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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1997
REGISTRATION NO. 33-76848
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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POST-EFFECTIVE AMENDMENT NO. 3
FILED ON
FORM S-3
TO
REGISTRATION STATEMENT ON FORM S-1
UNDER
THE SECURITIES ACT OF 1933
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RED ROOF INNS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 7011 31-1393666
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
4355 DAVIDSON ROAD
HILLIARD, OHIO 43026-2491
(614) 876-3200
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
FRANCIS W. CASH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
RED ROOF INNS, INC.
4355 DAVIDSON ROAD
HILLIARD, OHIO 43026-2491
(614) 876-3200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
SARAH JONES BESHAR
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 450-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the Registration Statement becomes
effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1993, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462 (b) under the Securities Act, please check the following
box and list the Securities Act Registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462 (c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED APRIL 7, 1997
RED ROOF INNS, INC.
9 5/8% SENIOR EXCHANGE NOTES DUE 2003
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Interest on the Notes (as defined) is payable semi-annually on June 15
and December 15 of each year. The Notes will not be redeemable at the option of
the Company prior to December 15, 1998. See "Description of the Notes."
Thereafter, the Notes will be redeemable at 104.813% of their principal amount,
declining ratably to par on and after December 15, 2000, plus accrued interest.
The Notes are unsecured senior indebtedness of the Company, ranking
pari passu with the Company's unsubordinated indebtedness and senior in right of
payment to all of its subordinated indebtedness. Holders of secured indebtedness
will be entitled to payment out of the proceeds of their collateral prior to any
holders of general unsecured indebtedness, including the Notes and will rank
pari passu with the Notes with respect to any claims not so satisfied.
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SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY 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.
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This Prospectus is to be used by Morgan Stanley & Co. Incorporated
("MS&Co."), in connection with offers and sales of the Notes in market-making
transactions at negotiated market prices at the time of sale. MS&Co. may act as
principal or as agent in such transactions. The Company will receive no portion
of the proceeds of the sales of such Notes and will bear the expenses incident
to the registration thereof. If MS&Co. conducts any market-making activities, it
may be required to deliver a "market-making prospectus" when effecting offers
and sales in the Notes because of the equity ownership by The Morgan Stanley
Real Estate Fund, L.P. ("MSREF"), an affiliate of MS&Co., and certain affiliates
of MSREF of the Company. MSREF and such affiliates beneficially own in the
aggregate a majority of the common stock of the Company. For as long as a
market-making prospectus is required to be delivered, the ability of MS&Co. to
make a market in the Notes may, in part, be dependent on the ability of the
Company to maintain a current market-making prospectus.
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April 7, 1997
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.
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TABLE OF CONTENTS
Page
----
The Merger and Related Transactions.................................. 1
Ratio of Earnings to Fixed Charges................................... 2
Risk Factors......................................................... 2
Use of Proceeds...................................................... 4
Description of the Notes............................................. 4
ERISA Considerations................................................. 26
Plan of Distribution................................................. 27
Legal Matters........................................................ 27
Experts.............................................................. 27
Available Information................................................ 27
Incorporation of Certain Information by Reference.................... 28
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Unless the context otherwise requires, the "Company," "Red Roof" or
"Red Roof Inns" refers to Red Roof Inns, Inc., a Delaware corporation and the
surviving corporation of the merger (the "Merger") in December 1993 with Red
Roof Inns, Inc., an Ohio corporation (the "Predecessor Company"), and includes
the Predecessor Company prior to the Merger and any subsidiaries of Red Roof
Inns, Inc. from time to time. The Company's principal executive offices are
located at 4355 Davidson Road, Hilliard, Ohio, 43026.
THE MERGER AND RELATED TRANSACTIONS
Under an Agreement and Plan of Merger dated as of August 12, 1993, as
amended (the "Merger Agreement") among The Morgan Stanley Real Estate Fund, L.P.
("MSREF"), the Predecessor Company and the Qualified Subchapter S Trust created
by James R. Trueman dated April 8, 1986 (the "Trueman Trust"), the Predecessor
Company merged with a merger subsidiary of MSREF (the "Merger"). The merger
subsidiary was the surviving corporation (the "Surviving Corporation") and the
existence of the predecessor Red Roof Inns, Inc. ceased. Upon the consummation
of the Merger, the Surviving Corporation was renamed Red Roof Inns, Inc. and
succeeded to substantially all of the rights, privileges, powers and franchises
and became subject to substantially all of the restrictions, liabilities,
obligations and duties of the predecessor. The consideration for the merger was
$179.7 million paid by delivery on the closing date of $1.2 million in cash and
a note for the balance issued by the Surviving Corporation and guaranteed by
MSREF. The note was paid in two installments of $177.5 million on the fifth day
following the Closing Date and $1 million on January 3, 1994, plus accrued
interest. As a result of certain post-closing adjustments, the Company received
approximately $1.0 million from the Trueman Trust during the first quarter of
1994. The Merger Agreement contained a tax indemnification agreement with the
former stockholder whereby the total merger consideration was subject to
adjustment for an additional $1.3 million. The Surviving Corporation and MSREF,
jointly and severally, agreed to indemnify the Trueman Trust for
misrepresentations or breach of warranty or covenant by the Surviving
Corporation or MSREF.
The Merger was consummated concurrently with the initial offering of
the Company's 9 5/8% Senior Notes due 2003 (the "Old Notes") in a private
placement. All of the Old Notes were exchanged for the Notes in June 1994. The
Old Notes and the Notes were identical in all material respects except that
transfer of the Old Notes was restricted.
In connection with the Merger, the Company repaid certain debt and
extended the maturity of certain debt that remains outstanding.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the unaudited historical ratios of
earnings to fixed charges of Red Roof Inns, Inc. and its subsidiaries (amounts
in thousands, except ratios).
Fiscal Years (1)
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(50 weeks) (2 weeks)
1992 1993 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
Ratio 1.3 1.5 (785) (2) 1.5 1.5 1.8
<FN>
(1) The Company operates on a 52-53 week fiscal year which ends on the
Saturday nearest to December 31. The 1992 fiscal year consisted of 53
weeks while the 1993 (combined), 1994, 1995 and 1996 fiscal years each
consisted of 52 weeks. The actual year end for each fiscal year was as
follows: January 2, 1993, December 17, 1993 (50 weeks pre-Merger),
January 1, 1994 (2 weeks post-Merger), December 31, 1994, December 30,
1995 and December 28, 1996.
(2) Earnings were inadequate to cover fixed charges by $785 in the two
weeks ended January 1, 1994 due to the seasonality of the Company's
business. The deficiency for the two weeks in 1993 is due to the
shortness of the period and historically lower occupancy during the
Christmas season.
For purposes of calculating the ratio of earnings to fixed charges,
earnings include income before income taxes plus fixed charges, excluding
capitalized interest. Fixed charges consist of interest expense, including
capitalized interest, and the portion of rental expense representative of an
interest factor.
RISK FACTORS
LEVERAGE; ABILITY TO SERVICE DEBT
The Company operates with significant financial leverage. In addition,
the Indenture permits the Company to incur certain additional indebtedness. See
"Description of the Notes - Covenants - Limitation on Indebtedness." The
Company's ability to satisfy its obligations will be dependent upon its future
performance, which is subject to prevailing economic conditions and financial,
business and other factors, including factors beyond the Company's control. If
the Company is not able to satisfy its fixed charges, including its interest
payment obligations, it could default on its indebtedness, including the Notes,
which would entitle holders of such indebtedness to accelerate the maturity
thereof.
PAYMENTS DUE ON INDEBTEDNESS PRIOR TO MATURITY OF THE NOTES; REFINANCING RISK
There is no assurance that refinancing of indebtedness maturing prior
to the Notes will be available or will be obtainable on terms, including rates,
as favorable as those currently in effect. If such indebtedness cannot be
refinanced, the Company could default on the indebtedness coming due, which
could result in acceleration of its indebtedness, including the Notes.
SECURED INDEBTEDNESS
The Notes are unsecured indebtedness of the Company. The Company
maintains significant amounts of indebtedness secured by liens on one or more of
its inns, including borrowings under the Company's bank credit facility ("Bank
Credit Facility"). The Indenture also permits the Company to grant additional
liens on newly acquired properties and liens to secure up to $50 million of
indebtedness under the Company's Bank Credit Facility, in addition to certain
other liens. See "Description of the Notes - Covenants - Limitation on Liens."
The Company's bank credit facility contains covenants that include restrictions
on the incurrence of additional debt and the payment of dividends which are less
restrictive than the covenants related to the Notes. See "Description of the
Notes - Events of Default." In the event of bankruptcy, liquidation or
reorganization of the Company, holders of secured indebtedness will have a claim
on the assets of the Company mortgaged to secure such indebtedness prior to the
claims of the Holders. In addition, to the extent that the value of such
collateral is insufficient to satisfy such secured indebtedness, amounts
remaining outstanding on such secured indebtedness would be entitled to share
pari passu with the Notes with respect to any other assets of the Company.
Assets
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remaining after satisfaction of the claims of holders of secured indebtedness
may not be sufficient to pay amounts due on any or all of the Notes then
outstanding.
FRAUDULENT CONVEYANCE STATUTES
The incurrence by the Company of indebtedness evidenced by the Old
Notes, a portion of the proceeds of which was used to finance the Merger, and
the issuance of the Notes, are subject to review under relevant federal and
state fraudulent conveyance statutes ("fraudulent conveyance statutes") in a
bankruptcy or reorganization case or a lawsuit by or on behalf of unpaid
creditors of the Company. Under these statutes, if a court were to find that, at
the time the Old Notes or Notes were issued (i) the Company incurred the
indebtedness evidenced by such Old Notes or Notes with the intent of hindering,
delaying or defrauding creditors or (ii) the Company received less than the
reasonably equivalent value or fair consideration for incurring the indebtedness
evidenced by such Old Notes or Notes and the Company (a) was insolvent or was
rendered insolvent by reason of the Merger and the related transactions, (b) was
engaged in a business or transaction for which its assets constituted
unreasonably small capital or (c) intended to incur, or believed that it would
incur, debts beyond its ability to pay as they matured (as the foregoing terms
are defined in or interpreted under the fraudulent conveyance statutes), such
court could subordinate the Notes to currently existing and future indebtedness
of the Company or take other action detrimental to the Holders, including, under
certain circumstances, invalidating the Notes.
The Company believes that indebtedness evidenced by the Old Notes and
Notes was incurred, and the Old Notes and Notes were issued, for proper purposes
and in good faith and, based upon its current prospects and other financial
information, the Company believes that at the time of the Merger and the
consummation of the exchange offer for Old Notes it was solvent, had and will
have sufficient capital to carry on its business and will continue to be able to
pay its debts as they mature.
FORWARD-LOOKING STATEMENTS; CERTAIN FACTORS AFFECTING FUTURE RESULTS
The Prospectus includes and incorporates by reference certain forward
looking statements, including without limitation statements contained in the
Company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996
(the "10-K") concerning the Company's ability to increase ADR, occupancy and
REVPAR, statements concerning the time and cost of completion of renovation and
construction of and improvements to newly acquired inns and development sites,
the inn renewal program and the revenue management system, statements concerning
the impact of the revenue management system on REVPAR and statements concerning
the expected stabilization of newly acquired or developed inns. Any
forward-looking statements contained or incorporated by reference in this
Prospectus or any other reports or documents prepared by the Company or made by
management of the Company involve risks and uncertainties, and are subject to
change based on various important factors. The following factors, among others,
in some cases have affected and in the future could affect the Company's actual
financial performance: economic conditions, both national and regional;
oversupply of hotel rooms; competition; expansion into new markets; pricing and
availability of construction materials; changes in interest rates; availability
of financing; and changes in federal, state and local government regulations
pertaining to building requirements and environmental matters. For a more
detailed discussion of these factors, please refer to the section of the 10-K
entitled "Management's Discussion and Analysis of Results of Operations and
Financial Condition-Forward Looking Statements; Certain Factors Affecting
Future Results."
