, 1994, 1995 and 1996, respectively, which represents the amortization of
pre-fresh start tax basis differences related to properties and notes
receivable. As a result of reflecting substantially all of the deferred tax
provisions as a contribution to stockholders' equity, the Company had no
material deferred tax assets or liabilities as of December 31, 1995 and 1996.
NOTE 11 -- BUSINESS INTERRUPTION INSURANCE
In September 1995, the Frenchman's Reef suffered damages when Hurricane
Marilyn struck the U.S. Virgin Islands. The Company and its insurance carrier
settled the Company's property and business interruption insurance claim with
respect to the Frenchman's Reef for $25.0 million. In July 1996, the Company
received the final installment under its settlement, bringing the net proceeds
to $22.8 million, net of deductibles, for which the Company provided a reserve
of $2.2 million in 1995. In addition, in July 1996, Hurricane Bertha struck the
island and caused further damage to the hotel. The Company is currently
reviewing its claim for property damage with its insurance carrier and is in the
process of preparing a claim under its business interruption insurance.
Although the Company has continued to operate the hotel, the impact of the
hurricanes has caused operating profits to decline from prior year levels. In
1996 and 1995, the Company continued to record the operating revenues and
expenses of the Frenchman's Reef. In addition, the Company recorded business
F-17
<PAGE> 113
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interruption insurance revenue of $13.6 million in 1996 based on the claim
settlement which is included in operating revenues. The Company is currently
underway with plans to refurbish and upgrade the Frenchman's Reef. In addition
to the hurricane-related renovations, the plan provides for structural
enhancements, redesigned guestrooms, increased banquet and meeting space and new
landscaping.
Other expense of $2.2 million for the year ended December 31, 1995 consists
of a reserve for insurance deductibles related to hurricane damage caused by
Hurricane Marilyn at the Frenchman's Reef.
NOTE 12 -- OTHER INCOME
Other income consists of items which are not considered part of the
Company's recurring operations and is composed of the following as of December
31, 1994, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Gains on settlements of notes receivable................. $6,355 $ 822 $1,774
Gains on sales of properties............................. 1,099 1,417 2,532
Rebates of prior years' insurance premiums............... 1,579 -- --
Other.................................................... 56 -- --
------ ------ ------
Total.......................................... $9,089 $2,239 $4,306
====== ====== ======
</TABLE>
NOTE 13 -- FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
The fair values of non-current financial assets and liabilities and other
financial instruments are shown below (in thousands). The fair values of current
assets and current liabilities are assumed to be equal to their reported
carrying amounts.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1996
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Mortgage and notes receivable........... $ 64,962 $ 76,058 $ 24,195 $ 38,928
Long-term debt.......................... 276,920 278,899 298,875 343,039
Interest rate swap agreement............ -- (15) -- (173)
Interest rate hedge agreement........... -- -- -- (620)
</TABLE>
The fair value for mortgages and notes receivable is based on the valuation
of the underlying collateral utilizing discounted cash flows and other methods
applicable to the industry. Valuations for long-term debt are based on quoted
market prices or at current rates available to the Company for debt of the same
maturities. The fair values of the interest rate swap and hedge agreements are
based on the estimated amounts the Company would pay to terminate the
agreements.
The Company's mortgages and other notes receivable (See Note 6) 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 United States.
F-18
<PAGE> 114
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- 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 years ended December 31, 1994, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Management and other fee income(a)....................... $ 1,165 $ 1,427 $ 1,040
Interest income(a)....................................... 1,283 518 582
Management fee expense(b)................................ 679 -- --
Interest expense(b)...................................... 461 -- --
Reservation fee expense(b)............................... 317 -- --
</TABLE>
- ---------------
(a) At December 31, 1996, the Company managed six hotels for partnerships in
which related parties own various interests. The income amounts shown above
primarily include transactions related to these hotel properties. On March
6, 1996, the Company acquired nine hotels owned by related parties. (See
Note 2).
(b) In 1991, the Company entered into an agreement with ShoLodge, a company
controlled by a former director, whereby ShoLodge was appointed the
exclusive agent to develop and manage certain hotel properties.
In March 1995, the Company acquired ShoLodge's option to purchase the
remaining 50% interest in all eleven hotels developed by ShoLodge and also
acquired the ownership interest of the remaining AmeriSuites hotel not
already owned by the Company (See Note 2).
NOTE 15 -- COMMON STOCK AND COMMON STOCK EQUIVALENTS
COMMON STOCK
On August 2, 1996, the Company sold 8.3 million shares of Common Stock at a
price of $18 per share. The Company utilized the proceeds from the offering of
approximately $141.4 million (net of underwriting discounts and expenses of $7.2
million) to fund AmeriSuites development, to reduce indebtedness of $40.0
million under the Revolving Credit Facility and to repay certain other
indebtedness of $26.7 million, thereby increasing availability for further
AmeriSuites development.
STOCK OPTIONS
The Company has adopted various stock option and performance incentive
plans under which options to purchase shares of common stock may be granted to
directors, officers or key employees under terms determined by the Board of
Directors. A total of 200,000 options were reserved under these plans (net of
amounts granted to date) as of December 31, 1996.
Under the 1995 Employee Stock Option Plan, options to purchase shares of
common stock may be granted at the fair market value of the common stock at the
date of grant. Options can generally be exercised during a participant's
employment with the Company in equal annual installments over a three-year
period and expire ten years from the date of grant. During 1995 and 1996,
respectively, options to purchase 648,000 and 595,000 shares of common stock
were granted under this plan.
Under the 1995 Non-Employee Director Stock Option Plan, options to purchase
10,000 shares of common stock are automatically granted to each non-employee
director at the fair market value of the common stock at the date of grant. All
options will be fully vested and exercisable one year after the date of grant
and will expire ten years after the date of grant, or earlier if the
non-employee director ceases to be a director. Options to purchase 50,000 shares
of common stock were granted under this plan in both 1995 and 1996.
F-19
<PAGE> 115
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the Company's 1992 Stock Option and Performance Incentive Plans,
options to purchase 367,000 and 15,000 shares of common stock were issued to
employees in 1994 and 1995, respectively. The options were granted at prices
which approximate fair market value at the date of grant. Generally, these
options can be exercised during a participant's employment in equal annual
installments over a three year period and expire six years from the date of
grant.
Options to purchase 30,000 and 60,000 shares of common stock were issued to
non-employee directors of the Company in 1994 and 1995, respectively, under the
Company's 1992 Stock Option Plan. The options were granted at prices which
approximate fair market value at the date of grant. Generally, one-third of
these options were exercisable at the date of grant and the remaining options
vest in equal annual installments over a two-year period. The options expire six
years after the date of grant.
During 1992, options to purchase 350,000 shares were granted to employee
officers and directors under the Company's 1992 Stock Option Plan. All 350,000
shares are currently exercisable at December 31, 1996. In addition, options to
purchase 330,000 shares were granted to a former officer in 1992, all of which
were exercised. The exercise prices of the remaining exercisable options are
based on the average market price one year from the date of grant which was
determined to be $2.71 per share with respect to 330,000 shares and $3.81 per
share with respect to the other 20,000 shares. Based on this exercise price, the
amount of compensation expense attributable to these options was $60,000,
$16,000 and $5,000 for the years ended December 31, 1994, 1995 and 1996,
respectively.
Effective January 1, 1996, the Company adopted the provisions of SFAS 123,
Accounting for Stock-Based Compensation. As permitted by the Statement, the
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method. Accordingly, no compensation expense has been recognized
for its stock-based compensation plans other than for performance-based awards,
which was not significant. Had the fair value method of accounting been applied
to the Company's stock plans, which requires recognition of compensation cost
ratably over the vesting period of the underlying equity instruments, net income
would have been reduced by $1.3 million, or $.03 per share in 1995 and $2.3
million, or $.05 per share in 1996. This pro forma impact only takes into
account options granted since January 1, 1995 and is likely to increase in
future years as additional options are granted and amortized ratably over the
vesting period. The average fair value of options granted during 1995 and 1996
was $4.46 and $7.33, respectively.
The fair value was estimated using the Black-Scholes option-pricing model
based on the weighted average market price at grant date of $9.59 in 1995 and
$16.51 in 1996 and the following weighted average assumptions: risk-free
interest rate of 6.22% for 1995 and 6.43% in 1996, volatility of 42.39% for 1995
and 38.64% for 1996, and dividend yield of 0.0% for 1995 and 1996.
F-20
<PAGE> 116
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a summary of the various stock option plans:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF SHARES PER SHARE
---------- --------------
<S> <C> <C>
Outstanding at December 31, 1994.................................. 1,442,000
Granted........................................................... 773,000 $ 9.25-$10.88
Exercised......................................................... (222,000) $ 2.71-$ 7.63
Canceled.......................................................... (165,000) $ 3.63-$ 9.63
---------
Outstanding at December 31, 1995.................................. 1,828,000
---------
Granted........................................................... 646,000 $14.75-$18.00
Exercised......................................................... (149,000) $ 3.63-$10.81
Canceled.......................................................... (59,000) $ 3.63-$16.63
---------
Outstanding at December 31, 1996.................................. 2,266,000
=========
Exercisable at December 31, 1996.................................. 1,101,000 $ 2.71-$10.88
=========
</TABLE>
WARRANTS
Pursuant to the Plan, warrants to purchase 2,053,583 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 and expire five years after the date of grant. The exercise price was
determined from the average per share daily closing price of the Company's
common stock during the year following its reorganization on July 31, 1992. As
of December 31, 1996 warrants to purchase 1,027,392 shares have been exercised
and 1,026,191 remain outstanding.
NOTE 16 -- SUPPLEMENTAL CASH FLOW INFORMATION
The following summarizes non-cash investing and financing activities for
the years ended December 31, 1994, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1994 1995 1996
-------- ------- --------
<S> <C> <C> <C>
Assumption of mortgages and notes payable in connection with
the acquisitions of hotels................................... $ 18,718 $ 5,120 $ 12,222
Hotels received in settlements of mortgage notes receivable.... 54,521 2,702 35,306
Note receivable received in exchange for the sale of a hotel... $ 1,497 $ -- $ --
</TABLE>
Cash paid for interest was $15.5 million, $22.4 million and $22.4 million
for the years ended December 31, 1994, 1995 and 1996, respectively.
Cash paid for income taxes was $1.9 million, $1.2 million and $8.0 million
for the years ended December 31, 1994, 1995 and 1996, respectively.
F-21
<PAGE> 117
PRIME HOSPITALITY CORP.
All tendered Original Notes, executed Letters of Transmittal, and other
related documents should be directed to the Exchange Agent. Requests for
assistance and for additional copies of the Prospectus, the Letter of
Transmittal and other related documents should be directed to the Exchange
Agent.
The Exchange Agent
for the Exchange Offer is
FIRST BANK NATIONAL ASSOCIATION
By Facsimile:
(612) 244-1537
Attention: David Haugen
Confirm by telephone:
(612) 244-8162
By Registered or Certified Mail:
First Bank National Association
First Trust Center
180 East Fifth Street
Saint Paul, Minnesota 55101
By Hand:
First Bank National Association
First Trust Center
180 East 5th Street
4th Floor -- Bond Drop Window
180 East Fifth Street
Saint Paul, Minnesota 55101
By Overnight Courier:
First Bank National Association
First Trust Center
180 East Fifth Street
Saint Paul, Minnesota 55101
(612) 762-3813
<PAGE> 118
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. 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 action 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 undertakes 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 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
II-1
<PAGE> 119
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.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<C> <C> <S>
2.1 -- Reference is made to the Disclosure Statement for Debtor's Second Amended Joint
Plan of Reorganization, dated January 16, 1992, which includes the Debtors'
Second Amended Plan of Reorganization as an exhibit thereto, filed as an Exhibit
to the Company's Form 10-K dated September 25, 1992, which is incorporated
herein by reference.
2.2 -- Reference is made to the Contract of Purchase and Sale between Hillsborough
Associates, Meriden Hotel Associates, L.P., Wellesley I, L.P., Multi-Wellesley
Limited Partnership and the Company, dated March 6, 1996, filed as an Exhibit to
the Company's 8-K dated March 21, 1996, which is incorporated herein by
reference.
2.3 -- Reference is made to Consent of the Holders Thereof to the Purchase by the
Company of the Outstanding First Mortgage Notes, filed as an Exhibit to the
Company's 8-K, dated March 21, 1996, which is incorporated herein by reference.
3.1 -- Reference is made to the Restated Certificate of Incorporation of the Company,
dated June 5, 1992, filed as an Exhibit to the Company's Form 10-K dated
September 25, 1992, which is incorporated herein by reference.
3.2 -- Reference is made to the Restated Certificate of Incorporation, As Amended,
filed as an Exhibit to the Company's Form 10-Q/A, dated April 30, 1996, which is
incorporated herein by reference.
3.3 -- Reference is made to the Restated Bylaws of the Company, filed as an Exhibit to
the Company's Form 10-K, dated September 25, 1992, which is incorporated herein
by reference.
4.1 -- Reference is made to the form of 9.20% Junior Secured Note of the Company, filed
as an Exhibit to the Company's Form 10-K, dated September 25, 1992, which is
incorporated herein by reference.
4.2 -- Reference is made to the Form of 8.20% Tax Note of the Company, filed as an
Exhibit to the Company's Form 10-K , dated September 25, 1992, which is
incorporated herein by reference.
4.3 -- Reference is made to the Form of 10.20% Secured UND Restructured Note of the
Company, filed as an Exhibit to the Company's Form 10-K, dated September 25,
1992, which is incorporated herein by reference.
4.4 -- Reference is made to the Form of 8% Secured UND Restructured Note of the
Company, filed as an Exhibit to the Company's Form 10-K, dated September 25,
1992, which is incorporated herein by reference.
</TABLE>
II-2
<PAGE> 120
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<C> <C> <S>
4.5 -- Reference is made to the Form of 9.20% OVR Restructured Note of the Company,
filed as an Exhibit to the Company's Form 10-K, dated September 25, 1992, which
is incorporated herein by reference.
4.6 -- Reference is made to the Collateral Agency Agreement among the Company, U.S.
Trust and the Secured Parties, dated as of July 31, 1992, filed as an Exhibit to
the Company's Form 10-K, dated September 25, 1992, which is incorporated herein
by reference.
4.6 -- Reference is made to the Security Agreement between the Company and U.S. Trust,
dated as of July 31, 1992, filed as an Exhibit to the Company's Form 10-K, dated
September 25, 1992, which is incorporated herein by reference.
4.8 -- Reference is made to the Subsidiary Guaranty from FR Delaware, Inc. to United
States Trust Company of New York, dated as of July 31, 1992, filed as an Exhibit
to the Company's Form 10-K, dated September 25, 1992, which is incorporated
herein by reference.
4.9 -- Reference is made to the Security Agreement between FR Delaware, Inc. and United
States Trust Company of New York, dated as of July 31, 1992, filed as an Exhibit
to the Company's Form 10-K, dated September 25, 1992, which is incorporated
herein by reference.
4.10 -- Reference is made to the Subsidiary Guaranty from Prime Note Collections
Company, Inc. to United States Trust Company of New York, dated as of July 31,
1992, filed as an Exhibit to the Company's Form 10-K, dated September 25, 1992,
which is incorporated herein by reference.
4.11 -- Reference is made to the Security Agreement between Prime Note Collections
Company, Inc. and United States Trust Company of New York, dated as of July 31,
1992, filed as an Exhibit to the Company's Form 10-K, dated September 25, 1992,
which is incorporated herein by reference.
4.12 -- Reference is made to Form 8-A of the Company as filed on June 5, 1992 with the
Securities and Exchange Commission, as amended by Amendment No. 1 and Amendment
No. 2, which is incorporated herein by reference.
4.13 -- Reference is made to an Indenture, dated April 26, 1995, between the Company and
the Trustee related to the issuance of 7% Convertible Subordinated Notes due
2002, filed as an Exhibit to the Company's Form 10-K, dated March 21, 1996,
which is incorporated herein by reference.
4.14 -- Reference is made to an Indenture, dated January 23, 1996, between the Company
and the Trustee related to 9 1/4% First Mortgage Notes due 2006, filed as an
Exhibit to the Company's Form 10-K, dated March 21, 1996, which is incorporated
herein by reference.
4.15 -- Reference is made to the Senior Secured Revolving Credit Agreement, dated as of
June 26, 1996, among the Company and the Lenders Party hereto, and Credit
Lyonnais New York Branch, as Documentation Agent, and Bankers Trust Company, as
Agent, filed as an Exhibit to the Company's Amendment No. 1 to Form S-3, dated
July 26, 1996, which is incorporated herein by reference.
4.16 -- Reference is made to the Master Repurchase Agreement, dated as of October 23,
1996, between BT Securities Corporation and Prime Hospitality Corp., filed as an
Exhibit to the Company's Form 10-K, dated February 28, 1997, which is
incorporated herein by reference.
4.17 -- Indenture, dated as of March 26, 1997, between Prime Hospitality Corp. and First
Bank National Association, as trustee.
4.18 -- Registration Rights Agreement, dated as of March 26, 1997, between Prime
Hospitality Corp. and the Initial Purchasers.
5 -- Opinion of Willkie Farr & Gallagher.
</TABLE>
II-3
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<C> <C> <S>
10.1 -- Reference is made to the Agreement of Purchase and Sale between Flamboyant
Investment Company, Ltd. and VMS Realty, Inc., dated June 3, 1985, and its
related agreements, each of which was included as an Exhibit to the Form 8-K,
dated August 14, 1985, of PMI, which are incorporated herein by reference.
10.2 -- Reference is made to PMI's Flexible Benefit Plan, filed as an Exhibit to the
Form 10-Q, dated February 12, 1988, of PMI, which is incorporated herein by
reference.
10.3 -- Reference is made to the 1992 Performance Incentive Stock Option Plan of the
Company, dated as of July 31, 1992, filed as an Exhibit to the Company's Form
10- K, dated September 25, 1992, which is incorporated herein by reference.
10.4 -- Reference is made to the 1992 Stock Option Plan of the Company filed as an
Exhibit to the Company's Form 10-K, dated September 25, 1992, which is
incorporated herein by reference.
10.5 -- Reference is made to the 1992 Non-Qualified Stock Option Agreement between the
Company and David A. Simon, filed as an Exhibit to the Company's Form 10-K,
dated September 25, 1992, which is incorporated herein by reference.
10.6 -- Reference is made to the 1992 Non-Qualified Stock Option Agreement between the
Company and John Elwood, filed as an Exhibit to the Company's Form 10-K, dated
March 26, 1993, which is incorporated herein by reference.
10.7 -- Reference is made to the Employment Agreement, dated as of May 18, 1993, between
Paul Hower and the Company, filed as an Exhibit to the Company's Form 10-K,
dated March 25, 1994, which is incorporated herein by reference.
10.8 -- Reference is made to the Consolidated and Amended Settlement Agreement, dated as
of October 12, 1993, between Allan V. Rose and the Company, filed as an Exhibit
to the Company's Form 10-K, dated March 25, 1994, which is incorporated herein
by reference.
10.9 -- Reference is made to the Consent and Amendment to Prime Hospitality Corp. 9.20%
Junior Secured Notes, filed as an Exhibit to the Company's Form 10-K, dated
March 10, 1995, which is incorporated herein by reference.
10.10 -- Reference is made to the Agreement, dated February 6, 1995, among Suites of
America, Inc., ShoLodge, Inc. and the Company, filed as an Exhibit to the
Company's Form 10-K, dated March 10, 1995, which is incorporated herein by
reference.
10.11 -- Reference is made to the Change of Control Agreement, dated February 15, 1995,
between David A. Simon and the Company, filed as an Exhibit to the Company's
Form 10-K, dated March 10, 1995, which is incorporated herein by reference.
10.12 -- References is made to the Change of Control Agreement, dated February 15, 1995,
between John M. Elwood and the Company, filed as an Exhibit to the Company's
Form 10-K, dated March 10, 1995, which is incorporated herein by reference.
10.13 -- Reference is made to the Change of Control Agreement, dated February 15, 1995,
between Paul H. Hower and the Company, filed as an Exhibit to the Company's Form
10-K, dated March 10, 1995, which is incorporated herein by reference.
10.14 -- Reference is made to the Change of Control Agreement, dated February 15, 1995,
between John H. Leavitt and the Company, filed as an Exhibit to the Company's
Form 10-K, dated March 10, 1995, which is incorporated herein by reference.
10.15 -- Reference is made to the Change of Control Agreement, dated February 15, 1995,
between Denis W. Driscoll and the Company, filed as an Exhibit to the Company's
Form 10-K, dated March 10, 1995, which is incorporated herein by reference.
10.16 -- Reference is made to the Change of Control Agreement, dated February 15, 1995,
between Timothy E. Aho and the Company, filed as an Exhibit to the Company's
Form 10-K, dated March 10, 1995, which is incorporated herein by reference.
</TABLE>
II-4
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<C> <C> <S>
10.17 -- Reference is made to the Change of Control Agreement, dated February 15, 1995,
between Joseph Bernadino and the Company, filed as an Exhibit to the Company's
Form 10-K, dated March 10, 1995, which is incorporated herein by reference.
10.18 -- Reference is made to the Change of Control Agreement, dated February 15, 1995,
between Richard T. Szymanski and the Company, filed as an Exhibit to the
Company's Form 10-K, dated March 10, 1995, which is incorporated herein by
reference.
10.19 -- Reference is made to the Change of Control Agreement, dated February 15, 1995,
between Douglas W. Vicari and the Company, filed as an Exhibit to the Company's
Form 10-K, dated March 10, 1995, which is incorporated herein by reference.
10.20 -- Reference is made to the Change of Control Agreement, dated February 15, 1995,
between Richard Moskal and the Company, filed as an Exhibit to the Company's
Form 10-K, dated March 10, 1995, which is incorporated herein by reference.
10.21 -- Reference is made to the Employment Agreement, dated May 15, 1995, between John
Elwood and the Company, filed as an Exhibit to the Company's Form 10-K, dated
March 21, 1996, which is incorporated herein by reference.
10.22 -- Reference is made to the Employment Agreement, dated August 1, 1995, between
David Simon and the Company, filed as an Exhibit to the Company's Form 10-K,
dated March 21, 1996, which is incorporated herein by reference.
11 -- Reference is made to the Statement regarding computation of per share earnings,
filed as an Exhibit to the Company's Form 10-K, dated February 28, 1997, which
is incorporated herein by reference.
12 -- Statement regarding computation of ratio of earnings to fixed charges.
21 -- Reference is made to the Subsidiaries of the Company, filed as an Exhibit to the
Company's Form 10-K, dated February 28, 1997, which is incorporated herein by
reference.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit
5).
24 -- Power of Attorney (included on the signature page hereto).
25 -- Statement on Form T-1 of Eligibility of Trustee.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Clients.
99.4 -- Form of Letter to Nominees.
</TABLE>
- ---------------
Certain instruments defining the rights of holders of long-term debt of the
Company and its subsidiaries have not been filed in accordance with Item
601(b)(4)(iii) of Regulation S-K. The Company hereby agrees to furnish a copy of
such instruments to the Commission upon request.
(b) Financial Statement Schedules:
All schedules have been omitted because they are not applicable or not
required or the required information is included in the financial statements or
notes thereto.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to
II-5
<PAGE> 123
section 15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of registrants
pursuant to the provisions described under Item 20 above, or otherwise, the
registrant has 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 court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, 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
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, 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 the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-6
<PAGE> 124
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements of filing on Form S-4 and 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 2 day of April,
1997.
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 any subsequent registration statement
for the same offering which may be filed under Rule 462(b) under the Securities
Act of 1933, as amended, 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, April 2, 1997
- ------------------------------------------ President, Chief Executive
David A. Simon Officer and Director
(principal executive officer)
/s/ JOHN M. ELWOOD Chief Financial Officer, Executive April 2, 1997
- ------------------------------------------ Vice President and Director
John M. Elwood (principal financial and
accounting officer)
/s/ HERBERT LUST, II Director April 2, 1997
- ------------------------------------------
Herbert Lust, II
/s/ JACK H. NUSBAUM Director April 2, 1997
- ------------------------------------------
Jack H. Nusbaum
/s/ ALLEN J. OSTROFF Director April 2, 1997
- ------------------------------------------
Allen J. Ostroff
/s/ A.F. PETROCELLI Director April 2, 1997
- ------------------------------------------
A.F. Petrocelli
/s/ HOWARD M. LORBER Director April 2, 1997
- ------------------------------------------
Howard M. Lorber
</TABLE>
II-7
<PAGE> 125
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------- --------------------------------------------------------------------- ------------
<C> <C> <S> <C>
2.1 -- Reference is made to the Disclosure Statement for Debtor's Second
Amended Joint Plan of Reorganization, dated January 16, 1992, which
includes the Debtors' Second Amended Plan of Reorganization as an
exhibit thereto, filed as an Exhibit to the Company's Form 10-K dated
September 25, 1992, which is incorporated herein by reference.
2.2 -- Reference is made to the Contract of Purchase and Sale between
Hillsborough Associates, Meriden Hotel Associates, L.P., Wellesley I,
L.P., Multi-Wellesley Limited Partnership and the Company, dated
March 6, 1996, filed as an Exhibit to the Company's 8-K dated March
21, 1996, which is incorporated herein by reference.
2.3 -- Reference is made to Consent of the Holders Thereof to the Purchase
by the Company of the Outstanding First Mortgage Notes, filed as an
Exhibit to the Company's 8-K, dated March 21, 1996, which is
incorporated herein by reference.
3.1 -- Reference is made to the Restated Certificate of Incorporation of the
Company, dated June 5, 1992, filed as an Exhibit to the Company's
Form 10-K dated September 25, 1992, which is incorporated herein by
reference.
3.2 -- Reference is made to the Restated Certificate of Incorporation, As
Amended, filed as an Exhibit to the Company's Form 10-Q/A, dated
April 30, 1996, which is incorporated herein by reference.
3.3 -- Reference is made to the Restated Bylaws of the Company, filed as an
Exhibit to the Company's Form 10-K, dated September 25, 1992, which
is incorporated herein by reference.
4.1 -- Reference is made to the form of 9.20% Junior Secured Note of the
Company, filed as an Exhibit to the Company's Form 10-K, dated
September 25, 1992, which is incorporated herein by reference.
4.2 -- Reference is made to the Form of 8.20% Tax Note of the Company, filed
as an Exhibit to the Company's Form 10-K , dated September 25, 1992,
which is incorporated herein by reference.
4.3 -- Reference is made to the Form of 10.20% Secured UND Restructured Note
of the Company, filed as an Exhibit to the Company's Form 10-K, dated
September 25, 1992, which is incorporated herein by reference.
4.4 -- Reference is made to the Form of 8% Secured UND Restructured Note of
the Company, filed as an Exhibit to the Company's Form 10-K, dated
September 25, 1992, which is incorporated herein by reference.
4.5 -- Reference is made to the Form of 9.20% OVR Restructured Note of the
Company, filed as an Exhibit to the Company's Form 10-K, dated
September 25, 1992, which is incorporated herein by reference.
4.6 -- Reference is made to the Collateral Agency Agreement among the
Company, U.S. Trust and the Secured Parties, dated as of July 31,
1992, filed as an Exhibit to the Company's Form 10-K, dated September
25, 1992, which is incorporated herein by reference.
4.6 -- Reference is made to the Security Agreement between the Company and
U.S. Trust, dated as of July 31, 1992, filed as an Exhibit to the
Company's Form 10-K, dated September 25, 1992, which is incorporated
herein by reference.
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------- --------------------------------------------------------------------- ------------
<C> <C> <S> <C>
4.8 -- Reference is made to the Subsidiary Guaranty from FR Delaware, Inc.
to United States Trust Company of New York, dated as of July 31,
1992, filed as an Exhibit to the Company's Form 10-K, dated September
25, 1992, which is incorporated herein by reference.
4.9 -- Reference is made to the Security Agreement between FR Delaware, Inc.
and United States Trust Company of New York, dated as of July 31,
1992, filed as an Exhibit to the Company's Form 10-K, dated September
25, 1992, which is incorporated herein by reference.
4.10 -- Reference is made to the Subsidiary Guaranty from Prime Note
Collections Company, Inc. to United States Trust Company of New York,
dated as of July 31, 1992, filed as an Exhibit to the Company's Form
10-K, dated September 25, 1992, which is incorporated herein by
reference.
4.11 -- Reference is made to the Security Agreement between Prime Note
Collections Company, Inc. and United States Trust Company of New
York, dated as of July 31, 1992, filed as an Exhibit to the Company's
Form 10-K, dated September 25, 1992, which is incorporated herein by
reference.
