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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
Annual Report Pursuant to Section 13
of the Securities Exchange Act of 1934
For the Year Ended December 31, 1997
BRISTOL HOTEL COMPANY
14295 Midway Road
Dallas, Texas 75244
972-391-3910
Commission File No. 1-14062
Incorporated in Delaware IRS No. 75-2584227
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Name of each exchange
Title of each class on which registered
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<S> <C>
Common Stock, Par Value $.01 per share New York Stock Exchange
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The Company (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90 days.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
required and will not be contained in a definitive proxy statement incorporated
by reference in Part III of this Form 10-K.
The aggregate market value of the voting stock held by non-affiliates of
the Company at March 6, 1998 was $309,762,521. Such computation excludes
12,267,783 shares held by the Company's two largest shareholders, directors and
executive officers. At March 6, 1998, there were 43,800,401 shares of Common
Stock outstanding.
Document Incorporated by Reference: Portions of the Proxy Statement for the
1998 annual meeting of stockholders are incorporated by reference into Part III
hereof to the extent stated herein. Except with respect to information
specifically incorporated by reference herein, the Proxy Statement is not
deemed to be filed as a part hereof.
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PART I.
FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995 and as such may involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of Bristol Hotel Company (the
"Company" or "Bristol") to be different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
statements include, among others, statements regarding the intent, belief or
expectations of the Company and its directors and officers with respect to (i)
the ownership, management, and operation of hotels, including the integration
of hotels acquired by the Company, (ii) potential acquisitions or dispositions
of hotel properties, (iii) the policies of the Company regarding investments,
acquisitions, dispositions, financings and other matters, (iv) the lodging
industry and real estate markets in general, (v) the availability of debt and
equity financing, (vi) general economic conditions, and (vii) trends affecting
the Company's financial condition and results of operations. Although the
Company believes the intent, belief or expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurance that its expectations will be attained. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances.
ITEMS 1 & 2. BUSINESS AND PROPERTIES
GENERAL
The Company is one of the largest owner/operators of hotels in North America,
currently operating 101 hotels containing approximately 28,800 rooms, including
86 owned hotels. The Company's properties are predominantly full-service
hotels that operate in the upscale and mid-priced with food and beverage
segments of the lodging industry under franchise agreements primarily with
Holiday Hospitality Corporation (formerly Holiday Inn Worldwide). The Company
is the largest Holiday Inn franchisee in the world and also operates hotels
under franchise agreements with other national hotel chains, including Marriott
International, Inc. and Hampton Inn (a division of Promus Hotels, Inc.). The
Company's hotels are located in 22 states, the District of Columbia and Canada,
with hotels clustered in major metropolitan areas with concentrations in the
South, East, Southwest and Pacific regions of the United States.
On March 24, 1998, the Company announced a proposed merger with FelCor Suite
Hotels, Inc. (See Merger.)
The Company was formed pursuant to the combination (the "Combination") of
Harvey Hotel Company, Ltd. and its affiliated businesses ("Harvey Hotel
Companies" or "Predecessor") and United Inns, Inc. ("United Inns"), which was
completed on January 31, 1995. The Company was incorporated in Delaware in
November 1994 and completed its initial public offering (the "IPO") of
4,887,500 shares of its common stock ("Common Stock") in December 1995.
Concurrent with the IPO, the Company obtained a $120 million credit facility
(the "1995 Senior Credit Facility") and $70 million aggregate principal amount
of Senior Notes Due 2000 (the "Senior Notes"). The Company used proceeds from
the IPO, the 1995 Senior Credit Facility and the Senior Notes to refinance
certain of the Company's then-existing indebtedness and for general corporate
purposes.
The completion of the Combination resulted in the Company owning 34 hotels,
eight from Harvey Hotel Companies and 26 from United Inns (the "United Hotels").
In 1995, the Company purchased two additional hotels and by the end of 1996 the
Company had acquired one additional hotel and had substantially completed a
comprehensive redevelopment program that included extensive exterior and
interior reconstruction and renovations to 20 of the United Hotels, as well as
the strategic repositioning of the redeveloped hotels within
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their local markets. Collectively, the 37 hotels owned by the Company at
Plano January 1, 1996, which excludes the Holiday Inn Plano, are referred to as
the "Original Bristol Portfolio." In 1997, the Company added 63 hotels to its
owned/operated portfolio when it completed the acquisition of 60 hotels from
Holiday Corporation (the "Holiday Inn Acquisition") and three additional hotels
comprising the 1997 Single Asset Purchases, as defined below. (See
Acquisitions.)
The Company also completed several debt and equity transactions during 1997,
including the repayment of the 1995 Senior Credit Facility with proceeds
received from the $560 million credit facility entered into in connection with
the Holiday Inn Acquisition (the "New Credit Facility"). The New Credit
Facility was subsequently repaid, first with $108 million in net proceeds
received in May 1997 when the Company completed the issuance of 3,162,500
(pre-Stock Split) shares of its Common Stock (the "Offering") and then the
remaining $452 million was repaid with proceeds from the $600 million credit
facility obtained by the Company in October 1997 (the "Refinancing"). In
December 1997, the Company repaid $40 million of its $70 million Senior Notes.
In July 1997, the Company effected a three-for-two stock split in the form of a
stock dividend (the "Stock Split"). All per share data and the average common
and common equivalent shares outstanding have been adjusted to reflect the
Stock Split for all periods presented.
The Company's principal executive offices are located at 14295 Midway Road,
Dallas, Texas 75244, and its telephone number is (972) 391-3910.
ACQUISITIONS
On April 28, 1997, the Company acquired 45 full-service Holiday Inns and the
management of an additional 15 Holiday Inn properties, of which three are owned
by joint ventures in which the Company acquired a 50% interest (the owned,
managed and joint venture properties, collectively referred to as the "Holiday
Inn Assets") through the merger of Holiday Inns, Inc. with and into the
Company. As consideration for the Holiday Inn Acquisition, the Company paid
$398 million in cash and issued 9,381,308 shares (pre-Stock Split) of its
Common Stock. The acquisition has been accounted for as a purchase and the
results of operations of the Holiday Inn Assets have been included in the
consolidated financial statements since April 28, 1997. The purchase price was
allocated to the assets acquired based upon their estimated fair market values.
The excess of the purchase price over the estimated fair market value of the
net assets acquired was recorded as goodwill.
During 1997, in addition to the Holiday Inn Assets, the Company acquired three
hotels through single asset purchases. In January 1997, the Company acquired
the 378 room Allerton Hotel in Chicago, Illinois for $35.0 million; in October
1997, the Company acquired the 318 room Holiday Inn - Westport in St. Louis,
Missouri for $18.0 million; and in December 1997, the Company acquired the 364
room Holiday Inn - Independence Mall in Philadelphia, Pennsylvania for $25.5
million. Collectively, these hotels are referred to as the "1997 Single Asset
Purchases."
In December 1997, the Company acquired the remaining 50% partnership interest
in the joint venture which owns the 305 room Holiday Inn - San Jose North ("HI
- - San Jose") in San Jose, California, resulting in full ownership of the hotel.
The Company had acquired its original 50% partnership interest in connection
with the Holiday Inn Acquisition.