MARKET FOR THE NOTES
Morgan Stanley & Co. Incorporated ("MS&Co.") has indicated to the
Company that it intends to make a market in the Notes, but it is under no
obligation to do so and such market-making could be discontinued at any time. No
assurance can be given that an active trading market for the Notes will develop
or continue. If MS&Co. conducts any market-making activities, it may be required
to deliver a "market-making prospectus" when effecting offers and sales in the
Notes because of the beneficial ownership of MSREF and its affiliates of the
Company. MSREF and its affiliates beneficially own in the aggregate a majority
of the common stock of the Company. For so long as a market-making prospectus is
required to be delivered, the ability of MS&Co. to make a market in the Notes
may, in part, be dependent on the ability of the Company to maintain a current
market-making prospectus. The Company does not intend to list the Notes on any
securities exchange.
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USE OF PROCEEDS
The net proceeds of the offering of the Old Notes were applied to the
repayment of mortgage indebtedness in the amount of approximately $93 million in
connection with the Refinancing, to payment of a portion of the consideration
for the Merger, to payment of related fees, costs and expenses, and for general
corporate purposes. The weighted average interest rate of the mortgage
indebtedness repaid was 9.1% at December 17, 1993 and such mortgage indebtedness
would have matured at various times between 1994 and 2014. See "The Merger and
Related Transactions."
The sources and uses of funds for the offering of the Old Notes, the
Merger and the Refinancing are set forth below:
SOURCES AND USES OF FUNDS
(IN MILLIONS)
SOURCES OF FUNDS
Equity investment by MSREF and co-investors $100.0
Gross proceeds from offering of Old Notes 200.0
Cash on hand 1.2
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Total $301.2
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USES OF FUNDS
Payment of Merger consideration $179.7 (a)
Purchase of affiliated partnership interests 3.9
Payment of bank overdraft 5.4
Payment of mortgage indebtedness 93.0
Fees, costs and expenses 14.3
Retained for general corporate purposes 4.9(a)
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Total $301.2
======
<FN>
(a) The Merger agreement contained a tax indemnification agreement with the
former stockholder whereby the total merger consideration was subject
to adjustment for an additional $1.3 million.
DESCRIPTION OF THE NOTES
The Notes were issued under an Indenture dated as of December 17, 1993
(the "Indenture") between the Company and The Bank of New York, as Trustee (the
"Trustee"), a copy of the form of which has been filed as an exhibit to the
Registration Statement. The following summary of the material provisions of the
Indenture is subject to, and is qualified in its entirety by reference to, all
the provisions of the Indenture, including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended. Whenever particular Sections or defined terms of the Indenture not
otherwise defined herein are referred to, such Sections or defined terms are
incorporated herein by reference.
GENERAL
The Notes are unsecured senior obligations of the Company, limited to
$200 million aggregate principal amount, and will mature on December 15, 2003.
Each Note bears interest at 9 5/8% from December 17, 1993 or from the most
recent Interest Payment Date to which interest has been paid or provided for,
payable semiannually (to Holders of record at the close of business on December
1, or June 1, immediately preceding the Interest Payment Date) on December 15,
and June 15, of each year, commencing June 15, 1994.
Principal of, premium, if any, and interest on the Notes is payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially will
be the corporate trust office of the Trustee at 101 Barclay Street, New York,
N.Y. 10286); provided that, at the option of the Company, payment of interest
may be made by check mailed to the address of the Holders as such address
appears in the Security Register (Sections 2.01, 2.03 and 2.05).
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The Notes are issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount and any integral multiple thereof
(Section 2.03). See "- Book-Entry; Delivery and Form." No service charge will be
made for any registration of transfer or exchange of Notes, but the Company may
require payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith (Section 2.06).
OPTIONAL REDEMPTION
The Notes are redeemable, at the Company's option, in whole or in part,
in cash at any time on or after December 15, 1998 and prior to maturity, upon
not less than 30 nor more than 60 days' prior notice mailed by first class mail
to each Holders' last address as it appears in the Security Register, at the
following Redemption Prices (expressed in percentages of principal amount), plus
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date), if redeemed during the 12-month period commencing December 15, of the
years set forth below:
YEAR REDEMPTION PRICE
---- ----------------
1998 ................................... 104.813%
1999 ................................... 102.406
2000 and thereafter ..................... 100.000
In addition, at any time prior to December 15, 1996, the Company may
redeem up to 35% of the aggregate principal amount of the Notes with the
proceeds of one or more Public Equity Offerings following which a Public Market
occurs, at any time as a whole or from time to time in part, at a Redemption
Price (expressed as a percentage of principal amount) of 109.625%, plus accrued
and unpaid interest, if any, to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date to receive interest due on
an Interest Payment Date that is on or prior to the Redemption Date). (Section
3.01).
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, on a
pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate; provided that no Note of
$1,000 in principal amount or less shall be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption relating to such Note shall
state the portion of the principal amount thereof to be redeemed. A Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note.
RANKING; AMOUNT OF SECURED INDEBTEDNESS
The Indebtedness evidenced by the Notes rank pari passu in right of
payment with all other unsubordinated indebtedness of the Company, including,
without limitation, the Company's obligations under the Credit Agreement. The
Indenture permits the Company to grant liens on all of the property owned by the
Company as of the Closing Date of the initial offering of the Old Notes to
secure Indebtedness in an amount up to the aggregate amount of secured
Indebtedness of the Company after giving effect to the offering of the Old
Notes, the Merger and the Refinancing ($337 million). The Indenture also permits
the Company to grant additional liens on newly acquired properties and liens to
secure up to $50 million of Indebtedness under the Credit Agreement and other
additional liens. See "Covenants Limitation on Liens." The Notes are effectively
subordinated to Indebtedness secured by such liens, to the extent of such liens.
See "Risk Factors - Secured Indebtedness."
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided.
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"Acquired Indebtedness" is defined to mean Indebtedness of a Person
existing at the time such Person became a Restricted Subsidiary and not Incurred
in connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary.
"Adjusted Consolidated Net Income" is defined to mean, for any period,
the aggregate net income (or loss) of the Company and its consolidated
Restricted Subsidiaries for such period determined in conformity with GAAP;
provided that the following items shall be excluded in computing Adjusted
Consolidated Net Income (without duplication): (i) the net income (or loss) of
any Person (other than net income (or loss) attributable to a Restricted
Subsidiary) in which any Person (other than the Company or any of its Restricted
Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to the Company or any of its
Restricted Subsidiaries by such other Person during such period; (ii) solely for
the purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first paragraph of the "Limitation on Restricted
Payments" covenant described below (and in such case, except to the extent
includable pursuant to clause (i) above), the net income (or loss) of any Person
accrued prior to the date it becomes a Restricted Subsidiary or is merged into
or consolidated with the Company or any of its Restricted Subsidiaries or all or
substantially all of the property and assets of such Person are acquired by the
Company or any of its Restricted Subsidiaries; (iii) the net income (or loss) of
any Restricted Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of such net
income is not at the time permitted by the operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary; (iv) any gains
or losses (on an after-tax basis) attributable to Asset Sales; (v) except for
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first paragraph of the "Limitation on Restricted
Payments" covenant described below, any amount paid as dividends on Preferred
Stock of the Company or Preferred Stock of any Restricted Subsidiary owned by
Persons other than the Company and any of its Restricted Subsidiaries; and (vi)
all extraordinary gains and extraordinary losses; provided that, solely for the
purposes of calculating the Interest Coverage Ratio (and in such case, except to
the extent it is already included pursuant to clause (i) above), "Adjusted
Consolidated Net Income" shall include the amount of all cash dividends received
by the Company or any Restricted Subsidiary from an Unrestricted Subsidiary.
"Adjusted Consolidated Net Tangible Assets" is defined to mean the
total amount of assets of the Company and its Restricted Subsidiaries (less
applicable depreciation, amortization and other valuation reserves), except to
the extent resulting from write-ups of capital assets (excluding write-ups in
connection with accounting for acquisitions in conformity with GAAP), after
deducting therefrom (i) all current liabilities of the Company and its
Restricted Subsidiaries (excluding intercompany items) and (ii) all goodwill,
trade names, trademarks, patents, unamortized debt discount and expense and
other like intangibles, all as set forth on the most recently available
quarterly or annual consolidated balance sheet of the Company and its Restricted
Subsidiaries, prepared in conformity with GAAP.
"Affiliate" is defined to mean, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person, is
defined to mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Asset Acquisition" is defined to mean (i) an investment by the Company
or any of its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary or shall be merged into or
consolidated with the Company or any of its Restricted Subsidiaries or (ii) an
acquisition by the Company or any of its Restricted Subsidiaries of the property
and assets of any Person other than the Company or any of its Restricted
Subsidiaries that constitute substantially all of a division or line of
business, or one or more motel properties, of such Person.
"Asset Disposition" is defined to mean the sale or other disposition by
the Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary) of (i) all or substantially all of the Capital
Stock of any Restricted Subsidiary or (ii) all or substantially all of the
assets that constitute a division or line of business, or one or more motel
properties, of the Company or any of its Restricted Subsidiaries.
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"Asset Sale" is defined to mean any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person other than the Company or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets of the Company or any of its Restricted
Subsidiaries outside the ordinary course of business of the Company or such
Restricted Subsidiary and, in each case, that is not governed by the provisions
of the Indenture applicable to Mergers, Consolidations and Sales of Assets;
provided that sales or other dispositions of inventory, receivables and other
current assets shall not be included within the meaning of "Asset Sale."
"Attributable Indebtedness" is defined to mean, when used in connection
with a sale-leaseback transaction referred to in the "Limitation on
Sale-Leaseback Transactions" covenant described below, at any date of
determination, the product of (i) the net proceeds from such sale-leaseback
transaction and (ii) a fraction, the numerator of which is the number of full
years of the term of the lease relating to the property involved in such
sale-leaseback transaction (without regard to any options to renew or extend
such term) remaining at the date of the making of such computation and the
denominator of which is the number of full years of the term of such lease
(without regard to any options to renew or extend such term) measured from the
first day of such term.
"Average Life" is defined to mean, at any date of determination with
respect to any debt security, the quotient obtained by dividing (i) the sum of
the products of (a) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security and
(b) the amount of such principal payment by (ii) the sum of all such principal
payments.
"Capital Stock" is defined to mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's capital stock, whether now
outstanding or issued after the date of the Indenture, including, without
limitation, all Common Stock and Preferred Stock.
"Capitalized Lease" is defined to mean, as applied to any Person, any
lease of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person;
and "Capitalized Lease Obligation" is defined to mean the rental obligations, as
aforesaid, under such lease.
"Change of Control" is defined to mean such time as (i) (a) prior to
the occurrence of a Public Market, a "person" or "group" (within the meaning of
Section 13(d) or 14(d)(2) of the Exchange Act) becomes the "beneficial owner"
(as defined in Rule 13d-3 of the Exchange Act) of a greater percentage of the
total Voting Stock, on a fully diluted basis, of the Company than is held by the
Existing Stockholder, its Affiliates and Persons whose rights to vote such
Voting Stock are controlled by the Existing Stockholder and its Affiliates on
such date and (b) after the occurrence of a Public Market, a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 40% of the total Voting Stock of the Company on a fully diluted basis and
such ownership is greater than the amount of Voting Stock, on a fully diluted
basis, held by the Existing Stockholder, its Affiliates and Persons whose rights
to vote such Voting Stock are controlled by the Existing Stockholder and its
Affiliates on such date; or (ii) individuals who at the beginning of any period
of two consecutive calendar years constituted the Board of Directors (together
with any new directors whose election by the Board of Directors or whose
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the members of the Board of Directors then still in
office who either were members of the Board of Directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
Board of Directors then in office.