4.12 -- Reference is made to Form 8-A of the Company as filed on June 5, 1992
with the Securities and Exchange Commission, as amended by Amendment
No. 1 and Amendment No. 2, which is incorporated herein by reference.
4.13 -- Reference is made to an Indenture, dated April 26, 1995, between the
Company and the Trustee related to the issuance of 7% Convertible
Subordinated Notes due 2002, filed as an Exhibit to the Company's
Form 10-K, dated March 21, 1996, which is incorporated herein by
reference.
4.14 -- Reference is made to an Indenture, dated January 23, 1996, between
the Company and the Trustee related to 9 1/4% First Mortgage Notes
due 2006, filed as an Exhibit to the Company's Form 10-K, dated March
21, 1996, which is incorporated herein by reference.
4.15 -- Reference is made to the Senior Secured Revolving Credit Agreement,
dated as of June 26, 1996, among the Company and the Lenders Party
hereto, and Credit Lyonnais New York Branch, as Documentation Agent,
and Bankers Trust Company, as Agent, filed as an Exhibit to the
Company's Amendment No. 1 to Form S-3, dated July 26, 1996, which is
incorporated herein by reference.
4.16 -- Reference is made to the Master Repurchase Agreement, dated as of
October 23, 1996, between BT Securities Corporation and Prime
Hospitality Corp., filed as an Exhibit to the Company's Form 10-K,
dated February 28, 1997, which is incorporated herein by reference.
4.17 -- Indenture, dated as of March 26, 1997, between Prime Hospitality
Corp. and First Bank National Association, as trustee.
4.18 -- Registration Rights Agreement, dated as of March 26, 1997, between
Prime Hospitality Corp. and the Initial Purchasers.
5 -- Opinion of Willkie Farr & Gallagher.
10.1 -- Reference is made to the Agreement of Purchase and Sale between
Flamboyant Investment Company, Ltd. and VMS Realty, Inc., dated June
3, 1985, and its related agreements, each of which was included as an
Exhibit to the Form 8-K, dated August 14, 1985, of PMI, which are
incorporated herein by reference.
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------- --------------------------------------------------------------------- ------------
<C> <C> <S> <C>
10.2 -- Reference is made to PMI's Flexible Benefit Plan, filed as an Exhibit
to the Form 10-Q, dated February 12, 1988, of PMI, which is
incorporated herein by reference.
10.3 -- Reference is made to the 1992 Performance Incentive Stock Option Plan
of the Company, dated as of July 31, 1992, filed as an Exhibit to the
Company's Form 10- K, dated September 25, 1992, which is incorporated
herein by reference.
10.4 -- Reference is made to the 1992 Stock Option Plan of the Company filed
as an Exhibit to the Company's Form 10-K, dated September 25, 1992,
which is incorporated herein by reference.
10.5 -- Reference is made to the 1992 Non-Qualified Stock Option Agreement
between the Company and David A. Simon, filed as an Exhibit to the
Company's Form 10-K, dated September 25, 1992, which is incorporated
herein by reference.
10.6 -- Reference is made to the 1992 Non-Qualified Stock Option Agreement
between the Company and John Elwood, filed as an Exhibit to the
Company's Form 10-K, dated March 26, 1993, which is incorporated
herein by reference.
10.7 -- Reference is made to the Employment Agreement, dated as of May 18,
1993, between Paul Hower and the Company, filed as an Exhibit to the
Company's Form 10-K, dated March 25, 1994, which is incorporated
herein by reference.
10.8 -- Reference is made to the Consolidated and Amended Settlement
Agreement, dated as of October 12, 1993, between Allan V. Rose and
the Company, filed as an Exhibit to the Company's Form 10-K, dated
March 25, 1994, which is incorporated herein by reference.
10.9 -- Reference is made to the Consent and Amendment to Prime Hospitality
Corp. 9.20% Junior Secured Notes, filed as an Exhibit to the
Company's Form 10-K, dated March 10, 1995, which is incorporated
herein by reference.
10.10 -- Reference is made to the Agreement, dated February 6, 1995, among
Suites of America, Inc., ShoLodge, Inc. and the Company, filed as an
Exhibit to the Company's Form 10-K, dated March 10, 1995, which is
incorporated herein by reference.
10.11 -- Reference is made to the Change of Control Agreement, dated February
15, 1995, between David A. Simon and the Company, filed as an Exhibit
to the Company's Form 10-K, dated March 10, 1995, which is
incorporated herein by reference.
10.12 -- References is made to the Change of Control Agreement, dated February
15, 1995, between John M. Elwood and the Company, filed as an Exhibit
to the Company's Form 10-K, dated March 10, 1995, which is
incorporated herein by reference.
10.13 -- Reference is made to the Change of Control Agreement, dated February
15, 1995, between Paul H. Hower and the Company, filed as an Exhibit
to the Company's Form 10-K, dated March 10, 1995, which is
incorporated herein by reference.
10.14 -- Reference is made to the Change of Control Agreement, dated February
15, 1995, between John H. Leavitt and the Company, filed as an
Exhibit to the Company's Form 10-K, dated March 10, 1995, which is
incorporated herein by reference.
</TABLE>
<PAGE> 128
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ----------- --------------------------------------------------------------------- ------------
<C> <C> <S> <C>
10.15 -- Reference is made to the Change of Control Agreement, dated February
15, 1995, between Denis W. Driscoll and the Company, filed as an
Exhibit to the Company's Form 10-K, dated March 10, 1995, which is
incorporated herein by reference.
10.16 -- Reference is made to the Change of Control Agreement, dated February
15, 1995, between Timothy E. Aho and the Company, filed as an Exhibit
to the Company's Form 10-K, dated March 10, 1995, which is
incorporated herein by reference.
10.17 -- Reference is made to the Change of Control Agreement, dated February
15, 1995, between Joseph Bernadino and the Company, filed as an
Exhibit to the Company's Form 10-K, dated March 10, 1995, which is
incorporated herein by reference.
10.18 -- Reference is made to the Change of Control Agreement, dated February
15, 1995, between Richard T. Szymanski and the Company, filed as an
Exhibit to the Company's Form 10-K, dated March 10, 1995, which is
incorporated herein by reference.
10.19 -- Reference is made to the Change of Control Agreement, dated February
15, 1995, between Douglas W. Vicari and the Company, filed as an
Exhibit to the Company's Form 10-K, dated March 10, 1995, which is
incorporated herein by reference.
10.20 -- Reference is made to the Change of Control Agreement, dated February
15, 1995, between Richard Moskal and the Company, filed as an Exhibit
to the Company's Form 10-K, dated March 10, 1995, which is
incorporated herein by reference.
10.21 -- Reference is made to the Employment Agreement, dated May 15, 1995,
between John Elwood and the Company, filed as an Exhibit to the
Company's Form 10-K, dated March 21, 1996, which is incorporated
herein by reference.
10.22 -- Reference is made to the Employment Agreement, dated August 1, 1995,
between David Simon and the Company, filed as an Exhibit to the
Company's Form 10-K, dated March 21, 1996, which is incorporated
herein by reference.
11 -- Reference is made to the Statement regarding computation of per share
earnings, filed as an Exhibit to the Company's Form 10-K, dated
February 28, 1997, which is incorporated herein by reference.
12 -- Statement regarding computation of ratio of earnings to fixed
charges.
21 -- Reference is made to the Subsidiaries of the Company, filed as an
Exhibit to the Company's Form 10-K, dated February 28, 1997, which is
incorporated herein by reference.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of Willkie Farr & Gallagher (included in their opinion filed
as Exhibit 5).
24 -- Power of Attorney (included on the signature page hereto).
25 -- Statement on Form T-1 of Eligibility of Trustee.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Letter to Clients.
99.4 -- Form of Letter to Nominees.
</TABLE>
<PAGE> 1
Exhibit 4.17
PRIME HOSPITALITY CORP.
$200,000,000
SERIES A AND SERIES B
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
INDENTURE
Dated as of March 26, 1997
FIRST BANK NATIONAL ASSOCIATION
Trustee
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
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) ............................................................................................... 7.08;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) ............................................................................................... 7.06
(c) ............................................................................................... 7.06;12.02
(d) ............................................................................................... 7.06
314(a) ............................................................................................... 4.03;12.02
(a)(4)............................................................................................... 4.03;12.05
(b) ............................................................................................... 10.02
(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(2)
(b) ............................................................................................... 7.05;12.02
(c) ............................................................................................... 7.01
(d) ............................................................................................... 7.01(3)
(e) ............................................................................................... 6.11;7.08
316(a)(last sentence)................................................................................... 2.08;2.09
(a)(1)(A)............................................................................................ 6.05
(a)(1)(B)............................................................................................ 6.04
(a)(2)............................................................................................... N.A.
(b) ............................................................................................... 6.07
(c) ............................................................................................... 9.04;2.13
317(a)(1)............................................................................................... 6.08
(a)(2)............................................................................................... 6.09
(b) ............................................................................................... 2.03
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>
PAGE
----
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
<S> <C> <C>
Section 1.01 Definitions............................................................ 1
Section 1.02. Other Definitions...................................................... 12
Section 1.03. Incorporation by Reference of Trust Indenture Act...................... 13
Section 1.04. Rules of Construction.................................................. 13
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating........................................................ 14
Section 2.02. Execution and Authentication........................................... 14
Section 2.03. Registrar and Paying Agent............................................. 15
Section 2.04. Paying Agent to Hold Money in Trust.................................... 15
Section 2.05. Holders Lists.......................................................... 16
Section 2.06. Transfer and Exchange.................................................. 16
Section 2.07. Replacement Notes...................................................... 17
Section 2.08. Outstanding Notes...................................................... 17
Section 2.09. Treasury Notes......................................................... 17
Section 2.10. Temporary Notes........................................................ 18
Section 2.11. Cancellation........................................................... 18
Section 2.12. Defaulted Interest..................................................... 18
Section 2.13. Record Date............................................................ 18
Section 2.14. CUSIP Number........................................................... 19
Section 2.15. Restrictive Legends.................................................... 19
Section 2.16. Book-Entry Provisions for Global Security.............................. 20
Section 2.17. Special Transfer Provisions............................................ 21
ARTICLE 3
REDEMPTIONS AND OFFERS TO PURCHASE
Section 3.01. Notices to Trustee..................................................... 23
Section 3.02. Selection of Notes to Be Redeemed or Purchased......................... 23
Section 3.03. Notice of Redemption................................................... 24
Section 3.04. Effect of Notice of Redemption......................................... 25
Section 3.05. Deposit of Redemption Price............................................ 25
Section 3.06. Notes Redeemed in Part................................................. 25
Section 3.07. Optional Redemption.................................................... 26
Section 3.08. Mandatory Redemption................................................... 26
Section 3.09. Offer to Purchase by Application of Excess Proceeds.................... 26
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes....................................................... 28
Section 4.02. Maintenance of Office or Agency........................................ 28
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 4.03. SEC Reports...................................................................... 29
Section 4.04. Compliance Certificate........................................................... 29
Section 4.05. Taxes............................................................................ 30
Section 4.06. Stay, Extension and Usury Laws................................................... 30
Section 4.07. Limitation on Restricted Payments................................................ 30
Section 4.08. Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries..................................................................... 33
Section 4.09. Limitation on Additional Indebtedness and Issuance of Certain Capital Stock...... 34
Section 4.10. Limitation on Sale of Assets..................................................... 35
Section 4.11. Limitation on Transactions With Affiliates....................................... 36
Section 4.12. [This Section Intentionally Omitted]............................................. 37
Section 4.13. Corporate Existence.............................................................. 37
Section 4.14. Change of Control................................................................ 37
Section 4.15. Subsidiary Guarantees............................................................ 38
Section 4.16. Line of Business................................................................. 39
Section 4.17. Payments for Consent............................................................. 39
Section 4.18. [This Section Intentionally Omitted]............................................. 39
Section 4.19 Liquidation...................................................................... 39
Section 4.20. Convertible Note Indenture....................................................... 40
Section 4.21. No Senior Subordinated Debt...................................................... 40
ARTICLE 5
SUCCESSORS
Section 5.01. When the Company May Merge, etc.................................................. 40
Section 5.02. Successor Substituted............................................................ 41
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default................................................................ 41
Section 6.02. Acceleration..................................................................... 44
Section 6.03. Other Remedies................................................................... 44
Section 6.04. Waiver of Past Defaults.......................................................... 44
Section 6.05. Control by Majority.............................................................. 44
Section 6.06. Limitation on Suits.............................................................. 45
Section 6.07. Rights of Holders to Receive Payment............................................. 45
Section 6.08. Collection Suit by Trustee....................................................... 45
Section 6.09. Trustee May File Proofs of Claim................................................. 46
Section 6.10. Priorities....................................................................... 46
Section 6.11. Undertaking for Costs............................................................ 46
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee................................................................ 47
Section 7.02. Rights of Trustee................................................................ 48
Section 7.03. Individual Rights of Trustee..................................................... 49
Section 7.04. Trustee's Disclaimer............................................................. 49
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 7.05. Notice of Defaults............................................................... 49
Section 7.06. Reports by Trustee to Holders.................................................... 49
Section 7.07. Compensation and Indemnity....................................................... 49
Section 7.08. Replacement of Trustee........................................................... 50
Section 7.09. Successor Trustee by Merger, etc................................................. 51
Section 7.10. Eligibility; Disqualification.................................................... 51
Section 7.11. Preferential Collection of Claims Against Company................................ 52
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Defeasance and Discharge of this Indenture and the Notes......................... 52
Section 8.02. Legal Defeasance and Discharge................................................... 53
Section 8.03. Covenant Defeasance.............................................................. 53
Section 8.04. Conditions to Legal or Covenant Defeasance....................................... 54
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions......................................................... 55
Section 8.06. Repayment to the Company......................................................... 56
Section 8.07 Reinstatement.................................................................... 56
ARTICLE 9
AMENDMENTS
Section 9.01. Without Consent of Holders....................................................... 57
Section 9.02. With Consent of Holders.......................................................... 57
Section 9.03. Compliance with Trust Indenture Act.............................................. 59
Section 9.04. Revocation and Effect of Consents................................................ 59
Section 9.05. Notation on or Exchange of Notes................................................. 59
Section 9.06. Trustee to Sign Amendments, etc.................................................. 59
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate......................................................... 60
Section 10.02. Liquidation; Dissolution; Bankruptcy............................................. 60
Section 10.03 No Payment on Notes in Certain Circumstances..................................... 61
Section 10.04. [This Section Intentionally Omitted]............................................. 61
Section 10.05. Acceleration of Notes............................................................ 62
Section 10.06. When Distribution Must Be Paid Over.............................................. 62
Section 10.06. Notice by the Company............................................................ 62
Section 10.07. Subrogation...................................................................... 62
Section 10.08. Relative Rights.................................................................. 63
Section 10.09. Subordination May Not Be Impaired by Company..................................... 63
Section 10.10. Distribution or Notice to Representative......................................... 63
Section 10.11. Rights of Trustee and Paying Agent............................................... 63
Section 10.12. Authorization to Effect Subordination............................................ 64
Section 10.13. Amendments....................................................................... 64
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
ARTICLE 11
SUBSIDIARY GUARANTEES
<S> <C> <C>
Section 11.01. Subsidiary Guarantees............................................................ 64
Section 11.02. When a Guarantor May Merge, Etc.................................................. 66
Section 11.03. Limitation of Guarantor's Liability.............................................. 66
Section 11.04. Release of a Guarantor........................................................... 67
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls..................................................... 67
Section 12.02. Notices.......................................................................... 67
Section 12.03. Communication by Holders with Other Holders...................................... 69
Section 12.04. Certificate and Opinion as to Conditions Precedent............................... 69
Section 12.05. Statements Required in Certificate or Opinion.................................... 69
Section 12.06. Rules by Trustee and Agents...................................................... 69
Section 12.07. Legal Holidays................................................................... 70
Section 12.08. Recourse Against Others.......................................................... 70
Section 12.09. Duplicate Originals.............................................................. 70
Section 12.10. Governing Law.................................................................... 70
Section 12.11. No Adverse Interpretation of Other Agreements.................................... 70
Section 12.12. Successors....................................................................... 70
Section 12.13. Severability..................................................................... 71
Section 12.14. Counterpart Originals............................................................ 71
Section 12.15. Table of Contents, Headings, etc................................................. 71
SIGNATURES.......................................................................................... 72
</TABLE>
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Supplemental Indenture
Exhibit C Form of Certificate To be Delivered in Connection with
Transfers to Non-QIB Accredited Investors
Exhibit D Form of Certificate To be Delivered in Connection with
Transfers Pursuant to Regulation S
iv
<PAGE> 7
INDENTURE dated as of March 26, 1997 between Prime Hospitality Corp.,
a Delaware corporation (the "Company"), and First Bank National Association, as
trustee (the "Trustee").
Each of the Company and the Trustee agrees as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the 9 3/4%
Series A Senior Subordinated Notes due 2007 of the Company (the "Series A
Notes") and the 9 3/4% Series B Senior Subordinated Notes due 2007 of the
Company (the "Series B Notes," and, together with the Series A Notes, the
"Notes").
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 beneficial ownership of 10% or more of the voting securities of a Person
shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means (i) the sale, lease (other than operating leases
in respect of facilities which are ancillary to the operation of the Company's
or a Restricted Subsidiary's hotel properties), 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 and including a disposition by the
Company or a Restricted Subsidiary of Equity Interests in an Unrestricted
Subsidiary), (ii) the issuance or sale of Equity Interests of any of the
Company's Restricted Subsidiaries or (iii) any Event of Loss, other than, with
respect to clauses (i), (ii) and (iii) above, the following: (1) the sale or
disposition of personal property held for sale in the ordinary course of
business, (2) the sale or disposal of damaged, worn out or other obsolete
property in the ordinary course of business so long as such property is no
longer necessary for the proper conduct of the business of the Company or such
Restricted Subsidiary, as applicable, (3) the transfer of
<PAGE> 8
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, (4) the exchange of assets held by the Company or a
Restricted Subsidiary of the Company for one or more hotels and/or one or more
Hospitality-Related Businesses of any Person or entity owning one or more hotels
and/or one or more Hospitality-Related Businesses; provided, that the Board of
Directors of the Company has determined that the terms of any exchange are fair
and reasonable and that the fair market value of the assets received by the
Company, as set forth in an opinion of a Qualified Appraiser, are equal to or
greater than the fair market value of the assets exchanged by the Company or a
Restricted Subsidiary of the Company, (5) any Restricted Payment, dividend or
purchase or retirement of Equity Interests permitted under Section 4.07 hereof,
(6) the sale, lease, conveyance or other disposition of all or substantially all
of the assets of the Company in compliance with Section 4.14 and Article V
hereof, (7) 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, or (8) 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 $5.0 million or an Event of Loss or related series of Events of Loss
pursuant to which the aggregate value of property or assets involved in such
Event of Loss or Events of Loss is less than $5.0 million.
"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 that is not a Saturday, Sunday or a day
on which banking institutions in New York, New York or the city in which the
Corporate Trust Office is located are authorized or obliged by law or executive
order to close.
"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) 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, (ii) 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, (iii)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (i) and (ii) entered into with any
financial institution meeting the qualifications specified in clause (ii) above,
(iv) commercial paper or commercial paper Master Notes 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, (v) money market mutual funds
that provide daily purchase and redemption features, and (vi) corporate debt
with maturities of not greater than six months and with a rating of A or the
equivalent thereof by Standard & Poor's Corporation and a rating of A2 or the
equivalent thereof by Moody's Investors Service, Inc.
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<PAGE> 9
"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 ownership
of the Company or 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), (iv) the merger or consolidation
of the Company with or into another corporation or the merger of another
corporation into the Company with the effect that immediately after such
transaction the stockholders of the Company immediately prior to such
transaction hold less than 50% of the total voting power of all securities
generally entitled to vote in the election of directors, managers, or trustees
of the Person surviving such merger or consolidation or (v) the first day on
which a majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"Company" means Prime Hospitality Corp., a Delaware corporation,
until a successor replaces it in accordance with the applicable provisions of
this Indenture, and thereafter, means such successor.
"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,
less (e) other income as reflected on such Person's consolidated financial
statements, as prepared in accordance with GAAP, to the extent such other income
was included in computing Consolidated Net Income. Notwithstanding the
foregoing, the provision for taxes on the income or profits of, the depreciation
and amortization of and the interest expense of, a Restricted Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to such Person by
such Restricted Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders. Any calculation of the Consolidated Cash Flow of
an individual hotel property shall be calculated in a manner consistent with the
foregoing.
"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.
3
<PAGE> 10
"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 Lease Obligations, 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 and
(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; 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 excluded, whether or not distributed to the
Company or one of 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, (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 and (iv) the cumulative effect
of change in accounting principles shall be excluded.
"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 consolidated 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 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.
"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" shall be at the address of the Trustee
specified in Section 12.02 or such other address as the Trustee may give notice
to the Company.
"Credit Agreement" means the revolving credit facility dated June 26,
1996 entered into between and among the Company and the lenders party thereto,
Credit Lyonnais New York branch, as
4
<PAGE> 11
documentation agent, and Bankers Trust Company, as agent, including any related
notes, security documentation, guarantees, collateral documents, instruments and
agreements executed in connection therewith, in each case as amended, modified,
supplemented, restricted, renewed, restated, refunded, replaced or refinanced or
extended from time to time on one or more occasions.
"Credit Facility" means the Credit Agreement and one or more
borrowing arrangements, to be entered into, by and between the Company and/or
one or more Restricted Subsidiaries and a commercial bank or other institutional
lender, including any related notes, security documentation, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, in each case as amended, modified, supplemented, restructured,
renewed, restated, refunded, replaced or refinanced or extended from time to
time on one or more occasions.
"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 Debt" means (i) Indebtedness under or in respect
of one or more Credit Facilities, (ii) Indebtedness under or in respect of the
First Mortgage Notes and (iii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $25.0 million and is specifically designated in the instrument evidencing
such Senior Debt as "Designated Senior Debt" by the Company.
"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 April 1,
2007.
"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).
"Event of Loss" means, with respect to any property or asset
(tangible or intangible, real or personal) any of the following: (A) any loss,
destruction or damage of such property or asset; (B) any institution of any
proceedings for the condemnation or seizure of such property or asset or for the
exercise of any right of eminent domain; or (C) any actual condemnation, seizure
or taking by the power of eminent domain or otherwise of such property or asset,
or confiscation of such property or asset or the requisition of the use of such
property or asset.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the Issuance Date (after giving effect
to the use of the proceeds of the Offering), excluding, for this purpose,
amounts outstanding or committed for under the Credit Agreement as in effect 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.
5
<PAGE> 12
"Final Memorandum" means the Company's Offering Memorandum dated
March 21, 1997 pertaining to the offer and sale of $200,000,000 in aggregate
principal amount of Notes, pursuant to Section 4(2) and Rule 144(A) of the
Securities Act.
"First Mortgage Notes" means the Company's 9 1/4% First Mortgage
Notes due 2006.
"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 that provide
working capital in the ordinary course of business) or issues or redeems
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.
"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 obligations
or guarantee 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.
6
<PAGE> 13
"Guarantor" means such 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.
"Holder" means the Person in whose name a Note is registered on the
Registrar's books.
"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,
constructing, managing, operating, improving or acquiring lodging facilities,
restaurants and other food-service facilities, sports or entertainment
facilities, and convention or meeting facilities, and 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 Restricted 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 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. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indirectly, greater than
50% of the outstanding Common Stock of such Restricted Subsidiary, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.
"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
7
<PAGE> 14
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however, 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 serving as security for
Non-Recourse Indebtedness) pursuant to any undertaking, agreement or instrument
that would constitute Indebtedness, (ii) is directly or indirectly liable (other
than in the form of a Lien on an asset serving as security for Non-Recourse
Indebtedness) 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 Notes issued under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers" means the Chairman of the Board, the President, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, Controller,
Secretary, any Assistant Secretary or any Vice President of the Company.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board of Directors, the President or a Vice President and by the Chief
Financial officer, the Treasurer, an Assistant Treasurer, the Controller, the
Secretary or an Assistant Secretary of the Company, as applicable, except with
respect to certificates required to be furnished by the Company to the Trustee
pursuant to Section 4.04 hereof, in which event "Officers' Certificate" means a
certificate signed by the principal executive officer or principal financial
officer.
"Opinion of Counsel" means a written opinion from legal counsel who
is reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
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<PAGE> 15
"Permitted Junior Securities" means Equity Interests in the Company
or debt securities that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) to substantially the same extent
as, or to a greater extent than, the Notes are subordinated to Senior Debt
pursuant to Article 10 of this Indenture.
"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 $5.0 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) net cash advances to
Restricted Subsidiaries in the ordinary course of business and consistent with
the Company's past cash management practices in an amount not to exceed $ 10.0
million at any one time outstanding.
"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; and (e) if
the Indebtedness or the Disqualified Stock, as the case may be, being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated or junior in
right of payment to the Notes, the Refinancing Indebtedness or Refinancing
Disqualified Stock, as the case may be, is subordinated or junior 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.
"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 or Indebtedness permitted to be
issued pursuant to the Fixed Charge Coverage Ratio test set forth in the
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<PAGE> 16
first paragraph of Section 4.09 hereof or Indebtedness referred to in clauses
(iii), (v), (vii) and (ix) in 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 clauses (iii), (v), (vii) and (ix) of the second
paragraph of Section 4.09 hereof.
"Registration Rights Agreement" means that certain Registration
Rights Agreement dated as of the Issuance Date by and among the Company and BT
Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Montgomery Securities and Smith Barney Inc. setting forth certain registration
rights with respect to the Notes.
"Representative" means the indenture trustee or other trustee, agent
or representative in respect of Designated Senior Debt; provided, that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means, in the case of the Company or any Guarantor, the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, any Indebtedness of the Company or such Guarantor, whether outstanding on
the Issuance Date or thereafter created, incurred or assumed, unless, in the
case of any particular Indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all Obligations of every nature of the Company under the Credit
Agreement, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses and
indemnities, whether outstanding on the Issuance Date or thereafter incurred,
(y) all Hedging Obligations (including Guarantees thereof), whether outstanding
on the Issuance Date or thereafter incurred and (z) the First Mortgage Notes.
Notwithstanding the foregoing, "Senior Debt" shall not include (i) any
Indebtedness of the Company or any Guarantor to a Subsidiary of the Company or
any Affiliate of the Company or any Guarantor or any
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<PAGE> 17
of such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf
of, any shareholder, director, officer or employee of the Company or any
Subsidiary of the Company or any Guarantor (including, without limitation,
amounts owed for compensation), (iii) Indebtedness to trade creditors and other
amounts incurred in connection with obtaining goods, materials or services, (iv)
any liability for federal, state, local or other taxes owed or owing by the
Company or any Guarantor, (v) that portion of Indebtedness incurred in violation
of the provisions set forth under Section 4.09 hereof, and (vi) any Indebtedness
which is, by its express terms, subordinated in right of payment to any other
Indebtedness of the Company or any Guarantor.
"Significant Subsidiary" means any Subsidiary which would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"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
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
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.
"Trust Officer" means any officer in the Corporate Trust Office of
the Trustee.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a board
resolution, but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Indebtedness; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the board resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by Section 4.07 hereof. If, at any time,
any Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09, the Company shall be in default of
such covenant). The Board of
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<PAGE> 18
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary, provided that such designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary, and such
designation shall only be permitted if (i) such Indebtedness is permitted under
Section 4.09 of this Indenture and (ii) no Default or Event of Default would be
in existence following such designation.
"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.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Accredited Investor"............................................ 2.01
"Affiliate Transaction".......................................... 4.11
"Agent Members".................................................. 2.16
"Asset Sale Offer"............................................... 3.09
"Asset Sale Offer Price"......................................... 4.10
"Bankruptcy Law"................................................. 6.01
"Blockage Period" ............................................... 10.03
"Change of Control Offer"........................................ 4.14
"Change of Control Payment"...................................... 4.14
"Change of Control Payment Date"................................. 4.14
"Computation Period"............................................. 4.07
"Convertible Note Indenture"..................................... 4.23
"Convertible Notes".............................................. 4.23
"Covenant Defeasance"............................................ 8.03
"Custodian"...................................................... 6.01
"defeasance trust"............................................... 8.04
"Default Notice"................................................. 10.03
"Depositary"..................................................... 2.01
</TABLE>
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<PAGE> 19
<TABLE>
<CAPTION>
<S> <C>
"Event of Default"............................................... 6.01
"Excess Collateral Proceeds"..................................... 4.10
"Excess Proceeds"................................................ 4.10
"Global Note".................................................... 2.01
"Legal Defeasance"............................................... 8.02
"Legal Holiday".................................................. 12.07
"Offshore Physical Securities"................................... 2.01
"Paying Agent"................................................... 2.04
"Payment Blockage Notice"........................................ 10.03
"Property"....................................................... 4.21
"Private Placement Legend"....................................... 2.15
"Public Equity Offering"......................................... 3.07
"Redemption Percentages"......................................... 3.07
"Registrar"...................................................... 2.03
"Restricted Payments"............................................ 4.07
"Rule 144A"...................................................... 2.01
"Subsidiary Guarantee"........................................... 11.01
"US Physical Securities"......................................... 2.01
</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.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"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, any Guarantor and any
successor obligor.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule 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;
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<PAGE> 20
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions.
