UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 20, 2005
(Date of earliest event reported)
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ARLINGTON HOSPITALITY, INC.
(Exact name of registrant as specified in its charter)
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Delaware 0-15291 36-3312434
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File No.) Identification No.)
2355 South Arlington Heights Road
Suite 400
Arlington Heights, Illinois 60005
(Address of Principal Executive Offices)
(847) 228-5400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
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Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.04 - TRIGGERING EVENTS THAT ACCELERATE OR INCREASE A DIRECT FINANCIAL
OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT
As previously described in our Form 10-Q for the quarter ended March
31, 2005, our subsidiary did not make the May 2005 monthly rent payment for the
18 hotels leased by it from PMC Commercial Trust ("PMC") pursuant to the Master
Lease Agreement, as amended (the "PMC lease"), in the total amount of
approximately $310,000. Additionally, our subsidiary has only partially paid the
real estate taxes for 12 of the 18 leased hotels. Our subsidiary's obligations
under the PMC lease are guaranteed by us. As a result of the failure to make the
May 2005 lease payment, we received a letter from PMC purporting that we were in
default of the PMC lease as of May 13, 2005. As a result of this purported
default, on May 23, 2005, we received a letter from PMC's legal counsel
notifying us that we are also in default of the Proceeds Deficit Note (the
"Note") payable by us to PMC, which Note is further evidenced and governed by
the Proceeds Deficit Loan Agreement (the "Loan Agreement"), and that PMC has
exercised its option to accelerate the maturity of the Note, together with all
interest and other charges due under the Loan Agreement. The letter specifies
that the principal balance of the Note is approximately $845,000, and that all
indebtedness owing under the Note and Loan Agreement is immediately due and
payable. Additionally, we were notified that from May 23, 2005, the Note shall
bear interest at the Default Rate (15% per annum) as defined in the Loan
Agreement. The Note and Loan Agreement have been previously described in our SEC
filings and are filed as exhibits to our Form 8-K filed on October 7, 2004.
ITEM 8.01 - OTHER EVENTS
As described in Item 2.04 above, as a result of the failure to pay the
May 2005 lease payments to PMC pursuants to the PMC lease and to pay in full the
real estate taxes for 12 of the 18 leased hotels, by a letter dated May 16,
2005, PMC terminated our subsidiary's right to possession of all leased
properties and demanded possession by various dates beginning on May 20, 2005.
On May 20, 2005, PMC filed a lawsuit against us and our subsidiary in the
District Court of Collin County, Texas, 296th Judicial District, Cause No.
296-1673-05. We received notice of the lawsuit on May 20, 2005. The lawsuit
seeks a temporary restraining order be entered against us and our subsidiary and
seeks payment of the past due rent and real estate taxes. The temporary
restraining order was granted ex parte on May 20, 2005. The order, among other
things, restrains us from using income from the 18 leased hotels without PMC's
prior approval. In addition to the injunctive action, the lawsuit alleges that
pursuant to our guaranty of the PMC lease, we are responsible for the full
amount of the past due rent together with late charges and costs and attorney's
fees.
On May 25, 2005, we filed an emergency motion to dissolve the temporary
restraining order. Our motion, among other things, alleges that (i) injunctive
relief is inappropriate because PMC has failed to show that the harm is
imminent, that any harm that will occur without a temporary restraining order is
irreparable and that there is no adequate remedy at law, (ii) the terms of the
temporary restraining order are too indefinite to be enforced, (iii) the
temporary restraining order constitutes a de facto receiver order, (iv) the bond
for the temporary restraining order is inadequate, and (v) venue is not proper
in Collin County, Texas. Based on the foregoing, we believe that the court
should dissolve the temporary restraining order. The motion is scheduled to be
heard by the court on Friday, May 27, 2005 at 9:00 a.m.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DATE: May 26, 2005
Arlington Hospitality, Inc.
(Registrant)
By: /s/ Stephen K. Miller
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Stephen K. Miller
Interim Chief Executive Officer
By: /s/ James B. Dale
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James B. Dale
Senior Vice President and
Chief Financial Officer