"Closing Date" is defined to mean the date on which the Old Notes were
originally issued under the Indenture.
"Consolidated EBITDA" is defined to mean, for any period, the sum of
the amounts for such period of (i) Adjusted Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) income taxes, to the extent such amount was
deducted in calculating Adjusted Consolidated Net Income (other than income
taxes (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets), (iv) depreciation
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expense, to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, (v) amortization expense, to the extent such amount was
deducted in calculating Adjusted Consolidated Net Income, and (vi) all other
non-cash items reducing Adjusted Consolidated Net Income, less all non-cash
items increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for the Company and its Restricted Subsidiaries in conformity
with GAAP; provided that, if any Subsidiary is not a Wholly Owned Restricted
Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise
reduced in accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted Subsidiary
multiplied by (B) the quotient of (1) the number of shares of outstanding Common
Stock of such Restricted Subsidiary not owned on the last day of such period by
the Company or any of its Restricted Subsidiaries divided by (2) the total
number of shares of outstanding Common Stock of such Restricted Subsidiary on
the last day of such period.
"Consolidated Interest Expense" is defined to mean, for any period, the
aggregate amount of interest in respect of Indebtedness (including amortization
of original issue discount on any Indebtedness and the interest portion of any
deferred payment obligation, calculated in accordance with the effective
interest method of accounting; all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed by the Company or any of its Restricted
Subsidiaries) and all but the principal component of rentals in respect of
Capitalized Lease Obligations paid, accrued or scheduled to be paid or to be
accrued by the Company and its Restricted Subsidiaries during such period;
excluding, however, (i) any amount of such interest of any Restricted Subsidiary
if the net income (or loss) of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income (or loss)
of such Restricted Subsidiary is excluded from the calculation of Adjusted
Consolidated Net Income pursuant to clause (iii) of the definition thereof) and
(ii) any premiums, fees and expenses (and any amortization thereof) payable in
connection with the offering of the Notes, all as determined on a consolidated
basis in conformity with GAAP.
"Consolidated Net Worth" is defined to mean, at any date of
determination, stockholder's equity as set forth on the most recently available
quarterly or annual consolidated balance sheet of the Company and its Restricted
Subsidiaries (which shall be as of a date not more than 90 days prior to the
date of such computation), less any amounts attributable to Redeemable Stock or
any equity security convertible into or exchangeable for Indebtedness, the cost
of treasury stock and the principal amount of any promissory notes receivable
from the sale of the Capital Stock of the Company or any of its Restricted
Subsidiaries, each item to be determined in conformity with GAAP (excluding the
effects of foreign currency exchange adjustments under Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 52).
"Credit Agreement" is defined to mean the Loan Agreement dated December
31, 1992 between the Company and The Huntington National Bank, and the Amended
and Restated Loan Agreement, dated July 3, 1991 between the Company and the
Huntington National Bank, as each may be amended, supplemented, extended,
renewed, replaced or modified from time to time, including, without limitation,
by adding additional parties thereto or increasing the commitment thereunder.
"Default" is defined to mean any event that is, or after notice or
passage of time or both would be, an Event of Default.
"Existing Stockholder" is defined to mean The Morgan Stanley Real
Estate Fund, L.P.
"GAAP" is defined to mean generally accepted accounting principles in
the United States of America as in effect as of the date of the Indenture,
including, without limitation, those 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
approved by a significant segment of the accounting profession. All ratios and
computations contained in the Indenture shall be computed in conformity with
GAAP applied on a consistent basis, except that calculations made for purposes
of determining compliance with the terms of the covenants and with other
provisions of the Indenture shall be made without giving effect to (i) the
amortization of any expenses incurred in connection with the offering of the
Notes, the Merger or the Refinancing, (ii) except as otherwise provided, the
amortization of any amounts required or permitted by Accounting Principles Board
Opinion Nos. 16 and 17 and
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(iii) any non-recurring charges associated with the adoption, after the Closing
Date, of Financial Accounting Standard Nos. 106 and 109.
"Guarantee" is defined to mean any obligation, contingent or otherwise,
of any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of such other Person (whether
arising by virtue of partnership arrangements, or by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term "Guarantee" shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Incur" is defined to mean, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Capital Stock of any Person; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" is defined to mean, with respect to any Person at any
date of determination (without duplication), (i) all indebtedness of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured
by a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided that the amount of such Indebtedness shall be
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness, (vii) all Indebtedness of
other Persons Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person and (viii) to the extent not otherwise included in
this definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided (i)
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP and (ii) that Indebtedness shall not
include any liability for federal, state, local or other taxes.
"Interest Coverage Ratio" is defined to mean, on any Transaction Date,
the ratio of (i) the aggregate amount of Consolidated EBITDA for the four fiscal
quarters for which financial information in respect thereof is available
immediately prior to such Transaction Date (the "Reference Period") to (ii) the
aggregate Consolidated Interest Expense during such Reference Period. In making
the foregoing calculation, (A) pro forma effect shall be given to (1) any
Indebtedness Incurred subsequent to the end of the Reference Period and prior to
the Transaction Date (other than Indebtedness Incurred under a revolving credit
or similar arrangement to the extent of the commitment thereunder (or under any
predecessor revolving credit or similar arrangement) in effect on the last day
of such Reference Period, (2) any Indebtedness Incurred during such period to
the extent such Indebtedness is outstanding at the Transaction Date and (3) any
Indebtedness to be Incurred on the Transaction Date, in each case as if such
Indebtedness had been Incurred on the first day of such Reference Period and
after giving pro forma effect to the application of the proceeds thereof as if
such application had occurred on such first day; (B) Consolidated Interest
Expense attributable to interest on any Indebtedness (whether existing or being
Incurred) computed on a pro forma basis and bearing a floating interest rate
shall be computed as if the rate in effect on the Transaction Date (taking into
account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of 12 months) had been
the applicable rate for the entire period; (C) there shall be excluded from
Consolidated Interest Expense any Consolidated Interest Expense related to any
amount of Indebtedness that was outstanding during such Reference Period or
thereafter but that is not
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outstanding or is to be repaid on the Transaction Date, except for Consolidated
Interest Expense accrued (as adjusted pursuant to clause (B)) during such
Reference Period under a revolving credit or similar arrangement to the extent
of the commitment thereunder (or under any successor revolving credit or similar
arrangement) in effect on the Transaction Date; (D) pro forma effect shall be
given to Asset Dispositions and Asset Acquisitions (including giving pro forma
effect to the application of proceeds of any Asset Disposition) that occur
during such Reference Period or thereafter and on or prior to the Transaction
Date as if they had occurred and such proceeds had been applied on the first day
of such Reference Period; (E) with respect to any such Reference Period
commencing prior to the Closing Date, the issuance of the Notes shall be deemed
to have taken place on the first day of such period; and (F) pro forma effect
shall be given to asset dispositions and asset acquisitions (including giving
pro forma effect to the application of proceeds of any asset disposition) that
have been made by any Person that has become a Restricted Subsidiary or has been
merged with or into the Company or any Restricted Subsidiary during such
Reference Period or subsequent to such period and prior to the Transaction Date
and that would have constituted Asset Dispositions or Asset Acquisitions had
such transactions occurred when such Person was a Restricted Subsidiary as if
such asset dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (D) or (F) of this sentence requires that pro
forma effect be given to an asset acquisition or asset disposition, such pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business of
the Person, or motel property, that is acquired or disposed for which financial
information is available.
"Investment" is defined to mean any direct or indirect advance, loan or
other extension of credit (other than advances to customers in the ordinary
course of business that are, in conformity with GAAP, recorded as accounts
receivable on the balance sheet of the Company or its Restricted Subsidiaries)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by any other Person. For purposes
of the definition of "Unrestricted Subsidiary" and the "Limitation on Restricted
Payments" covenant described below, (i) "Investment" shall include the fair
market value of the assets (net of liabilities) of any Restricted Subsidiary at
the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary and shall exclude the fair market value of the assets (net of
liabilities) of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined by the
Board of Directors in good faith.
"Lien" is defined to mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).
"Net Cash Proceeds" is defined to mean, with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Company and
its Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary as a reserve against any
liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP.
"Permitted Joint Venture Investments" is defined to mean Investments
(valued at original cost), of up to $25 million at any time outstanding, in
Unrestricted Subsidiaries engaged in a business related to the business of the
Company and its Restricted Subsidiaries on the Closing Date.
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"Permitted Liens" is defined to mean (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (ii) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (iii) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens incurred
or deposits made to secure the performance of tenders, bids, leases, statutory
or regulatory obligations, bankers' acceptances, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof)
upon real or personal property acquired after the Closing Date; provided that
(a) such Lien is created solely for the purpose of securing Indebtedness
Incurred (1) to finance the cost (including the cost of improvement or
construction) of the item of property or assets subject thereto (or to refinance
unsecured Indebtedness Incurred to finance such cost) and such Lien is created
prior to, at the time of or within twelve months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (2) to refinance any Indebtedness previously so
secured, (b) the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost and (c) any such Lien shall not extend to or cover
any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property
or assets under construction arising from obligations of the Company or any
Restricted Subsidiary to make progress or partial payments relating to such
construction; (ix) any interest or title of a lessor in the property subject to
any Capitalized Lease or operating lease; (x) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xi) Liens on property
of, or on shares of stock or Indebtedness of, any corporation existing at the
time such corporation becomes, or becomes a part of, any Restricted Subsidiary;
(xii) Liens in favor of the Company or any Restricted Subsidiary; (xiii) Liens
arising from the rendering of a final judgment or order against the Company or
any Restricted Subsidiary of the Company that does not give rise to an Event of
Default; (xiv) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (xv) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (xvi) Liens encumbering
customary initial deposits and margin deposits, and other Liens that are either
within the general parameters customary in the industry and incurred in the
ordinary course of business, in each case, securing Indebtedness under Interest
Rate Agreements and Currency Agreements and forward contracts, options, futures
contracts, futures options or similar agreements or arrangements designed to
protect the Company or any of its Restricted Subsidiaries from fluctuations in
the price of commodities; (xvii) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods entered
into by the Company or any of its Restricted Subsidiaries in the ordinary course
of business in accordance with the past practices of the Company and its
Restricted Subsidiaries prior to the Closing Date; and (xviii) Liens on or sales
of receivables.
"Public Equity Offering" is defined to mean an underwritten primary
public offering of Common Stock of the Company pursuant to an effective
registration statement under the Securities Act.
A "Public Market" shall be deemed to exist if (i) a Public Equity
Offering has been consummated and (ii) at least 15% of the total issued and
outstanding Common Stock of the Company has been distributed by means of an
effective registration statement under the Securities Act or sales pursuant to
Rule 144 under the Securities Act.