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. Subject to Section 2.07
hereof, the Notes shall be in an aggregate principal amount of $200,000,000. The
Notes may have notations, legends or endorsements 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 issued initially in denominations of $1,000 and integral multiples thereof.
Notes offered and sold in reliance on Rule 144A under the Securities
Act ("Rule 144A") and to institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act ("Accredited
Investors") shall be issued initially in the form of one or more permanent
global notes in registered form, in substantially the form set forth in Exhibit
A (the "Global Note"), deposited with the Trustee, as custodian for The
Depository Trust Company (the "Depositary"), duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary,
as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Securities in
registered form in substantially the form set forth in Exhibit A (the "Offshore
Physical Securities"). Additionally, Notes offered and sold in reliance on any
other exemption from registration under the Securities Act, including pursuant
to Rule 144A, other than as described in the preceding paragraph may be issued,
in the form of permanent certificated Notes in registered form, in substantially
the form set forth in Exhibit A (the "U.S. Physical Securities"). The Offshore
Physical Securities and the U.S. Physical Securities are sometimes collectively
herein referred to as the "Physical Securities."
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer of the Company shall sign the Notes for the Company by
manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that
office at the time the Note is authenticated, the Note 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
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<PAGE> 21
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 Section 2.01 hereof. The aggregate
principal amount of Notes outstanding at any time may not exceed the amount set
forth herein, except as provided in Section 2.07.
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 an Affiliate of the Company.
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 (the "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 or Registrar without notice to any Holder. The Company shall notify the
Trustee of the name and address of any Agent not a party to this Indenture. If
the Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may
act as Paying Agent or Registrar. The Company shall enter into an appropriate
agency agreement with any Agent not a party to this Indenture, which shall
incorporate 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 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 will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, or interest or Liquidated Damages (as defined in
the Registration Rights Agreement), if any, on the Notes, and will notify the
Trustee of any default by the Company or Guarantor, if any, 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) shall have no
further liability for the money delivered to the Trustee. If the Company or any
of its Subsidiaries 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.
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<PAGE> 22
SECTION 2.05. HOLDERS LISTS.
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 shall furnish to the Trustee at least seven (7)
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 thereof, and the Company and the Guarantors shall
otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Where Notes are presented to the Registrar with a request to
register the transfer thereof or 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 and the Trustee 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.
(b) The Company and the Registrar shall not be required (i) to issue,
to register the transfer of, or to exchange Notes during a period beginning at
the opening of business on a Business Day fifteen (15) days before the day of
any selection of Notes for redemption or purchase under Section 3.02 and ending
at the close of business on the day of selection, (ii) to register the transfer
of or exchange any Note so selected for redemption or purchase in whole or in
part, except the unredeemed or unpurchased portion of any Note being redeemed or
purchased in part or (iii) to register the transfer or exchange of a Note
between the Record Date and the next succeeding Interest Payment Date.
(c) No service charge shall be made for any registration of a
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment by the Holder 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 Section 2.10, 3.06 or 9.05.
(d) Prior to due presentment for registration of transfer of any
Note, the Trustee, any Agent and the Company 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 neither the Trustee, any Agent, nor the Company shall be affected
by notice to the contrary.
(e) Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.
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<PAGE> 23
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or either of the
Company or the Trustee receives evidence to its 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 if an indemnity bond is supplied by the Holder
that is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, each Agent and each authenticating agent from any loss
which any of them may suffer if a Note is replaced. The Company and the Trustee
may charge for its expenses in replacing a Note.
Every replacement Note is an additional Obligation of the Company.
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, those reductions in interest in a Global Note effected by the
Trustee in accordance with the provision hereof, and those described in this
Section 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 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, a Guarantor, if any, or any Affiliate of the Company or a Guarantor, if
any, 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 Trust Officer knows to be so
owned shall be so considered. The Company agrees to notify the Trustee of the
existence of any Notes owned by the Company, by any Guarantor or by any
Affiliate of the Company or a Guarantor.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. 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 in exchange
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<PAGE> 24
for temporary Notes. Until such exchange, temporary Notes shall be entitled to
the same rights, benefits and privileges as definitive Notes.
Holders of temporary Notes shall be entitled to all of the benefits
of this Indenture.
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 and no one else 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 them to be returned to them. The Company may not
issue new Notes to replace Notes that have been 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 an Officer of the Company, the
Company shall direct that cancelled Notes be returned to them.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
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 (5) 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, with the consent of the Trustee, fix or cause to be
fixed each such special record date and payment date. At least fifteen (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 identification numbers printed on the Notes. The Company will
promptly notify the Trustee of any change in the CUSIP number.
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<PAGE> 25
SECTION 2.15. RESTRICTIVE LEGENDS.
Each Global Note and Physical Security that constitutes a Restricted
Security shall bear the following legend (the "Private Placement Legend") unless
otherwise agreed by the Company and the Holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER THEREOF OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY
A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
SECURITYHOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE
AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
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<PAGE> 26
Each Global Note shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY
SUCH NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF A
SUCCESSOR DEPOSITARY, OR ANY NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF CEDE & CO., OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
SECTION 2.16. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITY.
(a) The Global Note initially shall (i) be registered in the name of
the Depositary or the nominee of such Depositary, (ii) be delivered to the
Trustee as custodian for such Depositary and (iii) bear legends as set forth in
Section 2.15.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of the Global Note
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Note.
(b) Transfers of the Global Note shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interest of beneficial owners in the Global Note may be transferred or
exchanged for Physical Securities in accordance with the rules and procedures of
the Depositary and the provisions of Section 2.17. In addition, Physical
Securities shall be transferred
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to all beneficial owners in exchange for their beneficial interests in the
Global Note if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for the Global Note and a successor depositary
is not appointed by the Company within 90 days of such notice or (ii) an Event
of Default has occurred and is continuing and the Registrar has received a
written request from the Depositary to issue Physical Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Note to beneficial owners pursuant to
paragraph (b) above, the Registrar shall (if one or more Physical Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to paragraph (b) above, the Global Note shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its beneficial interest in
the Global Note, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(e) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in the Global Note pursuant to paragraph
(b) or (c) above shall, except as otherwise provided by paragraphs (a)(i)(x) and
(c) of Section 2.17, bear the legend regarding transfer restrictions applicable
to the Physical Securities set forth in Section 2.15.
(f) The Holder of the Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Securities.
SECTION 2.17. SPECIAL TRANSFER PROVISIONS.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institutional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after March 26,
1999, or (y) (1) in the case of a transfer to an Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons), the proposed
transferee has delivered to the Registrar a certificate substantially in
the form of Exhibit C hereto or (2) in the case of a transfer to a
Non-U.S. Person, the proposed transferor has delivered to the Registrar a
certificate substantially in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depositary's and the Registrar's
procedures, (a) the Registrar shall reflect on its books and records the
date and (if the transfer does not involve a transfer of outstanding
Physical Securities) a decrease in the principal amount of the Global Note
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in an amount equal to the principal amount of the beneficial interest in
the Global Note to be transferred, and (b) the Company shall execute and
the Trustee shall authenticate and deliver one or more Physical Securities
of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided
for on the form of Note stating, or has otherwise advised the Company and
the Registrar in writing, that the sale has been effected in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has otherwise
advised the Company and the Registrar in writing, that it is purchasing
the Notes for its own account or an account with respect to which it
exercises sole investment discretion and that any such account is a QIB
within the meaning of Rule 144A, and it is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to
Rule 144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member and the Notes
to be transferred consist of Physical Securities which after transfer are
to be evidenced by an interest in the Global Note, upon receipt by the
Registrar of instructions given in accordance with the Depositary's and
the Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Global
Note in an amount equal to principal amount of the Physical Securities to
be transferred, and the Trustee shall cancel the Physical Securities so
transferred.
(c) Private Placement Legend. Upon the registration of the transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of the transfer, exchange or replacement of Notes bearing
the Private Placement Legend, the Registrar shall deliver only Notes that bear
the Private Placement legend unless (i) the circumstance contemplated by
paragraph (a)(i)(x) of this Section 2.17 exists or (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company and
the Trustee to the effect that neither such legend nor the related restrictions
on transfer are required in order to maintain compliance with the provisions of
the Securities Act.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain for at least two years copies of all
letters, notices and other written communications received pursuant to Section
2.16 hereof or this Section 2.17. The Company shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable written notice to the
Registrar.
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ARTICLE 3
REDEMPTIONS 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 45 days but not more than 90 days before a redemption date (unless a
shorter notice period shall be satisfactory to the Trustee), an Officers'
Certificate setting forth (i) the Section 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 4.14, it shall furnish to the
Trustee, 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) a statement to the effect that (a) the Company or one of its
Restricted Subsidiaries has made an Asset Sale and that the conditions set forth
in Sections 3.09 and 4.10 have been satisfied or (b) a Change of Control has
occurred and the conditions set forth in Section 4.14 have been satisfied, as
applicable.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED OR PURCHASED.
In the event that 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 redeemed or purchased among the Holders of the Notes 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 (and in
such manner as complies with applicable legal requirements). The Company shall
give notice to the Trustee of such requirements of any securities exchange not
less than forty-five (45) nor more than ninety (90) days prior to the date on
which notice of such redemption or purchase is to be given. In the event a
partial redemption is made with the proceeds of a public offering by the Company
of common equity securities, selection of the Notes or portions thereof for
redemption shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as practicable (subject to procedures of the Depositary),
unless such method is otherwise prohibited. In the event of partial redemption,
other than pro rata, 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 or purchase and, in the case of any Note selected for
partial redemption or purchase, the principal amount thereof to be redeemed or
purchased. Notes and portions of them selected shall be in principal amounts of
$1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder
are to be redeemed or purchased, the entire outstanding principal amount of
Notes held by such Holder shall be redeemed or purchased. 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 Section 3.09 and Section 4.10 hereof, and the amount of Excess
Proceeds to be applied to such purchase would result in
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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.
SECTION 3.03. NOTICE OF REDEMPTION.
At least thirty (30) days but not more than sixty (60) days before a
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 CUSIP number of the Notes, if any, and
the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) 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 of the same series
in principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption
payment, interest and Liquidated Damages, if any, on Notes called for
redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(8) 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 five Business Days prior
to the date such notice is to be given, 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.
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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 due and payable on the redemption
date at the redemption price. On and after the redemption date, unless the
Company defaults in the payment of the redemption price, interest and Liquidated
Damages, if any, will cease to accrue on the Notes or portions of them called
for redemption and all rights of Holders of such Notes will terminate except for
the right to receive the redemption price. Upon surrender to the Paying Agent,
the Holders of such Notes shall be paid the redemption price plus accrued
interest and Liquidated Damages, if any, to the redemption date, but interest
installments and unpaid Liquidated Damages, if any, whose maturity is on or
prior to the redemption date will be payable to the Holder of record at the
close of business on the relevant record dates referred to in the Notes. A
notice of redemption may not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
At least one Business Day before the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money in immediately
available funds sufficient to pay the redemption price of and, if applicable,
accrued interest and Liquidated Damages, if any, on all Notes to be redeemed on
that date. The Trustee or the Paying Agent shall promptly, and in any event
within two Business Days after the redemption date, 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, if applicable, accrued
interest and Liquidated Damages, if any, on all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, interest and Liquidated Damages, if any, on the Notes or the portions
of Notes to be redeemed will cease to accrue on the applicable redemption date,
whether or not such Notes are presented for payment. 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 will 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, from the redemption date until such unpaid interest is paid, 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 the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered; provided, however, that no Note of $1,000 or less in principal
amount shall be purchased or redeemed in part.
SECTION 3.07. OPTIONAL REDEMPTION.
The Notes are not redeemable at the Company's option prior to April
1, 2002. 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 and
Liquidated Damages thereon, if
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any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on April 1 of the years indicated below:
Year Percentage
---- ----------
2002 .................................................................. 104.875%
2003 .................................................................. 103.250%
2004 .................................................................. 101.625%
2005 and thereafter.................................................... 100.000%
Notwithstanding the foregoing, prior to April 1, 2000, the Company
may redeem, on any one or more occasions, with the net cash proceeds of one or
more public offerings of its common equity (a "Public Equity Offering") (within
60 days of the consummation of any such Public Equity Offering), up to 35% of
the aggregate principal amount of the Notes originally issued at a redemption
price equal to 109.750% of the principal amount of such Notes plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the redemption date;
provided, however, that at least 65% of the aggregate principal amount of Notes
originally issued remains outstanding immediately after any such redemption.
SECTION 3.08. MANDATORY REDEMPTION.
Subject to the Company's obligation to make an offer to purchase
Notes pursuant to Section 4.10 and Section 4.14, the Company is not required to
make mandatory redemption or sinking fund payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
Within 30 days after the date that Excess Proceeds exceed $20.0
million and an Asset Sale Offer is required under Section 4.10 hereof, the
Company shall mail or cause the Trustee to mail (in the Company's name and at
its expense and pursuant to an Officers' Certificate) an offer to purchase to
each Holder of Notes pursuant to the terms of this Section 3.09 and to holders
of other Indebtedness that ranks by its terms pari passu in right of payment
with the Notes and the terms of which contain substantially similar requirements
with respect to the application of net proceeds from asset sales as are
contained herein.
The Asset Sale Offer (as defined in Section 4.10) with respect to the
Notes shall be mailed by the Company (or the Trustee) to Holders of Notes at
their last registered address with a copy to the Trustee and the Paying Agent
and shall set forth (a) notice that an Asset Sale has occurred, that the Company
is making an Asset Sale Offer, pursuant to this Section 3.09, and that each
Holder of Notes then outstanding has the right to require the Company to
repurchase, for cash, such Holder's Notes at the Asset Sale Offer Price, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the
payment date; (b) the purchase price per $1,000 of principal amount and the
payment date of the Asset Sale Offer, (c) the maximum amount of Excess Proceeds,
required to be applied to such Asset Sale Offer with respect to the Notes; (d)
that any Notes properly tendered pursuant to the Asset Sale Offer will be
accepted for payment (subject to reduction as provided in this Section 3.09) on
the payment date of the Asset Sale Offer and any Notes not properly tendered
will remain outstanding and continue to accrue interest and Liquidated Damages,
if applicable; (e) that unless the Company defaults in the payment of the Asset
Sale Offer Price, all Notes accepted for payment pursuant to the Asset Sale
Offer shall cease
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to accrue interest and Liquidated Damages after the payment date of the Asset
Sale Offer; (f) that Holders electing to have any Notes purchased pursuant to an
Asset Sale 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, or
transfer by book-entry transfer, to the Company, the Depository or the Paying
Agent specified in the notice at the address specified in the notice prior to
the close of business on the third Business Day preceding the payment date of
the Asset Sale Offer; (g) that Holders will be entitled to withdraw their
tendered Notes and their election to require the Company to purchase the Notes
provided that the Paying Agent receives, not later than the close of business on
the second Business Day preceding the payment date of the Asset Sale Offer, a
telegram, telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Notes tendered for purchase, and a statement
that such Holder is withdrawing such Holder's tendered Notes and such Holder's
election to have such Notes purchased; (h) that, if the aggregate principal
amount of Notes surrendered by Holders exceeds the amount of the Asset Sale
Offer, the Company shall select the Notes to be purchased by lot on a pro rata
basis (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 or otherwise in accordance with the Indenture); and (i) 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 (or
transferred by book-entry transfer). If the payment date of the Asset Sale Offer
is on or after an interest payment record date and on or before the related
interest payment date, any accrued interest and Liquidated Damages will 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 will be payable to Holders who
tender a Note pursuant to the Asset Sale Offer.
The Company shall fix the payment date of the Asset Sale Offer for
such purchase no earlier than 30 but no more than 60 days after the Asset Sale
Offer is mailed as set forth above, except as may otherwise be required by
applicable law.
The Company shall comply, to the extent applicable, 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 the event that the Company is required to repurchase Notes
pursuant to this Section 3.09. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Section
3.09, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Indenture by virtue thereof.
On the payment date of the Asset Sale Offer, the Company shall, to
the extent permitted by law, (x) accept for payment Notes or portions thereof
properly tendered pursuant to the Asset Sale Offer, (y) deposit with the Paying
Agent the amount of money, in immediately available funds, equal to the maximum
Excess Proceeds required under Section 4.10 to be applied to such Asset Sale
Offer with respect to such Notes and (z) deliver or cause to be delivered to the
Trustee Notes so accepted together with an Officers' Certificate stating the
Notes or portions thereof tendered to the Company. If the aggregate purchase
price of all Notes properly tendered exceeds the maximum amount of Excess
Proceeds, required to be applied to such Asset Sale Offer with respect to such
Notes, as applicable, the Notes or portions thereof to be purchased shall be
selected pursuant to Section 3.02 hereof. The Paying Agent shall promptly mail
to each Holder of Notes so accepted for payment a check in an amount equal to
the aggregate purchase price of the Notes purchased by the Company from such
Holder and the Trustee shall promptly authenticate and mail to each Holder a new
Note of the same series equal in principal amount to any unpurchased portion of
any Note surrendered, if any, or return any unpurchased Note to such Holder;
provided, however, that each such new Note shall be in a principal amount of
$1,000 or an integral multiple thereof. The Company shall publicly announce in a
newspaper of national
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circulation or in a press release provided to a nationally recognized financial
wire service the results of the Asset Sale Offer on the payment date.
Other than as specifically provided in this Section 3.09, each
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01, 3.02, 3.05 and 3.06 hereof.
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
this Indenture and the Notes. Principal, premium, if any, and interest and
Liquidated Damages, if any, shall be considered paid on the due date if the
Paying Agent, if other than the Company or a Subsidiary of the Company, holds as
of 9:00 a.m. 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 and Liquidated Damages, if any, then
due. Such Paying Agent shall return to the Company promptly, and in any event,
no later than five 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 all Liquidated Damages, if
any, in the same manner and on the same dates as set forth above and in the
amounts set forth in the Registration Rights Agreement.
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 interest rate then applicable to the Notes to
the extent lawful. In addition, it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages, if any, (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 or Registrar) where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company 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.
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.
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<PAGE> 35
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. SEC REPORTS.
(i) The Company shall, whether or not required by the rules and
regulations of the SEC, submit to the SEC for public availability and provide to
the Trustee and the Holders copies of all quarterly and annual reports and other
information, documents and reports specified in Sections 13 and 15(d) of the
Exchange Act for so long as the Notes are outstanding. If, at any time during
the period presented in such quarterly or annual report, the Company has one or
more Unrestricted Subsidiaries that singly or together constitute a Significant
Subsidiary, each such quarterly and annual report shall contain "summarized
financial information" (as defined in Rule 1-02(aa)(1) of Regulation S-X under
the Exchange Act) for the Company and its Restricted Subsidiaries, on a
consolidated basis, in addition to the financial information required by the
Act. The summarized financial information required pursuant to the preceding
sentence may, at the election of the Company, be included in the footnotes to
audited consolidated financial statements of the Company and shall be as of the
same dates and for the same periods as the consolidated financial statements of
the Company and its Subsidiaries required pursuant to the Exchange Act.
(ii) If the Company or a Guarantor, if any, is required to furnish
annual or quarterly reports to its stockholders pursuant to the Exchange Act,
the Company shall cause such annual report or quarterly or other financial
report furnished to be filed with the Trustee and mailed to the Holders at their
addresses appearing in the register of Notes maintained by the Registrar.
(iii) The Company and the Guarantors, if any, shall deliver all
reports and other documents and information to the Holders under this Section
4.03. The Trustee shall, if requested to by the Company, deliver such reports,
other documents and information to the Holders, but at the sole expense of the
Company.
(iv) The Company, for so long as the Notes are outstanding, will
continue to provide to Holders and to prospective purchasers of Notes the
information required by Rule 144A(d)(4).
(v) Notwithstanding anything contrary herein, the Trustee shall have
no duty to review such documents for purposes of determining compliance with any
provision of this Indenture.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within sixty (60) 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 each of the Company and its
Subsidiaries has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge each of the Company and
its Subsidiaries 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 hereof (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 each of
the Company and its Subsidiaries is taking
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or propose 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 or Liquidated Damages, if
any, on the Notes are prohibited (or if such event has occurred, a description
of the event and what action each is taking or proposes to take with respect
thereto).
(b) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of (i) any
Default or Event of Default or (ii) any event of default under any other
mortgage, indenture or instrument which with the passage of time or giving of
notice would be a Default or an Event of Default under Section 6.01 hereof, 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, and shall cause each of its Subsidiaries to pay
prior to delinquency, all material taxes, assessments, and governmental levies
except as contested in good faith and by appropriate proceedings.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants, and the Company shall cause any Guarantor to
covenant (to the extent they may lawfully do so), that it will 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, which may affect the covenants or the performance of
this Indenture. The Company (to the extent it may lawfully do so) hereby
expressly waives, and the Company will cause any Guarantor (to the extent it may
lawfully do so) expressly to waive, all benefit or advantage of any such law,
and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law has been
enacted.
SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall 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 (other than Disqualified Stock) of the Company or
(2) dividends or distributions by a Restricted Subsidiary of the Company,
provided that to the extent that a portion of such dividend or distribution is
paid to a holder of Equity Interests of a Restricted Subsidiary other than the
Company or a Restricted Subsidiary, such portion of such dividend or
distribution is not greater than such holder's pro rata aggregate common equity
interest in such Restricted Subsidiary); (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 (A) any
Equity Interests owned by the Company or any Wholly Owned Restricted Subsidiary
of the Company and (B) pursuant to transactions otherwise constituting Permitted
Investments hereunder); (iii) purchase, redeem or otherwise acquire or retire
for value any Indebtedness of the Company or any Restricted Subsidiary that is
subordinated in right of payment, by its terms, to the Notes or any Subsidiary
Guarantee prior to the scheduled final maturity or sinking fund
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payment dates for payment of principal and interest in accordance with the
original documentation for such subordinated Indebtedness; 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 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 (excluding Restricted Payments permitted by clauses (ii),
(iii), (iv) and (v) of the next succeeding paragraph), is less than the sum of
(i) 50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from January 1, 1996 to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (ii) 100%
of the aggregate net cash proceeds received by the Company from the issue or
sale, in either case, since January 23, 1996, of either (A) Equity Interests of
the Company or of (B) 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 (iii) in case any
Unrestricted Subsidiary has been redesignated a Restricted Subsidiary and
becomes a Guarantor pursuant to the terms of the Indenture or has been merged,
consolidated or amalgamated with or into, or transfers or conveys assets to, or
is liquidated into, the Company or a Restricted Subsidiary that is a Guarantor,
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 (A) the book
value (determined in accordance with GAAP) at the date of such redesignation,
combination or transfer of the aggregate Investments made by the Company and its
Restricted Subsidiaries in such Unrestricted Subsidiary (or of the assets
transferred or conveyed, as applicable) and (B) the fair market value of such
Investments in such Unrestricted Subsidiary at the time of such redesignation,
combination or transfer (or of the assets transferred or conveyed, as
applicable), in each case 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 and, in each case, after deducting any Indebtedness
associated with the Unrestricted Subsidiary so designated or combined or with
the assets so transferred or conveyed, plus (iv) 100% of any dividends or
interest actually received in cash by the Company or a Restricted Subsidiary
that is a Guarantor after the Issuance Date from (A) a Restricted Subsidiary the
Net Income of which has been excluded from the computation of Consolidated Net
Income, (B) an Unrestricted Subsidiary, (C) a Person that is not a Subsidiary or
(D) a Person that is accounted for on the equity method plus (v) $25.0 million,
minus (vi) the aggregate amount of all Restricted Payments made by the Company
and its Restricted Subsidiaries from and after January 23, 1996 and on or before
the Issuance Date. To the extent that any Restricted Investment made since
January 23, 1996, is sold for cash or Cash Equivalents or otherwise liquidated
or repaid for cash after the Issuance Date, the lesser of (A) the cash return of
capital with respect to such Restricted Investment less the cost of disposition,
if any, and (B) the aggregate amount of the Investment made by the Company or a
Restricted Subsidiary in such Restricted Investment shall not, following such
sale,
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liquidation or repayment, be counted in the calculation of the aggregate amount
of Restricted Payments made by the Company or its Restricted Subsidiaries for
purposes of this clause (c).
Notwithstanding the foregoing, the provisions of this Section 4.07
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);
provided that the amount of any proceeds that is utilized for such
redemption, repurchase, retirement or other acquisition shall be excluded
from clause (c) (ii) of the preceding paragraph; (iii) the defeasance,
redemption, repayment or purchase of Indebtedness of the Company or any
Restricted Subsidiary that is subordinated or junior in right of payment,
by its terms, to the Notes or any Subsidiary Guarantee in a Permitted
Refinancing; (iv) the defeasance, redemption, repayment or purchase of
Indebtedness of the Company or any Restricted Subsidiary that is
subordinated or junior in right of payment, by its terms, to the Notes or
any Subsidiary Guarantee with the proceeds of a substantially concurrent
sale (other than to a Subsidiary of the Company) of Equity Interests
(other than Disqualified Stock) of the Company; provided that the amount
of any proceeds that is utilized for such defeasance, redemption,
repayment or purchase shall be excluded from clause (c) (ii) of the
preceding paragraph; and (v) 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 January 1, 1996; provided, however that the aggregate price
paid for all such purchased, redeemed, acquired or retired Equity
Interests shall not exceed $1,000,000 per year on a cumulative basis since
January 1, 1996; provided that, in the case of clauses (ii) through (v)
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 this
Section 4.07, the Company may allocate or reallocate all or any portion of such
Restricted Payment among the clauses (i) through (v) of the preceding paragraph
or among such clauses and the first paragraph of this Section 4.07 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 this Section 4.07.
The amount of all Restricted Payments (other than cash) shall be the
fair market value (evidenced by a resolution of the Board of Directors of the
Company set forth in an Officers' Certificate delivered to the Trustee) on the
date of the Restricted Payment of the asset(s) proposed to be transferred by the
Company or such Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. Not later than the date of making any Restricted Payment,
the Company shall deliver to the Trustee an Officers' Certificate stating that
such Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, which calculations may
be based upon the Company's latest available financial statements.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default or
Event of Default. For purposes of making the determination as to whether such
designation would cause a Default or Event of Default, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such
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designation and will reduce the amount available for Restricted Payments under
the first paragraph of this Section 4.07. All such outstanding Investments will
be deemed to constitute Investments in an amount equal to the greatest of (x)
the net book value of such Investments at the time of such designation, (y) the
fair market value of such Investments at the time of such designation and (z)
the original fair market value of such Investments at the time they were made.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
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.
SECTION 4.08. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES.