On February 2, 1998, the Company announced a definitive agreement to acquire 20
Midwestern hotels with a total of 3,456 rooms (the "Omaha Acquisition"). Under
the transaction, the Company will acquire by merger Omaha Hotel, Inc. and will
purchase an individual hotel. The total consideration for the Omaha
Acquisition is as follows: $19.1 million in cash, $40.9 million in assumed
debt and 1.43 million shares of newly issued Common Stock. Consummation of the
Omaha Acquisition is subject to certain conditions, and there can be no
assurance that the Omaha Acquisition will be consummated if any such conditions
are not satisfied.
The hotels in the Omaha Acquisition consist of nine full-service Holiday Inns,
five Holiday Inn Express hotels,
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five Hampton Inns and one Homewood Suites, with locations in Omaha, Nebraska;
Moline, Illinois; Davenport, Iowa; central Kansas and Midland/Odessa, Texas.
Seven of the nine full-service hotels have undergone major property improvement
plans over the past 24 months. Of the five Holiday Inn Express hotels, one is
a new construction project set to open for business in mid-1998 and two others
are newly built hotels that opened in the past two years.
MERGER
On March 24, 1998, the Company announced a proposed merger with FelCor Suite
Hotels, Inc. ("FelCor"), which was unanimously approved by the boards of both
companies subject to final documentation. FelCor will acquire the Company's
real estate holdings and associated debt in return for 31.7 million shares of
newly issued FelCor stock. Prior to the merger, the Company will spin off, as a
taxable dividend, all of its non-real estate holdings into a newly formed public
company to be known as Bristol Hotels & Resorts, Inc. ("New Bristol"). New
Bristol will become one of FelCor's two major tenants, with long-term leases on
all of the Bristol hotels included in the merger. New Bristol will continue to
be Holiday Hospitality's largest franchisee. The existing Hotel Properties
Agreement will be terminated and New Bristol will commit to add 8,700 Holiday
branded rooms over the next five years. New Bristol will aggressively pursue
lease and management of larger, full-service hotels which can be redeveloped and
repositioned.
Bass PLC, which owned 32% of the Company's common stock at December 31, 1997,
will reduce its ownership in New Bristol to 9.9% in order to ensure compliance
with REIT requirements.
The proposed merger is subject to shareholder approval and other customary
conditions. FelCor and New Bristol will be completely independent public
companies with no overlap in management or boards of directors. Both companies
will maintain their existing headquarter facilities in Dallas and no layoffs
are expected at either company. FelCor will continue to operate as a REIT. New
Bristol will operate as a C-corporation and will apply for listing on the New
York Stock Exchange.
Subsequent to closing, FelCor will fund the Redevelopment and Rebranding
Program as defined below. This merger is expected to close by the end of June
1998.
REDEVELOPMENT AND REBRANDING PROGRAM
In November 1997, the Company initiated a comprehensive redevelopment and
rebranding program (the "Redevelopment and Rebranding Program") which entails
exterior and interior reconstruction of and renovations to a substantial number
of the Holiday Inn Assets (the "HI Renovations") and the three hotels
comprising the 1997 Single Asset Purchases as well as the rebranding of certain
hotels operated under the Company's own brand names. The Redevelopment and
Rebranding Program is expected to be substantially complete by the end of 1999.
The HI Renovations include 41 of the Holiday Inn Assets. In addition to the
renovations, the Company expects to rebrand 17 of the 41 hotels primarily to
the Crowne Plaza or Crowne Plaza Suites brand. The renovation and rebranding
of the 1997 Single Asset Purchases is expected to be completed in 1999 and
include the rebranding of the Allerton Hotel and the Holiday Inn - Westport to
the Crowne Plaza brand. The Company believes the conversions to the Crowne
Plaza brands will enable the hotels to more effectively compete in the markets
in which they operate.
The Redevelopment and Rebranding Program also includes the renovation and
rebranding of seven hotels in the Original Bristol Portfolio that are or have
been operated as a Harvey Hotel brand, a Bristol Suites brand or a Harvey
Suites brand. Six of these hotels have been or will be converted to the Crowne
Plaza or Crowne Plaza Suites brand, and one hotel is being converted to a
Holiday Inn and Suites. The conversion of these seven Original Bristol Hotels
is in accordance with franchise agreements entered into in connection with the
Holiday Inn Acquisition as more fully discussed below. (See Franchise
Agreements and Trademarks.)
EMPLOYEES
As of December 1997, the Company employed approximately 13,000 persons,
including 370 employees at the Company's corporate headquarters. An estimated
86% of those employed were compensated on an hourly basis.
Approximately 1,400 employees at 13 of the Company's hotels are represented by
a labor union. Management believes that its ongoing labor relations are good.
PROPERTIES
The following table sets forth certain information with respect to each of the
Company's hotels as of December 31, 1997:
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NO. OF
HOTEL LOCATION ROOMS
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OWNED:
Holiday Inn - Montgomery . . . . . . . . . . . . . . . . . . Montgomery, AL . . . . . . 213
Holiday Inn - Texarkana I-30 (1) . . . . . . . . . . . . . . Texarkana, AR . . . . . . . 210
Days Inn - Flagstaff . . . . . . . . . . . . . . . . . . . . Flagstaff, AZ . . . . . . . 157
Fairfield Inn - Downtown Scottsdale (1) . . . . . . . . . . Scottsdale, AZ . . . . . . 218
Holiday Inn - Santa Barbara . . . . . . . . . . . . . . . . Santa Barbara, CA . . . . . 160
Holiday Inn Select - Irvine/Orange County Airport (3) . . . Irvine, CA . . . . . . . . 334
</TABLE>
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<TABLE>
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Holiday Inn Select - Pleasanton (2) . . . . . . . . . . . . Pleasanton, CA . . . . . . 244
Holiday Inn - San Diego on the Bay (1) (3) . . . . . . . . San Diego, CA . . . . . . . 600
Holiday Inn - San Jose North . . . . . . . . . . . . . . . . San Jose, CA . . . . . . . 305
Holiday Inn - San Francisco Financial District (1) (3) . . San Francisco, CA . . . . . 565
Holiday Inn - San Francisco Fisherman's Wharf (1) . . . . . San Francisco, CA . . . . . 584
Holiday Inn Select - San Francisco Union Square (2) . . . . San Francisco, CA . . . . . 400
Holiday Inn Express - Colorado Springs Central . . . . . . . Colorado Springs, CO . . . 207
Ramada Inn - Colorado Springs North . . . . . . . . . . . . Colorado Springs, CO . . . 220
Holiday Inn - Hartford Downtown (2) . . . . . . . . . . . . Hartford, CT . . . . . . . 342
Holiday Inn Select - Stamford (1) . . . . . . . . . . . . . Stamford, CT . . . . . . . 383