"Redeemable Stock" is defined to mean any class or series of Capital
Stock of any Person that by its terms or otherwise is (i) required to be
redeemed prior to the Stated Maturity of the Notes, (ii) redeemable at the
option of the holder of such class or series of Capital Stock at any time prior
to the Stated Maturity of the Notes or
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(iii) convertible into or exchangeable for Capital Stock referred to in clause
(i) or (ii) above or Indebtedness having a scheduled maturity prior to the
Stated Maturity of the Notes; provided that any Capital Stock that would not
constitute Redeemable Stock but for provisions thereof giving holders thereof
the right to require such Person to repurchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of control" occurring prior to the
Stated Maturity of the Notes shall not constitute Redeemable Stock if the "asset
sale" or "change of control" provisions applicable to such Capital Stock are no
more favorable to the holders of such Capital Stock than the provisions
contained in "Limitation on Asset Sales" and "Repurchase of Notes Upon a Change
of Control" covenants described below and such Capital Stock specifically
provides that such Person will not repurchase or redeem any such stock pursuant
to such provision prior to the Company's repurchase of such Notes as are
required to be repurchased pursuant to the "Limitation on Asset Sales" and
"Repurchase of Notes upon a Change of Control" covenants described below.
"Restricted Subsidiary" is defined to mean any Subsidiary of the
Company other than an Unrestricted Subsidiary.
"Significant Subsidiary" is defined to mean, at any date of
determination, any Restricted Subsidiary of the Company that, together with its
Subsidiaries, (i) for the most recent fiscal year of the Company, accounted for
more than 10% of the consolidated revenues of the Company and its Restricted
Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more
than 10% of the consolidated assets of the Company and its Restricted
Subsidiaries, all as set forth on the most recently available consolidated
financial statements of the Company for such fiscal year.
"Stated Maturity" is defined to mean, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.
"Subsidiary" is defined to mean, with respect to any Person, any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
"Transaction Date" is defined to mean, with respect to the Incurrence
of any Indebtedness by the Company or any of its Restricted Subsidiaries, the
date such Indebtedness is to be Incurred and, with respect to any Restricted
Payment, the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" is defined to mean (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary; provided that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, that such designation would be
permitted under the "Limitation on Restricted Payments" covenant described
below. The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary of the Company; provided that immediately after giving
effect to such designation (x) the Company could Incur $1.00 of additional
Indebtedness under the first paragraph of the "Limitation on Indebtedness"
covenant described below and (y) no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Voting Stock" is defined to mean with respect to any Person, Capital
Stock of any class or kind ordinarily having the power to vote for the election
of directors, managers or other voting members of the governing body of such
Person.
"Wholly Owned" is defined to mean, with respect to any Subsidiary of
any Person, such Subsidiary if all of the outstanding Common Stock or other
similar equity ownership interests (but not including Preferred Stock)
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in such Subsidiary (other than any director's qualifying shares or Investments
by foreign nationals mandated by applicable law) is owned directly or indirectly
by such Person.
COVENANTS
Limitation on Indebtedness
(a) Under the terms of the Indenture, the Company will not, and will
not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (other
than the Notes and Indebtedness existing on the Closing Date); provided that the
Company may Incur Indebtedness if, after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the
Interest Coverage Ratio would be greater than 1.75:1, with respect to an
Incurrence prior to January 1, 1997, or 2.00:1, with respect to an Incurrence on
or after January 1, 1997.
Notwithstanding the foregoing, the Company and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following:
(i) Indebtedness of the Company outstanding at any time in an aggregate
principal amount not to exceed an amount equal to $50 million under the Credit
Agreement, less any amount of Indebtedness permanently repaid as provided under
the "Limitation on Asset Sales" covenant described below; (ii) Indebtedness to
the Company or any of its Wholly Owned Restricted Subsidiaries as long as such
Indebtedness continues to be owed to the Company or any of its Wholly Owned
Restricted Subsidiaries; (iii) Indebtedness issued in exchange for, or the net
proceeds of which are used to refinance or refund, then outstanding
Indebtedness, other than Indebtedness Incurred under clause (i), (v), (vii),
(viii) or (ix) of this paragraph and any refinancings thereof in an amount not
to exceed the amount so refinanced or refunded (plus premiums, accrued interest,
fees and expenses); provided that Indebtedness the proceeds of which are used to
refinance or refund the Notes or Indebtedness that is pari passu with, or
subordinated in right of payment to, the Notes shall only be permitted under
this clause (iii) if (A) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the remaining Notes, (B) in
case the Indebtedness to be refinanced is subordinated in right of payment to
the Notes, such new Indebtedness, by its terms or by the terms of any agreement
or instrument pursuant to which such new Indebtedness is outstanding, is
expressly made subordinate in right of payment to the Notes at least to the
extent that the Indebtedness to be refinanced is subordinated to the Notes and
(C) such new Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness
to be refinanced or refunded, and the Average Life of such new Indebtedness is
at least equal to the remaining Average Life of the Indebtedness to be
refinanced or refunded; and provided further that in no event may Indebtedness
of the Company be refinanced pursuant to this clause (iii) by means of any
Indebtedness of any Restricted Subsidiary; (iv) Indebtedness (A) in respect of
performance, surety or appeal bonds provided in the ordinary course of business,
(B) under Currency Agreements and Interest Rate Agreements; provided that, in
the case of Currency Agreements that relate to other Indebtedness, such Currency
Agreements do not increase the Indebtedness of the obligor outstanding at any
time other than as a result of fluctuations in foreign currency exchange rates
or by reason of fees, indemnities and compensation payable thereunder; and (C)
arising from agreements providing for indemnification, adjustment of purchase
price or similar obligations, or from Guarantees or letters of credit, surety
bonds or performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
(other than Guarantees of Indebtedness Incurred by any Person acquiring all or
any portion of such business, assets or Restricted Subsidiary for the purpose of
financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary in
connection with such disposition; (v) Indebtedness under letters of credit and
bankers' acceptances issued in the ordinary course of business; (vi) Acquired
Indebtedness; provided that, with respect to this clause (vi), after giving
effect to the Incurrence thereof, the Company could Incur at least $1.00 of
Indebtedness pursuant to the first paragraph of this "Limitation on
Indebtedness" covenant; (vii) Indebtedness, in an amount not to exceed $2
million at any one time outstanding, Incurred by the Company in connection with
the purchase, redemption, acquisition, cancellation or other retirement for
value of shares of Capital Stock of the Company, options on any such shares or
related stock appreciation rights or similar securities held by officers or
employees or former officers or employees (or their estates or beneficiaries
under their estates), upon death, disability, retirement, termination of
employment or pursuant to any agreement under which such shares of stock or
related rights were issued; provided that (A) such Indebtedness, by its terms or
by the terms of any agreement
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or instrument pursuant to which such Indebtedness is outstanding, is expressly
made subordinate in right of payment to the Notes, (B) such Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, provides that no payments of principal of such
Indebtedness by way of sinking fund, mandatory redemption or otherwise
(including defeasance) may be made by the Company at any time prior to the
Stated Maturity of the Notes and (C) the scheduled maturity of all principal of
such Indebtedness is beyond the Stated Maturity of the Notes; (viii)
Indebtedness of the Company, in an amount not to exceed $5 million at any one
time outstanding, to the extent such Indebtedness is secured by Liens permitted
under clause (i) of the second paragraph of the "Limitation on Liens" covenant
described below; and (ix) Indebtedness of the Company not to exceed $50 million
at any time outstanding.
(b) For purposes of determining any particular amount of Indebtedness
under this "Limitation on Indebtedness" covenant, (i) Indebtedness Incurred
pursuant to the Credit Agreement prior to or on the Closing Date shall be
treated as Incurred pursuant to clause (i) of the second paragraph in part (a)
of this "Limitation on Indebtedness" covenant and (ii) Guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness otherwise
included in the determination of such particular amount shall not be included.
For purposes of determining compliance with this "Limitation on Indebtedness"
covenant, (A) in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness described in the above clauses, the
Company, in its sole discretion, shall classify such item of Indebtedness and
only be required to include the amount and type of such Indebtedness in one of
such clauses and (B) the amount of Indebtedness issued at a price that is less
than the principal amount thereof shall be equal to the amount of the liability
in respect thereof determined in conformity with GAAP and (C) any Liens granted
pursuant to the equal and ratable provisions referred to in the first paragraph
of the "Limitation on Liens" covenant shall not be treated as Indebtedness.
(Section 4.03) .
Limitation on Restricted Payments
So long as any of the Notes are outstanding, the Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend or make any distribution on its Capital Stock (other
than dividends or distributions payable solely in shares of its or such
Restricted Subsidiary's Capital Stock (other than Redeemable Stock) of the same
class held by such holders or in options, warrants or other rights to acquire
such shares of Capital Stock) held by Persons other than the Company or any of
its Wholly Owned Restricted Subsidiaries, (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Capital Stock of the Company or any
Restricted Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by Persons other than the Company or any of
its Wholly Owned Restricted Subsidiaries, (iii) make any voluntary or optional
principal payment, or voluntary or optional redemption, repurchase, defeasance,
or other acquisition or retirement for value, of Indebtedness of the Company
that is subordinated in right of payment to the Notes, or (iv) make any
Investment in any Affiliate of the Company (other than a Restricted Subsidiary
of the Company) or any Unrestricted Subsidiary (such payments or any other
actions described in clauses (i) through (iv) being collectively "Restricted
Payments") if, at the time of, and after giving effect to, the proposed
Restricted Payment: (A) a Default or Event of Default shall have occurred and be
continuing, (B) the Company could not Incur at least $1.00 of Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant or (C) the
aggregate amount expended for all Restricted Payments (the amount so expended,
if other than in cash, to be determined in good faith by the Board of Directors,
whose determination shall be conclusive and evidenced by a Board Resolution)
after the date of the Indenture shall exceed the sum of (1) 50% of the aggregate
amount of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated
Net Income is a loss, minus 100% of such amount) (determined by excluding income
created by transfers of assets received by the Company or a Restricted
Subsidiary from an Unrestricted Subsidiary) accrued on a cumulative basis during
the period (taken as one accounting period) beginning on the first day of the
month immediately following the Closing Date and ending on the last day of the
last fiscal quarter preceding the Transaction Date plus (2) the aggregate net
proceeds (including the fair market value of non-cash proceeds as determined in
good faith by the Board of Directors) received by the Company from the issuance
and sale permitted by the Indenture of its Capital Stock (other than Redeemable
Stock) to a Person who is not a Subsidiary of the Company, including an issuance
or sale permitted by the Indenture for cash or other property upon the
conversion of any Indebtedness of the Company subsequent to the Closing Date, or
from the issuance of any options, warrants or other rights to acquire Capital
Stock of the Company (in each case, exclusive of any Redeemable Stock or any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Notes) plus (3) an amount equal to the net reduction in Investments (other than
Investments made
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pursuant to clause (viii) of the second paragraph of this "Limitation on
Restricted Payments" covenant) in Unrestricted Subsidiaries resulting from
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries, or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investments"), not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made by the
Company and any Restricted Subsidiary in such Unrestricted Subsidiary, plus (4)
$7.5 million.