The Company shall not, and shall 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) sell,
lease or 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 (including, for this purpose,
amounts outstanding or committed for under the Credit Agreement) 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
Subsidiary 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 this clause (c) 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
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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. LIMITATION ON ADDITIONAL INDEBTEDNESS AND ISSUANCE OF
CERTAIN CAPITAL STOCK.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to (collectively, "incur" and
correlatively, an "incurrence" of) any Indebtedness (including Acquired Debt),
the Company shall not issue, and shall not permit any of its Restricted
Subsidiaries to issue, any shares of Disqualified Stock and the Company shall
not permit any of its Restricted Subsidiaries to issue any Preferred Stock;
provided, however, that the Company or any of its Restricted Subsidiaries may
incur Indebtedness or issue shares of Disqualified Stock and its Restricted
Subsidiaries may issue Preferred 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 or Preferred
Stock is issued would have been at least 2.0 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 or
Preferred Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
Notwithstanding the foregoing, if no Default or Event of Default
shall occur as a consequence thereof, the foregoing provisions shall not apply
to:
(i) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Indebtedness; provided, however, that if any such
Indebtedness ceases to be Non-Recourse Indebtedness of an Unrestricted
Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of the Company;
(ii) the incurrence by the Company or its Restricted
Subsidiaries of Indebtedness pursuant to the Credit Agreement in an
aggregate principal amount not to exceed $100.0 million at any one time
outstanding, plus up to an additional a $50.0 million in aggregate
principal amount of Indebtedness at any one time outstanding that may be
incurred from time to time pursuant to one or more Credit Facilities,
minus the aggregate amount of all proceeds of all sales or other
dispositions of assets that have been applied to permanently reduce the
outstanding amount of such Indebtedness pursuant to clause (a) of the
second paragraph of Section 4.10 hereof;
(iii) the incurrence by the Company and its Restricted
Subsidiaries of Existing Indebtedness;
(iv) 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 or required by the terms of the Credit Agreement to be
outstanding;
(v) 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;
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(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly Owned Restricted Subsidiaries; provided, however, that
(a) any subsequent issuance or transfer of Equity Interests that results
in any such Indebtedness being held by a Person other than a Wholly Owned
Restricted Subsidiary and (b) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Wholly Owned
Restricted Subsidiary shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;
(vii) the incurrence of Indebtedness represented by the Notes
and any Subsidiary Guarantee;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries, in the ordinary course of business and consistent with past
practice, of Indebtedness to secure performance bonds not to exceed $15.0
million at any one time outstanding; or
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any
other clause of this paragraph) in an aggregate principal amount at any
time outstanding not to exceed $10.0 million; provided that the net
proceeds of such Indebtedness are used to finance the renovation or
refurbishment of properties owned by the Company or a Restricted
Subsidiary which are employed in a Hospitality-Related Business.
In the event any Restricted Subsidiary of the Company becomes a
guarantor of Indebtedness of the Company pursuant to any provisions of such
Indebtedness causing such Guarantee to arise subsequent to incurrence of the
underlying Indebtedness in a manner similar to that provided for in Section 4.15
hereof, such Guarantee shall not be deemed a separate incurrence of
Indebtedness, provided that the underlying Indebtedness is either (i) Existing
Indebtedness or (ii) permitted to be incurred under the terms of this Indenture
when first incurred.
SECTION 4.10. LIMITATION ON SALE OF ASSETS.
The Company shall not, and shall 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 of the assets sold or
otherwise disposed of (evidenced by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee) and (y) at least 75%
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 to the Notes or any Subsidiary Guarantee) that are
assumed or forgiven 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, the restriction in clause (y)
above will not apply with respect to mortgages or other notes receivable
received by the Company or any Restricted Subsidiary from a transferee of any
assets to the extent such mortgages or other notes receivable are Restricted
Investments permitted to be made by the Company or such Restricted Subsidiary
under Section 4.07 hereof.
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Within 365 days of any Asset Sale, the Company or such Restricted
Subsidiary may (a) apply the Net Proceeds from such Asset Sale to repay any
Indebtedness that ranks by its terms senior to the Notes (or a Subsidiary
Guarantee) and, in the case of any Indebtedness under a Credit Facility, to
effect a permanent reduction in the amount of Indebtedness that may be incurred
pursuant to clause (ii) of the second paragraph of Section 4.09 hereof, 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 its 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 an 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 $20.0 million,
the Company shall make an offer, to all Holders of Notes and to holders of other
Indebtedness that ranks by its terms pari passu in right of payment with the
Notes and the terms of which contain substantially similar requirements with
respect to the application of net proceeds from asset sales as are contained in
the Indenture (an "Asset Sale Offer") to purchase on a pro rata basis 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 and Liquidated Damages thereon, 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 and other such Indebtedness 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
available for purchase thereof, the Trustee shall select the Notes to be
purchased in the manner described under Section 3.03 hereof. 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
Indebtedness of the Company or a Restricted Subsidiary that is a Guarantor that
ranks by its terms senior to the Notes (or any Subsidiary Guarantee) or
otherwise invest such Net Proceeds in Cash Equivalents.
Any offer to purchase the Notes pursuant to this Section 4.10 shall
be made pursuant to the provisions of Section 3.09 hereof. Simultaneously with
the notification of such offer to the Trustee, the Company shall provide the
Trustee with an Officer's Certificate setting forth the calculations used in
determining the amount of Excess Proceeds to be applied to the purchase of the
Notes. The Company will comply, to the extent applicable, with the requirements
of Rule 14e-1 under the Exchange Act and other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with any offer to purchase and the purchase of Notes as described above. To the
extent that the provisions of any securities laws or regulations conflict with
Section 3.09 and this Section 4.10, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the provisions of Section 3.09 and this Section 4.10 to make
an Asset Sale Offer.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall 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, (b) the Company
delivers to the Trustee (i) with respect to any Affiliate Transaction involving
aggregate payments in excess of $5.0 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
nonemployee members of the Board of Directors and (ii) with respect to any
Affiliate Transaction involving aggregate payments in excess of $10.0 million
(other than an Affiliate Transaction involving the acquisition or disposition of
a hotel by the Company or a Restricted Subsidiary of the Company), 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 a Qualified Appraiser and (c) the Company delivers
to the Trustee in the case of an Affiliate Transaction involving the acquisition
or disposition of a hotel by the Company or a Restricted Subsidiary of the
Company and (x) involving aggregate payments of less than $25.0 million, an
appraisal by a Qualified Appraiser to the effect that the transaction is being
undertaken at fair market vale or (y) involving aggregate payments of $25.0
million or more, an opinion as to the fairness of the transaction to the Company
or such Restricted Subsidiary from a financial point of view issued by an
investment banking firm of national standing; provided, however, that the
following shall not be deemed Affiliate Transactions: (A) 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, (B) transactions between or among the
Company and/or its Wholly Owned Restricted Subsidiaries or any Guarantor, (C)
the incurrence of fees in connection with the provision of hotel management
services, provided that such fees are paid in the ordinary course of business
and are consistent with past practice and (D) Restricted Payments permitted by
Section 4.07 hereof.
SECTION 4.12. [THIS SECTION INTENTIONALLY OMITTED.]
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Section 4.14 and Article 5 hereof, the Company 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 existence of each of its
Subsidiaries, in accordance with its respective organizational documents (as the
same may be amended from time to time) and (ii) its (and its Subsidiaries')
rights (charter and statutory), licenses and franchises; provided, however, that
the Company shall not be required to preserve any such right, license or
franchise, or the corporate existence of any of its Subsidiaries, if the Board
of Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders.
SECTION 4.14. CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require that the Company purchase all or a portion of
such Holder's Notes pursuant to the offer described below (the "Change of
Control Offer"), at a purchase price in cash equal to 101% of the principal
amount
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thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of purchase (the "Change of Control Payment").
Prior to the mailing of the notice referred to below, but in any
event within 30 days following any Change of Control, the Company shall (i)
repay in full and terminate all commitments under Indebtedness under the Credit
Agreement and all other Senior Debt the terms of which require repayment upon a
Change of Control or offer to repay in full and terminate all commitments under
all Indebtedness under the Credit Agreement and all other such Senior Debt and
to repay the Indebtedness owed to each lender or holder of Senior Debt which has
accepted such offer or (ii) obtain the requisite consents under the Credit
Agreement and all other Senior Debt to permit the repurchase of the Notes as
provided below. The Company shall first comply with the covenant in the
immediately preceding sentence before it shall be required to repurchase Notes
pursuant to the provisions described below, and the Company's failure to comply
with the covenant described in the immediately preceding sentence shall
constitute an Event of Default described in clause (3) and not in clause (2)
under Section 6.01 hereof.
Within 30 days following the date upon which the Change of Control
occurred, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have a Note purchased pursuant to a Change
of Control Offer will 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 Trustee or Paying Agent, if any, at the address specified in the notice
prior to the close of business on the third business day prior to the Change of
Control Payment Date.
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
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.14, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 4.14 to make a Change of Control Offer.
On the Change of Control Payment Date, the Company will, to the extent
permitted by law, (x) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (y) deposit with the Paying
Agent an amount equal to the aggregate Change of Control Payment in respect of
all Notes or portions thereof so tendered and (z) deliver, or cause to be
delivered, to the Trustee for cancellation the Notes so accepted together with
an Officers' Certificate stating the aggregate principal amount of Notes or
portions thereof being purchased by the Company. The Paying Agent shall promptly
mail to each Holder of Notes so accepted the Change of Control Payment for such
Notes, and the Trustee shall 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, however, that each such new Note shall be in
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce in a newspaper of national circulation or in a press release
provided to a nationally recognized financial wire service the results of the
Change of Control Offer on the Change of Control Payment Date.
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SECTION 4.15. SUBSIDIARY GUARANTEES.
If (i) the Company or any Restricted Subsidiary shall transfer or
cause to be transferred, in one or a series of related transactions, any assets
(including cash or Cash Equivalents other than pursuant to clause (e) of the
definition of Permitted Investments), business, 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 $5.0
million to any Restricted Subsidiary that is not a Guarantor or (ii) if the
Company or any of its Restricted Subsidiaries shall acquire or create after the
Issuance Date another Restricted Subsidiary having total assets with a fair
market value in excess of $5.0 million at the time of such acquisition or
creation, the Company shall cause such Restricted Subsidiary to execute and
deliver to the Trustee a supplemental indenture in the form of Exhibit B hereto
pursuant to which such Restricted Subsidiary shall guarantee all of the
obligations of the Company with respect to the Notes on an unsecured senior
subordinated basis together with an Opinion of Counsel to the effect that the
supplemental indenture has been duly executed and delivered by such Restricted
Subsidiary and is in compliance in all material respects with the terms of this
Indenture.
The Indebtedness represented by any such Subsidiary Guarantee (i.e.,
the payment of Obligations on the Notes) will be subordinated on the same basis
to Senior Debt of the Guarantor as the Notes are subordinated to Senior Debt of
the Company.
SECTION 4.16. LINE OF BUSINESS.
For so long as any Notes are outstanding, the Company shall not, and
shall not permit any of its Restricted Subsidiaries to, engage in any business
or activity other than a Hospitality-Related Business.
SECTION 4.17. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.18. [THIS SECTION INTENTIONALLY OMITTED].
SECTION 4.19. LIQUIDATION.
A plan of liquidation or dissolution may not be adopted for the
Company which provides for, contemplates or the effectuation of which is
preceded by (a) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company otherwise than substantially as
an entirety (Article 5 of this Indenture being the Article hereof which governs
any such sale, lease, conveyance or other disposition substantially as an
entirety) and (b) the distribution of all or substantially all of the proceeds
of such sale, lease, conveyance or other disposition and of the remaining assets
of the
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Company to the holders of Equity Interests in the Company, unless the Company,
prior to making any liquidating distribution pursuant to such plan, makes
provision for the satisfaction of the Company's Obligations hereunder and under
the Notes as to the payment of principal, interest and Liquidated Damages, if
any. The Company shall be deemed to make provision for such payments only if (i)
the Company delivers in trust to the Trustee or Paying Agent (other than the
Company or its Restricted Subsidiaries) cash or Government Securities maturing
as to principal and interest in such amounts and at such times as are sufficient
without consideration of any reinvestment of such interest to pay, when due, the
principal of and interest and Liquidated Damages, if any, on the Notes or (ii)
there is an express assumption and observance of all covenants and conditions to
be performed by the Company hereunder by the execution and delivery of a
supplemental indenture in the form of Exhibit B hereto by a Person that acquires
or will acquire (otherwise than pursuant to a lease) a portion of the assets of
the Company which person will have Consolidated Net Worth (immediately after the
acquisition) and Consolidated Net Income (for such Person's four full fiscal
quarters immediately preceding the acquisition) equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the acquisition and
the Consolidated Net Income of the Company (for its four full fiscal quarters
immediately preceding such acquisition), respectively, and which is organized
and existing under the laws of the United States, any state thereof or the
District of Columbia; provided, however, that the Company shall not make any
liquidating distribution until after the Company shall have certified to the
Trustee with an Officers' Certificate at least five days prior to the making of
any liquidating distribution that it has complied with the provisions of this
Section 4.19 and that no Default or Event of Default then exists or would occur
as a result of any such liquidating distribution.
SECTION 4.20. CONVERTIBLE NOTE INDENTURE.
Without the consent of at least 75% in aggregate principal amount of
the Notes outstanding, the Company shall not amend, modify or alter the
indenture (the "Convertible Note Indenture") governing its 7% Convertible
Subordinated Notes due 2002 (the "Convertible Notes") in any way that will (i)
increase the rate of or change the time for payment of interest on any
Convertible Notes, (ii) increase the principal of, advance the final maturity
date of or shorten the Weighted Average Life to Maturity of any Convertible
Notes, (iii) alter the redemption provisions or the price or terms at which the
Company is required to offer to purchase such Convertible Notes or (iv) amend
the provisions of Article Twelve of the Convertible Note Indenture which relate
to subordination.
SECTION 4.21. NO SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is senior in right of payment
to the Notes and subordinate or junior in right of payment to any other
Indebtedness of the Company, and no Guarantor shall incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is senior
in right of payment to the Subsidiary Guarantee by such Guarantor and
subordinate or junior in right of payment to any other Indebtedness of the
Guarantor.
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ARTICLE 5
SUCCESSORS
SECTION 5.01. WHEN THE COMPANY MAY MERGE, ETC.
The Company shall not consolidate or merge with or into or wind up
into (whether or not the Company is the surviving entity), 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 or to which such sale,
assignment, transfer, lease, conveyance or other disposition will have
been made assumes all the obligations of the Company under the Notes and
this Indenture pursuant to a supplemental indenture;
(iii) at the time of such transaction and immediately after such
transaction after giving pro forma effect thereto, no Default or Event of
Default exists or would exist;
(iv) the Company or any Person formed by or surviving 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; and
(v) the Company shall have delivered to the Trustee prior to the
consummation of the proposed transaction an Officers' Certificate and an
Opinion of Counsel to the combined effect that such sale, assignment,
transfer, lease, conveyance or other disposition, and, if applicable, any
supplemental indenture executed in connection therewith, comply with this
Indenture. The Trustee shall be entitled to conclusively rely upon such
Officers' Certificate and Opinion of Counsel.
SECTION 5.02. SUCCESSOR SUBSTITUTED.
Upon any consolidation, merger, lease, conveyance or transfer of all
or substantially all of the assets of the Company, as the case may be, in
accordance with Section 5.01 hereof, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale, lease,
conveyance or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture and the
Notes with the same effect as if such successor had been named as the Company
herein or therein and thereafter the predecessor corporation shall be relieved
of all further obligations and covenants under this Indenture and the Notes.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following shall constitute an Event of Default under this
Indenture:
(1) default for 30 days in the payment when due of interest or
Liquidated Damages, if any, on the Notes (whether or not such payment shall be
prohibited by the subordination provisions of this Indenture);
(2) default in payment when due of principal of or premium, if any,
on the Notes at maturity, upon redemption or otherwise (including the
failure to make a payment to purchase Notes tendered pursuant to a Change
of Control Offer or an Assets Sale Offer) (whether or not such payment
shall be prohibited by the subordination provisions of this Indenture);
(3) failure by the Company or any Restricted Subsidiary to comply
with Sections 4.07, 4.09, 4.10 (other than a failure to make a payment to
purchase Notes pursuant thereto, which failure shall be an Event of
Default pursuant to clause (2) above), 4.14 (other than a failure to make
a payment to purchase Notes pursuant thereto, which failure shall be an
Event of Default pursuant to clause (2) above), 4.20, 4.21 and 5.01, which
failure continues for a period of 30 days 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;
(4) failure by the Company or any Guarantor for 60 days in the
performance of any other covenant, warranty or agreement in this 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;
(5) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of Non-Recourse Indebtedness of the Company or any of its Restricted
Subsidiaries with an aggregate principal amount in excess of the lesser of
(A) 10% of the total assets of the Company and its Restricted Subsidiaries
measured as of the end of the Company's most recent fiscal quarter for
which internal financial statements are available immediately preceding
the date on which such default occurred, determined on a pro forma basis
and (B) $100 million, and such failure continues for a period of 10 days
or more, or the acceleration of the final stated maturity of any such
Non-Recourse Indebtedness (which acceleration is not rescinded, annulled
or otherwise cured within 10 days of receipt by the Company or such
Restricted Subsidiary of notice of any such acceleration);
(6) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness (other than Non-Recourse Indebtedness) of the Company
or any Restricted Subsidiary of the Company and such failure continues for
a period of 10 days or more, or the acceleration of the final stated
maturity of any such Indebtedness (which acceleration is not rescinded,
annulled or otherwise cured within 10 days of receipt by the Company or
such Restricted Subsidiary of notice of any such acceleration) if the
aggregate principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to
pay principal at final maturity or which has been
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accelerated, in each case with respect to which the 10-day period
described above has passed, aggregates $10.0 million or more at any time;
(7) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments rendered against them (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 $10.0 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);
(8) except as permitted by this Indenture, any Subsidiary Guarantee
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 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
Subsidiary Guarantee;
(9) the Company, any Guarantor or any of the Company's Subsidiaries
that would constitute a Significant Subsidiary or any group of the Company's
Subsidiaries that, taken together, would constitute a Significant Subsidiary
pursuant to or within the meaning of the Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
an involuntary case,
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(d) makes a general assignment for the benefit of its creditors,
or
(e) admits in writing its inability to pay its debts as they
become due; and
(10) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief in an involuntary case against the Company, any
Guarantor or any Subsidiary that is a Significant Subsidiary of the Company or
any group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary of the Company,
(b) appoints a Custodian of the Company, any Guarantor or any
Subsidiary that is a Significant Subsidiary of the Company or any group of
Subsidiaries that, taken together, would constitute a Significant Subsidiary of
the Company, or for all or substantially all of the property of the Company, any
Guarantor or any Subsidiary that is a Significant Subsidiary of the Company, or
any group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary of the Company, or
(c) orders the liquidation of the Company, any Guarantor or any
Subsidiary that is a Significant Subsidiary of the Company or any group of
Subsidiaries that, taken together, would constitute a Significant Subsidiary of
the Company,
and the order or decree remains unstayed and in effect for 60 consecutive
days.
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The term "Bankruptcy Law" means, title 11, U.S. Code or any similar
federal or state law for the relief of debtors, each as amended from time to
time. The term "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clauses (9) and (10) of Section 6.01 hereof) occurs and is continuing, the
Trustee by written notice to the Company, or the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes by written notice to
the Company and the Trustee, may declare all Notes to be due and payable
immediately. Upon the effectiveness of such declaration, all amounts due and
payable on the Notes, as determined in the succeeding paragraphs, shall be due
and payable effective immediately. If an Event of Default specified in clause
(9) or (10) of Section 6.01 hereof occurs, all outstanding Notes shall ipso
facto become and be immediately due and payable immediately without further
action or notice within part of or by the Trustee or any Holder.
In the event that the maturity of the Notes is accelerated pursuant
to this Section 6.02, 100% of the principal amount thereof shall become due and
payable plus premium, if any, and accrued and unpaid interest, if any, to the
date of payment.
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 of, premium, if
any, or interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture and, in addition, may pursue any remedy available
under any of the Collateral Documents or otherwise available under applicable
law with respect to any of the Collateral.
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 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.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Subject to Section 9.02 hereof, Holders of a majority in aggregate
principal amount of the then outstanding Notes by notice to the Trustee may
waive an existing Default or Event of Default and its consequences except a
continuing Default or Event of Default in the payment of the principal of,
premium, if any, or interest or Liquidated Damages, if any, on any Note held by
a non-consenting Holder. 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.
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SECTION 6.05. CONTROL BY MAJORITY.
The Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for 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, or that the Trustee determines may be
unduly prejudicial to the rights of other Holders or that may involve the
Trustee in personal liability; provided, however, that the Trustee may take any
other action deemed proper by the Trustee that is not inconsistent with such
direction.
SECTION 6.06. LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Notes only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default or the Trustee receives such notice from the Company;
(2) the Holders of at least 25% in aggregate principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) 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
(5) during such 60-day period the Holders of a majority in aggregate
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
SECTION 6.07. RIGHTS OF HOLDERS 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 and Liquidated Damages, if any, on the Note, on or after the respective
due dates expressed in the Note, 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 the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(1) or (2) 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 or any Guarantor for the
whole amount of principal, premium, if any, and interest and Liquidated Damages,
if any, remaining unpaid on the Notes and interest on overdue principal and, to
the extent
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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 any other
amounts due the Trustee under Section 7.07 hereof) and the Holders allowed in
any judicial proceedings relative to the Company or any Guarantor (or any other
obligor upon the Notes), their creditors or their property and shall be entitled
and empowered to collect, receive and distribute any money or securities or
other property payable or deliverable on any such claims and to distribute the
same, 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 of the Notes 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 thereof, 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 or receives any money or securities or other
property pursuant to this Article, it shall pay out the money or securities or
other property in the following order:
First: to the Trustee, its agents and counsel for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest and Liquidated Damages, if any,
ratably, without preference or priority of any kind (including defaulted
interest), according to the amounts due and payable on the Notes for principal,
premium, if any, and interest and Liquidated Damages, if any, respectively;
Third: without duplication, to Holders for any other obligations
owing to the Holders under the Notes or this Indenture; 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 such
payment to Holders.
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 such party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
aggregate principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(1) 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 their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(2) Except during the continuance of an Event of Default:
(a) 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
(b) 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.
(3) 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:
(a) this paragraph does not limit the effect of paragraph (2) of this
Section ;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
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(c) 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.
(4) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(1), (2) and (3) of this Section.
(5) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
(6) 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.
SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to TIA Section 315:
(1) The Trustee may conclusively rely and shall be protected in
acting or refraining from acting 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.
(2) 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.
(3) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed and monitored with due
care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by the Indenture.
(5) Unless otherwise specifically provided in the Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(6) Without limiting the provisions of Section 7.01(5), 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 the Holders of a majority in
aggregate principal amount of the then outstanding Notes pursuant to this
Indenture, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(7) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
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(8) Except with respect to Section 4.01, the Trustee shall have no
duty to inquire as to the performance of the Company's covenants in Article 4.
In addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Sections
6.01(1), 6.01(2) or 4.01 or (ii) any Default or Event of Default of which the
Trustee shall have received written notification or obtained actual knowledge.
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, any
Subsidiary of the Company or any Affiliate of the foregoing with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee is 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 hereof,
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 by a Trust Officer of the Trustee, the Trustee shall mail to Holders 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 or interest
on any Note, the Trustee may withhold the notice if and so long as a Trust
Officer in good faith determines that withholding the notice is in the interests
of Holders. The Trustee shall comply with TIA Section 315(b).
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15, 1997
following the date hereof, the Trustee shall mail to 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). 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 Holders shall be
submitted to the SEC and each stock exchange, if any, on which the Notes are
listed. The Company shall promptly notify the Trustee when the Notes are listed
on or delisted by any stock exchange.
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SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company agrees to 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 agrees to 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.
The Company agrees to indemnify the Trustee 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, except
as set forth in the next paragraph. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Company shall not relieve the Company of its obligations hereunder
except to the extent the Company has been prejudiced thereby. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee may
have separate counsel and, if the Company or the Trustee shall have been advised
by its respective counsel that representation of the Trustee and the Company by
the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel has
been proposed), the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld. The provisions of this
paragraph shall survive the satisfaction and discharge of this Indenture.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own gross negligence or
willful misconduct.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section , the
Trustee shall have a Lien 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 the Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(9) or (10) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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 at any time by so notifying the Company in
writing at least 30 days prior to the date of the proposed resignation. The
Holders of a majority in aggregate principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Company.
The Company may remove the Trustee at its discretion or if:
(1) the Trustee fails to comply with Section 7.10;
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(2) 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;
(3) a Custodian or public officer takes charge of the Trustee or its
property; or
(4) 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 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in aggregate principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
Subject to the provision of TIA Section 315(e), if the Trustee after
written request by any Holder who has been a bona fide holder of a Note or Notes
for at least six months fails to comply with Section 7.10, such Holder, on
behalf of himself and others similarly situated, 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 the 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. Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company' 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.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise corporate
trustee powers, shall be subject to supervision or examination by Federal or
state authority and shall have a combined capital and surplus of at least
$100,000,000 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). 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
DISCHARGE OF INDENTURE
SECTION 8.01. DEFEASANCE AND DISCHARGE OF THIS INDENTURE AND THE NOTES.
(a) The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
with respect to the Notes, 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 8.
(b) The Company may terminate its obligations (and the obligations of
any Guarantor in respect of Subsidiary Guarantees) under the Notes and this
Indenture (except those obligations referred to in the penultimate paragraph of
this Section 8.01(b)) if all such Notes thereto authenticated and delivered
(except lost, stolen or destroyed Notes that have been replaced or paid and
Notes for whose payment cash in United States dollars has theretofore been
deposited in trust or segregated and held in trust by the Company and thereafter
repaid to the Company, as provided in Section 8.06, or discharged from such
trust) have been delivered to the Trustee for cancellation and the Company has
paid all sums payable by it hereunder, or if (i) either (x) pursuant to Article
3, the Company shall have given notice to the Trustee and mailed a notice of
redemption to each Holder of the redemption of all of the Notes under
arrangements satisfactory to the Trustee for the giving of such notice or (y)
all Notes have otherwise become due and payable hereunder, (ii) the Company
shall have irrevocably deposited or caused to be deposited with the Trustee or a
trustee satisfactory to the Trustee, under the terms of an irrevocable trust
agreement in form and substance satisfactory to the Trustee, as trust funds in
trust solely for the benefit of the Holders for that purpose, cash in United
States dollars in such amount as is sufficient without consideration of
reinvestment of such interest, to pay principal of, premium, if any, interest
and Liquidated Damages, if any, on the outstanding Notes to maturity or
redemption; provided that the Trustee shall have been irrevocably instructed to
apply such deposit to the payment of said principal, premium, if any, interest
and Liquidated Damages, if any, with respect to the Notes; and, provided,
further, that from and after the time of deposit, the money deposited shall not
be subject to the rights of holders of Senior Debt pursuant to the provisions of
Article 10; (iii) no Default or Event of Default with respect to this Indenture
or the Notes shall have occurred and be continuing on the date of such deposit
or shall occur as a result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other instrument to
which the Company or any Guarantor is a party or by which it is bound; (iv) the
Company shall have paid all other sums payable by it hereunder; and (v) the
Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent relating to the
satisfaction and discharge of this Indenture have been complied with. Such
Opinion of Counsel shall also state that such satisfaction and discharge does
not result in a default under the Credit Agreement (if then in effect) or any
other agreement or instrument then known to such counsel that binds or affects
the Company or any Guarantor.
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Notwithstanding the foregoing paragraph, the Company's (and any
Guarantor's) obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07,
8.06 and 8.07 shall survive until the Notes are no longer outstanding pursuant
to the last paragraph of Section 2.08. After the Notes are not longer
outstanding, the Company's obligations in Sections 7.07, 8.06 and 8.07 shall
survive.
After such delivery or irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations (and the
obligations of any Guarantors in respect of Subsidiary Guarantees) under the
Notes and this Indenture except for those surviving obligations specified above.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01(a) hereof of the
option applicable to this Section 8.02, the Company and the Guarantors, if any,
shall be deemed to have been discharged from their obligations with respect to
all outstanding Notes and Subsidiary Guarantees, if any, on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, such 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 clauses (i) and (ii) of this Section 8.02, 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 which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages, if any, on such Notes when such
payments are due, solely from amounts deposited with the Trustee, as provided in
Section 8.04 hereof, (ii) the Company's and the Guarantors' obligations with
respect to the Notes under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.10 and 4.02
hereof, (iii) the rights, powers, trusts, duties, indemnities and immunities of
the Trustee and the Company's obligations in connection therewith and (iv) this
Article 8.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01(a) hereof of the
option applicable to this Section 8.03, the Company and the Guarantors, if any,
shall be released from their obligations under the covenants contained in
Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.13, 4.14, 4.16, 4.20, 4.21, 5.01 and
11.02 with respect to the outstanding Notes 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
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, such Covenant Defeasance means that, with respect
to the outstanding Notes, the Company and the Guarantors 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(3) hereof but, except as specified above, the remainder of
this Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.01 hereof of the option applicable to this
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Section 8.03, any event described in Sections 6.01(3) through 6.01(9) hereof
shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to application of either Section
8.02 or Section 8.03 hereof to the outstanding Notes:
(i) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 hereof who shall agree to comply with the provisions of
this Article 8 applicable to it), in trust (the "defeasance trust"), for
the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of such
Notes, (a) cash in United States dollars in an amount, or (b) non-callable
Government Securities which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide,
not later than one day before the due date of any payment, cash in United
States dollars in an amount, or (c) a combination thereof, in such amounts
as will be sufficient in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge and which shall be
applied by the Trustee (or other qualifying trustee) to pay and discharge
the principal of, premium, if any, and interest (including defaulted
interest) and Liquidated Damages, if any, on the outstanding Notes and any
other obligations owing to the Holders of the Notes, under the Notes or
this Indenture 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, interest and Liquidated Damages, if any, on the
outstanding Notes, provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such non-callable
Government Securities to said payments with respect to the Notes;
(ii) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States (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 time, as would have been
the case if such Legal Defeasance had not occurred;
(iii) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States (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;
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(iv) no Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing of funds
applied to such deposit) or, insofar as Section 6.01(8) or 6.01(9) hereof
is concerned, at any time in the period ending on the 91st day after the
date of such 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) (it being understood that
this condition shall not be deemed satisfied until the expiration of such
period);
(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 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;
(vi) in the case of an election under either Section 8.02 or
8.03 hereof, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that, as of the date of such opinion, (A) the trust
funds will not be subject to any rights of holders of Indebtedness other
than the Notes and (B) assuming no intervening bankruptcy of the Company
between the date of deposit and the 91st day following the deposit and
assuming no Holder of the Notes is an insider of the Company, after the
91st day following the deposit, as of the date of such opinion, the trust
funds will not be subject to avoidance under Section 547 of the United
States Bankruptcy Code (or any successor provision thereto) and related
judicial decisions or any other applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally under
any United States or state law;
(vii) in the case of an election under either Section 8.02 or
8.03 hereof, the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit made by the Company pursuant to its
election under Section 8.02 or 8.03 hereof was not made by the Company
with the intent of preferring the Holders of Notes over other creditors of
the Company or with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and
(viii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel in the United States
(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 either the Legal Defeasance under Section 8.02 hereof or the Covenant
Defeasance under Section 8.03 hereof (as the case may be) have been
complied with as contemplated by this Section 8.04.