Holiday Inn - Cocoa Beach Oceanfront Resort . . . . . . . . Cocoa Beach, FL . . . . . . 500
Holiday Inn - Nikki Bird (1) . . . . . . . . . . . . . . . . Kissimmee, FL . . . . . . . 529
Holiday Inn Select - Miami International Airport (1) (2) . . Miami, FL . . . . . . . . . 304
Holiday Inn Select - Orlando International Airport . . . . . Orlando, FL . . . . . . . . 288
Holiday Inn - Orlando International Drive Resort . . . . . . Orlando, FL . . . . . . . . 652
Holiday Inn - Orlando North/Winter Park . . . . . . . . . . Orlando, FL . . . . . . . . 200
Holiday Inn - Near Busch Gardens(R) Tampa . . . . . . . . . Tampa, FL . . . . . . . . . 395
Courtyard by Marriott - Downtown Atlanta . . . . . . . . . . Atlanta, GA . . . . . . . . 211
Fairfield Inn - Downtown Atlanta . . . . . . . . . . . . . . Atlanta, GA . . . . . . . . 242
Holiday Inn - Atlanta Airport North . . . . . . . . . . . . Atlanta, GA . . . . . . . . 493
Harvey Hotel - Atlanta Powers Ferry (2) . . . . . . . . . . Atlanta, GA . . . . . . . . 296
Crowne Plaza - Atlanta Airport . . . . . . . . . . . . . . . Atlanta, GA . . . . . . . . 378
Holiday Inn Select - Atlanta Perimeter Dunwoody . . . . . . Atlanta, GA . . . . . . . . 250
Holiday Inn Express - Atlanta I-20 East . . . . . . . . . . Atlanta, GA . . . . . . . . 167
Holiday Inn Express - Atlanta Northeast . . . . . . . . . . Atlanta, GA . . . . . . . . 199
Holiday Inn - Atlanta South/Jonesboro . . . . . . . . . . . Atlanta, GA . . . . . . . . 180
Holiday Inn - Columbus Airport North (1) . . . . . . . . . . Columbus, GA . . . . . . . 223
Hampton Inn - Marietta . . . . . . . . . . . . . . . . . . . Marietta, GA . . . . . . . 140
Allerton Hotel - Chicago (3) . . . . . . . . . . . . . . . . Chicago, IL . . . . . . . . 378
Holiday Inn - New Orleans French Quarter (1) . . . . . . . . New Orleans, LA . . . . . . 276
Holiday Inn Select - Boston Government Center (1)(3) . . . . Boston, MA . . . . . . . . 303
Holiday Inn - Kansas City Northeast . . . . . . . . . . . . Kansas City, MO . . . . . . 167
Holiday Inn - Westport . . . . . . . . . . . . . . . . . . . St. Louis, MO . . . . . . . 318
Holiday Inn - Jackson Southwest . . . . . . . . . . . . . . Jackson, MS . . . . . . . . 289
Crowne Plaza - Downtown Jackson . . . . . . . . . . . . . . Jackson, MS . . . . . . . . 354
Hampton Inn - Jackson North . . . . . . . . . . . . . . . . Jackson, MS . . . . . . . . 119
Harvey Hotel & Suites - Jackson North . . . . . . . . . . . Jackson, MS . . . . . . . . 224
Whispering Woods Hotel and Conference Center . . . . . . . . Olive Branch, MS . . . . . 181
Holiday Inn - Albuquerque Mountainview . . . . . . . . . . . Albuquerque, NM . . . . . . 360
Holiday Inn Select - Philadelphia Center City (2) . . . . . Philadelphia, PA . . . . . 445
Holiday Inn - Independence Mall . . . . . . . . . . . . . . Philadelphia, PA . . . . . 364
The Mills House Hotel - Charleston Holiday Inn . . . . . . . Charleston, SC . . . . . . 214
Holiday Inn - Columbia Airport . . . . . . . . . . . . . . . Columbia, SC . . . . . . . 148
Holiday Inn Select - Greenville (Roper) (2) . . . . . . . . Greenville, SC . . . . . . 208
Holiday Inn - Spartanburg West . . . . . . . . . . . . . . . Spartanburg, SC . . . . . . 224
Holiday Inn - Chattanooga Southeast I-75 . . . . . . . . . . Chattanooga, TN . . . . . . 230
Holiday Inn - Knoxville West (1) . . . . . . . . . . . . . . Knoxville, TN . . . . . . . 242
Holiday Inn Select - Nashville Opryland/Airport (1) (3) . . Nashville, TN . . . . . . . 384
Holiday Inn - Amarillo I-40 (1) . . . . . . . . . . . . . . Amarillo, TX . . . . . . . 247
Holiday Inn - Austin Town Lake . . . . . . . . . . . . . . . Austin, TX . . . . . . . . 320
Holiday Inn - Beaumont Midtown I-10 . . . . . . . . . . . . Beaumont, TX . . . . . . . 190
Fairfield Inn - Dallas Regal Row . . . . . . . . . . . . . . Dallas, TX . . . . . . . . 204
Harvey Hotel - Dallas (1) . . . . . . . . . . . . . . . . . Dallas, TX . . . . . . . . 313
Harvey Hotel - Addison (2) . . . . . . . . . . . . . . . . . Dallas, TX . . . . . . . . 429
</TABLE>
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<TABLE>
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Bristol Suites - Dallas (1) (2) . . . . . . . . . . . . . . Dallas, TX . . . . . . . . 295
Hampton - Downtown Dallas/West End . . . . . . . . . . . . . Dallas, TX . . . . . . . . 311
Harvey Hotel - Dallas Brookhollow (2) . . . . . . . . . . . Dallas, TX . . . . . . . . 354
Courtyard by Marriott - Houston Near The Galleria . . . . . Houston, TX . . . . . . . . 209
Fairfield Inn - Houston Near The Galleria . . . . . . . . . Houston, TX . . . . . . . . 107
Holiday Inn Select - Houston Near Greenway Plaza . . . . . . Houston, TX . . . . . . . . 355
Holiday Inn - Medical Center (2) . . . . . . . . . . . . . . Houston, TX . . . . . . . . 297
Fairfield Inn - Houston I-10 East . . . . . . . . . . . . . Houston, TX . . . . . . . . 160
Holiday Inn - Houston Intercontinental Airport . . . . . . . Houston, TX . . . . . . . . 413
Hampton Inn - Houston I-10 East . . . . . . . . . . . . . . Houston, TX . . . . . . . . 90
Holiday Inn Select - Houston I-10 West (3) . . . . . . . . . Houston, TX . . . . . . . . 349
Harvey Suites - Houston Medical Center (1)(4) . . . . . . . Houston, TX . . . . . . . . 285
Harvey Suites - DFW Airport . . . . . . . . . . . . . . . . Irving, TX . . . . . . . 164
Harvey Hotel - DFW Airport (1) . . . . . . . . . . . . . . . Irving, TX . . . . . . . . 506
Harvey Hotel - Plano . . . . . . . . . . . . . . . . . . . . Plano, TX . . . . . . . . . 279
Holiday Inn - Plano . . . . . . . . . . . . . . . . . . . . Plano, TX . . . . . . . . . 161
Holiday Inn - San Antonio Downtown (1) . . . . . . . . . . . San Antonio, TX . . . . . . 314
Holiday Inn Select - San Antonio International Airport . . . San Antonio, TX . . . . . . 397
Holiday Inn - Waco I-35 . . . . . . . . . . . . . . . . . . Waco, TX . . . . . . . . . 171
Holiday Inn - Salt Lake City Airport . . . . . . . . . . . . Salt Lake City, UT . . . . 190
Holiday Inn - Cambridge . . . . . . . . . . . . . . . . . . Cambridge, Ontario . . . . 139
Holiday Inn Select - Toronto Airport . . . . . . . . . . . . Toronto, Ontario . . . . . 444
Holiday Inn - Kitchener Waterloo . . . . . . . . . . . . . . Kitchener, Ontario . . . . 182
Holiday Inn - Peterborough - Waterfront . . . . . . . . . . Peterborough, Ontario . . . 154
Holiday Inn - Sarnia . . . . . . . . . . . . . . . . . . . . Sarnia, Ontario . . . . . . 151
Holiday Inn - Toronto Yorkdale . . . . . . . . . . . . . . . Toronto, Ontario . . . . . 370
MANAGED:
Holiday Inn - Hollywood . . . . . . . . . . . . . . . . . . Hollywood, CA . . . . . . . 470
Holiday Inn - City Center . . . . . . . . . . . . . . . . . Los Angeles, CA . . . . . . 195
Holiday Inn - Woodland Hills . . . . . . . . . . . . . . . . Woodland Hills, CA . . . . 124
Holiday Inn - San Francisco Civic Center . . . . . . . . . . San Francisco, CA . . . . . 393
Holiday Inn - Torrance . . . . . . . . . . . . . . . . . . . Torrance, CA . . . . . . . 329
Holiday Inn - South Bend University Area . . . . . . . . . . South Bend, IN . . . . . . 229
Holiday Inn - Lexington North . . . . . . . . . . . . . . . Lexington, KY . . . . . . . 303