The foregoing provision shall not take into account, and shall not be
violated by reason of: (i) the payment of any dividend within 60 days after the
date of declaration thereof if, at said date of declaration, such payment would
comply with the foregoing paragraph; (ii) the redemption, repurchase, defeasance
or other acquisition or retirement for value of Indebtedness that is
subordinated in right of payment to the Notes including premium, if any, and
accrued and unpaid interest, with the proceeds of, or in exchange for,
Indebtedness Incurred under clause (iii) of the second paragraph of part (a) of
the "Limitation on Indebtedness" covenant; (iii) the declaration or payment of
dividends on the Common Stock of the Company, following a Public Equity Offering
of such Common Stock, of up to 6% per annum of the net proceeds received by the
Company in such Public Equity Offering; (iv) the repurchase, redemption or other
acquisition of Capital Stock of the Company in exchange for, or out of the
proceeds of a substantially concurrent offering of, shares of Capital Stock
(other than Redeemable Stock) of the Company; (v) the acquisition of
Indebtedness of the Company which is subordinated in right of payment to the
Notes in exchange for, or out of the proceeds of, a substantially concurrent
offering of, shares of the Capital Stock of the Company (other than Redeemable
Stock); (vi) the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company, options on any
such shares or related stock appreciation rights or similar securities held by
officers or employees or former officers or employees (or their estates or
beneficiaries under their estates), upon death, disability, retirement,
termination of employment or pursuant to any agreement under which such shares
of stock or related rights were issued; provided that the aggregate cash
consideration paid for such purchase, redemption, acquisition, cancellation or
other retirement of such shares of Capital Stock or related rights after the
Closing Date does not exceed an aggregate amount of $2 million and that any
consideration in excess of such $2 million is in the form of Indebtedness that
would be permitted to be Incurred under clause (vii) of the second paragraph of
the "Limitation on Indebtedness" covenant; (vii) payments or distributions
pursuant to or in connection with a consolidation, merger or transfer of assets
that complies with the provisions of the Indenture applicable to mergers,
consolidations and transfers of all or substantially all of the property and
assets of the Company and (viii) Permitted Joint Venture Investments; provided
that, except in the case of clauses (i) and (iv), no Default or Event of Default
shall have occurred and be continuing or occur as a consequence of the actions
or payments set forth therein. (Section 4.04)
Notwithstanding the foregoing, in the event of an issuance of Capital
Stock of the Company and (1) the repurchase, redemption or other acquisition of
Capital Stock out of the proceeds of such issuance or (2) the acquisition of
Notes or Indebtedness that is subordinated in right of payment to the Notes out
of the proceeds of such issuance, then, in calculating whether the conditions of
clause (C) of the first paragraph of this "Limitation on Restricted Payments"
covenant have been met with respect to any subsequent Restricted Payments, the
proceeds of any such issuance shall be included under such clause (C) only to
the extent such proceeds are not applied as described in clause (1) or (2) of
this paragraph.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
So long as any of the Notes are outstanding, the Company will not, and
will not permit any Restricted Subsidiary to, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Restricted Subsidiary to (i) pay dividends or
make any other distributions permitted by applicable law on any Capital Stock of
such Restricted Subsidiary owned by the Company or any other Restricted
Subsidiary, (ii) pay any Indebtedness owed to the Company or any other
Restricted Subsidiary, (iii) make loans or advances to the Company or any other
Restricted Subsidiary or (iv) transfer any of its property or assets to the
Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Credit Agreement, the
Indenture or any other agreements in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements of any of the foregoing;
provided that the encumbrances and
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restrictions in any such extensions, refinancings, renewals or replacements are
no less favorable in any material respect to the Holders than those encumbrances
or restrictions that are then in effect and that are being extended, refinanced,
renewed or replaced; (ii) existing under or by reason of applicable law; (iii)
existing with respect to any Person or the property or assets of such Person
acquired by the Company or any Restricted Subsidiary and existing at the time of
such acquisition, which encumbrances or restrictions are not applicable to any
Person or the property or assets of any Person other than such Person or the
property or assets of such Person so acquired, and any extensions, refinancings,
renewals or replacements of any of the foregoing; provided that the encumbrances
and restrictions in any such extensions, refinancings, renewals or replacements
are no less favorable in any material respect to the Holders than those
encumbrances or restrictions that are then in effect and that are being
extended, refinanced, renewed or replaced; (iv) in the case of clause (iv) of
the first paragraph of this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant, (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by the Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of the Company or any Restricted Subsidiary in
any manner material to the Company or any Restricted Subsidiary; or (v) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of the
Capital Stock of, or property and assets of, such Restricted Subsidiary. Nothing
contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted by the "Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the Company or
any of its Restricted Subsidiaries (Section 4.05).
Limitation on the Issuance of Capital Stock of Restricted Subsidiaries
Under the terms of the Indenture, the Company will not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell any shares of
its Capital Stock (including options, warrants or other rights to purchase
shares of such Capital Stock) except (i) to the Company or a Wholly Owned
Restricted Subsidiary or (ii) if, immediately after giving effect to such
issuance or sale, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary (Section 4.06).
Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Guarantee is otherwise permitted under the terms
of the Indenture, (ii) such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a Guarantee (a
"Subsidiary Guarantee") of payment of the Notes by such Restricted Subsidiary
and (iii) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee of any Restricted Subsidiary that (x) existed
at the time such Person became a Restricted Subsidiary and (y) was not Incurred
in connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the Notes,
then the Guarantee of such Guaranteed Indebtedness shall be pari passu with, or
subordinated to, the Subsidiary Guarantee or (B) subordinated to the Notes, then
the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the
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creation of such Subsidiary Guarantee, except a discharge or release by or as a
result of payment under such Guarantee (Section 4.07).
Limitation on Transactions with Shareholders and Affiliates
Under the terms of the Indenture, the Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, enter into, renew
or extend any transaction (including, without limitation, the purchase, sale,
lease or exchange of property or assets, or the rendering of any service) with
any holder (or any Affiliate of such holder) of 5% or more of any class of
Capital Stock of the Company or with any Affiliate of the Company or any
Restricted Subsidiary, except upon fair and reasonable terms no less favorable
to the Company or such Restricted Subsidiary than could be obtained, at the time
of such transaction or at the time of the execution of the agreement providing
therefor, in a comparable arm's-length transaction with a Person that is not
such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
between the Company and any of its Wholly Owned Restricted Subsidiaries or
between Wholly Owned Restricted Subsidiaries of the Company; (iii) the payment
of reasonable and customary regular fees to directors of the Company who are not
employees of the Company; (iv) any payments or other transactions pursuant to
any tax-sharing agreement between the Company and any other Person with which
the Company is required or permitted to file a consolidated tax return or with
which the Company is or could be part of a consolidated group for tax purposes;
(v) any Restricted Payments not prohibited by the "Limitation on Restricted
Payments" covenant; or (vi) any loans or advances by the Company to employees of
the Company or a Restricted Subsidiary in the ordinary course of business and in
furtherance of the Company's business, in an aggregate amount not to exceed $2
million at any one time outstanding (Section 4.08).
Limitation on Liens
Under the terms of the Indenture, the Company will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist
any Lien on any of its assets or properties, or any shares of Capital Stock or
Indebtedness of any Restricted Subsidiary, without making effective provision
for all of the Notes and all other amounts due under the Indenture to be
directly secured equally and ratably with (or prior to) the obligation or
liability secured by such Lien unless, after giving effect thereto, the
aggregate amount of any Indebtedness so secured does not exceed 10% of Adjusted
Consolidated Net Tangible Assets.
The foregoing limitation does not apply to (i) purchase money Liens
upon or in furniture, fixtures or equipment acquired or held in the ordinary
course of business by the Company or any of its Restricted Subsidiaries taken or
retained by the seller of such furniture, fixtures or equipment to secure all or
a part of the purchase price therefor; provided that such Liens do not extend to
or cover any property or assets of the Company or any Restricted Subsidiary
other than the inventory or equipment so acquired; (ii) Liens securing
Indebtedness under the Credit Agreement permitted to be Incurred under clause
(i) of the second paragraph of part (a) of the "Limitation on Indebtedness"
covenant; (iii) other Liens existing on the Closing Date; (iv) Liens granted
after the Closing Date on any assets or Capital Stock of the Company or its
Restricted Subsidiaries created in favor of the Holders; (v) Liens with respect
to Acquired Indebtedness permitted under the "Limitation on Indebtedness"
covenant and permitted refinancings thereof; provided that such Liens do not
extend to or cover any property or assets of the Company or any Restricted
Subsidiary other than the property or assets acquired; (vi) Liens with respect
to the assets of a Restricted Subsidiary granted by such Restricted Subsidiary
to the Company or a Wholly Owned Restricted Subsidiary to secure Indebtedness
owing to the Company or such other Restricted Subsidiary; (vii) Liens securing
Indebtedness which is Incurred to refinance secured Indebtedness and which is
permitted to be Incurred under clause (iii) of part (a) of the second paragraph
of the "Limitation on Indebtedness" covenant; provided that such Liens do not
extend to or cover any property or assets of the Company or any Restricted
Subsidiary other than the property or assets securing the Indebtedness being
refinanced; (viii) Liens on properties owned by the Company on the Closing Date
which secure an amount of Indebtedness at any one time outstanding equal to the
amount of secured Indebtedness of the Company outstanding after giving effect to
the offering of the Notes, the Merger and the Refinancing, less the principal
amount outstanding (at the time a Lien is granted under
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this clause (viii) of any Indebtedness secured pursuant to clause (vii) of this
paragraph; or (ix) Permitted Liens (Section 4.09).
Limitation on Sale-Leaseback Transactions
Under the Indenture, the Company will not, and will not permit any
Restricted Subsidiary to, enter into any sale-leaseback transaction involving
any of its assets or properties, unless the aggregate amount of all Attributable
Indebtedness with respect to such transactions, plus all Indebtedness secured by
Liens (excluding secured Indebtedness that is excluded as described in the
"Limitation on Liens" covenant) does not exceed 10% of Adjusted Consolidated Net
Tangible Assets.
The foregoing restriction does not apply to, and any computation of
Attributable Indebtedness under such limitation shall exclude, any
sale-leaseback transaction if (i) the lease is for a period, including renewal
rights, of not in excess of three years; (ii) the sale or transfer of the assets
or properties is entered into prior to, at the time of, or within six months
after the later of the acquisition of the assets or properties or the completion
of construction thereof; (iii) the lease secures or relates to industrial
revenue or pollution control bonds; (iv) the transaction is between the Company
and any Restricted Subsidiary or between Restricted Subsidiaries; or (v) the
Company or such Restricted Subsidiary, within 12 months after the sale of any
assets or properties is completed, applies an amount not less than the net
proceeds received from such sale in accordance with clause (A) or (B) of the
first paragraph of the "Limitation on Asset Sales" covenant described below.
(Section 4.12) .
Limitation on Asset Sales
Under the terms of the Indenture, in the event and to the extent that
the Net Cash Proceeds received by the Company or any of its Restricted
Subsidiaries from one or more Asset Sales occurring on or after the Closing Date
in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net
Tangible Assets in any one fiscal year (determined as of the date closest to the
commencement of such 12-month period for which a consolidated balance sheet of
the Company and its Subsidiaries has been prepared), then the Company shall or
shall cause the relevant Restricted Subsidiary to (i) within 12 months after the
date Net Cash Proceeds so received exceed 10% of Adjusted Consolidated Net
Tangible Assets in any one fiscal year (determined as of the date closest to the
commencement of such 12-month period for which a balance sheet of the Company
and its Subsidiaries has been prepared) (A) apply an amount equal to such excess
Net Cash Proceeds to permanently repay unsubordinated Indebtedness of the
Company or of any Restricted Subsidiary providing a Subsidiary Guarantee
pursuant to the "Limitation on Issuances of Guarantees by Restricted
Subsidiaries" covenant described above or Indebtedness of any other Restricted
Subsidiary, in each case owing to a Person other than the Company or any of its
Restricted Subsidiaries or (B) invest an equal amount, or the amount not so
applied pursuant to clause (A) (or enter into a definitive agreement committing
to so invest within 12 months after the date of such agreement), in property or
assets of a nature or type or that are used in a business (or in a company
having property and assets of a nature or type, or engaged in a business)
similar or related to the nature or type of the property and assets of, or the
business of, the Company and its Restricted Subsidiaries existing on the date of
such investment (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) and (ii)
apply (no later than the end of the 12-month period referred to in clause (i))
such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i))
as provided in the following paragraphs of this "Limitation on Asset Sales"
covenant. The amount of such excess Net Cash Proceeds required to be applied (or
to be committed to be applied) during such 12-month period as set forth in
clause (i) of the preceding sentence and not applied as so required by the end
of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as defined
below) totals at least $1 million, the Company must, not later than the
fifteenth Business Day of such month, make an offer (an "Excess Proceeds Offer")
to purchase from the Holders on a pro rata basis an aggregate principal amount
of Notes equal to the Excess Proceeds on such date, at a purchase price equal to
101% of the principal amount of the Notes, plus, in each case, accrued interest
(if any) to the date of purchase (the "Excess Proceeds Payment").