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 8.01(b) or 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.
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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 8.01(b)
or Section 8.04 hereof or the principal, premium, if any, 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 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request 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(i) hereof), are in excess of the amount thereof which would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO THE COMPANY.
The Trustee shall promptly pay to the Company after request therefor
any excess money held at such time in excess of amounts required to pay any of
the Company's Obligations then owing with respect to the Notes.
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 on any Note and remaining unclaimed for one year after such
principal, premium, if any, or interest has 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 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 cash or
non-callable Government Securities in accordance with Section 8.01(b), Section
8.02 or Section 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 obligations of the Company and
the Guarantors, if any, under this Indenture, the Notes and the Subsidiary
Guarantees, if any, shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.01(b), Section 8.02 or Section 8.03 hereof until
such time as the Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.01(b), Section 8.02 or Section 8.03 hereof, as the
case may be; provided, however, that, if the Company or any Subsidiary Guarantor
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Company or such Subsidiary
Guarantor shall be subrogated to the rights of the Holders of such Note to
receive such payment from the money held by the Trustee or Paying Agent.
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ARTICLE 9
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS.
The Company, any Guarantor and the Trustee, as applicable, may amend
or supplement this Indenture, the Notes, and any Subsidiary Guarantee without
the consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of the Company's obligations to
Holders of the Notes under this Indenture or any Guarantor's obligations
under its Subsidiary Guarantee in the case of a merger, consolidation or
sale of assets involving the Company or such Guarantor, as applicable,
pursuant to Article 5 or Article 11 hereof;
(4) to make any change that would provide any additional rights or
benefits to the Holders of the Notes (including providing for Subsidiary
Guarantees and any supplemental indenture required pursuant to Section
4.15 hereof) or that does not adversely affect the legal rights under the
Indenture of any such Holder;
(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; and
(6) to release a Guarantor in accordance with Section 11.04 hereof.
Upon the request of the Company and any Restricted Subsidiary, in its
capacity as a Guarantor, accompanied by a resolution of the Board of Directors
of the Company or such Restricted Subsidiary, as applicable, authorizing the
execution of any such amended or supplemental indenture and upon receipt by the
Trustee of the documents described in Section 9.06 hereof, the Trustee shall
join with the Company and any such Restricted Subsidiary 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 which
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental indenture which adversely affects its own rights,
duties or immunities under this Indenture, or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS.
Except as provided below in this Section 9.02, the Company, any
Guarantor and the Trustee together may amend this Indenture, the Notes and any
Subsidiary Guarantee with the written consent of the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes (including
consents obtained in connection with a purchase of or a tender offer or exchange
offer for Notes).
Upon the request of the Company, accompanied by a resolution of the
Board of Directors of the Company, authorizing the execution of any such
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon
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receipt by the Trustee of the documents described in Section 9.06 hereof, the
Trustee shall join with the Company and any Guarantor, as the case may be, in
the execution of such supplemental indenture unless such supplemental indenture
adversely 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 supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section 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 or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of each Note affected thereby a
notice briefly describing the amendment 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 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 (including consents obtained in connection
with a purchase of or a tender offer or exchange offer for Notes) may waive any
existing default or compliance in a particular instance by the Company or any
Guarantor with any provision of this Indenture or the Notes. However, without
the consent of each Holder affected, an amendment or waiver under this Section
may not (with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note
or waive any of the provisions with respect to the redemption of the
Notes;
(3) reduce the rate of or change the time for payment of interest on
any Note;
(4) waive a Default or an 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 then outstanding Notes and a
waiver of the payment default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the
Note;
(6) 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 or Liquidated
Damages on the Notes;
(7) waive a redemption payment with respect to any Note;
(8) modify or change any provision of this Indenture or the related
definitions affecting the subordination or ranking of the Notes in a
manner which adversely affects the Holders in any material respect;
(9) except pursuant to Article 8 or pursuant to Section 11.04,
release any Guarantor from its obligations under a Subsidiary Guarantee,
or change any such Subsidiary Guarantee in any manner that would adversely
affect the Holders in any material respect; or
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(10) 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, or be effective with respect to, Section 4.10 and 4.14 hereof.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Notes shall be set forth in
an amendment or supplemental indenture that complies with the TIA as then in
effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Note is a continuing consent by the Holder 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 or subsequent Holder may revoke the consent as to
his or her Note if the Trustee receives written notice of revocation before the
date the waiver or amendment becomes effective. An amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
The Company may fix a record date for determining which Holders must
consent to such amendment or waiver. If the Company fixes a record date, the
record date shall be fixed at (i) the later of 30 days prior to the first
solicitation of such consent or the date of the most recent list of Holders
furnished to the Trustee prior to such solicitation pursuant to Section 2.05, or
(ii) such other date as the Company shall designate.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment or
waiver on any Note thereafter authenticated. The Company in exchange for all
Notes may issue and the Trustee shall authenticate new Notes that reflect the
amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing such amendment or supplemental
indenture, the Trustee shall be entitled to receive, and, subject to Section
7.01 hereof, shall be fully protected in relying upon, an Officers' Certificate
and an Opinion of Counsel as conclusive evidence that such amendment or
supplemental indenture is authorized or permitted by this Indenture, that it is
not inconsistent herewith, and that it will be valid and binding upon the
Company in accordance with its
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terms. The Company may not sign an amendment or supplemental indenture until the
Board of Directors of the Company or any Restricted Subsidiary in its capacity
as a Guarantor, as applicable, approves it.
ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes is subordinated in right of payment, to
the extent and in the manner provided in this Article, to the prior payment in
full in cash or Cash Equivalents of all Obligations on Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors or marshalling of assets of the Company or in a bankruptcy,
reorganization, insolvency, receivership or other similar proceeding relating to
the Company or its property, whether voluntary or involuntary, all Obligations
due upon all Senior Debt shall first be paid in full in cash or Cash
Equivalents, or such payment duly provided for to the satisfaction of the
holders of Senior Debt, before any payment or distribution of any kind or
character is made on account of any Obligations on the Notes, or for the
acquisition by the Company or any of its Subsidiaries of any of the Notes for
cash or property or otherwise, and until all Obligations with respect to Senior
Debt are paid in full in cash or Cash Equivalents, any distribution to which the
Holders would be entitled shall be made to the Holders of Senior Debt (except
that Holders of the Notes may receive Permitted Junior Securities and payments
made pursuant to Section 8.04 or Section 8.01(b)).
(b) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by Section 10.02(a), such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Debt (pro rata to such holders on the basis of the
respective amount of Senior Debt held by such holders) or their respective
Representatives, or to the trustee under any indenture pursuant to which any of
such Senior Debt may have been issued, as their respective interests may appear,
for application to the payment of Senior Debt then due remaining unpaid until
all such Senior Debt has been paid in full in cash or Cash Equivalents, after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of such Senior Debt.
(c) The consolidation of the Company with, or the merger of the
Company with or into, another corporation or the liquidation or dissolution of
the Company following the conveyance or transfer of all or substantially all of
its assets, to another corporation upon the terms and conditions provided in
Article 5 hereof and as long as permitted under the terms of the Senior Debt
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume the Company's obligations
hereunder in accordance with Article 5 hereof.
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SECTION 10.03 NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES.
If any default occurs and is continuing in the payment when due
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by, or on behalf of, the Company
or any other Person on its behalf with respect to any Obligations on the Notes,
or to acquire any of the Notes for cash or property or otherwise (except that
Holders of Notes may receive Permitted Junior Securities and payments made from
the trust pursuant to Section 8.01(b) or Section 8.04). In addition, if any
other event of default occurs and is continuing with respect to any Designated
Senior Debt, as such event of default is defined in the instrument creating or
evidencing such Designated Senior Debt, permitting the holders of such
Designated Senior Debt then outstanding to accelerate the maturity thereof and
if the Representative for the respective issue of Designated Senior Debt gives
written notice of the event of default to the Trustee (a "Default Notice"),
then, unless and until all events of default have been cured or waived or have
ceased to exist or the Trustee receives notice from the Representative for the
respective issue of Designated Senior Debt terminating the Blockage Period (as
defined below), during the 179 days after the delivery of such Default Notice
(the "Blockage Period"), neither the Company nor any of its Subsidiaries shall
(x) make any payment of any kind or character with respect to any Obligations on
the Notes (except that Holders of Notes may receive Permitted Junior Securities
and payments made from the trust pursuant to Section 8.04 or 8.01(b)) or (y)
acquire any of the Notes for cash or property or otherwise. Notwithstanding
anything herein to the contrary, in no event will a Blockage Period extend
beyond 179 days from the date the payment on the Notes was due and only one such
Blockage Period may be commenced within any 365 consecutive days. No event of
default which existed or was continuing on the date of the commencement of any
Blockage Period with respect to the Designated Senior Debt shall be, or be made,
the basis for the commencement of a second Blockage Period by the Representative
of such Designated Senior Debt whether or not within a period of 365 consecutive
days, unless such event of default shall have been cured or waived for a period
of not less than 90 consecutive days (it being acknowledged that any subsequent
action, or any breach of any financial covenants for a period commencing after
the date of commencement of such Blockage Period that, in either case, would
give rise to an event of default pursuant to any provisions under which an event
of default previously existed or was continuing shall constitute a new event of
default for this purpose).
The Trustee shall be entitled to rely on information regarding
amounts then due and owing on the Senior Debt, if any, received from the holders
of Senior Debt (or their Representatives) or, if such information is not
received from such holders or their Representatives, from the Company and only
amounts included in the information provided to the Trustee shall be paid to the
holders of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder.
SECTION 10.04. [THIS SECTION INTENTIONALLY OMITTED.]
SECTION 10.05. ACCELERATION OF NOTES.
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If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
SECTION 10.06. 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, as applicable, has actual knowledge that such payment is prohibited by
Section 10.03 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 Debt (pro rata to such holders
on the basis of the respective amounts of Senior Debt held by such Holders) or
their Representatives under the indenture or other agreement (if any) pursuant
to which Senior Debt may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to Senior
Debt 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 Debt.
With respect to the holders of Senior Debt, 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 Debt 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 Debt, 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 Debt 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.
SECTION 10.07. NOTICE BY THE 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 Debt as
provided in this Article.
SECTION 10.08. SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made under this Article to holders of Senior Debt
that otherwise would have been made to Holders is not, as between the Company
and Holders, a payment by the Company on the Notes.
SECTION 10.09. RELATIVE RIGHTS.
This Article defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
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(1) impair, as between the Company and 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 Debt; 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 and owners of Senior Debt to receive distributions and
payments otherwise payable to Holders.
If the Company fails because of this Article to pay principal of or
interest or Liquidated Damages, if any, on Notes on the due date, the failure is
still a Default or Event of Default.
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company 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 making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other 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 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 Notes to violate this Article. Only the Company or a
Representative 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.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights.
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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 to act as 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 of the time to file such
claim, any Representative of Designated Senior Debt is hereby authorized to file
an appropriate claim for and on behalf of the Holders of the Notes.
SECTION 10.14. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEES.
The Company's Obligations under the Notes and this Indenture will be
jointly and severally guaranteed by any Restricted Subsidiary (a "Guarantor")
which is required to execute and deliver a supplemental indenture pursuant to
Section 4.15 hereof (the "Subsidiary Guarantees"). Subject to the provisions of
this Article 11, any such Subsidiary Guarantor will, jointly and severally,
unconditionally guarantee, on an unsecured senior subordinated basis, to each
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, irrespective of the validity and enforceability
of this Indenture, the Notes or the Obligations of the Company under this
Indenture or the Notes, that: (i) the principal of, premium, if any, and
interest and Liquidated Damages, if any, 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, offer to purchase or otherwise, and
interest on the overdue principal of, premium, and interest and Liquidated
Damages, if any, 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; (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; and (iii) any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing any rights under any Subsidiary Guarantee will be paid. Failing
payment when due of any amount so guaranteed for whatever reason, any Subsidiary
Guarantor will be obligated (subject to any grace periods allowed pursuant to
Section 6.01 hereof) 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. An Event of Default under this Indenture or the Notes shall
constitute an event of default under any Subsidiary Guarantee, and shall entitle
the Holders of Notes to accelerate the Obligations of any Guarantor hereunder in
the same manner and to the same extent as the Obligations of the Company. Any
Guarantor will agree that its Obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this
Indenture, the absence of any action to enforce the same, any waiver or consent
by any Holder of
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the Notes with respect to any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of any Guarantor. Any Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of either or both of the Company, protest, notice and all demands
whatsoever and covenants that its Subsidiary Guarantee will not be discharged
except by complete performance of its Obligations under the Notes and this
Indenture. If any Holder or the Trustee is required by any court or otherwise to
return to the Company, any Guarantor or any Custodian, Trustee, liquidator or
other similar official acting in relation to either the Company or any Guarantor
any amount paid by any such entity to the Trustee or such Holder, any Subsidiary
Guarantee to the Notes, to the extent theretofore discharged, shall be
reinstated in full force and effect. Any Guarantor agrees that it shall not be
entitled to any right of subrogation in relation to the Holder in respect of any
Obligations guaranteed hereby until payment in full of all Obligations
guaranteed hereby. Any Guarantor will agree that, as between it, on the one
hand, and the Holders of Notes and the Trustee, on the other hand, (x) the
maturity of the Obligations guaranteed hereby may be accelerated as provided in
Article 6 hereof for the purposes hereof, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any acceleration of such Obligations
as provided in Article 6 hereof, such Obligations (whether or not due and
payable) shall forthwith become due and payable by such Guarantor for the
purpose of such Subsidiary Guarantee. A Guarantor shall have the right to seek
contribution from any non-paying Guarantor so long as the exercise of such right
does not impair the rights of the Holder under its Subsidiary Guarantee.
The obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be junior and subordinated to the Senior Debt
of such Guarantor on the same basis as the Notes are junior and subordinated to
Senior Debt of the Company. For the purpose of the foregoing sentence, the
Trustee and the Holders of Notes shall have the right to receive and/or retain
payments by any of the Guarantors only at such times as they may receive and/or
retain payments in respect of the Notes pursuant to this Indenture, including
Article 10 hereof. In the event that the Trustee or any Holder shall have
received any Guarantor payment that is prohibited by the foregoing sentence,
such Guarantor payment shall be paid over and delivered forthwith to the holders
of the Senior Debt remaining unpaid, to the extent necessary to pay in full all
Senior Debt.
Each Holder of a Note by its acceptance thereof (a) agrees to and
shall be bound by the provisions of this Section 11.01, (b) authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and (c) appoints the
Trustee its attorney-in-fact for any and all such purposes.
SECTION 11.02. WHEN A GUARANTOR MAY MERGE, ETC.
No Guarantor shall consolidate or merge with or into (whether or not
such Guarantor is the surviving person), another corporation, Person or entity
whether or not affiliated with such Guarantor unless:
(i) the person formed by or surviving any such consolidation or
merger (if other than such Guarantor) assumes all the Obligations of such
Guarantor pursuant to a supplemental indenture in the form of Exhibit B
hereto and under the Notes and this Indenture;
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(ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; and
(iii) such Guarantor or any person formed by or surviving any such
consolidation or merger, (A) will have Consolidated Net Worth (immediately
after giving effect to such transaction) equal to or greater than the
Consolidated Net Worth of such Guarantor immediately preceding the
transaction and (B) would be permitted by virtue of the Company's Fixed
Charge Coverage Ratio set forth in the first paragraph of Section 4.09
hereof to incur, immediately after giving effect to such transaction, at
least $1.00 of additional Indebtedness.
The Guarantor shall deliver to the Trustee prior to the consummation
of the proposed transaction an Officers' Certificate to the foregoing effect and
an Opinion of Counsel, covering clauses (i) and (ii) (in the case of clause
(ii), to such counsel's knowledge), stating that the proposed transaction and
such supplemental indenture comply with this Indenture. The Trustee shall be
entitled to conclusively rely upon such Officers' Certificate and Opinion of
Counsel.
Notwithstanding the foregoing, (A) a Guarantor may consolidate with
or merge with or into the Company; provided, however, that 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 and
Liquidated Damages, if any, 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 (B) a Guarantor may consolidate with or merge
with or into any other Guarantor.
SECTION 11.03. LIMITATION OF GUARANTOR'S LIABILITY.
For purposes of this Article 11 and any Subsidiary Guarantee, each
Guarantor's liability will be that amount from time to time equal to the
aggregate liability of such Guarantor hereunder and thereunder, but shall be
limited to the least of (i) the aggregate amount of the obligations of the
Company under the Notes and this Indenture or (ii) the amount, if any, which
would not have (A) rendered such Guarantor "insolvent" (as such term is defined
in the federal Bankruptcy Code and in the Debtor and Creditor Law of the State
of New York) or (B) left it with unreasonably small capital at the time its
Subsidiary Guarantee was entered into, after giving effect to the incurrence of
existing Indebtedness immediately prior to such time; provided that, it shall be
a presumption in any lawsuit or other proceeding in which a Guarantor is a party
that the amount guaranteed pursuant to the Subsidiary Guarantee is the amount
set forth in clause (i) above unless any creditor, or representative of
creditors of such guarantor, or debtor in possession or trustee in bankruptcy of
the Guarantor, otherwise proves in such a lawsuit that the aggregate liability
of the Guarantor is limited to the amount set forth in clause (ii). In making
any determination as to the solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors and any other rights such Guarantor may have,
contractual or otherwise, shall be taken into account.
SECTION 11.04. RELEASE OF A GUARANTOR.
Concurrently with the payment in full of all of the Company's
Obligations under the Notes and this Indenture (other than with respect to any
indemnification obligations), each Guarantor shall be released from and relieved
of its Obligations under this Article 11. In the event of a sale or other
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disposition of all of the assets of any Guarantor, which sale or other
disposition is otherwise in compliance with the terms of this Indenture, 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 of the assets of
such Guarantor) will be automatically and unconditionally released and relieved
of any obligations under its Subsidiary Guarantee. The Trustee shall deliver an
appropriate instrument evidencing any such release under this Section 11.04 upon
receipt of a request by the Company accompanied by an Officers' Certificate and
an Opinion of Counsel certifying as to the compliance with this Section 11.04.
The provisions of Section 11.02 shall not apply to any merger or consolidation
pursuant to which a Guarantor is released from its Obligations under this 11.04.
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 operation of TIA Section 318(c), the imposed duties
shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company or the Trustee to the
other is duly given if in writing and delivered in Person or mailed by
first-class mail (registered or certified, return receipt requested), or sent by
telex, telecopier or overnight air courier guaranteeing next Business Day
delivery, to the other's address:
If to the Company:
Prime Hospitality Corp.
700 Route 46 East
P.O. Box 2700
Fairfield, N.J. 07007-2700
Attention: Corporate Secretary
Telecopier No.: (201) 882-8577
With a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, N.Y. 10022
Attention: William N. Dye, Esq.
Telecopier No.: (212) 821-8111
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If to the Trustee:
First Bank National Association
180 East 5th Street
St. Paul, MN 55101
Attention: Richard Prokosch
Telecopier No.: (612) 244-0711
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
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 Business Day
delivery.
Any notice or communication to a Holder shall be mailed by
first-class mail to his address shown on the register kept by the Registrar.
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 or given in the manner
provided above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company 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 WITH OTHER HOLDERS.
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 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 to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05) 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 complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been complied with.
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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 Section 4.04 and TIA Section 314(a)(4)) shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) 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;
(3) a statement that, in the opinion of such Person, he 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
complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificate 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. LEGAL HOLIDAYS.
A "Legal Holiday" is a Saturday, a Sunday, or a day on which banking
institutions in The City of New York are authorized or obligated 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 on such
payment for the intervening period.
SECTION 12.08. RECOURSE AGAINST OTHERS.
No director, officer, partner, employee, agent, manager, stockholder,
incorporator or other Affiliate, as such of the Company or of a Guarantor, if
any, shall have any liability for any obligations of the Company or any
Guarantor under the Notes, or the Indenture or a Subsidiary Guarantee, if any,
or for any claim based upon, in respect of or by reason of such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. This waiver and release are part of the consideration for issuance of
the Notes. Such waiver and release may not be effective to waive or release
liabilities under the federal securities laws.
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<PAGE> 76
SECTION 12.09. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
SECTION 12.10. GOVERNING LAW.
The internal law of the State of New York shall govern and be used,
without reference to its choice of law principles (other than Sec. 5-1401 of the
General Obligation Law), to construe this Indenture, the Notes and Subsidiary
Guarantee.
SECTION 12.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or its Subsidiaries. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 12.12. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 12.13. SEVERABILITY.
In case any provision in this Indenture or in the Notes 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.
SECTION 12.14. 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 12.15. 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 hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
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<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective duly authorized officers as of the date first
written above.
SIGNATURES
PRIME HOSPITALITY CORP.
By: _______________________________
Its: ______________________________
FIRST BANK NATIONAL ASSOCIATION
as Trustee
By: _______________________________
Its: ______________________________
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<PAGE> 78
EXHIBIT A
(Face of Note)
9 3/4% [Series A] [Series B] Senior Subordinated Note due 2007
No. $__________
PRIME HOSPITALITY CORP.
promises to pay to ______________________________, or registered assigns, the
principal sum of _________________ Dollars on _______________, 2007.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
Dated:
PRIME HOSPITALITY CORP.
By:________________________________
Name:
Title:
Trustee's Certificate of Authentication:
This is one of the [Global] Notes
referred to in the within-
mentioned Indenture:
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
By:__________________________________
Authorized Signatory
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<PAGE> 79
(Back of Note)
9 3/4% [Series A] [Series B] Senior Subordinated Note due 2007
of
Prime Hospitality Corp.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) or (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A)
TO THE ISSUER THEREOF OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
SECURITYHOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE
ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF
THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT.
EACH GLOBAL NOTE SHALL ALSO BEAR THE FOLLOWING LEGEND ON THE FACE THEREOF:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE
DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF A
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SUCCESSOR DEPOSITARY OR ANY NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture referred to below unless otherwise indicated.
1. INTEREST. Prime Hospitality Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this 9 3/4%
[Series A] [Series B] Senior Subordinated Note due 2007 (the "Note") at the rate
and in the manner specified below.
The Company shall pay interest on the principal amount of this Note
in cash at the rate per annum shown above and shall pay the Liquidated Damages,
if any, payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company shall pay interest and Liquidated Damages, if
any, semi-annually on each April 1 and October 1 commencing October 1, 1997, or
if any such day is not a Business Day (as defined in the Indenture referred to
below), 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 for the actual number of days elapsed. 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 this Note. To
the extent lawful, the Company shall pay interest on overdue principal and
premium at the rate of 1% per annum in excess of the then applicable interest
rate on this Note; 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) and Liquidated Damages, if any, to the Persons who
are registered Holders of Notes at the close of business on the March 15 and
September 15 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium, if any, and
interest and Liquidated Damages, if any, at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders at their addresses set forth in
the register of Holders; provided that payment by wire transfer of immediately
available funds will be required with respect to principal and premium, if any,
and interest and Liquidated Damages, if any, on all Global Notes and all other
Notes the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United Sates of America as at the time of payment is legal tender for
payment of public and private debts.
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3. PAYING AGENT AND REGISTRAR. Initially, First Bank National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company, any Guarantor or any other of its Subsidiaries may
act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of March 26, 1997 (the "Indenture") between the Company, as issuer, 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, as
amended (15 U.S. Code Sections 77aaa-77bbbb). 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.
5. OPTIONAL REDEMPTION. On or after April 1, 2002, the Company may
redeem all or any portion of the Notes, 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 April 1 of the years indicated below:
Year Percentage
---- ----------
2002 .................................................................. 104.875%
2003 .................................................................. 103.250%
2004 .................................................................. 101.625%
2005 and thereafter.................................................... 100.000%
Notwithstanding the foregoing, prior to April 1, 2000, the Company may
redeem, on any one or more occasions, with the net cash proceeds of one or more
public offerings of its common equity (a "Public Equity Offering") (within 60
days of the consummation of any such Public Equity Offering), up to 35% of the
aggregate principal amount of the Notes originally issued at a redemption price
equal to 109.750% of the principal amount of such Notes plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption date;
provided, however, that at least 65% of the aggregate principal amount of Notes
originally issued remains outstanding immediately after any such redemption.
6. OFFERS TO PURCHASE. Subject to the Company's obligation to make an
offer to purchase Notes in connection with Asset Sales and a Change of Control
(as described in the Indenture), the Company has no mandatory redemption or
sinking fund obligations with respect to the Notes. Notice of any such offer to
purchase will be given as provided in the Indenture. Holders of Notes that are
the subject of an offer to purchase may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" appearing
below and taking certain other actions, all as set forth in the Indenture.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 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 thereof
called for redemption.
8. SUBORDINATION. The Notes and the Subsidiary Guarantees, if any,
are subordinated to Senior Debt, as defined in the Indenture. To the extent
provided in the Indenture, Senior Debt must be paid before the Notes and the
Subsidiary Guarantees may be paid. The Company agrees, and each Holder by
accepting a Note and any Subsidiary Guarantee agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give them
effect and appoints the Trustee as attorney-in-fact for such purpose.