Holiday Inn - Cincinnati North . . . . . . . . . . . . . . . Cincinnati, OH . . . . . . 407
Holiday Inn Select - Pittsburgh University Center . . . . . Pittsburgh, PA . . . . . . 251
Holiday Inn - Memphis East . . . . . . . . . . . . . . . . . Memphis, TN . . . . . . . . 243
Holiday Inn - Nashville Vanderbilt . . . . . . . . . . . . . Nashville, TN . . . . . . . 300
Bristol House . . . . . . . . . . . . . . . . . . . . . . . Dallas, TX . . . . . . . . 127
Holiday Inn - San Antonio Riverwalk . . . . . . . . . . . . San Antonio, TX . . . . . . 313
JOINT VENTURES:
Holiday Inn - Washington D.C. Downtown . . . . . . . . . . . Washington, DC . . . . . . 208
Chateau LeMoyne - New Orleans Holiday Inn . . . . . . . . . New Orleans, LA . . . . . . 171
</TABLE>
NOTES:
(1) The Company leases the land for these hotels.
(2) These hotels will be converted to Crowne Plaza hotels during 1998.
(3) These hotels will be converted to Crowne Plaza hotels during 1999.
(4) This hotel will be converted to a Holiday Inn and Suites during 1998.
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FRANCHISE AGREEMENTS AND TRADEMARKS
As of December 31, 1997, the Company had franchise agreements (collectively,
the "Franchise Agreements") with Holiday Inns Franchising, Inc., Hampton Inn (a
division of Promus Hotels, Inc.), Days Inn of America Franchising, Inc.,
Marriott International, Inc., and Ramada Franchise Systems, Inc. Although the
terms of the Franchise Agreements differ, each requires the Company to pay a
monthly royalty fee based on gross revenues attributable to room rentals, plus
marketing and reservation contributions, which are also based on gross
revenues. The terms of the Franchise Agreements generally are between 10 and 20
years, with a substantial penalty for early termination by the Company. The
Company anticipates no changes in the brands used for its hotels which would
require the payment of franchise termination fees.
Several of the franchise agreements with Holiday Inns Franchising, Inc. were
entered into in conjunction with the Holiday Inn Acquisition and the related
conversion of the majority of Bristol's own branded hotels to a Crowne Plaza or
other Holiday Inn brand. The franchise fees payable under these conversion
agreements will be a phased-in percentage of 0% of room revenue in 1997, 1% in
1998, 3% in 1999 and 5% in 2000 and thereafter. Seven of these hotels have
been or are expected to be converted by the end of 1998. (See Redevelopment
and Rebranding Program.)
The Company obtained registration of the "Bristol" and "Bristol Suites"
trademarks on June 25, 1996, and July 2, 1996, respectively, with the United
States Patent and Trademark Office. The Company knows of approximately 15
lodging establishments located in the United States that use "Bristol" in their
trade names, but which have no existing or historical relationship with the
Company. Some of these establishments are located in areas where the Company
has not previously used the Bristol name. Accordingly, others may be able to
restrict the Company's use of the name in those markets. The Company has not
registered or applied for any other trademarks in connection with any other
hotel brand names that the Company utilizes.
MANAGEMENT AGREEMENTS
The Company acquired 15 management agreements in the Holiday Inn Acquisition,
three of which were for joint ventures in which the Company purchased a 50%
interest. The Company entered into one additional management agreement in the
fall of 1997 unrelated to the Holiday Inn Acquisition. In December the Company
purchased the remaining 50% interest in one of the joint ventures resulting in
15 total management agreements.
In general, the management agreements have remaining terms that range from one
to 11 years (subject to extension or renewal), and are generally cancelable
under certain conditions. The management agreements specify base fees, which
are generally based on percentages of gross revenues and, in certain cases,
also provide for incentive fees. These management contracts may contain
provisions which allow the third party owner to terminate the contract for such
reasons as sale of the property, for cause or without cause. Therefore, the
Company cannot guarantee that it will continue to manage these properties to
the contract expiration date.
COMPETITION
The Company competes primarily in the upscale and mid-priced with food and
beverage full-service segment of the lodging industry, as defined by Smith
Travel Research, a noted industry resource. Hotel chains such as Marriott,
Hyatt and Embassy Suites are direct competitors of the Company; and in each
geographic market in which the Company's hotels are located, there are other
limited and full-service hotels that compete with the Company's hotels. In
addition, the Company's food and beverage operations compete with local
free-standing restaurants and bars. Some of the Company's competitors have
larger networks of locations and greater financial resources than the Company.
Competition in the United States lodging industry is generally based on
convenience of location, price, range of services and guest amenities offered,
plus the
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quality of customer service and overall product. Newer, recently constructed
hotels compete effectively against older hotels if the older hotels are not
refurbished on a regular basis. While newer limited-service hotels do not
compete directly with the Company's larger full-service hotels, they do provide
alternatives for guests who do not need the amenities of a full-service hotel.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in various legal proceedings arising in the normal
course of business. The Company believes that the ultimate outcome of such
proceedings will not have a material adverse effect on the results of
operations or financial condition of the Company; however, there can be no
assurance that this will be the case.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
During the fourth quarter of 1997, no matter was submitted to a vote of the
Company's security holders.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
RELATED SHAREHOLDER.
The Company's Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "BH." The range of the high and low sales price of the
Company's Common Stock as reported on the NYSE Composite Tape for each of the
quarters during the years ended December 31, 1997 and 1996, as adjusted for the
Stock Split, is set forth below:
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
High Low High Low
------- ------- ------- -------
<S> <C> <C> <C> <C>
First quarter ...... $29.667 $21.083 $19.083 $16.250
Second quarter ..... 28.917 24.083 21.667 18.250
Third quarter ...... 28.250 25.500 21.417 17.500
Fourth quarter ..... 29.750 23.937 21.167 16.667
</TABLE>
On March 6, 1998, the last reported sale price of the Common Stock on the NYSE
was $25.25. On March 6, 1998, the Company had 66 stockholders of record. The
Company believes the number of beneficial owners of its Common Stock to be
approximately 2,200.