The Company shall commence an Excess Proceeds Offer by mailing a notice
to the Trustee and each Holder stating: (i) that the Excess Proceeds Offer is
being made pursuant to this "Limitation on Asset Sales" covenant and that all
Notes validly tendered will be accepted for payment on a pro rata basis; (ii)
the purchase
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price and the date of purchase (which shall be a Business Day no earlier than 30
days nor later than 60 days from the date such notice is mailed) (the "Excess
Proceeds Payment Date"); (iii) that any Note not tendered will continue to
accrue interest pursuant to its terms; (iv) that, unless the Company defaults in
the payment of the Excess Proceeds Payment, any Note accepted for payment
pursuant to the Excess Proceeds Offer shall cease to accrue interest on and
after the Excess Proceeds Payment Date; (v) that Holders electing to have a Note
purchased pursuant to the Excess Proceeds Offer will be required to surrender
the Note, together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of the Note completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the Business
Day immediately preceding the Excess Proceeds Payment Date; (vi) that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the third Business Day immediately preceding
the Excess Proceeds Payment Date, a telegram, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of Notes delivered
for purchase and a statement that such Holder is withdrawing his election to
have such Notes purchased; and (vii) 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; provided that each Note purchased
and each new Note issued shall be in a principal amount of $1,000 or integral
multiples thereof.
On the Excess Proceeds Payment Date, the Company shall (i) accept for
payment on a pro rata basis Notes or portions thereof tendered pursuant to the
Excess Proceeds Offer; (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all Notes or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee all Notes or portions thereof
so accepted together with an Officers' Certificate specifying the Notes or
portions thereof accepted for payment by the Company. The Paying Agent shall
promptly mail to the Holders of Notes so accepted payment in an amount equal to
the purchase price, and the Trustee shall promptly authenticate and mail to such
Holders a new Note equal in principal amount to any unpurchased portion of the
Note surrendered; provided that each Note purchased and each new Note issued
shall be in a principal amount of $1,000 or integral multiples thereof. The
Company will publicly announce the results of the Excess Proceeds Offer as soon
as practicable after the Excess Proceeds Payment Date. For purposes of this
"Limitation on Asset Sales" covenant, the Trustee shall act as the Paying Agent.
The Company will comply with 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 such Excess Proceeds are received
by the Company under this "Limitation on Asset Sales" covenant and the Company
is required to repurchase Notes as described above (Section 4.10).
Each of the agreements relating to the Company's secured indebtedness
requires repayment of such indebtedness upon a sale of the property securing
such indebtedness unless the lender otherwise consents. As a result, the Company
may be required to use the proceeds of Asset Sales to repay indebtedness secured
by the asset sold prior to application of the proceeds to investment in a
similar or related business or for repurchase of the Notes.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the
right to require the repurchase of its Notes by the Company in cash 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 interest (if any) to
the date of purchase (the "Change of Control Payment"). Prior to the mailing of
the notice to Holders provided for in the succeeding paragraph, but in any event
within 30 days following any Change of Control, the Company covenants to (i)
repay in full all indebtedness of the Company that would prohibit the repurchase
of the Notes as provided for in the succeeding paragraph or (ii) obtain any
requisite consents under instruments governing any such indebtedness of the
Company to permit the repurchase of the Notes as provided for in the succeeding
paragraph. The Company shall first comply with the covenant in the preceding
sentence before it shall be required to repurchase Notes pursuant to this
"Repurchase of Notes upon a Change of Control" covenant.
Within 30 days of the Change of Control, the Company shall mail a
notice to the Trustee and each Holder stating: (i) that a Change of Control has
occurred, that the Change of Control Offer is being made pursuant to this
"Repurchase of Notes upon a Change of Control" covenant and that all Notes
validly tendered will be accepted for payment; (ii) the purchase price and the
date of purchase (which shall be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed) (the "Change of Control
Payment
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Date"); (iii) that any Note not tendered will continue to accrue interest
pursuant to its terms; (iv) that, unless the Company defaults in the payment of
the Change of Control Payment, any Note accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest on and after the Change
of Control Payment Date; (v) that Holders electing to have any Note or portion
thereof purchased pursuant to the Change of Control Offer will be required to
surrender such Note, together with the form entitled "Option of the Holder to
Elect Purchase" on the reverse side of such Note completed, to the Paying Agent
at the address specified in the notice prior to the close of business on the
Business Day immediately preceding the Change of Control Payment Date; (vi) that
Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the third Business Day
immediately preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Notes delivered for purchase and a statement that such
Holder is withdrawing his election to have such Notes purchased; and (vii) 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;
provided that each Note purchased and each new Note issued shall be in a
principal amount of $1,000 or integral multiples thereof.
On the Change of Control Payment Date, the Company shall: (i) accept
for payment Notes or portions thereof tendered pursuant to the Change of Control
Offer; (ii) deposit with the Paying Agent money sufficient to pay the purchase
price of all Notes or portions thereof so accepted; and (iii) deliver, or cause
to be delivered, to the Trustee, all Notes or portions thereof so accepted
together with an Officers' Certificate specifying the Notes or portions thereof
accepted for payment by the Company. The Paying Agent shall promptly mail, to
the Holders of Notes so accepted, payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail to such Holders a
new Note equal in principal amount to any unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued shall be
in a principal amount of $1,000 or integral multiples thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
"Repurchase of Notes upon a Change of Control" covenant, the Trustee shall act
as Paying Agent.
The Company will comply with 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 a Change of Control occurs and the
Company is required to repurchase the Notes under this "Repurchase of Notes upon
a Change of Control" covenant (Section 4.11).
Certain events constituting a Change of Control will also require the
Company to repay substantially all of its other outstanding indebtedness. If the
Company is unable to repay all of such indebtedness or is unable to obtain the
consents of the holders of indebtedness, if any, of the Company outstanding at
the time of a Change of Control whose consent would be so required to permit the
repurchase of Notes, then the Company will have breached such covenant. This
breach will constitute an Event of Default under the Indenture if it continues
for a period of 30 consecutive days after written notice is given to the Company
by the Trustee or the Holders of at least 25% in aggregate principal amount of
the Notes outstanding. In addition, the failure by the Company to repurchase
Notes at the conclusion of the Change of Control Offer will constitute an Event
of Default without any waiting period or notice requirements. The Company's
obligation to repurchase Notes upon the occurrence of a Change of Control may
not be waived by the Company or the Trustee without the consent of the Holders
of the Notes.
There can be no assurances that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of the Company which might be outstanding
at the time). The above covenant requiring the Company to repurchase the Notes
will, unless the consents referred to above are obtained, require the Company to
repay all indebtedness then outstanding which by its terms would prohibit such
Note repurchase, either prior to or concurrently with such Note repurchase.
Except as described above with respect to a Change of Control, the
Indenture does not contain any other provisions that permit the Holders of Notes
to require repurchase or repayment of the Notes in the event of a takeover or
similar transaction. A Change of Control will not occur as a result of transfers
of voting stock of the Company by MSREF to its Affiliates. See " - Certain
Definitions - Change of Control."
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EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period of 30
days; (c) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture or under the Notes and
such default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the Holders of 25% or more in aggregate
principal amount of the Notes; (d) there occurs with respect to any issue or
issues of Indebtedness of the Company or any of its Significant Subsidiaries
having an outstanding principal amount of $10 million or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now exists or
shall hereafter be created, (A) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its Stated
Maturity and such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (B) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (e) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $10 million in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against the Company or any of its
Significant Subsidiaries and shall not be paid or discharged, and there shall be
any period of 30 consecutive days following entry of the final judgment or order
that causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to exceed $10
million during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; (f) a court
having jurisdiction in the premises enters a decree or order for (A) relief in
respect of the Company or any of its Significant Subsidiaries in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any of
its Significant Subsidiaries or for all or substantially all of the property and
assets of the Company or any of its Significant Subsidiaries or (C) the winding
up or liquidation of the affairs of the Company or any of its Significant
Subsidiaries and, in each case, such decree or order shall remain unstayed and
in effect for a period of 60 consecutive days; or (g) the Company or any of its
Significant Subsidiaries (A) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case under any
such law, (B) consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any of its Significant Subsidiaries or for all or substantially
all of the property and assets of the Company or any of its Significant
Subsidiaries or (C) effects any general assignment for the benefit of creditors
(Section 6.01).
If an Event of Default (other than an Event of Default specified in
clause (f) or (g) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
the Company (and to the Trustee if such notice is given by the Holders) (the
"Acceleration Notice"), may, and the Trustee at the request of such Holders
shall, declare the principal of, premium, if any, and accrued interest on the
Notes to be immediately due and payable. Upon a declaration of acceleration,
such principal of, premium, if any, and accrued interest shall be immediately
due and payable. In the event of a declaration of acceleration because an Event
of Default set forth in clause (d) above has occurred and is continuing, such
declaration of acceleration shall be automatically rescinded and annulled if the
event of default or payment default triggering such Event of Default pursuant to
clause (d) shall be remedied or cured by the Company and/or the relevant
Significant Subsidiaries or waived by the holders of the relevant Indebtedness
within 60 days after the declaration of acceleration with respect thereto. If an
Event of Default specified in clause (f) or (g) above occurs with respect to the
Company, the principal of, premium, if any, and accrued interest on the Notes
then outstanding shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of at least a majority in principal amount of the outstanding Notes
by written notice to the Company and to the Trustee, may waive all past defaults
and rescind and annul a declaration of acceleration and its consequences if (i)
all existing Events of Default, other than the nonpayment of the principal of,
premium, if any, and interest on the Notes that have become due solely by such
declaration of acceleration, have been cured or waived and (ii) the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction (Sections 6.02 and 6.04). For information as to the waiver of
defaults, see "- Modification and Waiver."
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The Holders of at least a majority in aggregate principal amount of the
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 the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes (Section
6.05). A Holder may not pursue any remedy with respect to the Indenture or the
Notes unless: (i) the Holder gives the Trustee written notice of a continuing
Event of Default; (ii) the Holders of at least 25% in aggregate principal amount
of outstanding Notes make a written request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer the Trustee indemnity satisfactory to the
Trustee against any costs, liability or expense; (iv) the Trustee does not
comply with the request within 60 days after receipt of the request and the
offer of indemnity; and (v) during such 60-day period, the Holders of a majority
in aggregate principal amount of the outstanding Notes do not give the Trustee a
direction that is inconsistent with the request (Section 6.06). However, such
limitations do not apply to the right of any Holder of a Note to receive payment
of the principal of, premium, if any, or interest on, such Note or to bring suit
for the enforcement of any such payment, on or after the due date expressed in
the Notes, which right shall not be impaired or affected without the consent of
the Holder (Section 6.07).