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9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of $1,000
of principal amount. 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 Company shall not be required to exchange or register the
Notes during a period beginning at the opening of business 15 days before the
day of any selection of Notes for redemption under Section 3.02 of the Indenture
and ending at the close of business on the day of selection, or to exchange or
register any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part, or to exchange or
register a Note between a record date and the next succeeding Interest Payment
Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
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 then outstanding
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 Notes then outstanding. The Change of
Control and Asset Sale purchase features of the Notes may not be amended or
waived without the consent of at least 66 2/3% in principal amount of the Notes
then outstanding. Without the consent of any Holder of a Note, the Indenture or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to comply with Section 5.01, 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 under the Indenture or any
Guarantor's Obligations under its Subsidiary Guarantee in the case of a merger,
consolidation or sale of assets involving the Company or such Guarantor, as
applicable, pursuant to Article 5 or Article 11 of the Indenture, to make any
change that would provide any additional rights or benefits to the Holders of
the Notes (including providing for Subsidiary Guarantees and any supplemental
indenture required pursuant to Section 4.15 of the Indenture) or that does not
adversely affect the legal rights under the Indenture of any such Holder, to
comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA and to release a Guarantor in
accordance with the Indenture.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest or Liquidated Damages, if any, on
the Notes (whether or not such payment shall be 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 at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered pursuant to
a Change of Control Offer or an Assets Sale Offer) (whether or not such payment
shall be prohibited by the subordination provisions of the Indenture); (iii)
failure by the Company or any Restricted Subsidiary to comply with Sections
4.07, 4.09, 4.10 (other than a failure to make a payment to purchase Notes
pursuant thereto, which failure shall be an Event of Default pursuant to clause
(ii) above), 4.14 (other than a failure to make a payment to purchase Notes
thereto, which failure shall be an Event of Default pursuant to clause (ii)
above), 4.20, 4.21 and 5.01 of the Indenture, which failure continues for a
period of 30 days 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; (iv) failure by the Company or
any Guarantor 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)
the failure to pay at final stated maturity (giving effect to any applicable
grace periods and any extensions thereof) the principal amount of Non-Recourse
Indebtedness of the Company or any of its Restricted Subsidiaries with an
aggregate principal amount in excess of the lesser of (A) 10% of the total
assets of the Company and its Restricted Subsidiaries measured as of the end of
the Company's most recent fiscal quarter for which internal financial statements
are available immediately prior to the date on which such default occurred,
determined on a pro forma basis and (B) $100
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<PAGE> 83
million, and such failure continues for a period of 10 days or more, or the
acceleration of the final stated maturity of any such Non-Recourse Indebtedness
(which acceleration is not rescinded, annulled or otherwise cured within 10 days
of receipt by the Company or such Restricted Subsidiary of notice of such
acceleration); (vi) the failure to pay at final stated maturity (giving effect
to any applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness (other than Non-Recourse Indebtedness) of the Company or any
Restricted Subsidiary of the Company and such failure continues for a period of
10 days or more, or the acceleration of the final stated maturity of any such
Indebtedness (which acceleration is not rescinded, annulled or otherwise cured
within 10 days of receipt by the Company or such Restricted Subsidiary of notice
of any such acceleration) if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such Indebtedness,
in default for failure to pay principal at final maturity or which has been
accelerated, in each case with respect to which the 10-day period described
above has passed, aggregates $10.0 million or more at any time; (vii) failure by
the Company or any of its Restricted Subsidiaries to pay final judgments
rendered against them (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
$10.0 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); (viii) except as permitted by the Indenture, any
Subsidiary Guarantee 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 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 Subsidiary
Guarantee; and (ix) certain events of bankruptcy or insolvency with respect to
the Company, any Guarantor or any of the Company's Subsidiaries that would
constitute a Significant Subsidiary or any group of the Company's Subsidiaries
that, taken together, would constitute a Significant Subsidiary. 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, any of its Subsidiary that would constitute a
Significant Subsidiary or any group of its Subsidiaries that, taken together,
would constitute a Significant Subsidiary 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.
13. GUARANTEES OF NOTES. Payment of principal, premium, if any, and
interest and Liquidated Damages, if any, (including interest on overdue
principal and overdue interest, if lawful) on the Notes will be unconditionally
guaranteed by the Guarantors, if any, pursuant to, and subject to the terms of,
Article 11 of the Indenture.
14. SECURITY. The Notes will be unsecured obligations of the Company,
ranking subordinate in right of payment to all Senior Debt of the Company.
15. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder shall have any liability for any obligations of the
Company or any Guarantor under the Notes, any Subsidiary Guarantee or the
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. Such waiver and release may not be
effective to waive or release liabilities under the federal securities laws.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
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17. 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).
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Note Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may 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.
19. [SERIES A NOTES] REGISTRATION RIGHTS. Pursuant to the
Registration Rights Agreement (as defined in the Indenture), and subject to
certain terms and conditions stated therein, the Company will be obligated to
consummate an Exchange Offer pursuant to which the Holders of the Notes shall
have the right to exchange this Note for Exchange Notes, which have been
registered under the Securities Act, in like principal amount and having terms
identical in all material respect to the Note. In certain circumstances, and
subject to certain terms and conditions, Holders of the Notes shall have the
right to receive liquidated damages if the Company shall have failed to fulfill
its obligations under the Registration Rights Agreement.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07007
Attention: Corporate Secretary
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<PAGE> 85
Assignment Form
To assign this Note, fill in the form below: (I) or
(we) assign and transfer this Note to
________________________________________________________________________________
(Insert assignee's Social Security or tax I.D. No.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
agent 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:* ______________________________________
__________________
* Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
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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 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.14 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:*/ _________________________
__________________
*Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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Transfer and Exchange
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date of the declaration by SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) March 26, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
Check One
(1) ___ to the Company or a subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) ___ to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act)
that has furnished to the Trustee a signed letter
containing certain representations and agreements (the
form of which letter can be obtained from the Trustee); or
(4) ___ outside the United States to a "foreign person" in
compliance with Rule 904 of Regulation S under the
Securities Act; or
(5) ___ pursuant to the exemption from registration provided by
Rule 144 under the Securities Act; or
(6) ___ pursuant to an effective registration statement under the
Securities Act; or
(7) ___ pursuant to another available exemption from the
registration requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any Person other than the
registered Holder thereof; provided that if box (3), (4), (5) or (7) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Notes in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Security in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.17 of the Indenture shall have
been satisfied.
Dated:__________________ Signed:__________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature Guarantee:_______________________________________________________
A-10
<PAGE> 88
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:__________________ Signed:__________________________________
NOTICE: To be executed by an
executive officer
A-11
<PAGE> 89
SCHEDULE OF EXCHANGES OF CERTIFICATED NOTES
The following exchanges of a part of this Global Note for Certificated
Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ---------------- -------------------- --------------------- ------------------------ --------------
<S> <C> <C> <C> <C>
</TABLE>
A-12
<PAGE> 90
EXHIBIT B
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE
This "Supplemental Indenture", dated as of _______________, between
__________________ (the "Guarantor"), a subsidiary of Prime Hospitality Corp., a
Delaware corporation (the "Company"), and ______________________________, as
trustee under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company, a Delaware corporation, has heretofore executed
and delivered to the Trustee an indenture (the "Indenture"), dated as of March
26, 1997, providing for the issuance of up to an aggregate principal amount of
$200,000,000 of 9 3/4% Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, Section 4.15 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 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 of the Notes 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, jointly and
severally with all other Guarantors, to guarantee the Company's obligations
under the Notes on the terms and subject to the conditions set forth in Article
11 of the Indenture and to be bound by all other applicable provisions of the
Indenture and to be bound by all other applicable provisions of the Indenture.
The obligations of the Guarantor hereunder shall be junior and subordinated to
the Senior Debt of such Guarantor in the manner and to the extent set forth in
Article 11 of the Indenture.
3. REGISTRATION RIGHTS AGREEMENT. The Guarantor hereby agrees that,
by virtue of entering into this Supplemental Guarantee and becoming a Guarantor
under the Indenture, such Guarantor, automatically and without the need of
further action of any person, shall become a party to the Registration Rights
Agreement as a "Guarantor" within the meaning provided in the Registration
Rights Agreement.
4. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, shareholder or agent of the Guarantor, as such,
shall have any liability for any obligations of the Company or any Guarantor
under the Notes, any 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. Such waiver or release may not be effective to waive or
release liabilities under the federal securities laws.
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.
B-1
<PAGE> 91
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:
FIRST BANK NATIONAL ASSOCIATION
as Trustee
By:___________________________
Name:
Title:
B-2
<PAGE> 92
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
First Bank National Association
180 East 5th Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
Re: Prime Hospitality Corp.
9 3/4% Senior Subordinated Notes due 2007
Ladies and Gentlemen:
In connection with our proposed purchase of 9 3/4% Senior
Subordinated Notes due 2007 (the "Notes") of Prime Hospitality Corp. (the
"Company"), we confirm that:
1. We have received a copy of the Final Memorandum (the "Final
Memorandum"), dated March 21, 1997 relating to the Notes and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages A-1 and
A-2 of the Final Memorandum and in the section entitled "Transfer Restrictions"
of the Final Memorandum including the restrictions on duplication and
circulation of the Final Memorandum.
2. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture relating to
the Notes (as described in the Final Memorandum) and the undersigned agrees to
be bound by, and not to resell, pledge or otherwise transfer the Notes except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell or otherwise transfer any Notes prior to the date which
is three years after the original issuance of the Notes, we will do so only (i)
to the Company or any of its subsidiaries, (ii) inside the United States in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act), (iii) inside the
United States to an institutional "accredited investor" (as defined below) that,
prior to such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to the Trustee (as defined in the Indenture relating to the
Notes), a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes, (iv) outside the United
States in accordance with Rule 904 of Regulation S under the Securities Act, (v)
pursuant to the exemption from registration provided by Rule 144 under the
Securities Act (if available), or (vi) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
4. We are not acquiring the Notes for or on behalf of, and will not
transfer the Notes to, any pension or welfare plan (as defined in Section 3 of
the Employee Retirement Income Security Act of 1974), except as permitted in the
section entitled "Transfer Restrictions" of the Final Memorandum.
5. We understand that, on any proposed resale of any Notes, we will
be required to furnish to the Trustee and the Company such certification, legal
opinions and other information as the Trustee and the Company may reasonably
C-1
<PAGE> 93
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereto to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:________________________
Name
C-2
<PAGE> 94
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
First Bank National Association
180 East 5th Street
St. Paul, Minnesota 55101
New York, New York
Attention: Corporate Trust Department
Re: Prime Hospitality Corp.
(the "Company") 9 3/4% Senior Subordinated
Notes due 2007 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $________ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a Person in the United
States
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
By:________________________
Authorized Signature
D-1
<PAGE> 1
Exhibit 4.18
REGISTRATION RIGHTS AGREEMENT
Dated as of March 26, 1997
by and among
PRIME HOSPITALITY CORP.
and
BT SECURITIES CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MONTGOMERY SECURITIES
SMITH BARNEY INC.
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of March 26, 1997 by and among Prime Hospitality Corp., a
Delaware corporation (the "Company"), and BT Securities Corporation, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Montgomery Securities and Smith
Barney Inc. (each an "Initial Purchaser" and, collectively, the "Initial
Purchasers"), each of whom has agreed to purchase the Company's 9 3/4% Senior
Subordinated Notes due 2007 (the "Series A Notes") pursuant to the Purchase
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
March 21, 1997 (the "Purchase Agreement"), by and between the Company and the
Initial Purchasers. In order to induce the Initial Purchasers to purchase the
Series A Notes, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 7 of
the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 405 under the Act (as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission).
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Business Day: Any day except Saturday, Sunday or other day in The
City of New York on which banks are authorized to close.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: A registered Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Notes, each Interest
Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
1
<PAGE> 3
Exchange Notes: The Company's Series B 9 3/4% Senior Subordinated
Notes due 2007 to be issued pursuant to the Indenture in the Exchange Offer.
Exchange Offer: The registration by the Company under the Act of the
Exchange Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Series A Notes to (i) certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act, (ii) certain
institutional "accredited investors," as such term is defined in Rule 501(a)(1),
(2), (3) and (7) of Regulation D under the Act and (iii) non-U.S. persons
outside the United States in reliance upon Regulation S under the Act.
Guarantor: Any Person which becomes a guarantor of Notes under the
Indenture, and each of its respective successors, which Person shall, by virtue
of become a Guarantor under the Indenture (as defined therein), automatically
and without the need of further action of any other Person become a Guarantor
hereunder.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, dated as of the Closing Date, among the
Company and First National Bank Association, as trustee (the "Trustee") pursuant
to which the Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchasers: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture and the Notes.
Liquidated Damages: As defined in Section 5 hereof.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Exchange Notes.
Offering: The sale of the Series A Notes pursuant to the Purchase
Agreement.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
2
<PAGE> 4
Record Holder: With respect to any Damages Payment Date relating to
Notes, each Person who is a Holder of Notes on the record date with respect to
the Interest Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, which is filed pursuant to the provisions of
this Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Series A Note until (i) the date
on which such Series A Note has been exchanged by a person other than a
Broker-Dealer for an Exchange Note in the Exchange Offer, (ii) following the
exchange by a Broker-Dealer in the Exchange Offer of a Series A Note for an
Exchange Note, the date on which such Exchange Note is sold to a purchaser who
receives from such Broker-Dealer on or prior to the date of such sale a copy of
the prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Series A Note has been effectively registered under the Act
and disposed of in accordance with the Shelf Registration Statement or (iv) the
date on which such Series A Note may be sold pursuant to Rule 144(k) under the
Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with), the Company and any Guarantors shall (i)
cause to be filed with the Commission as soon as practicable after the Closing
Date, but in no event later than 30 days after the Closing Date, a Registration
Statement under the Act
3
<PAGE> 5
relating to the Exchange Notes and the Exchange Offer, (ii) use its best efforts
to cause such Registration Statement to become effective at the earliest
possible time, but in no event later than 135 days after the Closing Date, (iii)
in connection with the foregoing, file (A) all pre-effective amendments to such
Registration Statement as may be necessary in order to cause such Registration
Statement to become effective, (B) if applicable, a post-effective amendment to
such Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings in connection with the registration and qualification of
the Exchange Notes to be made under the Blue Sky laws of such jurisdictions as
are necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Registration Statement, commence the Exchange Offer. The
Exchange Offer shall be on the appropriate form permitting registration of the
Exchange Notes to be offered in exchange for the Transfer Restricted Securities
and to permit resales of Notes held by Broker-Dealers as contemplated by Section
3(c) below.
(b) The Company and each Guarantor shall use its best efforts to
cause the Exchange Offer Registration Statement to be effective continuously and
shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period be
less than 20 business days. The Company and each Guarantor shall cause the
Exchange Offer to comply with all applicable federal and state securities laws.
No securities other than the Notes shall be included in the Exchange Offer
Registration Statement. The Company and each Guarantor shall use its best
efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 business days thereafter.
(c) The Company and each Guarantor shall indicate in a "Plan of
Distribution" section contained in the Prospectus contained in the Exchange
Offer Registration Statement that any Broker-Dealer who holds Notes that are
Transfer Restricted Securities and that were acquired for its own account as a
result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Company), may exchange
such Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer
may be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the Exchange Notes received by such Broker-Dealer
in the Exchange Offer, which prospectus delivery requirement may be satisfied by
the delivery by such Broker-Dealer of the Prospectus contained in the Exchange
Offer Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such resales by Broker-Dealers
that the Commission may require in order to permit such resales pursuant
thereto, but such "Plan of Distribution" shall not name any such Broker- Dealer
or disclose the amount of Notes held by any such Broker-Dealer except to the
extent required by the Commission as a result of a change in policy after the
date of this Agreement.
The Company and each Guarantor shall use its best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that it conforms with the requirements
of this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of 180 days from the
date on which the Exchange Offer Registration Statement is declared effective.
The Company and each Guarantor shall provide sufficient copies of the
latest version of such Prospectus to Broker-Dealers promptly upon request at any
time during such 180-day period in order to facilitate such resales.
4
<PAGE> 6
(d) Upon Consummation of the Exchange Offer in accordance with this
Section 3, the Company and any Guarantors shall have no further obligation to
register Transfer Restricted Securities pursuant to Section 3 of this Agreement.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company and the Guarantors are not
required or permitted to file an Exchange Offer Registration Statement or to
Consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with) or (ii) if any Holder of Transfer Restricted
Securities shall notify the Company within 20 days following the Consummation of
the Exchange Offer (a "Shelf Notice") (A) that such Holder is prohibited by
applicable law or Commission policy from participating in the Exchange Offer, or
(B) that such Holder may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and that in the
opinion of counsel to such Holder the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a Broker-Dealer and holds Series A Notes
acquired directly from the Company or one of its affiliates, then the Company
and each Guarantor shall
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration
Statement"), on or prior to the earlier to occur of (1) the 30th day after
the date on which the Company determines that it is not required to file
the Exchange Offer Registration Statement or (2) the 30th day after the
date on which the Company receives notice from a Holder of Transfer
Restricted Securities as contemplated by clause (ii) above (such earliest
date being the "Shelf Filing Deadline"), which Shelf Registration
Statement shall provide for resales of all Transfer Restricted Securities
the Holders of which shall have provided the information required pursuant
to Section 4(b) hereof; and
(y) use its best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the
105th day after the Shelf Filing Deadline.
The Company and each Guarantor shall use its best efforts to keep
such Shelf Registration Statement continuously effective, supplemented and
amended as required by the provisions of Sections 6(b) and (c) hereof to the
extent necessary to ensure that it is available for resales of Notes by the
Holders of Transfer Restricted Securities entitled to the benefit of this
Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least three years following the
Closing Date or such shorter period that will terminate when all Transfer
Restricted Securities covered by the Shelf Registration have been sold pursuant
to the Shelf Registration Statement.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with any
Shelf Registration Statement or Prospectus or preliminary Prospectus included
therein and in any application to be filed with NASD. No
5
<PAGE> 7
Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages
pursuant to Section 5 hereof unless and until such Holder shall have used its
best efforts to provide all such reasonably requested information. Each Holder
as to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within 5 Business Days
by a post-effective amendment to such Registration Statement that cures such
failure and that is itself immediately declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
and each Guarantor hereby agrees jointly and severally that liquidated damages
("Liquidated Damages") shall accrue on the principal amount of each Transfer
Restricted Security so effected by a Registration Default at a rate of .50% per
annum with respect to the first 90-day period (or any portion thereof)
immediately following the occurrence of such Registration Default. The amount of
the Liquidated Damages shall increase by an additional .50% per annum with
respect to each subsequent 90-day period (or any portion thereof) until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of 1.0% per annum on the principal amount of such Transfer Restricted
Securities. All accrued Liquidated Damages shall be paid to applicable Record
Holders by the Company or any Guarantor in the same manner in which payments of
interest are made pursuant to the Indenture. Following the cure of all
Registration Defaults relating to any particular Transfer Restricted Securities,
the accrual of liquidated damages with respect to such Transfer Restricted
Securities will cease.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and each Guarantor shall comply with all of the
provisions of Section 6(c) below, shall use its best efforts to effect such
exchange and to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof and shall
comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company there
is a question as to whether the Exchange Offer is permitted by applicable
law, the Company and the Guarantors hereby agree to seek a no-action
letter or other favorable decision from the Commission allowing the
Company and the Guarantors to Consummate an Exchange Offer for such Series
A Notes. The Company and
6
<PAGE> 8
the Guarantors hereby agree to pursue the issuance of such a decision to
the Commission staff level but shall not be required to take commercially
unreasonable action to effect a change of Commission policy. The Company
and the Guarantors hereby agree, however, to (A) participate in telephonic
conferences with the Commission, (B) deliver to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases,
if any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursue a resolution (which need not
be favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company or
any Guarantor, prior to the Consummation thereof, a written representation
to the Company and the Guarantors (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to
the effect that (A) it is not an affiliate of the Company or any
Guarantor, (B) it is not engaged in, and does not intend to engage in, and
has no arrangement or understanding with any person to participate in, a
distribution of the Exchange Notes to be issued in the Exchange Offer and
(C) it is acquiring the Exchange Notes in its ordinary course of business.
In addition, all such Holders of Transfer Restricted Securities shall
otherwise cooperate in the Company's preparations for the Exchange Offer.
Each Holder hereby acknowledges and agrees that any Broker-Dealer and any
such Holder using the Exchange Offer to participate in a distribution of
the securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission's letter to Shearman &
Sterling dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above),
and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction should be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K
if the resales are of Exchange Notes obtained by such Holder in exchange
for Series A Notes acquired by such Holder directly from the Company and
the Guarantors or an affiliate thereof.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company and the Guarantors are registering
the Exchange Offer in reliance on the position of the Commission
enunciated in Exxon Capital Holdings Corporation (available May 13, 1988),
Morgan Stanley and Co., Inc. (available June 5, 1991) and, if applicable,
any no-action letter obtained pursuant to clause (i) above, (B) including
a representation that neither the Company nor any Guarantor has entered
into any arrangement or understanding with any Person to distribute the
Exchange Notes to be received in the Exchange Offer and that, to the best
of the Company's and each Guarantor's information and belief, each Holder
participating in the Exchange Offer is acquiring the Exchange Notes in its
ordinary course of business and has no arrangement or understanding with
any Person to participate in the distribution of the Exchange Notes
received in the Exchange Offer and (C) including any other undertaking or
representation reasonably required by the Commission as set forth in any
no-action letter obtained pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being
7
<PAGE> 9
sold in accordance with the intended method or methods of distribution thereof
(as indicated in the information provided to the Company pursuant to Section
4(b) hereof), and pursuant thereto the Company and the Guarantors will as
expeditiously as possible prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Series A
Notes by Broker-Dealers), the Company and each Guarantor shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder, financial
statements of any Guarantor) for the period specified in Section 3 or 4 of
this Agreement, as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and each Guarantor
shall file promptly an appropriate amendment to such Registration
Statement, in the case of clause (A), correcting any such misstatement or
omission, and, in the case of either clause (A) or (B), use its best
efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as applicable, or such shorter
period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of any notice of suspension
by any state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or any
notice of initiation of any proceeding for any of the preceding purposes,
(D) of the existence of any fact or the happening of any event that makes
any statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference
8
<PAGE> 10
therein untrue, or that requires the making of any additions to or changes
in the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in
the Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. If at any time
the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Company and the Guarantors shall
use their best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time;
(iv) to the extent reasonably practicable, furnish to each of
the selling Holders and each of the underwriter(s), if any, before filing
with the Commission, copies of any Registration Statement or any
Prospectus included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents incorporated
by reference after the initial filing of such Registration Statement),
which documents will be subject to the review of such Holders and
underwriter(s), if any, for a period of at least five business days, and
the Company and the Guarantors will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a selling Holder of Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s), if any, shall reasonably object within five business days
after the receipt thereof. A selling Holder or underwriter, if any, shall
be deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains a material misstatement or omission;
(v) to the extent reasonably practicable, promptly prior to the
filing of any document that is to be incorporated by reference into a
Registration Statement or Prospectus, provide copies of such document to
the selling Holders and to the underwriter(s), if any, make the Company's
representatives (and representatives of any Guarantor) available for
discussion of such document and other customary due diligence matters, and
include such information in such document prior to the filing thereof as
such selling Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney or accountant retained by
such selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and
any Guarantors and cause the Company's and the Guarantor's officers,
directors and employees to supply all information reasonably requested by
any such Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof and prior to
its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s),
if any, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the principal
amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other terms
of the offering of the Transfer Restricted Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment
9
<PAGE> 11
as soon as practicable after the Company or any Guarantor is notified of
the matters to be incorporated in such Prospectus supplement or
post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies,
if so requested by the Holders of a majority in aggregate principal amount
of Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein, but excluding all exhibits (including exhibits incorporated
therein by reference), except upon request;
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary Prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company and each
Guarantor hereby consents to the use of the Prospectus and any amendment
or supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto for the time periods set forth in this
Agreement;
(xi) enter into such agreements (including an underwriting
agreement), and make, and cause the Guarantors, if any, to make, such
representations and warranties, and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement, all to such extent as may be reasonably
requested by any Initial Purchaser or by any Holder of Transfer Restricted
Securities or underwriter in connection with any sale or resale pursuant
to any Registration Statement contemplated by this Agreement; and whether
or not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Company and the
Guarantors, if any, shall:
(A) furnish to each selling Holder and each underwriter, if any,
in such substance and scope as they may request and as are
customarily made by issuers to underwriters in primary underwritten
offerings, upon the date of the Consummation of the Exchange Offer
and, if applicable, the effectiveness of the Shelf Registration
Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
President or any Vice President and (z) a principal financial or
accounting officer of the Company and the Guarantors, if any,
confirming, as of the date thereof, the matters set forth in
paragraphs (g), (h) and (i) of Section 7 of the Purchase
Agreement and such other matters as such parties may reasonably
request;
(2) an opinion or opinions, dated the date of Consummation
of the Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantors, covering the matters similar to the
matters covered by paragraph (a) of Section 7 of the Purchase
Agreement and such other matter as such parties may reasonably
request, and in any event including a statement to the effect
that such counsel has participated in conferences with officers
and other representatives of
10
<PAGE> 12
the Company, the Guarantors and selling Holders (to the extent
applicable), and representatives of the independent public
accountants for the Company and the Guarantors in connection
with the preparation of such Registration Statement and the
related Prospectus and have considered the matters required to
be stated therein and the statements contained therein, although
such counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing (relying as
to materiality to a large extent upon facts provided to such
counsel by officers and other representatives of the Company and
the Guarantors and without independent check or verification),
no facts came to such counsel's attention that caused such
counsel to believe that the applicable Registration Statement,
at the time such Registration Statement or any post-effective
amendment thereto became effective, and, in the case of the
Exchange Offer Registration Statement, as of the date of
Consummation, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein, or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading,
or that the Prospectus contained in such Registration Statement
as of its date and, in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material fact
or omitted to state a material fact necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading. Without limiting the
foregoing, such counsel may state further that such counsel
assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the
financial statements, notes and schedules and other financial
data included in any Registration Statement contemplated by this
Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, from
the Company's and the Guarantors' independent accountants, in
the customary form and covering matters of the type customarily
covered in comfort letters by underwriters in connection with
primary underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to Section 7(c)
of the Purchase Agreement, without material exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section ; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company
pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company and
any Guarantors contemplated in clause (A)(1) above cease to be true and
correct, the Company and such Guarantors shall so advise the Initial
Purchasers and the underwriter(s), if any, or each selling Holder promptly
and, if requested by such Persons, shall confirm such advice in writing;
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<PAGE> 13
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with, and cause the Guarantors to cooperate with,
the selling Holders, the underwriter(s), if any, and their respective
counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s) may reasonably
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided, however,
that the neither Company nor any Guarantor shall be required to register
or qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of process in suits
or to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xiii) shall issue, upon the request of any Holder of Series A
Notes covered by the Shelf Registration Statement, Exchange Notes, having
an aggregate principal amount equal to the aggregate principal amount of
Series A Notes surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such Exchange Notes to be
registered in the name of such Holder or in the name of the purchaser(s)
of such Notes, as the case may be; in return, the Series A Notes held by
such Holder shall be surrendered to the Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with and cause the Guarantors, if any, to
cooperate with the selling Holders and the underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be
in such denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to
any sale of Transfer Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the underwriter(s),
if any, to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
and provide the Trustee under the Indenture with printed certificates for
the Transfer Restricted Securities which are in a form eligible for
deposit with the Depositary Trust Company;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified
12
<PAGE> 14
independent underwriter") that is required to be retained in accordance
with the rules and regulations of the NASD, and use its reasonable best
efforts to cause such Registration Statement to become effective and
approved by such governmental agencies or authorities as may be necessary
to enable the Holders selling Transfer Restricted Securities to consummate
the disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if not
sold to underwriters in such an offering, beginning with the first month
of the Company's first fiscal quarter commencing after the effective date
of the Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate, and cause the
Guarantors to cooperate with, the Trustee and the Holders of Notes to
effect such changes to the Indenture as may be required for such Indenture
to be so qualified in accordance with the terms of the TIA; and execute,
and use its best efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner;
(xxi) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or
shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or any Guarantor's
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses (including
filings made by any Initial Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses
13
<PAGE> 15
of any "qualified independent underwriter" and its counsel that may be required
by the rules and regulations of the NASD); (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Exchange Notes
to be issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company and the Guarantors, if any, and, subject to Section 7(b) below, the
Holders of Transfer Restricted Securities; (v) all application and filing fees
in connection with listing Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company and the
Guarantors, if any, (including the expenses of any special audit and comfort
letters required by or incident to such performance). Notwithstanding anything
in this Section 7 to the contrary, the Company shall not be required to pay (a)
the fees and expenses of any underwriter or of legal counsel for any
underwriter, other than a "qualified independent underwriter" (acting solely in
such capacity) as provided in clause (i) of the preceding sentence or (b) any
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Transfer Restricted Notes.
The Company will, in any event, bear its and any Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company.
(b) In connection with any Shelf Registration Statement required by
this Agreement, the Company will reimburse Holders of Transfer Restricted
Securities the distribution of which is being registered pursuant to the Shelf
Registration for the reasonable fees and disbursements of not more than one
counsel chosen by the Holders of a majority of the principal amount of such
Transfer Restricted Securities; provided, however, that such counsel must be
reasonably satisfactory to the Company.
SECTION 8. INDEMNIFICATION
(a) In the event of a Shelf Registration Statement or in connection
with any prospectus delivery pursuant to an Exchange Offer Registration
Statement by any Broker-Dealer, Initial Purchaser or other Holder, as
applicable, of Transfer Restricted Securities, the Company shall indemnify and
hold harmless each Holder and each person, if any, who controls such Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any such
Registration Statement or any Prospectus forming a part thereof or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
and
(ii) against any and all expense whatsoever, as incurred
(including, subject to Section 8(c) hereof, the fees and disbursements of
counsel chosen by the indemnified party), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental or regulatory agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission;
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<PAGE> 16
provided, however, that (i) this indemnity shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
indemnified party expressly for use in such Registration Statement and (ii) this
indemnity with respect to any untrue statement or alleged untrue statement or
omission or alleged omission in any related preliminary Prospectus shall not
enure to the benefit of any indemnified party from whom the person asserting any
such loss, claim damage or liability received Notes if such persons did not
receive a copy of the final Prospectus at or prior to the confirmation of the
sale of such Notes to such person in any case where such delivery is required by
the Securities Act and the untrue statement or omission of material fact
contained in the related preliminary Prospectus was corrected in the final
Prospectus unless such failure to deliver the final Prospectus was a result of
noncompliance by the Company with Sections 6(c)(iv), 6(c)(ix) or 6(c)(x).