The Company has not paid any cash dividends on its Common Stock and does not
anticipate that it will do so in the foreseeable future. Instruments governing
certain of the Company's indebtedness prohibit the payment of dividends on the
Common Stock.
8
<PAGE> 9
PART II.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected historical financial data for the
Company for the years ended December 31, 1997 and 1996, and the 11 months ended
December 31, 1995, and unaudited pro forma financial data for the years ended
December 31, 1997, 1996 and 1995, respectively. The unaudited pro forma
financial data for the years ended December 31, 1997 and 1996 give effect to
the Holiday Inn Acquisition and the refinancing (the New Credit Facility) of
the indebtedness in connection with the Holiday Inn Acquisition (collectively
the "HI Pro Forma Transactions") as if these transactions had occurred on
January 1 of each period presented. The unaudited pro forma financial data for
the Company for the year ended December 31, 1995, give effect to the
Combination, the 1995 Senior Credit Facility, the Senior Notes and the IPO as
if they had been consummated at the beginning of the period but do not give
effect to the Holiday Inn Acquisition. The selected balance sheet data for the
Company is presented as of December 31, 1997, 1996 and 1995.
The pro forma financial information presented is not necessarily indicative of
what the actual financial position and results of operations of the Company
would have been as of and for the periods indicated, nor does it purport to
represent the Company's future financial position and results of operations.
The financial data set forth below are qualified in their entirety by, and
should be read in conjunction with, "Management's Discussion and Analysis of
Financial Information and Results of Operations" and the financial statements
and notes thereto included herein.
9
<PAGE> 10
BRISTOL HOTEL COMPANY
SELECTED HISTORICAL AND PRO FORMA (UNAUDITED) FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
ELEVEN MONTHS PRO FORMA (UNAUDITED)
YEAR ENDED ENDED -----------------------------------
DECEMBER 31, DECEMBER 31, YEAR ENDED DECEMBER 31,
---------------------- ------------ -----------------------------------
1997 1996 1995 1997 1996 (1) 1995 (2)
--------- --------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
REVENUE:
Rooms ............................. $ 377,380 $ 149,794 $ 115,771 $ 469,885 $ 421,278 $ 127,670
Food, beverage and other .......... 127,138 62,046 49,424 156,162 150,598 54,012
--------- --------- --------- --------- --------- ---------
Total revenue .............. 504,518 211,840 165,195 626,047 571,876 181,682
--------- --------- --------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Departmental expenses:
Rooms .......................... 105,063 37,706 32,692 131,124 119,654 36,240
Food, beverage and other ....... 79,092 35,810 31,376 99,363 95,779 34,312
Undistributed operating expenses:
Administration and general,
marketing ................... 78,694 33,821 28,254 99,465 95,995 30,504
Property operating costs ....... 79,633 28,402 24,738 100,907 85,115 26,804
Depreciation and amortization .. 39,690 18,377 13,505 49,665 49,017 14,387
Corporate expense .............. 24,450 10,958 8,035 24,787 21,412 8,691
--------- --------- --------- --------- --------- ---------
Operating income ........... 97,896 46,766 26,595 120,736 104,904 30,744
--------- --------- --------- --------- --------- ---------
Other expenses:
Interest expense (3) .......... 44,591 18,616 18,374 55,694 54,248 16,133
Other non-operating expenses ... -- -- 430 -- -- 93
Equity in income of joint
ventures ................... (1,916) -- -- (2,440) (1,483) --
Income taxes ................... 22,007 10,401 2,822 26,317 20,158 5,226
--------- --------- --------- --------- --------- ---------
Income before extraordinary item .... 33,214 17,749 4,969 41,165 31,981 9,292
Extraordinary loss on early
extinguishment of debt, net
of income taxes ................. 12,741 -- 1,908 11,403 -- --
--------- --------- --------- --------- --------- ---------
Net income .......................... $ 20,473 $ 17,749 $ 3,061 $ 29,762 $ 31,981 $ 9,292
========= ========= ========= ========= ========= =========
Diluted earnings per common and
common equivalent share:
Income before extraordinary item .. $ 0.87 $ 0.70 $ 0.28 $ 1.03 $ 0.81 $ 0.37
Net income ........................ $ 0.53 $ 0.70 $ 0.17 $ 0.75 $ 0.81 $ 0.37
Weighted average number of
common and common
equivalent shares outstanding
- diluted (in thousands) ......... 38,332 25,526 17,909 39,865 39,568 24,892
</TABLE>
10
<PAGE> 11
BRISTOL HOTEL COMPANY
SELECTED HISTORICAL AND PRO FORMA (UNAUDITED) FINANCIAL DATA (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------
DECEMBER 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents ................................ $ 86,167 $ 4,666 $ 7,906
Property and equipment - net ............................. 1,439,167 552,564 470,705
Total assets ............................................. 1,666,638 592,788 512,901
Long-term debt including
current portion ....................................... 717,319 232,694 170,544
Stockholders' equity ..................................... 648,794 252,157 236,122
</TABLE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA (UNAUDITED) FINANCIAL DATA
(1) Pro forma operating results for 1996 include the operations of the
Holiday Inn - Stamford, which was purchased by Holiday Inn in July
1996.
(2) Pro forma operating results for 1995 include the operations of the
Sheraton - Atlanta, a 368 room hotel purchased by the Company in June
1995 and exclude the operations of the Holiday Inn-West Loop, which
was sold by the Company in July 1995.
(3) Pro forma interest expense for 1997 and 1996 reflects an increase in
interest primarily as a result of additional debt incurred in
connection with the Holiday Inn Acquisition. Pro forma interest
expense for 1995 has been reduced from actual interest expense by $3.2
million related primarily to the reduction of debt with proceeds from
the IPO.
11
<PAGE> 12
The following tables set forth selected historical combined financial data for
Harvey Hotel Companies as of and for the two years ended December 31, 1994 and
1993, and for the month ended January 31, 1995, which have been derived from
financial statements audited by Price Waterhouse LLP, independent accountants,
each of which financial statements is included or incorporated by reference
herein. The selected financial data set forth below are qualified in their
entirety by, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
financial statements and notes thereto included elsewhere herein.