The Indenture will require certain officers of the Company to certify,
on or before a date not more than 90 days after the end of each fiscal year,
that a review has been conducted of the activities of the Company and its
Restricted Subsidiaries and the Company's and its Restricted Subsidiaries'
performance under the Indenture and that the Company has fulfilled all
obligations thereunder, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default and the nature and status
thereof (Section 4.17). The Company will also be obligated to notify the Trustee
of any default or defaults in the performance of any covenants or agreements
under the Indenture (Section 4.17). If a default or an Event of Default occurs
and is continuing and is known to the Trustee, the Trustee will mail notice
thereof to the Holders of the Notes within 45 days after it occurs, provided
that, except in the case of a default in the payment of the principal of,
premium, if any, or any interest on any Notes, the Trustee will be protected in
withholding notice if and so long as the board of directors, executive
committee, trust committee of directors and/or Responsible Officers of the
Trustee in good faith determine that the withholding of such notice is in the
interest of the Holders.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company shall not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person (other than a
consolidation with or merger with or into a Wholly Owned Restricted Subsidiary
with a positive net worth; provided that, in connection with any such merger of
the Company with a Wholly Owned Restricted Subsidiary, no consideration (other
than Common Stock in the surviving Person or the Company) shall be issued or
distributed to the stockholders of the Company) or permit any Person to merge
with or into the Company unless: (i) the Company shall be the continuing Person,
or the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or that acquired or leased such property and assets
of the Company shall be a corporation organized and validly existing under the
laws of the United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, all of the obligations of the Company on all of the Notes and under the
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; (iii) immediately
after giving effect to such transaction on a pro forma basis, the Company or any
Person becoming the successor obligor of the Notes, as the case may be, shall
have a Consolidated Net Worth equal to or greater than the Consolidated Net
Worth of the Company immediately prior to such transaction; (iv) immediately
after giving effect to such transaction on a pro forma basis, the Interest
Coverage Ratio of the Company or any Person becoming the successor obligor of
the Notes, as the case may be, is at least 1:1; provided that, if the Interest
Coverage Ratio of the Company before giving effect to such transaction
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is within the range set forth in column (A) below, then the pro forma Interest
Coverage Ratio of the Company or any Person becoming the successor obligor of
the Notes, as the case may be, shall be at least equal to the lesser of (1) the
ratio determined by multiplying the percentage set forth in column (B) below by
the Interest Coverage Ratio of the Company prior to such transaction and (2) the
ratio set forth in column (C) below:
(A) (B) (C)
----------------- --- ------
1.11:1 to 1.99:1 . . . . . . . . . 90% 1.60:1
2.00:1 to 2.99:1 . . . . . . . . . 80% 2.10:1
3.00:1 to 3.99:1 . . . . . . . . . 70% 2.40:1
4.00:1 to more . . . . . . . . . 60% 2.50:1
and (v) the Company delivers to the Trustee an Officers' Certificate (attaching
the arithmetic computations to demonstrate compliance with clauses (iii) and
(iv) and Opinion of Counsel, in each case stating that such consolidation,
merger or transfer and such supplemental indenture complies with this provision
and that all conditions precedent provided for herein relating to such
transaction have been complied with; provided, however, that clauses (iii) and
(iv) above do not apply if, in the good faith determination of the Board of
Directors of the Company, whose determination shall be evidenced by a Board
Resolution, the principal purpose of such transaction is to change the state of
incorporation of the Company; and provided further that any such transaction
shall not have as one of its purposes the evasion of the foregoing
limitations.(Section 5.01).
DEFEASANCE
Defeasance and Discharge. The Indenture will provide that the Company
will be deemed to have paid and will be discharged from any and all obligations
in respect of the Notes on the 123rd day after the deposit referred to below,
and the provisions of the Indenture will no longer be in effect with respect to
the Notes (except for, among other matters, certain obligations to register the
transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes,
to maintain paying agencies and to hold monies for payment in trust) if, among
other things, (A) the Company has deposited with the Trustee, in trust, money
and/or U.S. Government Obligations that through the payment of interest and
principal in respect thereof in accordance with their terms will provide money
in an amount sufficient to pay the principal of, premium, if any, and accrued
interest on the Notes on the Stated Maturity of such payments in accordance with
the terms of the Indenture and the Notes, (B) the Company has delivered to the
Trustee (i) either (x) an Opinion of Counsel to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
the Company's exercise of its option under this "Defeasance" provision and will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit, defeasance and
discharge had not occurred, which Opinion of Counsel must be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service to the same
effect unless there has been a change in applicable federal income tax law after
the date of the Indenture such that a ruling is no longer required or (y) a
ruling directed to the Trustee received from the Internal Revenue Service to the
same effect as the aforementioned Opinion of Counsel and (ii) an Opinion of
Counsel to the effect that the creation of the defeasance trust does not violate
the Investment Company Act of 1940 and after the passage of 123 days following
the deposit, the trust fund will not be subject to the effect of Section 547 of
the United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law, (C) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or lapse of
time or both would become an Event of Default, shall have occurred and be
continuing on the date of such deposit or during the period ending on the 123rd
day after the date of such deposit, and such deposit shall not result in a
breach or violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which the Company is bound, and
(D) if at such time the Notes are listed on a national securities exchange, the
Company has delivered to the Trustee an Opinion of Counsel to the effect that
the Notes will not be delisted as a result of such deposit, defeasance and
discharge (Section 8.02).
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further will provide that the provisions of the Indenture will no
longer be in effect with respect to clauses (iii) and (iv) under
"-Consolidation, Merger and Sale of Assets" and all the covenants described
herein under "- Covenants," clause (c) under "-Events of Default" with respect
to such covenants and clauses (iii) and (iv) under "- Consolidation, Merger and
Sale of Assets," and clauses (d) and (e) under "Events of Default" shall be
deemed not to be Events of Default, upon, among other things, the deposit with
the Trustee, in trust, of money and/or U.S. Government
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Obligations that through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of, premium, if any, and accrued interest on the
Notes on the Stated Maturity of such payments in accordance with the terms of
the Indenture and the Notes, the satisfaction of the provisions described in
clauses (B)(ii), (C) and (D) of the preceding paragraph and the delivery by the
Company to the Trustee of an Opinion of Counsel to the effect that, among other
things, the Holders will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and defeasance of certain covenants and
Events of Default and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (Section 8.03).
Defeasance and Certain Other Events of Default. In the event the
Company exercises its option to omit compliance with certain covenants and
provisions of the Indenture with respect to the Notes as described in the
immediately preceding paragraph and the full principal amount of the Notes is
declared immediately due and payable because of the occurrence of an Event of
Default that remains applicable, the amount of money and/or U.S. Government
Obligations on deposit with the Trustee may not be sufficient to pay the full
principal amount due on the Notes as the result of the acceleration of the
Notes. However, the Company will remain liable for such payments and the amount
of money and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Notes at the time of their original Stated
Maturity.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the outstanding Notes; provided,
however, that no such modification or amendment may, without the consent of each
Holder affected thereby, (i) change the Stated Maturity of the principal of, or
any installment of interest on, any Note, (ii) reduce the principal amount of,
or premium, if any, or interest on, any Note, (iii) change the place or currency
of payment of principal of, or premium, if any, or interest on, any Note, (iv)
impair the right to institute suit for the enforcement of any payment on or
after the Stated Maturity (or, in the case of a redemption, on or after the
Redemption Date) of any Note, (v) reduce the above-stated percentage of
outstanding Notes the consent of whose Holders is necessary to modify or amend
the Indenture, (vi) waive a default in the payment of principal of, premium, if
any, or interest on the Notes or (vii) reduce the percentage or aggregate
principal amount of outstanding Notes the consent of whose Holders is necessary
for waiver of compliance with certain provisions of the Indenture or for waiver
of certain defaults (Section 8.01 and 8.02)
BOOK-ENTRY; DELIVERY AND FORM; THE GLOBAL NOTE
The certificates representing the Notes are issued in fully registered
form without interest coupons. Investors may elect to hold their Notes directly,
or subject to the rules and procedures of DTC described below, hold interests in
a global note (the "Global Note") registered in the name of DTC or its nominees.
With respect to the Global Note, DTC or its custodian credits, on its
internal system, the respective principal amounts of the individual beneficial
interests represented by such Global Note to the accounts of persons who have
accounts with such depositary. Such accounts to be credited are designated by
the Holders that sold such Notes to such participants (as defined below).
Ownership of beneficial interests in a Global Note are limited to persons who
have accounts with DTC ("participants") or persons who hold interests through
participants. Ownership of beneficial interests in the Global Note are shown on,
and the transfer of that ownership is 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).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture.
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Payments of the principal of, and interest on, the Global Note will be
made to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, the Trustee nor 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
beneficiary ownership interests.
The Company expects that DTC or its nominee, upon receipt of any
payment of principal or interest in respect of a Global Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such 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 such Global Note
held through such participants will be governed by standing instructions and
customary practices, 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 in accordance with DTC rules and will be settled in next-day funds. If a
Holder requires physical delivery of a Certificated Note for any reason,
including to sell Notes to persons in states which require such delivery of such
Notes or to pledge such Notes, such holder must transfer its interest in the
Global Note in accordance with the normal procedures of DTC and the procedures
set forth in the Indenture. Transfers between participants in Euroclear and
Cedel will be effected in the ordinary way in accordance with their respective
rules and operating procedures.
DTC has advised the Company that it will take any action permitted to
be taken by a holder of Notes (including the presentation of 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 is credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Notes, DTC will exchange the Global Note for
Certificated Notes 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 "banking
organization" within the meaning of New York Banking Law, 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 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 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,
they are under no obligation to perform or continue 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 NOTES
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, the Company will issue Certificated Notes in exchange for the
Global Note.
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the
principal of, premium, if any, or interest on any of the Notes or for any claim
based thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or in any of
the Notes or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, shareholder, officer, director, employee
or controlling person of the Company or of any successor Person thereof. Each
Holder, by
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accepting the Notes, waives and releases all such liability (Section 10.09).
Such waiver and release are not intended to affect the rights of Holders under
the federal securities laws. .
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a
Default, the Trustee will not be liable, except for the performance of such
duties as are specifically set forth in such Indenture. If an Event of Default
has occurred and is continuing, the Trustee will use the same degree of care and
skill in its exercise as a prudent person would exercise under the circumstances
in the conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain 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 by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided, however, that if its acquires any
conflicting interest, it must eliminate such conflict or resign. .
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing, retirement, or other employee
benefit plan subject to Title 1 of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") ("Plan") should consider the fiduciary standards
under ERISA in the context of the Plan's particular circumstances before
authorizing an investment of a portion of such Plan's assets in the Notes.
Accordingly, such fiduciary should consider (i) whether the investment satisfies
the diversification requirements of Section 404(a)(1)(C) of ERISA, (ii) whether
the investment is in accordance with the documents and instruments governing the
Plan as required by Section 404(a)(1)(D) of ERISA, and (iii) whether the
investment is prudent under ERISA.
In addition to the imposition of general fiduciary standards of
investment prudence and diversification, ERISA, and the corresponding provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), prohibit a wide
range of transactions involving the assets of a Plan or a plan subject to
Section 4975 of the Code (hereinafter a Plan and such plan are collectively
referred to as an "ERISA Plan") and persons who have certain specified
relationships to the ERISA Plan ("parties in interest" within the meaning of
ERISA, "disqualified persons" within the meaning of the Code). A prohibited
transaction described in Section 406 of ERISA or Section 4975 of the Code could
arise if the Company were, or were to become, a party in interest or a
disqualified person with respect to an ERISA Plan purchasing the Notes during
the offering or any time thereafter. Certain exemptions from the prohibited
transaction rules could be applicable to the purchase of the Notes by an ERISA
Plan depending on the type and circumstances of the fiduciary of the ERISA Plan
making the decision to acquire the Notes. Included among these exemptions are:
Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding investments by
insurance company pooled separate accounts; PTCE 91-38, regarding investments by
bank collective investment funds; or PTCE 84-14, regarding transactions effected
by a qualified professional asset manager. Thus, a fiduciary of an ERISA Plan
considering an investment in the Notes also should consider whether the
acquisition or the continued holding of the Notes might constitute or give rise
to a non-exempt prohibited transaction. No ERISA Plan with respect to which the
Company is a party in interest or a disqualified person may purchase the Notes,
unless a statutory or administrative exemption is available.