(b) In the event of a Shelf Registration Statement, each Holder
agrees to indemnify and hold harmless the Company, its directors, officers,
agents and employees and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act and the directors, officers, agents and employees of such controlling
persons against any and all loss, liability, claim, damage and expense described
in the indemnity contained in Section 8(a) hereof, as incurred, arising out of
or based upon any untrue statements or omissions, or alleged untrue statements
or omissions, made in the Registration Statement (or any amendment or supplement
thereto) in reliance on and in conformity with written information furnished to
the Company by such Holder expressly for use in the Registration Statement (or
in such amendment or supplement); provided, however, that no such Holder shall
be liable for any indemnity claims hereunder in excess of the amount of net
proceeds received by such Holder from the sale of Notes pursuant to the
Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any claim or action
commenced against it in respect of which indemnity may be sought hereunder,
provided, that failure to so notify an indemnifying party shall not relieve such
indemnifying party from any obligation that it may have pursuant to this Section
except to the extent that it has been materially prejudiced (through the
forfeiture of substantive rights or defenses) by such failure and, provided
further that the failure to notify the indemnifying party shall not relieve it
from any liability that it may have to an indemnified party otherwise than on
account of this indemnity agreement. If any such claim or action shall be
brought against an indemnified party, the indemnified party shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof (other than reasonable costs of investigation); provided, however, that
an indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (1) the employment of counsel by the
indemnified party has been authorized in writing by the indemnified party, (2)
the indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(3) a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has
15
<PAGE> 17
not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees disbursements and other charges of more than on separate
firm of attorneys (in addition to any local counsel) at any one time for all
such indemnified party or parties. Each indemnified party, as a condition of the
indemnity agreements contained in Sections 8(a) and 8(b), shall use all
reasonable efforts to cooperate with the indemnifying party in the defense of
any such action or claim. No indemnifying party shall be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If a claim by an indemnified party for indemnification under this
Section 8 is found unenforceable in a final judgment by a court of competent
jurisdiction (not subject to further appeal or review) even though the express
provisions hereof provide for indemnification in such case, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in connection with the
actions, statements or omissions that resulted in such losses as well as any
other relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in questions, including any untrue or alleged untrue
statement of a material fact or omission of a material fact, has been taken or
made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any losses shall
be deemed to include, subject to the limitations set forth in Section 8(c)
herein, any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section , an indemnifying party that is a
holder of Transfer Restricted Notes or Exchange Notes shall not be required to
contribute any amount in excess of the amount by which the total price at which
the securities sold by such indemnifying party and distributed to the public
were offered to the public exceeds the amount of any damages that such
indemnifying party has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty or
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holders' obligation to
contribute pursuant to this Section 8(d) are several in proportion to the
respective principal amount of Series A Notes held by each of the Holders
hereunder and not joint.
16
<PAGE> 18
SECTION 9. RULE 144 AND RULE 144A
The Company shall use its best efforts to file the reports required
to be filed by it under the Act and the Exchange Act in a timely manner and, if
at any time the Company is not required to file such reports, it will, upon the
request of any Holder of Transfer Restricted Securities, make publicly available
other information so long as necessary to permit sales of their securities
pursuant to Rule 144. The Company hereby agrees with each Holder, for so long as
any Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company agrees, and shall cause the Guarantors to
agree, that monetary damages (including the liquidated damages contemplated
hereby) would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. Neither the Company nor any
Guarantors will, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as may have been otherwise previously been disclosed
to the Initial Purchasers in writing, neither the Company nor any Guarantors has
previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's securities under any agreement in
effect on the date hereof.
(c) Adjustments Affecting the Notes. Neither the Company nor any
Guarantor will take any action, or permit any change to occur, with respect to
the Notes that would materially and adversely affect the ability of the Holders
to Consummate any Exchange Offer.
17
<PAGE> 19
(d) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or to any Guarantor:
Prime Hospitality Corp.
700 Route 46 East
P.O. Box 2700
Fairfield, NJ 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, NY 10022
Telecopier No.: (212) 821-8111
Attention: William N. Dye, Esq.
All such notices and communications 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 on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this
18
<PAGE> 20
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing 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 LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company and the
Guarantors with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
[signature page follows]
19
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
PRIME HOSPITALITY CORP.
By: ________________________________
Name:
Title:
BT SECURITIES CORPORATION
By: __________________________
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: __________________________
Name:
Title:
MONTGOMERY SECURITIES
By: __________________________
Name:
Title:
SMITH BARNEY INC.
By: __________________________
Name:
Title:
20
<PAGE> 1
EXHIBIT 5
April 2, 1997
Prime Hospitality Corp.
700 Route 46 East
Fairfield, New Jersey 07007-2700
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to Prime Hospitality Corp., a Delaware corporation (the
"Company") in connection with the registration statement on Form S-4, filed with
the Securities and Exchange Commission on April __, 1997 (the "Registration
Statement") relating to the offer to exchange up to $200,000,000 aggregate
principal amount of 9-3/4% Series B Senior Subordinated Notes due April 1, 2007
(the "Exchange Notes") for up to $200,000,000 aggregate principal amount of the
Company's outstanding 9-3/4% Series A Senior Subordinated Notes due April 1,
2007 that were issued and sold in a transaction exempt from registration under
the Securities Act of 1933, as amended (the "Original Notes"). The Original
Notes were issued under, and the Exchange Notes are to be issued under, an
Indenture, dated as of March 26, 1997 (the "Indenture"), between the Company and
First Bank National Association, as trustee (the "Trustee"). Capitalized terms
used herein that are not otherwise defined have the meanings ascribed thereto as
set forth in the Registration Statement.
We have examined copies of the Registration Statement, the Offering Memorandum
relating to the Original Notes, dated March 21, 1997, and such other documents,
papers, statutes and authorities as we have deemed necessary to form a basis for
the opinions hereinafter expressed. In our examination, we have assumed the
genuineness of all signatures and the conformity to original documents of all
copies submitted to us.
Based upon the foregoing, we are of the opinion that:
<PAGE> 2
Prime Hospitality Corp.
April 2, 1997
Page 2
1. The Company is duly formed and validly existing under the laws of the State
of Delaware.
2. The execution and delivery of the Indenture have been duly authorized by
the Company, and the Indenture constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance
with the terms thereof, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance and other
similar laws affecting the enforcement of creditors' rights generally
and except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a proceeding
in equity or at law).
3. The Exchange Notes have been duly authorized and, when duly executed by the
proper officers of the Company, duly authenticated by the Trustee and issued
by the Company in accordance with the terms of the Indenture and the
Exchange Offer, will constitute legal, valid and binding obligations of the
Company, will be entitled to the benefits of the Indenture and will be
enforceable against the Company in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance and other similar laws affecting the
enforcement of creditors' rights generally and except as enforcement thereof
is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
We are members of the bar of the State of New York and we express no opinion as
to the laws of any jurisdiction other than the laws of the State of New York,
the General Corporation Law of the State of Delaware and the federal laws of the
United States typically applicable to transactions of the type contemplated by
the Exchange Offer.
This opinion letter is limited to the matters stated herein and no opinion is
implied or may be inferred beyond the matters expressly stated.
This letter speaks only as of the date hereof and is limited to present
statutes, regulations and administrative and judicial interpretations. We
undertake no responsibility to update or supplement this letter after the date
hereof.
<PAGE> 3
Prime Hospitality Corp.
April 2, 1997
Page 3
We consent to being named in the Registration Statement and related Prospectus
as counsel who are passing upon the legality of the Exchange Notes for the
Company and to the reference to our name under the caption "Legal Matters" in
such Prospectus. We further consent to your filing copies of this opinion as an
exhibit to the Registration Statement or any amendment thereto. In giving such
consents, we do not hereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ Willkie Farr & Gallagher
- -----------------------------
<PAGE> 1
EXHIBIT 12
PRIME HOSPITALITY CORP.
STATEMENT RE: COMPUTATION OF
THE RATIO OF EARNINGS TO FIXED CHARGES
(S-K SECTION 503 (D))
<TABLE>
<CAPTION>
PRE-REORGANIZATION POST REORGANIZATION
---------------------- --------------------------------------------------------------------
FOR THE
---------------------------------------------------------------------------------------------
ONE MONTH FIVE MONTHS YEAR YEAR YEAR YEAR
YEAR ENDED ENDED ENDED ENDED ENDED ENDED ENDED
June 30, July 31, December 31, December 31, December 31, December 31, December 31,
1992 1992 1992 1993 1994 1995 1996
----------- --------- ----------- ------------ ----------- ----------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Computation of earnings:
Pre-tax income (loss) from
continuing operations ........... $(70,965) $(10,274) $ 2,321 $13,856 $30,430 $29,108 $51,523
Less:
Interest capitalized ............ $ -- -- -- -- 836 2,596 7,545
======== ======== ======= ======= ======= ======= =======
Total earnings .................... $(70,965) $(10,274) $ 2,321 $13,856 $29,594 $26,512 $43,978
======== ======== ======= ======= ======= ======= =======
Computation of fixed charges:
For interest .................... $ 8,245 $ 779 $ 7,718 $16,116 $13,993 $21,603 $20,312
For capitalized interest ........ -- -- -- -- 836 2,596 7,545
For interest on rentals ......... 2,540 189 703 1,924 1,826 1,792 2,634
-------- -------- ------- ------- ------- ------- -------
Total fixed charges ............... $ 10,785 $ 968 $ 8,421 $18,040 $16,655 $25,991 $30,491
======== ======== ======= ======= ======= ======= =======
Total earnings and fixed
charges ......................... $(60,180) $ (9,306) $10,742 $31,896 $46,249 $52,503 $74,469
-------- -------- ------- ------- ------- ------- -------
Ratio ............................. -- -- 1.28 1.77 2.78 2.02 2.44
-------- -------- ------- ------- ------- ------- -------
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Prime Hospitality Corp.:
As independent public accountants, we hereby consent to the use of our
report dated January 28, 1997, covering the Company's consolidated financial
statements for the years ended December 31, 1994, 1995 and 1996 and to all
references to our firm included in or made a part of this Registration
Statement.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
April 2, 1997
<PAGE> 1
Exhibit 25
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
FIRST BANK NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0256895
(State of Incorporation) (I.R.S. Employer
Identification No.)
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
PRIME HOSPITALITY CORP.
(Exact name of registrant as specified in its charter)
Delaware 22-2640625
(State of Incorporation) (I.R.S. Employer
Identification No.)
700 Route 46 East
Fairfield, New Jersey 07007-2700
(Address of Principal Executive Offices) (Zip Code)
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
(Title of the Indenture Securities)
<PAGE> 2
GENERAL
-------
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.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
------------------------------------------
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this
----------------
statement of eligibility and qualification. Each of the exhibits listed
below is incorporated by reference from registration number 33-90786.
1. Copy of Articles of Association.
2. Copy of Certificate of Authority to Commence Business.
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).
4. Copy of existing By-Laws.
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority.
<PAGE> 3
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, First Bank National Association, an Association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 31st day of March, 1997.
FIRST BANK NATIONAL ASSOCIATION
[SEAL]
/s/ Richard H. Prokosch
-----------------------
Richard H. Prokosch
Trust Officer
/s/ Christina Hatfield
- ----------------------
Christina Hatfield
Assistant Secretary
<PAGE> 4
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, FIRST BANK NATIONAL ASSOCIATION hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: March 31, 1997
FIRST BANK NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
-------------------------
Richard H. Prokosch
Trust Officer
<PAGE> 5
AMENDED AND RESTATED
--------------------
ARTICLES OF ASSOCIATION
FIRST BANK NATIONAL ASSOCIATION
FIRST. The title of this Association, which shall carry on the
business of banking under the laws of the United States, shall be "First Bank
National Association."
SECOND. The main office of the Association shall be in the City of
Minneapolis, County of Hennepin, State of Minnesota. The general business of
the Association shall be conducted at its main office and branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five members. At any meeting of the
shareholders held for the purpose of electing Directors, or changing the number
thereof, the number of Directors may be determined by a majority of the votes
cast by the shareholders in person or by proxy. Between meetings of the
shareholders held for the purpose of electing Directors, the Board of Directors
by a majority vote of the full Board may increase the size of the Board by not
more than four Directors in any one year, but not to more than a total of
twenty-five Directors, and fill any vacancy so created in the Board. A majority
of the Board of Directors shall be necessary to constitute a quorum for the
transaction of business at any Directors' meeting. Each Director, during the
full term of his directorship, shall own a minimum of $1,000 par value of stock
of this Association, or any equivalent interest in stock of First Bank System,
Inc.
FOURTH. The regular annual meeting of the shareholders of this
Association shall be held at its main banking house, or other convenient place
duly authorized by the Board of Directors, on such day of each year as is
specified therefor in the By-laws, but if no election is held on that day, it
may be held on any subsequent day according to such lawful rules as may be
prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association
shall be divided into 3,500,000 shares of common stock at the par value of Fifty
Dollars ($50.00) 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.
If the capital stock is increased by the sale of additional shares
thereof, each shareholder shall be entitled to subscribe for such additional
share in proportion to the number of shares of said capital stock owned by him
at the time the increase is authorized by the shareholders, unless another time
subsequent to the date of the shareholders' meeting is specified in a resolution
adopted by the shareholders at the time the increase is authorized. The Board of
Directors shall have the power to prescribe a reasonable period of time within
which the preemptive rights to subscribe to the new shares of capital stock must
be exercised.
Page 1 of 6
<PAGE> 6
If the capital stock is increased by a stock dividend, each shareholder
shall be entitled to his proportionate amount of such increase in accordance
with the number of shares of capital stock owned by him at the time the increase
is authorized by the shareholders, unless another time subsequent to the date of
the shareholders' meeting is specified in a resolution adopted by the
shareholders at the time the increase is authorized.
The Association, and at any time and from time to time, may authorize
and issue debt obligations, whether or not subordinated, without the approval of
the shareholders. In the event said debt obligations are convertible to capital
stock of the Association, each shareholder shall be entitled to subscribe for
such additional shares in proportion to the number of shares of capital stock
owned by him one month prior to the issuance of capital stock in satisfaction of
said convertible debt obligations.
SIXTH. The Board of Directors shall appoint one of its members
President of this Association, who shall be Chairman of the Board, unless the
Board appoints another director to be the Chairman. The Board may also appoint
one or more of its members to serve as Vice Chairman. The Board shall have the
power to appoint such officers and employees as may be required to transact the
business of this Association; to fix the salaries to be paid to such officers
and employees of this Association; and to dismiss any of such officers or
employees and appoint others to take their place.
The Board of Directors shall have the power to define the duties of
officers and employees of this Association and to require adequate bonds from
them for the faithful performance of their duties; to regulate the manner in
which any increase of the capital of the Association shall be made; to make all
By-laws that may be lawful for the general regulation of the business of this
Association and the management of its affairs; and generally to do and perform
all acts that may be lawful 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 of this Association to any other place within the
limits of the City of Minneapolis, Minnesota, without the approval of the
shareholders of this Association but subject to the approval of the Comptroller
of the Currency; and shall have the power to change the location of any branch
or branches of this Association to any other location, without the approval of
the shareholders of this Association but subject to the approval of the
Comptroller of the Currency.
EIGHTH. This Association shall have succession from the date of its
organization certificate until such time as it be dissolved by the act of its
shareholders in accordance with the provisions of the banking laws of the United
States, or until its franchise becomes forfeited by reason of violation of law,
or until terminated by either a general or a special act of Congress, or until
its affairs be placed in the hands of a receiver and finally wound up by him.
Page 2 of 6
<PAGE> 7
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten per centum of the stock
of this Association, may call a special meeting of shareholders at any time;
provided, however, that unless otherwise provided by law, not less than ten days
prior to the date fixed for any such meeting, a notice of the time, place, and
purpose of the meeting shall be given by first-class mail, postage prepaid, to
all shareholders of record of this Association at their respective addresses as
shown upon the books of the Association.
TENTH. Any action required to be taken at a meeting of the shareholders
or directors of or any action which may be taken at a meeting of shareholders or
directors may be taken without a meeting if consent in writing, setting forth
the action as taken shall be signed by all the shareholders or directors
entitled to vote with respect to the matter thereof. Such action shall be
effective on the date on which the last signature is place on the writing, or
such earlier date as is set forth therein.
ELEVENTH. Meetings of the Board of Directors or shareholders, regular
or special, may be held by means of conference telephone or similar
communication equipment by means of which all persons participating in the
meeting can simultaneously hear each other, and participation in such meeting by
such aforementioned means shall constitute presence in person at such meeting.
TWELFTH. (a) 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 any action
by or in the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified by the Corporation, unless similar indemnification is
provided by such other corporation, partnership, joint venture, trust or other
enterprise (any funds received by any person as a result of the provisions of
this Article being deemed an advance against his receipt of any such other
indemnification from any such other 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 such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interest of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person seeking
indemnification did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of the corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Page 3 of 6
<PAGE> 8
(b) Any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other corporation, partnership, joint venture, trust or other
enterprise shall be indemnified by the Corporation, unless similar
indemnification is provided by such other corporation, partnership, joint
venture, trust or other enterprise (any funds received by any person as a result
of the provisions of this Article being deemed an advance against his receipt of
any such other indemnification from any such other corporation, partnership,
joint venture, trust or other enterprise), against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interest of
the corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all of the circumstances of the case, such person is
fairly and reasonably entitled to indemnify for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent
of the Corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in paragraphs (a) and (b), or in
defense of any claim, issue or matter therein, such person shall be indemnified
by the Corporation against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Except as set forth in paragraph (c) of this Article, any
indemnification under paragraphs (a) and (b) of this Article (unless ordered by
the court), shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because such person has met the
applicable standard of conduct set forth in paragraphs (a) and (b) of this
Article. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, of if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of any undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation. Such expenses (including attorneys' fees)
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
Page 4 of 6
<PAGE> 9
(f) The indemnification and advancement of expenses provided
by this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification or seeking advancement of expenses may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office.
(g) By action of the Board of Directors, notwithstanding any
interest of the directors in the action, the Corporation may purchase and
maintain insurance, in such amounts as the Board of Directors deems appropriate,
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation shall have the power to indemnify him against
such liability under the provisions of this Article.
(h) For purpose of this Article, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under this Article with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; reference to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article.
(j) The indemnification and advancement of expenses hereby
provided shall, unless otherwise provided when authorized or ratified, continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
person.
Page 5 of 6
<PAGE> 10
THIRTEENTH. 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. The notice of any shareholders' meeting at which
an amendment to the Articles of Association of this Association is to be
considered shall be given as hereinabove set forth.
IN WITNESS WHEREOF, we have hereunto set our hands as of the 23rd day
of February, 1995.
- --------------------------------- ------------------------------------
John F. Grundhofer Philip G. Heasley
- --------------------------------- ------------------------------------
William F. Farley Richard A. Zona
- --------------------------------- ------------------------------------
Daniel C. Rohr Michael J. O'Rourke
- ---------------------------------
J. Robert Hoffmann
Page 6 of 6
<PAGE> 11
BYLAWS
OF
FIRST BANK NATIONAL ASSOCIATION
ARTICLE I.
MEETINGS OF SHAREHOLDERS
The regular annual meeting of the shareholders for the election of
directors and for the transaction of such other business as properly may come
before the meeting shall be held at the main banking house of the Association in
the City of Minneapolis, Minnesota, or other convenient place duly authorized by
the Board of Directors (hereinafter referred to as the "Board"), on the last
Thursday in February of each year at 9:30 o'clock A.M. of said day, or such
other date or time which the Board may designate at any Board meeting held prior
to the required date for sending notice of the annual meeting to the
shareholders. The holders of a majority of the outstanding shares entitled to
vote, and represented at any annual or special meeting of the shareholders, may
choose persons to act as Chairman and as Secretary of the meeting.
ARTICLE II.
BOARD OF DIRECTORS
Section 1. Number. As provided in the Articles of Association, the
Board of this Association shall consist of not less than five nor more than
twenty-five members. At any meeting of the shareholders held for the purpose of
electing directors, or changing the number thereof, the number of directors may
be determined by a majority of the votes cast by the shareholders in person or
by proxy. Any vacancy occurring in the Board shall be filled by the remaining
directors. Between meetings of the shareholders held for the purpose of electing
directors, the Board by a majority vote of the full Board may increase the size
of the Board by not more than four directors in any one year, but not to more
than a total of twenty-five directors, and fill any vacancy so created in the
Board. All directors shall hold office until their successors are elected and
qualified.
Section 2. Powers. The Board shall have and may exercise all of the
powers granted to or conferred upon it by the Articles of Association and Bylaws
of the Association and by law. The Board may appoint from time to time one or
more committees for any purposes and with such powers as the Board may
determine.
Section 3. Organization. The President or the Chairman of the Board
shall notify the directors-elect of their election and of the time at which they
are required to meet for the purpose of organizing the new Board. If, at the
time fixed for such meeting, there is not a quorum in attendance, the members
present may adjourn from time to time until a quorum is secured, and no business
shall be transacted until a majority of the directors-elect shall have taken the
oath of office prescribed by law and shall otherwise duly qualified.
<PAGE> 12
The Board shall appoint one of its members President of this
Association, who shall be Chairman of the Board, but the Board may appoint a
Director in lieu of the President, to be Chairman of the Board, in which case
the latter shall preside at all meetings and shall perform such other duties as
may be designated by the Board. If a Chairman of the Board is so appointed in
lieu of the President, in his absence the President shall preside at meetings of
the Board. In the absence of a presiding officer, the Board shall appoint a
Chairman pro tem. The Board shall appoint a recording officer who shall keep a
record of the meetings and proceedings of the Board. The recording officer need
not be a member of the Board.
Section 4. Meetings. The regular meetings of the Board shall consist of
the annual meeting following the annual election of directors by the
shareholders, and quarterly meetings which shall be held at such place and at
such time as the Chairman or President from time to time may designate. When the
date of any regular meeting of the Board falls on a holiday, the meeting shall
be held on the next ensuing business day other than a Saturday, or on such day
and at such time as may have been ordered.
Special meetings of the Board shall be held at any time upon the call
of the Chairman of the Board, a Vice Chairman, the President, or the acting
Chief Executive Officer, or upon written request of any three (3) directors.
Notice of all meetings of the Board, whether regular or special, shall
be given to each director either orally in person or by mail, telegraph or
telephone, on or before the day of the meeting. Meetings of the Board or
shareholders may be held by conference telephone or similar communication device
by means of which all persons participating in the meeting can simultaneously
hear each other. Participating in such a meeting shall constitute presence in
person at such meeting.
Section 5. Quorum. A majority of all the qualified directors shall
constitute a quorum and shall be necessary for the transaction of business, but,
if at any meeting there shall be less than a quorum present, a majority of those
present may adjourn the meeting from time to time until a quorum is in
attendance.
Section 6. Advisory Board of Directors. The Board may appoint persons,
who need not be shareholders or directors, to serve as advisory directors on an
Advisory Board of Directors established to serve this bank or a group of
affiliated banks of which this bank is one. An advisory director shall have such
power and duties as may be determined by the Board, provided that advisory
directors shall have no power to vote on matters presented to the Board for
final decision and, provided further, that the Board's responsibility for the
affairs of the Association shall in no respect be delegated or diminished.
Section 7. Directors' Fees, etc. The Board shall have the power to fix
and vote fees and compensation to directors and advisory directors of the
Association for their services as directors and advisory directors, and also for
their services as member of any committee or committees of the Association
contemplated by these Bylaws or otherwise created or appointed by the Board, the
Executive Committee, or the President of the Association.
2
<PAGE> 13
Nothing herein contained shall be construed to preclude any director or advisory
director from serving the Association in any other capacity and being paid
compensation therefor by the Association.
ARTICLE III.
OFFICERS
Section 1. Officers. The Board may elect a Chairman of the Board of
Directors and one (1) or more Vice Chairmen. The Board shall also elect a
President. The Board shall elect, as appropriate, such additional officers as it
may determine, including Executive Vice Presidents or Senior Vice Presidents.
The Chief Executive Officer or in the absence of the Chief Executive Officer,
the President, may appoint such other officers necessary to conduct the affairs
of the Association.
Section 2. Chief Executive Officer. The Board of Directors may
designate a Chief Executive Officer of the Association, who shall be either the
President or Chairman of the Board. The Board may also designate an officer or
director to serve as acting Chief Executive Officer in the absence or incapacity
of the Chief Executive Officer. Subject to the law and the control of the Board
and the Executive Committee, the Chief Executive Officer, or, in the absence of
the Chief Executive Officer, the President shall have authority to manage the
affairs and business of the Association and prescribe and define the duties of
its officers, agents and employees.
Section 3. Term of Office. Any officer elected by the Board shall hold
his office for the current year for which the Board by which he is elected was
elected, unless he shall resign, become disqualified or be removed. The
Chairman, Vice Chairman, and President can be removed by action of a majority of
the Board. All other elected officers can be removed by order of the Chief
Executive Officer, or in his absence, the President. Any other officer shall
hold his office at the pleasure of the Chief Executive Officer, or, in his
absence, the President.
Section 4. Bonds. All officers, agents or employees as the business of
the Association may require, shall give bond with surety to be approved and in a
sum to be fixed by the Board or the Chairman or the President, conditioned upon
the faithful and honest discharge of their respective duties.
ARTICLE IV.
STOCK CERTIFICATES
Section 1. Forms. Certificates of stock, signed by any elected officer
and any other officer, shall be issued to the shareholders, and each certificate
shall state upon its face that such stock is transferable only upon the books of
the Association.
3
<PAGE> 14
Section 2. Transfers. Certificates of stock of this Association shall
be assignable and transferable only on the books of this Association subject to
the restrictions and provisions of the national banking laws, and a transfer
book shall be provided in which all assignments and transfers of stock shall be
made. When stock is transferred, the certificates representing the same shall be
returned to the bank, canceled and preserved, and new certificates issued.
Section 3. Dividends. Transfers of stock shall not be suspended
preparatory to the declaration of dividends; and, unless an agreement to the
contrary shall be expressed in the assignment or assignments, dividends shall be
paid to the shareholders in whose name the stock shall stand at the date of
declaration of dividends.
ARTICLE V.
MINUTE BOOK
The organization papers of this Association, the Bylaws as revised or
amended from time to time and the proceedings of all regular and special
meetings of the shareholders and the directors shall be recorded in a minute
book or books. All reports of committees required to be made to the Board shall
be recorded in a minute book or shall be filed by the recording officer. The
minutes of each meeting of the shareholders and the Board shall be signed by the
recording officer and approved by the Chairman of the meeting.
ARTICLE VI.
CONVEYANCES, CONTRACTS, ETC.
All transfers and conveyances of real estate, mortgages, and transfers,
endorsements or assignments of stock, bonds, notes, debentures or other
negotiable instruments, securities or personal property shall be signed by any
elected or appointed officer.
All checks, drafts, certificates of deposit, mortgage satisfactions,
releases, all types of loans, all obligations of the Association, and all funds
of the Association held in its own or in a fiduciary capacity may be paid out by
an order, draft or check bearing the manual or facsimile signature of any
elected or appointed officer of the Association or of such other employees or
agents as may be designated by the Chief Executive Officer or the President.
All other instruments not hereinabove specifically provided for,
whether to be executed in a fiduciary capacity or otherwise, may be signed on
behalf of the Association by any officer thereof.
The Secretary of the Association or other proper officer may execute
and certify that required action or authority has been given or has taken place
by resolution of the Board under this Bylaw without the necessity of further
action by the Board.
4
<PAGE> 15
ARTICLE VII.
SEAL
The following is an impression of the seal if this Association.
ARTICLE VIII.
INDEMNIFICATION OF DIRECTORS,
OFFICERS, AND EMPLOYEES
Section 1. The Association shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action, or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the pertinent
corporation) by reason of the fact that he is or was a director, advisory
director or officer of the Association, or is or was serving at the request of
the Association as a director or officer of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses (including
attorneys' fees), judgments, 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 interest of the pertinent corporation. The termination of
any action, suit, or proceeding by judgment, order, settlement, or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the pertinent
corporation.