HARVEY HOTEL COMPANIES (PREDECESSOR)
SELECTED HISTORICAL COMBINED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
MONTH ENDED -----------------------
JANUARY 31, 1995 1994 1993
---------------- -------- --------
<S> <C> <C> <C>
OPERATING DATA:
REVENUE:
Rooms ......................... $ 4,006 $ 44,972 $ 39,968
Food, beverage and other ...... 1,937 25,379 24,054
-------- -------- --------
Total revenue ................. 5,943 70,351 64,022
-------- -------- --------
OPERATING COSTS AND EXPENSES:
Departmental expenses:
Rooms ......................... 1,124 10,344 9,469
Food, beverage and other ...... 1,055 14,835 14,600
Undistributed operating expenses:
Administrative and general,
marketing .................. 579 11,369 10,285
Property operating costs ...... 629 10,563 10,086
Depreciation .................. 309 4,041 3,963
Corporate expense ............. 315 3,761 2,827
-------- -------- --------
Operating income .......... 1,932 15,438 12,792
-------- -------- --------
Other (income) expenses:
Interest expense, net ......... 652 7,631 7,737
Other non-operating income .... -- (337) (241)
-------- -------- --------
Income before extraordinary item $ 1,280 $ 8,144 $ 5,296
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
---------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents . . . . . . . . . . . . . $ 4,118 $ 395
Property and equipment, net . . . . . . . . . . . . 80,635 72,387
Total assets . . . . . . . . . . . . . . . . . . . 109,874 99,635
Long-term debt, including current portion . . . . . 114,054 112,963
Equity . . . . . . . . . . . . . . . . . . . . . . (11,988) (20,604)
</TABLE>
12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
Historical results for the year ended December 31, 1997, include the Original
Bristol Hotels and Holiday Inn - Plano, as well as the Holiday Inn Assets
(except for HI - San Jose) and the 1997 Single Asset Purchases from their
respective acquisition dates. Historical results for the year ended December
31, 1997, also reflect the management and the 50% joint venture ownership of
the HI - San Jose from the Holiday Inn Acquisition date to November 1997 and
the full ownership of the hotel for the month of December 1997. Historical
results for the year ended December 31, 1996, include the Original Bristol
Portfolio and Holiday Inn - Plano (as of May 31, 1996). The 45 owned hotels
included in the Holiday Inn Assets are referred to below as the "Acquired
Hotels."
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1997, COMPARED WITH YEAR ENDED
DECEMBER 31, 1996
Actual Results
Total revenue increased 138.2% to $504.5 million for the year ended December
31, 1997, as compared to 1996 as a result of the inclusion of the Holiday Inn
Assets and the 1997 Single Asset Purchases from their respective acquisition
dates and the improved operating performance of the Original Bristol Portfolio.
Revenue per available room ("RevPAR") for the Original Bristol Portfolio was
$47.53 for the year ended December 31, 1997, compared to $43.92 for 1996,
representing an 8.2% increase. The improvement in RevPAR is primarily
attributable to the successful repositioning and/or redevelopment of several
hotels in the Original Bristol Portfolio. Occupancy and average daily room
rate ("ADR") for the Original Bristol Portfolio was 70.0% and $67.91,
respectively, for the year ended December 31, 1997, compared to 64.4% and
$68.21, respectively, for 1996. The change from 1996 to 1997 was also impacted
by nonrecurring items in 1996 including the Atlanta Olympics and the
renovations of the United Hotels. The Atlanta Olympics had a positive impact
on results in 1996 due to the 100% occupancy experienced by the ten Atlanta
hotels in the Original Bristol Portfolio during the 20 days of the Olympic
games. Results for 1996 were also impacted by the renovations of 13 United
Hotels throughout the year.
Rooms revenue as a percent of total revenue was 74.8% for the year ended
December 31, 1997, as compared to 70.7% for the year ended December 31, 1996,
resulting from the Acquired Hotels having proportionally lower food and
beverage business than the Original Bristol Portfolio. This is also evidenced
by the 151.9% increase in rooms revenue for the year ended December 31, 1997,
compared to the same period in 1996 as compared to a 108.8% increase in food
and beverage revenue.
Food and beverage revenue increased primarily due to the increase in the number
of hotels and also due to higher food and beverage revenues for the Original
Bristol Portfolio. Food and beverage revenue for the Original Bristol
Portfolio for the year ended December 31, 1997 was $51.6 million, representing
a 12% increase over 1996. This increase is primarily attributable to the
effective redevelopment of several hotels in the Original Bristol Portfolio.
The increase in management fees relates primarily to the addition of the 15
management contracts acquired in the Holiday Inn Acquisition offset by the loss
of two management agreements previously held by Bristol in 1996.
Gross operating margin (consisting of total revenue less department expenses,
administrative and general, marketing and property operating costs divided by
total revenue) was 32.1% for the year ended December 31, 1997, compared to
35.9% for the year ended December 31, 1996. The 3.8 percentage point decrease
in gross operating margin is primarily attributable to declines in departmental
operating margins and higher
13
<PAGE> 14
property operating costs related to property taxes and land rentals. Declines
in departmental margins relate primarily to the integration of the Acquired
Hotels, which have had historically lower margins. Property tax increases
relate to increased valuations as a result of the significant capital
improvements for several hotels in the Original Bristol Portfolio as well as an
increase in tax rates for certain hotels. Increased land rentals relate to the
Acquired Hotels having a proportionately higher number of ground leases than
the Original Bristol Portfolio.
Depreciation and amortization increased $21.3 million for the year ended
December 31, 1997, compared to 1996 as a result of the Holiday Inn Acquisition
and the 1997 Single Asset Purchases. Depreciation expense also increased as a
result of the substantial capital improvements at several hotels in the
Original Bristol Portfolio.
Corporate expenses for the year ended December 31, 1997, were $24.5 million
compared to $11.0 million for 1996. Approximately $3.1 million of the increase
relates to one-time costs incurred during the second quarter of 1997 for the
closing and integration of the Holiday Inn Acquisition. The remaining increase
relates primarily to the increase in the number of corporate employees and
related costs and increased travel expenses as a result of the acquisition.
Interest expense for the year ended December 31, 1997, increased $26.0 million
to $44.6 million primarily as a result of additional debt incurred to finance
the Holiday Inn Acquisition as well as borrowings increasing ratably in 1996 to
fund acquisitions and certain redevelopment costs.
Equity in income of joint ventures of $1.9 million for the year ended December
31, 1997, represents the Company's 50% interest in the earnings of the three
joint ventures acquired in the Holiday Inn Acquisition.
As a result of the factors described above, income before extraordinary items
increased 87.1% to $33.2 million for the year ended December 31, 1997, compared
to the year ended 1996 and diluted earnings per share increased 24.3% to $.87
for the year ended December 31, 1997, compared to $.70 for 1996. Recurring
earnings for the year ended December 31, 1997 of $35.1 million, which exclude
the extraordinary item of $12.7 million and the one-time costs related to the
Holiday Inn Acquisition ($1.8 million, net of tax), represents a 138.8%
increase over recurring earnings for the year ended December 31, 1996 of $14.7
million, which excludes a one-time gain related to the sale of marketable
securities ($.3 million, net of tax), the positive impact of the Atlanta
Olympics ($2.2 million, net of tax), and the litigation settlement gain ($.6
million, net of tax). Recurring diluted earnings per share of $.92 for the
year ended December 31, 1997, represents a 58.6% improvement over 1996.
Pro Forma Results
Pro forma revenues increased $54.2 million, or 9.5%, to $626.0 million for the
year ended December 31, 1997, compared to 1996, reflecting increases in rooms
revenue and food and beverage revenue. Revenue increases reflect the addition
of the 1997 Single Asset Purchases and improvements in RevPAR. RevPAR for the
Original Bristol Portfolio was $47.53 for the year ended December 31, 1997,
compared to $43.92 for the year ended December 31, 1996. This RevPAR increase
is primarily attributable to the successful repositioning and/or redevelopment
of several hotels in the Original Bristol Portfolio. The Acquired Hotels
achieved a 7.5% improvement in RevPAR for the year ended December 31, 1997,
compared to 1996 primarily as a result of favorable results in the mid-priced
with food and beverage sector as well as the strength of the Holiday Inn brand
name and reservation system. RevPAR, occupancy and ADR for the Acquired Hotels
for the year ended December 31, 1997, was $57.65, 73.2% and $78.74,
respectively, compared to $53.62, 73.5% and $72.95, respectively, for 1996.