Every investor considering the acquisition of the Notes should consult
with its counsel with respect to the potential applicability of ERISA and
Section 4975 of the Code to such investment.
Certain employee benefit plans, such as governmental plans and church
plans (if no election has been made under Section 410(d) of the Code), are not
subject to the restrictions of ERISA, and assets of such plans may be invested
in the Notes without regard to the ERISA considerations described above. The
investment in the Notes by such employee benefit plans may, however, be subject
to other applicable federal and state laws, which should be carefully considered
by such employee benefit plans before investing in the Notes.
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PLAN OF DISTRIBUTION
This Prospectus is to be used by MS&Co. in connection with offers and
sales of the Notes in market-making transactions at negotiated prices relating
to prevailing market prices at the time of sale. MS&Co. may act as principal or
agent in such transactions. MS&Co. has no obligation to make a market in the
Notes, and may discontinue its market-making activities at any time without
notice, at its sole discretion.
There is currently no established public market for the Notes. The
Company does not currently intend to apply for listing of the Notes on any
securities exchange. Therefore, any trading that does develop will occur on the
over-the-counter market. The Company has been advised by MS&Co. that it intends
to make a market in the Notes but it has no obligation to do so and any
market-making may be discontinued at any time. No assurance can be given that an
active public market for the Notes will develop or continue.
MS&Co. acted as placement agent in connection with the original private
placement of the Notes and received a placement fee of $6,000,000 in connection
therewith. MS&Co. is affiliated with entities that beneficially own a majority
of the voting power of the capital stock of the Company. For other information
regarding the involvement of affiliates of MS&Co. in connection with the Merger
and their equity ownership in the Company, see "The Merger and Related
Transactions" and the 10-K.
Although there are no agreements to do so, MS&Co., as well as others,
may act as broker or dealer in connection with the sale of Notes contemplated by
this Prospectus and may receive fees or commissions in connection therewith.
The Company has agreed to indemnify MS&Co. against certain liabilities
under the Securities Act or to contribute to payments that MS&Co. may be
required to make in respect of such liabilities.
LEGAL MATTERS
Certain legal matters with respect to the Notes offered hereby were
passed upon for the Company by Davis Polk & Wardwell, special counsel to the
Company.
EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedules incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended December 28, 1996
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with any amendments
thereto, including this Post-Effective Amendment No. 3 filed on Form S-3, the
"Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, omits certain information contained in the Registration
Statement as permitted by the rules and regulations of the Commission. In
addition, certain documents filed by the Company with the Commission have been
incorporated herein by reference. See "Incorporation of Certain Information by
Reference." For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement and
the exhibits and the financial statements, notes and schedules filed as a part
thereof, which may be inspected at the public reference facilities of the
Commission, at the addresses set forth below.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports and other information with the Commission.
The Company intends to make available to holders of the Notes upon their request
annual reports that include audited annual consolidated financial statements and
an opinion thereon expressed by independent certified public accountants.
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31
The Registration Statement, as well as such reports and other
information filed with the Commission can be inspected and copied at the
Commission's public reference facilities at Room 1024, 450 Fifth Street, N.W.,
Washington, DC 20549 and at the Commission's regional offices at Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and
7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can be obtained by mail from the Commission's Public Reference Section
at 450 Fifth Street, N.W., Washington, DC 20549 at prescribed rates.
The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed by the Company with the
commission (File No. 1-14058) and are hereby incorporated herein by reference:
The Company's Annual Report on Form 10-K for the year ended
December 28, 1996 (which incorporates by reference certain
information from the Company's Proxy Statement relating to the
1997 Annual Meeting of Stockholders).
All documents filed by the Company pursuant to Sections 13 (a), 13 (c),
14 or 15 (d) of the Exchange Act on or after the date of this Prospectus and
prior to the termination of the offering of the securities offered hereby shall
be deemed to be incorporated herein by reference. Any statement contained 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 and the
Registration Statement of which it is a part to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus or such Registration Statement.
The Company undertakes to provide without charge to each person to whom
a copy of this Prospectus has been delivered, upon written or oral request of
such person, a copy of any or all of the documents which have been or may be
incorporated herein by reference; other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference into such documents).
Requests for such copies should be directed to Red Roof Inns, Inc., 4355
Davidson Road, Hilliard, Ohio, 43026. Attention: David L. Rea, Vice
President-Treasurer, telephone number (614) 876-3200.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Previously provided.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, as amended,
provides in regards to indemnification of directors and officers as follows:
145. Indemnification of Officers, Directors, Employees and Agents;
Insurance.
(a) A corporation may 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 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, 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 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 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 corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may 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 corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the 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 expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense of
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
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 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
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity 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 a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, 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.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a 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 he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
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33
(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 an
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 as authorized in this section. 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.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
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 would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, 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, and 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 section 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 section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any 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
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section 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 a person.
Section 102(b)(7) of the Delaware General Corporation Law, as amended,
provides in regard to the limitation of liability of directors and officers as
follows:
(b) In addition to the matters required to be set forth in the
certificate of incorporation by subsection (a) of this section, the
certificate of incorporation may also contain any or all of the
following matters:
* * *
(7) A provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation
II-2
34
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct of a knowing violation of law, (iii) under
section 174 of this Title, or (iv) for any transaction from which the director
derived an improper personal benefit. No such provision shall eliminate or limit
the liability or a director for any act or omission occurring prior to the date
when such provision becomes effective. All references in this Paragraph to a
director shall also be deemed to refer (x) to a member of the governing body of
a corporation which is not authorized to issue capital stock, and (y) to such
other person or persons, if any, who, pursuant to a provision of the certificate
of incorporation in accordance with subsection (a) of ss.141 of this title,
exercise or perform any of the powers or duties otherwise conferred or imposed
upon the board of directors by this title.
Article Ninth of the Certificate of Incorporation of the Company
provides in regard to indemnification of directors and officers as follows:
NINTH: (1) A director of the Company shall not be liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director to the fullest extent permitted by Delaware Law.
(2)(a) Each person (and the heirs, executors or administrators of such
person) who was or is a party or is threatened to be made a party to, or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the Company or is or was
serving at the request of the Company as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless by the Company to the fullest extent permitted by
Delaware Law. The right to indemnification conferred in this ARTICLE NINTH shall
also include the right to be paid by the Company the expenses incurred in
connection with any such proceeding in advance of its final disposition to the
fullest extent authorized by Delaware Law. The right to indemnification
conferred in this ARTICLE NINTH shall be a contract right.
(b) The Company may, by action of its Board of Directors, provide
indemnification to such of the officers, employees and agents of the Company to
such extent and to such effect as the Board of Directors shall determine to be
appropriate and authorized by Delaware Law.
(3) The Company shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss incurred by
such person in any such capacity or arising out of his status as such, whether
or not the Company would have the power to indemnify him against such liability
under Delaware Law.
(4) The rights and authority conferred in this ARTICLE NINTH shall not
be exclusive of any other right which any person may otherwise have or hereafter
acquire.
(5) Neither the amendment nor repeal of this ARTICLE NINTH, nor the
adoption of any provision of this Certificate of Incorporation or the bylaws of
the Company, nor, to the fullest extent permitted by Delaware Law, any
modification of law, shall eliminate or reduce the effect of this ARTICLE NINTH
in respect of any acts or omissions occurring prior to such amendment, repeal,
adoption or modification.
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ITEM 16. EXHIBITS.
* 2.01 - The Merger Agreement dated as of August 12, 1993, as
amended, among the Company, MSREF and the Trueman Trust.
* 4.01 - Form of Notes.
* 4.02 - Indenture, dated as of December 17, 1993, from the Company
to The Bank of New York, as Trustee.
* 5.01 - Opinion of Davis Polk & Wardwell.
* 8.01 - Opinion of Davis Polk & Wardwell regarding certain matters.
12.01 - Statement re computation of ratios (incorporated by
reference to Exhibit 12.01 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 28, 1996).
** 23.01 - Consent of Deloitte & Touche LLP.
* 23.02 - Consent of Davis Polk & Wardwell (included in their
opinions filed as Exhibits 5.01 and 8.01).
* 24.01 - Powers of Attorney of certain officers and directors of the
Company.
* 25.01 - Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The Bank of New York.
* Previously filed
** Filed herewith
II-4
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ITEM 17. UNDERTAKINGS.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange of 1934) 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 the initial bona
fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company 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
Company of expenses incurred or paid by a director, officer or controlling
person of the Company 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 Company will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
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.
(6) 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 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.
(7) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired therein, that was
not the subject of and included in the registration statement when it
became effective.
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(b) The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 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.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECURITIES ACT OF 1933, RED ROOF INNS,
INC. HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT NO. 3 TO THE REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSTAND, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF HILLIARD, STATE OF OHIO, ON THIS 7TH DAY OF APRIL,
1997
RED ROOF INNS, INC.
By /s/ Francis W. Cash
-----------------------------------------
Name: Francis W. Cash
Title: Chairman of the Board, President,
Chief Executive Officer and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
POST-EFFECTIVE AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Francis W. Cash Chairman of the Board, President, April 7, 1997
- -------------------------------------- Chief Executive Officer and Director
Francis W. Cash
/s/ David N. Chichester Executive Vice President, Chief Financial Officer April 7, 1997
- -------------------------------------- and Director
David N. Chichester
/s/ James M. Allwin Director April 7, 1997
- --------------------------------------
James M. Allwin
/s/ Thomas E. Dobrowski Director April 7, 1997
- --------------------------------------
Thomas E. Dobrowski
/s/ C. William Hosler Director April 7, 1997
- --------------------------------------
C. William Hosler
/s/ William M. Lewis, Jr. Director April 7, 1997
- --------------------------------------
William M. Lewis, Jr.
/s/ Edward D. Powers Director April 7, 1997
- --------------------------------------
Edward D. Powers
/s/ Judith A. Rogala Director April 7, 1997
- --------------------------------------
Judith A. Rogala
/s/ Owen D. Thomas Director April 7, 1997
- --------------------------------------
Owen D. Thomas
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EXHIBIT INDEX
Exhibit Description
No.
* 2.01 - The Merger Agreement dated as of August 12, 1993, as
amended, among the Company, MSREF and the Trueman Trust.
* 4.01 - Form of Notes.
* 4.02 - Indenture, dated as of December 17, 1993, from the Company to
The Bank of New York, as Trustee.
* 5.01 - Opinion of Davis Polk & Wardwell.
* 8.01 - Opinion of Davis Polk & Wardwell regarding certain matters.
12.01 - Statement re computation of ratios (incorporated by reference
to Exhibit 12.01 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 28, 1996).
** 23.01 - Consent of Deloitte & Touche LLP.
* 23.02 - Consent of Davis Polk & Wardwell (included in their opinions
filed as Exhibits 5.01 and 8.01).
* 24.01 - Powers of Attorney of certain officers and directors of the
Company.
* 25.01 - Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939 of The Bank of New York.
* Previously filed
** Filed herewith