Section 2. The Association shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the pertinent corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, advisory director or officer of the Association, or is or was serving
at the request of the Association as a director or officer of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses, (including attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the pertinent corporation and except that no indemnification
shall be made in respect to any claim, issue, or matter as to which such
5
<PAGE> 16
person shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the pertinent corporation unless and only to the
extent that the court in which such action or suit was brought shall determine
upon application that despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such expenses which such court shall deem proper.
Section 3. To the extent that a director, advisory director, or officer
has been successful on the merits or otherwise in defense of any action, suit,
or proceeding referred to in Sections 1 or 2 of this Article, or in defense of
any claim, issue, or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Any indemnification under Sections 1 and 2 of this Article
(unless ordered by a court) shall be made by the Association only upon a
determination that indemnification of the director, advisory director, or
officer is proper in the circumstances because he has met the applicable
standards of conduct set fourth in said Sections 1 and 2. Such determination
shall be made: (a) by the Board of the Association by a majority vote of a
quorum consisting of directors who were not parties to such action, suit, or
proceeding; or (b) if such a quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel (who
may be regular counsel for the Association or pertinent corporation) in a
written opinion; or (c) by the stockholders of the Association.
Section 5. Expenses incurred by any person who may have a right of
indemnification under this Article in defending a civil or criminal action,
suit, or proceeding may be paid by the Association in advance of the final
disposition of such action, suit, or proceeding as authorized by its Board upon
receipt of an undertaking by or on behalf of such person, to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Association pursuant to this Article.
Section 6. The indemnification provided by this Article is in addition
to and independent of and shall not be deemed exclusive of any other rights to
which any person may be entitled under any certificate of incorporation,
articles of incorporation, articles of association, bylaw, agreement, vote of
stockholders, or disinterested directors, or otherwise, both as to action in his
official capacity and as to action in another while holding such office, and
shall continue as to a person who has ceased to be a director, advisory
director, or officer and shall inure to the benefit of the heirs, executors, and
administrators of such a person; provided, that any indemnification realized
other than under this Article shall apply as a credit against any
indemnification provided by this Article.
Section 7. The Association may purchase and maintain insurance on
behalf of any person who is or was a director, advisory director, officer,
employee, or agent of the Association, or is or was serving at the request of
the Association as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other
6
<PAGE> 17
enterprise, against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, if the Association
would have the power to indemnify him against such liability under the
provisions of the Article or of applicable law, if and whenever the Board of the
Association deems it to be in the best interest of the Association to do so.
Section 8. For purposes of this Article and indemnification hereunder,
any person who is or was a director or officer of any other corporation of which
the Association owns or controls or at the time owned or controlled directly or
indirectly a majority of the shares of stock entitled to vote for election of
directors of such other corporation shall be conclusively presumed to be serving
or to have served as such director or officer at the request of the Association.
Section 9. The Association may provide indemnification under this
Article to any employee or agent of the Association or of any other corporation
of which the Association owns or controls or at the time owned or controlled
directly or indirectly a majority of the shares of stock entitled to vote for
election of directors or to any director, officer, employee, or agent of any
other corporation, partnership, joint venture, trust, or other enterprise in
which the Association)'n has or at the time had an interest as an owner,
creditor, or otherwise, if and whenever the Board of the Association deems it in
the best interest of the Association to do so.
Section 10. The Association may, to the fullest extent permitted by
applicable law from time to time in effect, indemnify any and all persons whom
the Association shall have power to indemnify under said law from and against
any and all of the expenses, liabilities, or other matters referred to in or
covered by said law, if and whenever the Board of the Association deems it to be
in the best interest of the Association to do so.
ARTICLE IX.
AMENDMENTS
These Bylaws, or any of them, may be added to, altered, amended or
repealed by the Board at any regular or special meeting of the Board.
7
<PAGE> 18
(Adopted July 19, 1990)
8
<PAGE> 1
EXHIBIT 99.1
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON ________
__, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
PRIME HOSPITALITY CORP.
700 Route 46 East
Fairfield, New Jersey 07007-2700
LETTER OF TRANSMITTAL
For 9 3/4% Senior Subordinated Notes due 2007
EXCHANGE AGENT:
FIRST BANK NATIONAL ASSOCIATION
By Facsimile:
(612) 244-1537
Attention: Paul Haugen
Confirm by telephone:
(612) 244-8162
By Registered or Certified Mail:
First Bank National Association
First Trust Center
180 East Fifth Street
Saint Paul, Minnesota 55101
By Hand:
First Bank National Association
First Trust Center
4th Floor - Bond Drop Window
180 East Fifth Street
Saint Paul, Minnesota 55101
By Overnight Courier:
First Bank National Association
First Trust Center
180 East Fifth Street
Saint Paul, Minnesota 55101
(612) 762-3813
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated __________ ,
1997 (the "Prospectus") of Prime Hospitality Corp., a Delaware corporation (the
"Company"), and this Letter of Transmittal for 9 3/4% Senior Subordinated Notes
due 2007 which may be amended from time to time (this "Letter"), which together
constitute the Company's offer (the "Exchange Offer") to exchange, for each
$1,000 in principal amount of its outstanding 9 3/4% Series A Senior
Subordinated Notes due 2007 issued and sold in a transaction exempt from
registration under the Securities Act of 1933, as amended (the "Original
Notes"), $1,000 in principal amount of 9 3/4% Series B Senior Subordinated Notes
due 2007 (the "Exchange Notes").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the
Exchange Offer.
All holders of Original Notes who wish to tender their Original Notes must,
prior to the Expiration Date: (1) complete, sign, date and mail or otherwise
deliver this Letter to the Exchange Agent, in person or to the address set forth
above; and (2) tender his or her Original Notes or, if a tender of Original
Notes is to be
<PAGE> 2
made by book-entry transfer to the account maintained by the Exchange Agent at
The Depository Trust Company (the "Book-Entry Transfer Facility"), confirm such
book-entry transfer (a "Book-Entry Confirmation"), in each case in accordance
with the procedures for tendering described in the Instructions to this Letter.
Holders of Original Notes whose certificates are not immediately available, or
who are unable to deliver their certificates or Book-Entry Confirmation and all
other documents required by this Letter to be delivered to the Exchange Agent on
or prior to the Expiration Date, must tender their Original Notes according to
the guaranteed delivery procedures set forth under the caption "The Exchange
Offer -- How to Tender" in the Prospectus. (See Instruction 1).
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this Letter may be directed to the Exchange Agent, at the address
listed above, or Joseph Bernadino, Esq., Senior Vice President, General Counsel
and Secretary of the Company, 700 Route 46 East, Fairfield, New Jersey
07007-2700 (telephone (201) 882-1010).
<PAGE> 3
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have the
respective meanings ascribed to them in the Prospectus.
List in Box 1 below the Original Notes of which you are the holder. If the
space provided in Box 1 is inadequate, list the certificate numbers and
principal amount of Original Notes on a separate SIGNED schedule and affix that
schedule to this Letter.
BOX 1
TO BE COMPLETED BY ALL TENDERING HOLDERS
- --------------------------------------------------------------------------------
Name(s) and Address(es) of Certificate Principal Principal
Registered Holder(s) Number(s)(1) Amount Amount of
(Please fill in if blank) of Original Original Notes
Notes Tendered(2)
- --------------------------------------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
TOTALS:
- --------------------------------------------------------------------------------
(1) Need not be completed if Original Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Original
Notes represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered.
- --------------------------------------------------------------------------------
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Company the principal amount of Original Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
the Original Notes tendered with this Letter, the undersigned exchanges, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to the Original Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Original Notes,
with full power of substitution, to: (a) deliver certificates for such Original
Notes; (b) deliver Original Notes and all accompanying evidence of transfer and
authenticity to or upon the order of the Company upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Company of the Original Notes
tendered under the Exchange Offer; and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Original Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full power
and authority to tender, exchange, assign and transfer the Original Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not
<PAGE> 4
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Company to be necessary or
desirable to complete the assignment and transfer of the Original Notes
tendered.
The undersigned agrees that acceptance of any tendered Original Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall constitute
performance in full by the Company of its obligations under the Registration
Rights Agreement (as defined in the Prospectus) and that, upon the issuance of
the Exchange Notes, the Company will have no further obligations or liabilities
thereunder (except in certain limited circumstances). By tendering Original
Notes, the undersigned certifies (a) that it is not an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act, that it is not
a broker-dealer that owns Original Notes acquired directly from the Company or
an affiliate of the Company, that it is acquiring the Exchange Notes in the
ordinary course of the undersigned's business and that the undersigned has no
arrangement with any person to participate in the distribution of the Exchange
Notes or (b) that it is an "affiliate" (as so defined) of the Company or of the
initial purchasers in the offering of the Original Notes, and that it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable to it.
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account, it will deliver a prospectus in
connection with any resale of such Exchange Notes. By so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Company may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of the
undersigned under this Letter shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns. Tenders may be withdrawn only
in accordance with the procedures set forth in the Instructions contained in
this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate
for any Original Notes not tendered but represented by a certificate also
encompassing Original Notes which are tendered) to the undersigned at the
address set forth in Box 1.
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict between
the terms of the Prospectus and this Letter, the Prospectus shall prevail.
/ / CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:_____________________________________________
Account Number:____________________________________________________________
Transaction Code Number:___________________________________________________
<PAGE> 5
/ / CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):______________________________________
Date of Execution of Notice of Guaranteed Delivery:__________________
Window Ticket Number (if available):_________________________________
Name of Institution which Guaranteed Delivery:_______________________
<PAGE> 6
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
BOX 2
PLEASE SIGN HERE
WHETHER OR NOT ORIGINAL NOTES ARE BEING
PHYSICALLY TENDERED HEREBY
X_________________________________ ________
X_________________________________ ________
SIGNATURE(S) OF OWNER(S) DATE
OR AUTHORIZED SIGNATORY
Area Code and Telephone Number:______________________________
This box must be signed by registered holder(s) of Original Notes as their
name(s) appear(s) on certificate(s) for Original Notes, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Letter. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
(See Instruction 3)
Name(s)_________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT)
Capacity________________________________________________________________________
Address_________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Signature(s) Guaranteed ________________________________________________________
by an Eligible Institution: (AUTHORIZED SIGNATURE)
(If required by ________________________________________________________
Instruction 3) (TITLE)
_______________________________________________________
(NAME OF FIRM)
<PAGE> 7
BOX 3
- --------------------------------------------------------------------------------
TO BE COMPLETED BY ALL TENDERING HOLDERS
- --------------------------------------------------------------------------------
PAYOR'S NAME: FIRST BANK NATIONAL ASSOCIATION
- --------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX
AT RIGHT AND CERTIFY BY SIGNING AND DATING
BELOW.
--------------------------------------------
SOCIAL SECURITY NUMBER
OR EMPLOYER IDENTIFICATION NUMBER
- --------------------------------------------------------------------------------
SUBSTITUTE PART 2--CHECK THE BOX IF YOU ARE NOT SUBJECT
FORM W-9 TO BACK-UP WITHHOLDING UNDER THE PROVISIONS
DEPARTMENT OF THE OF SECTION 2406(a)(1)(C) OF THE INTERNAL
TREASURY INTERNAL REVENUE CODE BECAUSE (1) YOU HAVE NOT BEEN
REVENUE SERVICE NOTIFIED THAT YOU ARE SUBJECT TO BACK-UP
WITHHOLDING AS A RESULT OF FAILURE TO REPORT
ALL INTEREST / / OR DIVIDENDS OR (2) THE
INTERNAL REVENUE SERVICE HAS NOTIFIED YOU
THAT YOU ARE NO LONGER SUBJECT TO BACK-UP
WITHHOLDING.
PAYOR'S REQUEST
FOR
TAXPAYER
IDENTIFICATION
NUMBER (TIN)
-----------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, PART 3
I CERTIFY THAT THE INFORMATION PROVIDED ON CHECK IF
THIS FORM IS TRUE, CORRECT AND COMPLETE. AWAITING
TIN
SIGNATURE______________________________ DATE__________ / /
BOX 4 BOX 5
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if To be completed ONLY if
certificates for Original certificates for Original
Notes in a principal amount Notes in a principal amount
not exchanged, or Exchange not exchanged, or Exchange
Notes, are to be issued in the Notes, are to be sent to
name of someone other than the someone other than the person
person whose signature appears whose signature appears in Box
in Box 2, or if Original Notes 2 or to an address other than
delivered by book-entry that shown in Box 1.
transfer which are not
accepted for exchange are to Deliver:
be returned by credit to an
account maintained at the (check appropriate boxes)
Book-Entry Transfer Facility / / Original Notes not tendered
other than the account
indicated above. / / Exchange Notes, to:
Issue and deliver: Name________________________________
(PLEASE PRINT)
(check appropriate boxes)
/ / Original Notes not tendered
Address_____________________________
/ / Exchange Notes, to:
____________________________________
Name______________________________
(PLEASE PRINT)
Address___________________________
Please complete the Substitute Form
W-9 at Box 3
Tax I.D. or Social
Security Number:__________________
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Original Notes
or a Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed copy of this Letter and any other documents required
by this Letter, must be received by the Exchange Agent at one of its addresses
set forth herein on or before the Expiration Date. The method of delivery of
this Letter, certificates for Original Notes or a Book-Entry Confirmation, as
the case may be, and any other required documents is at the election and risk of
the tendering holder, but except as otherwise provided below, the delivery will
be deemed made when actually received by the Exchange Agent. If delivery is by
mail, the use of registered mail with return receipt requested, properly
insured, is suggested.
Holders whose Original Notes are not immediately available or who cannot
deliver their Original Notes or a Book-Entry Confirmation, as the case may be,
and all other required documents to the Exchange Agent on or before the
Expiration Date may tender their Original Notes pursuant to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedure: (i)
tender must be made by or through an Eligible Institution (as defined in the
Prospectus under the caption "The Exchange Offer"); (ii) prior to the Expiration
Date, the Exchange Agent must have received from the Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by telegram,
telex, facsimile transmission, mail or hand delivery) (x) setting forth the name
and address of the holder, the description of the Original Notes and the
principal amount of Original Notes tendered, (y) stating that the tender is
being made thereby and (z) guaranteeing that, within five New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery, this Letter together with the certificates representing the Original
Notes or a Book-Entry Confirmation, as the case may be, and any other documents
required by this Letter will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) the certificates for all tendered Original Notes or a
Book-Entry Confirmation, as the case may be, as well as all other documents
required by this Letter, must be received by the Exchange Agent within five New
York Stock Exchange trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in the Prospectus under the caption "The
Exchange Offer --How to Tender."
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders that are not in
proper form or the acceptance of which, in the opinion of the Company's counsel,
would be unlawful. The Company also reserves the right to waive any
irregularities or conditions of tender as to particular Original Notes. All
tendering holders, by execution of this Letter, waive any right to receive
notice of acceptance of their Original Notes.
Neither the Company, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire principal amount of
any Original Note evidenced by a submitted certificate or by a Book-Entry
Confirmation is tendered, the tendering holder must fill in the principal amount
tendered in the fourth column of Box 1 above. All of the Original Notes
represented by a certificate or by a Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
A certificate for Original Notes not tendered will be sent to the holder, unless
otherwise provided in Box 5, as soon as practicable after the Expiration Date,
in
<PAGE> 9
the event that less than the entire principal amount of Original Notes
represented by a submitted certificate is tendered (or, in the case of Original
Notes tendered by book-entry transfer, such non-exchanged Original Notes will be
credited to an account maintained by the holder with the Book-Entry Transfer
Facility).
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. To be effective with respect to the
tender of Original Notes, a notice of withdrawal must: (i) be received by the
Exchange Agent before the Company notifies the Exchange Agent that it has
accepted the tender of Original Notes pursuant to the Exchange Offer; (ii)
specify the name of the person who tendered the Original Notes; (iii) contain a
description of the Original Notes to be withdrawn, the certificate numbers shown
on the particular certificates evidencing such Original Notes and the principal
amount of Original Notes represented by such certificates; and (iv) be signed by
the holder in the same manner as the original signature on this Letter
(including any required signature guarantee).
3. SIGNATURES ON THIS LETTER; ASSIGNMENTS; GUARANTEE OF SIGNATURES. If this
Letter is signed by the holder(s) of Original Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Original Notes, without alteration, enlargement or any
change whatsoever.
If any of the Original Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Original Notes are
held in different names on several certificates, it will be necessary to
complete, sign and submit as many separate copies of this Letter as there are
names in which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Original Notes are tendered; and/or (ii)
untendered Original Notes, if any, are to be issued to the holder of record,
then the holder of record need not endorse any certificates for tendered
Original Notes, nor provide a separate bond power. If any other case, the holder
of record must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to the
Company of their authority to so act must be submitted, unless waived by the
Company.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Original Notes are tendered: (i) by a holder who has not completed the
Box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on this Letter; or (ii) for the account of an Eligible Institution. In the event
that the signatures in this Letter or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by an eligible
guarantor institution which is a member of The Securities Transfer Agents
Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature
Program (MSP) or The Stock Exchanges Medallion Program (SEMP) (collectively,
"Eligible Institutions"). If Original Notes are registered in the name of a
person other than the signer of this Letter, the Original Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company, in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Original Notes not exchanged are to be issued
or sent, if different from the name and address of the person signing this
Letter. In the case of issuance in a different name, the tax identification
number of the person named must also be
<PAGE> 10
indicated. Holders tendering Original Notes by book-entry transfer may request
that Original Notes not exchanged be credited to such account maintained at the
Book-Entry Transfer Facility as such holder may designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
whose tendered Original Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Exchange Agent is not provided with the correct
TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, delivery to the holder of the Exchange Notes pursuant to
the Exchange Offer may be subject to back-up withholding. (If withholding
results in overpayment of taxes, a refund may be obtained.) Exempt holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these back-up withholding and reporting requirements. See the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions.
Under federal income tax laws, payments that may be made by the Company on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W- 9" referred to above, certifying that the TIN
provided is correct (or that the holder is awaiting a TIN) and that: (i) the
holder has not been notified by the Internal Revenue Service that he or she is
subject to back-up withholding as a result of failure to report all interest or
dividends; or (ii) the Internal Revenue Service has notified the holder that he
or she is no longer subject to back-up withholding; or (iii) certify in
accordance with the Guidelines that such holder is exempt from back-up
withholding. If the Original Notes are in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for information on
which TIN to report.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of Original Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Notes or certificates for Original
Notes not exchanged are to be delivered to, or are to be issued in the name of,
any person other than the record holder, or if tendered certificates are
recorded in the name of any person other than the person signing this Letter, or
if a transfer tax is imposed by any reason other than the transfer of Original
Notes to the Company or its order pursuant to the Exchange Offer, then the
amount of such transfer taxes (whether imposed on the record holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of taxes or exemption from taxes is not submitted with this Letter, the
amount of transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS. The Company reserve the absolute right
to amend or waive any of the specified conditions in the Exchange
Offer in the case of any Original Notes tendered.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificates for Original Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
<PAGE> 11
IMPORTANT: This Letter (together with certificates representing tendered
Original Notes or a Book-Entry Confirmation and all other required documents)
must be received by the Exchange Agent on or before the Expiration Date (as
defined in the Prospectus).
<PAGE> 1
EXHIBIT 99.2
PRIME HOSPITALITY CORP.
EXCHANGE OFFER
TO HOLDERS OF ITS
9 3/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2007
NOTICE OF GUARANTEED DELIVERY
As set forth in the Prospectus dated ________ , 1997 (the "Prospectus")
of Prime Hospitality Corp. ("Company") under "The Exchange Offer -- How to
Tender" and in the Letter of Transmittal (the "Letter of Transmittal") relating
to the offer (the "Exchange Offer") by the Company to exchange up to
$200,000,000 in principal amount of its 9 3/4% Series B Senior Subordinated
Notes due 2007 (the "Exchange Notes") for $200,000,000 in principal amount of
its 9 3/4% Series A Senior Subordinated Notes due 2007, issued and sold in a
transaction exempt from registration under the Securities Act of 1933, as
amended (the "Original Notes"), this form or one substantially equivalent hereto
must be used to accept the Exchange Offer of the Company if: (i) certificates
for the Original Notes are not immediately available; or (ii) time will not
permit all required documents to reach the Exchange Agent (as defined below) on
or prior to the Expiration Date (as defined in the Prospectus) of the Exchange
Offer. Such form may be delivered by hand or transmitted by telegram, telex,
facsimile transmission or letter to the Exchange Agent.
TO: First Bank National Association (the "Exchange Agent")
By Facsimile:
(612) 244-1537
Attention: Paul Haugen
Confirm by telephone:
(612) 244-8162
By Registered or Certified Mail:
First Bank National Association
First Trust Center
180 East Fifth Street
Saint Paul, Minnesota 55101
By Hand:
First Bank National Association
First Trust Center
4th Floor - Bond Drop Window
180 East Fifth Street
Saint Paul, Minnesota 55101
By Overnight Courier:
First Bank National Association
First Trust Center
180 East Fifth Street
Saint Paul, Minnesota 55101
(612) 762-3813
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMITTAL OF THIS INSTRUMENT TO
A FACSIMILE OR TELEX NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and conditions set
forth in the Prospectus and the Letter of Transmittal (which together constitute
the "Exchange Offer"), receipt of which are hereby acknowledged, the principal
amount of Original Notes set forth below pursuant to the guaranteed delivery
procedure described in the Prospectus and the Letter of Transmittal.
Sign Here
Principal Amount of Original Notes Signature(s)______________________________
Tendered__________________________ __________________________________________
Please Print the Following Information
Certificate Nos.
(if available)____________________ Name(s)___________________________________
Address___________________________________
Total Principal Amount __________________________________________
Represented by Original Notes
Certificate(s)
Area Code and Tel. No(s)._________________
__________________________________________
Account Number____________________
Dated: _______________, 1997
<PAGE> 3
GUARANTEE
The undersigned, a member of a recognized signature guarantee medallion program
within the meaning of Rule 17A(d)-15 under the Securities Exchange Act of 1934,
as amended, hereby guarantees (a) that the above-named person(s) own(s) the
above-described securities tendered hereby within the meaning of ________ under
the Securities Exchange Act of 1934, (b) that such tender of the above-described
securities complies with Rule ________ and (c) that delivery to the Exchange
Agent of certificates tendered hereby, in proper form for transfer, or delivery
of such certificates pursuant to the procedure for book-entry transfer, in
either case with delivery of a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other required documents, is being
made within five trading days after the date of execution of a Notice of
Guaranteed Delivery of the above-named person.
Name of Firm
Authorized Signature
Number and Street or P.O. Box
City State Zip Code
Area Code and Tel. No.
Dated: _____________, 1997
<PAGE> 1
EXHIBIT 99.3
PRIME HOSPITALITY CORP.
OFFER TO EXCHANGE
UP TO $200,000,000 IN PRINCIPAL AMOUNT OF
9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
FOR
$200,000,000 IN PRINCIPAL AMOUNT OF
9 3/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2007 ISSUED AND
SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
To Our Clients:
Enclosed for your consideration is a Prospectus dated __________ , 1997
(as the same may be amended or supplemented from time to
time, the "Prospectus") and a form of Letter of Transmittal (the "Letter of
Transmittal") relating to the offer (the "Exchange Offer") by Prime Hospitality
Corp. (the "Company") to exchange up to $200,000,000 in principal amount of its
9 3/4% Series B Senior Subordinated Notes due 2007 (the "Exchange Notes") for
$200,000,000 in principal amount of its 9 3/4% Series A Senior Subordinated
Notes due 2007, issued and sold in a transaction exempt from registration under
the Securities Act of 1933, as amended (the "Original Notes").
The material is being forwarded to you as the beneficial owner of
Original Notes carried by us for your account or benefit but not registered in
your name. A tender of any Original Notes may be made only by us as the
registered holder and pursuant to your instructions. Therefore, the Company
urges beneficial owners of Original Notes registered in the name of a broker,
dealer, commercial bank, trust company or other nominee to contact such
registered holder promptly if they wish to tender Original Notes in the Exchange
Offer.
Accordingly, we request instructions as to whether you wish us to
tender any or all Original Notes, pursuant to the terms and conditions set forth
in the Prospectus and Letter of Transmittal. We urge you to read carefully the
Prospectus and Letter of Transmittal before instructing us to tender your
Original Notes.
YOUR INSTRUCTIONS TO US SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN
ORDER TO PERMIT US TO TENDER ORIGINAL NOTES ON YOUR BEHALF IN ACCORDANCE WITH
THE PROVISIONS OF THE EXCHANGE OFFER. The Exchange Offer will expire at 5:00
p.m., Eastern Standard Time, on _______, ________ __, 1997, unless extended (the
"Expiration Date"). Original Notes tendered pursuant to the Exchange Offer may
be withdrawn, subject to the procedures described in the Prospectus, at any time
prior to the Expiration Date.
If you wish to have us tender any or all of your Original Notes held by
us for your account or benefit, please so instruct us by completing, executing
and returning to us the instruction form that appears below. The accompanying
Letter of Transmittal is furnished to you for informational purposes only and
may not be used by you to tender Original Notes held by us and registered in our
name for your account or benefit.
<PAGE> 2
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer of Prime Hospitality
Corp.
THIS WILL INSTRUCT YOU TO TENDER THE PRINCIPAL AMOUNT OF ORIGINAL NOTES
INDICATED BELOW HELD BY YOU FOR THE ACCOUNT OR BENEFIT OF THE UNDERSIGNED,
PURSUANT TO THE TERMS OF AND CONDITIONS SET FORTH IN THE PROSPECTUS AND THE
LETTER OF TRANSMITTAL.
Box 1 / / Please tender my Original Notes held by you for my account or
benefit. I have identified on a signed schedule attached hereto the
principal amount of Original Notes to be tendered if I wish to
tender less than all of my Original Notes.
Box 2 / / Please do not tender any Original Notes held by you for my account
or benefit.
Date: , 1997
-----------------------------------
-----------------------------------
Signature(s)
-----------------------------------
-----------------------------------
Please print name(s) here
- ----------
Unless a specific contrary instruction is given in a signed Schedule attached
hereto, your signature(s) hereon shall constitute an instruction to us to tender
all of your Original Notes.
<PAGE> 1
EXHIBIT 99.4
PRIME HOSPITALITY CORP.
OFFER TO EXCHANGE
UP TO $200,000,000 IN PRINCIPAL AMOUNT OF
9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
FOR
$200,000,000 IN PRINCIPAL AMOUNT OF
9 3/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2007 ISSUED
AND SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
To Securities Dealers, Commercial Banks
Trust Companies and Other Nominees:
Enclosed for your consideration is a Prospectus dated __________ , 1997
(as the same may be amended or supplemented from time to time, the "Prospectus")
and a form of Letter of Transmittal (the "Letter of Transmittal") relating to
the offer (the "Exchange Offer") by Prime Hospitality Corp. (the "Company") to
exchange up to $200,000,000 in principal amount of its Series B 9 3/4% Senior
Subordinated Notes due 2007 (the "Exchange Notes") for $200,000,000 in principal
amount of its 9 3/4% Series A Senior Subordinated Notes due 2007, issued and
sold in a transaction exempt from registration under the Securities Act of 1933,
as amended (the "Original Notes").
We are asking you to contact your clients for whom you hold Original
Notes registered in your name or in the name of your nominee. In addition, we
ask you to contact your clients who, to your knowledge, hold Original Notes
registered in their own name. The Company will not pay any fees or commissions
to any broker, dealer or other person in connection with the solicitation of
tenders pursuant to the Exchange Offer. You will, however, be reimbursed by the
Company for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. The Company will pay
all transfer taxes, if any, applicable to the tender of Original Notes to it or
its order, except as otherwise provided in the Prospectus and the Letter of
Transmittal.
Enclosed are copies of the following documents:
1. The Prospectus;
2. A Letter of Transmittal for your use in connection with the
tender of Original Notes and for the information of your
clients;
3. A form of letter that may be sent to your clients for whose
accounts you hold Original Notes registered in your name or
the name of your nominee, with space provided for obtaining
the clients' instructions with regard to the Exchange Offer;
4. A form of Notice of Guaranteed Delivery; and
5. Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., Eastern Standard Time, on _________, ________ __, 1997, unless extended
(the "Expiration Date"). Original Notes tendered pursuant to the Exchange Offer
may be withdrawn, subject to the procedures described in the Prospectus, at any
time prior to the Expiration Date.
<PAGE> 2
To tender Original Notes, certificates for Original Notes or a
Book-Entry Confirmation, a duly executed and properly completed Letter of
Transmittal or a facsimile thereof, and any other required documents, must be
received by the Exchange Agent as provided in the Prospectus and the Letter of
Transmittal.
Additional copies of the enclosed material may be obtained from First
Bank National Association, the Exchange Agent, by calling (612) 244-1537.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO
THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS AND
THE LETTER OF TRANSMITTAL.