Pro forma operating income margin remained relatively consistent on a
year-to-date basis. Pro forma operating income margin for the year ended
December 31, 1997 was 19.3% compared to 18.3% for the 1996.
Pro forma interest expense increased by $1.4 million to $55.7 million for the
year ended December 31, 1997,
14
<PAGE> 15
compared to 1996. This increase was due primarily to borrowings increasing
ratably during 1996 to fund acquisitions and certain redevelopment costs.
Pro forma equity in income of joint ventures increased $1.0 million for the
year ended December 31, 1997, compared to 1996. The increase is due to
improvements in the operating results for the three hotels owned by the joint
ventures.
As a result of the factors described above, pro forma income before
extraordinary items increased to $41.2 million for the year ended December 31,
1997, from $32.0 million for the year ended December 31, 1996, an increase of
28.7% and pro forma diluted earnings per share increased 27.2% to $1.03 for the
year ended December 31, 1997, compared to $.81 in 1996.
RESULTS OF OPERATIONS - YEAR ENDED DECEMBER 31, 1996, COMPARED WITH PRO FORMA
YEAR ENDED DECEMBER 31, 1995
Revenues increased from $181.7 million for the pro forma year ended December
31, 1995 to $211.8 million, an increase of $30.1 million, or 16.6%, for the
year ended December 31, 1996. The increase is primarily attributable to the
addition of the Holiday Inn Plano in May 1996, the completion of the renovation
and redevelopment of the United Hotels and the application of the Company's
operating strategies to the United Hotels. The hotels in the United Hotels
portfolio that had substantially completed renovations by the end of 1995 (the
"Phase I" hotels) posted gains in total hotel revenue in excess of 60%, with
only a 5.3% increase in available rooms from 1995 to 1996. The positive impact
of applying the Company's operating strategies to the United Hotels is also
evidenced by the 17% increase in occupancy for the Phase I hotels and a 16.1%
increase in hotel revenue for those hotels. (Although the Company took over
management of the United Hotels in February 1995, the operating strategy
integration was a several month process.) The Atlanta Olympics also had a
positive impact on 1996 results as compared to 1995. Increases in total hotel
revenues were partially offset by declines in total revenues for the United
Hotels undergoing renovations in 1996. The increase in total revenues reflects
increases in all revenue categories, as discussed below.
Hotel room revenues were $149.8 million for the year ended December 31, 1996,
an increase of $22.1 million, or 17.3%, from the pro forma year ended December
31, 1995, due primarily to improved occupancy and average daily room rates of
67.4% and $68.24, respectively, for the year ended December 31, 1996, as
compared to 64.1% and $62.67, respectively, for the pro forma year ended
December 31, 1995. Rooms department operating margins increased to 74.8% from
71.6%, benefiting from a higher number of occupied rooms and the availability
of rooms in 1996 which were undergoing renovation and unavailable during 1995.
Food and beverage revenues improved by $4.7 million to $44.3 million for the
year ended December 31, 1996, from $39.6 million for the pro forma year ended
December 31, 1995, due primarily to the higher occupancy levels in the
Company's hotels and increased focus on banquet and catering business for the
United Hotels. Food and beverage department margins increased to 29.5% from
24.8%, primarily as a result of applying the Company's operating strategies to
the United Hotels.
Other revenues increased 23.1%, or by $3.3 million, to $17.7 million for the
year ended December 31, 1996. The Company sold marketable securities in the
third quarter of 1996, resulting in a gain of approximately $0.5 million. In
addition, the Company recognized gains of $0.9 million and $0.5 million as a
result of the settlement of certain litigation and the early termination of a
management agreement, respectively. Other revenues also increased as a result
of improved occupancy, and the increased emphasis on maximizing telephone
revenue.
Gross operating income (consisting of total revenue less rooms, food, beverage
and other expense) was $138.3 million, a $27.2 million improvement for the year
ended December 31, 1996, as compared to the pro forma year ended December 31,
1995. Gross operating margin for the year ended December 31, 1996, was 65.3%
as compared to 61.2% for the pro forma period ended December 31, 1995, an
improvement of 6.7% as a result of the factors noted above.
15
<PAGE> 16
Operating income increased to $46.8 million for the year ended December 31,
1996, from $30.7 million for the pro forma year ended December 31, 1995. This
$16.1 million, or 52.4%, increase was due primarily to increased revenues and
the improvements in departmental performance noted above. In addition,
administration and general and marketing expenses have stabilized. Combined
administrative and general and marketing expenses increased 10.9% for the year
ended December 31, 1996, compared to the pro forma year ended December 31,
1995, in contrast to a 14.2% increase from the pro forma year ended December
31, 1994, as compared to 1995.
Corporate expenses increased to $10.9 million for the year ended December 31,
1996, as compared to $8.7 million for the pro forma year ended December 31,
1995. The increase of $2.2 million is primarily related to additional costs
incurred during 1996 to establish the Company as a public entity as well as
costs incurred in connection with the establishment of an acquisition
department.
Depreciation expense was $18.4 million for the year ended December 31, 1996, a
$3.9 million increase from the pro forma year ended December 31, 1995. The
increase is a result of the renovation costs associated with certain United
Hotels being placed in service during 1996.
Interest expense increased by $2.5 million to $18.6 million for the year ended
December 31, 1996, compared to the pro forma year ended December 31, 1995.
This increase was due primarily to increased borrowings during 1996 for the
costs of the United Hotels renovations and the acquisition of the Holiday Inn
Plano in May 1996.
As a result of the factors described above, net income increased to $17.7
million for the year ended December 31, 1996, from $9.3 million for the pro
forma year ended December 31, 1995, an increase of 91.0%.
PERFORMANCE OF REDEVELOPED ASSETS
In February 1997, the Company completed the last phase of its renovation
program that had commenced in the spring of 1995. The total cost of the
program was approximately $130 million and included 20 hotels with
approximately 5,400 rooms. Excluding the Company's hotels in Jackson,
Mississippi, the return on redevelopment capital for the full-service assets
substantially complete as of December 1996 was approximately 20%. (Return on
redevelopment capital is defined as the improvement in EBITDA, defined below,
for the twelve months immediately preceding each hotel's start of renovation
compared to the year ended December 31, 1997.) The Company's limited-service
assets also substantially complete as of December 1996 achieved a return on
redevelopment capital of approximately 12%. These considerable returns are
primarily attributable to substantial improvements in RevPAR and food and
beverage revenue as well as enhanced operating margins.
With respect to the Company's portfolio in Jackson, Mississippi, the Company's
redeveloped assets have not yet reached similar returns. Market occupancies in
Jackson have averaged around 60%, limiting the Company's opportunities to
greatly improve average daily rates. As a result, the performance of the assets
to date have not yet met the Company's expectations, thereby lowering the
Company's overall return on redevelopment capital for all assets substantially
complete as of December 1996 to approximately 13%. However, the Company is
proactively defining alternative strategies including brand conversions in
order to enhance the performance of the Jackson portfolio. The Company remains
optimistic that adding stronger brand names to these hotels and revising the
operating cost structure will, over time, produce acceptable returns on the
redeveloped assets. Early results for the downtown Jackson hotel which
converted to the Crowne Plaza brand in late 1997 are extremely encouraging. A
brand conversion is likely for the other non-branded hotel in Jackson over
time.
16
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of capital to fund its operational and capital
needs is cash flow from operations, which it typically measures in terms of
EBITDA (earnings before interest, taxes, depreciation and amortization). EBITDA
is considered to be principally available to pay income taxes, fund routine
capital maintenance and to pay debt service, both interest and principal.
Management believes that EBITDA is an effective measure of operating performance
because it is industry practice to evaluate hotel properties using multiples of
EBITDA. EBITDA is unaffected by the debt and equity structure of the property
owner. EBITDA does not represent cash flow from operations as defined by
generally accepted accounting principles ("GAAP"), and is not necessarily
indicative of cash available to fund all cash flow needs and should not be
considered an alternative to net income for purposes of evaluating the Company's
operating performance. Management believes that cash flow from operations will
be sufficient to cover the Company's reasonably foreseeable working capital,
capital expenditure and debt service requirements. EBITDA totaled $139.5 million
for the year ended December 31, 1997, compared to $65.1 million for the year
ended December 31, 1996, an increase of 114.3%. The Company filed a
registration statement relating to the issuance from time to time of up to $500
million of equity or debt securities, which was partially utilized with the
Offering, and expects from time to time to consider the possible issuance of
other debt or equity securities thereunder.
The Company's net cash provided by operations totaled $75.0 million for the
year ended December 31, 1997, compared to $40.6 million for 1996. The
Company's cash and cash equivalent assets were $86.2 million and $4.7 million
at December 31, 1997 and 1996, respectively. The $34.4 million increase in net
cash provided by operating activities from 1996 to 1997 relates primarily to
the increase in income before depreciation and amortization and an increase in
working capital offset by an increase in restricted cash. The increase in
working capital relates primarily to the Holiday Inn Acquisition and the
resulting increases in accounts receivable offset by the increases in accounts
payable and accrued expenses. The increase in restricted cash relates
primarily to reserves for real estate taxes and capital expenditures deposited
in accordance with the terms of the Refinancing.
The Company anticipates using cash on hand along with cash from operations to
fund the Redevelopment and Rebranding Program and planned capital projects
scheduled for completion up to the date of the proposed merger, at which time
FelCor will assume responsibility for funding capital expenditures.
The Redevelopment and Rebranding Program, which started in November 1997, is
expected to continue throughout 1998 and 1999 at a total cost of approximately
$331 million. This activity includes approximately $245 million for the HI
Renovations, $32 million to renovate and rebrand several of the hotels in the
Original Bristol Portfolio, and $54 million for the redevelopment and
rebranding of the 1997 Single Asset Purchases. In addition to the amounts
funded in 1997, the Company anticipates spending $175 million in 1998,
approximately $100 million in 1999 and the remainder thereafter to fund this
redevelopment. In addition to the Redevelopment and Rebranding Program, the
Company plans to spend approximately $18 million on capital projects during
1998. As noted above, the Company plans to fund these costs with cash from
operations scheduled for completion up to the date of the proposed merger, at
which time FelCor will assume responsibility for funding capital expenditures.
YEAR 2000 ISSUE
The Company has reviewed its computer systems and has determined that the
majority of the systems are Year 2000 compliant. There are, however, a few
computer systems including automated time clock systems, certain embedded
systems such as phone systems and certain other third-party reservation systems
that may require reprogramming. The Company has initiated a comprehensive
program to identify, correct or reprogram, and test these systems and
anticipates that all reprogramming efforts will be substantially complete by
December 31, 1998, thereby allowing adequate time for testing. Management will
assess the Year 2000 compliance expense and related potential effect on the
Company's earnings by June 1998, and does not anticipate that such expense or
effect will be material.
17
<PAGE> 18
SEASONALITY
The lodging industry is affected by seasonal patterns. At most of the Company's
hotels, demand is higher in the second and third quarters than during the
remainder of the year. The Company's results are also impacted during periods
of renovation when rooms are placed out of service. The Company expects to
have approximately 376,000 and 280,000 rooms out of service in 1998 and 1999,
respectively, in conjunction with the Redevelopment and Rebranding Program.
INFLATION
The Company is impacted by inflation in both the general price movement of
certain costs of the operations of its hotels and in the ability to increase
the rates charged to its guests for rooms, food and beverage and other
services.
Many of the costs of operating the hotels can be fixed for certain periods of
time, reducing the short-term effects of changes in the rate of inflation.
Room rates, which are set on a daily basis, can be rapidly changed to meet
changes in inflation rates (as well as other changing market conditions). The
Company believes that given the favorable demand/supply balance in the hotel
segments in which it operates, increases in inflation from today's relatively
low rates will not have an adverse impact on profits generated by the Company's
hotels.
Changes in the rate of inflation could impact the level of short-term interest
rates. The Company does not anticipate a significant increase or decrease in
the level of short-term interest rates, and, since the Company has no floating
rate debt currently outstanding, the Company does not believe that it has any
significant exposure should a rise in market interest rates occur.
18
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial information is included on the pages indicated and is
incorporated into this item by reference:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports of Independent Public Accountants . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated and Combined Statements of Income . . . . . . . . . . . . . F-4
Consolidated Statements of Changes in Stockholders' Equity . . . . . . . F-5
Consolidated and Combined Statements of Cash Flows . . . . . . . . . . . F-6
Notes to Consolidated and Combined Financial Statements . . . . . . . . . F-8
</TABLE>
19
<PAGE> 20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On June 17, 1996, the Company appointed Arthur Andersen LLP as independent
accountants for fiscal 1996 to replace Price Waterhouse LLP effective with such
appointment. The change in independent accountants was approved by the Audit
Committee of the Company's Board of Directors and the Company's stockholders.
Price Waterhouse LLP's report on the financial statements for the 11 months
ended December 31, 1995, did not contain an adverse opinion, disclaimer of
opinion, qualification, or modification as to uncertainty, audit scope, or
accounting principles. Furthermore, during the 11 months ended December 31,
1995, and the interim period subsequent to December 31, 1995, there have not
been any disagreements with Price Waterhouse LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Price
Waterhouse LLP, would have caused that firm to make reference to the subject
matter of such disagreements in connection with its report.
PART III.
The information called for by Items 10-13 is incorporated by reference to the
sections of the Company's Proxy Statement for its 1998 Annual Meeting of
Stockholders (to be filed pursuant to Regulation 14A not later than 120 days
after the close of the fiscal year).
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORT ON FORM 8-K.
(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
1. The financial statements as set forth under Item 8 are filed as part
of this report.
2. All financial statement schedules are omitted as they are either not
applicable or the required information is included in the financial
statements or the notes thereto.
3. The list of exhibits contained in the Index to Exhibits is
incorporated herein by reference.
(b) REPORTS ON FORM 8-K
Current Report on Form 8-K dated November 14, 1997, containing the
financial statements of Bristol Hotel Asset Company for the period
ended September 30, 1997.
20
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Bristol Hotel Company
We have audited the accompanying consolidated balance sheets of Bristol Hotel
Company (a Delaware corporation) as of December 31, 1997 and 1996, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Bristol Hotel Company as of
December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Dallas, Texas
February 6, 1998 (except with respect
to the matter discussed in Note 20 as
to which the date is March 25, 1998
F-1
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Bristol Hotel Company
In our opinion, the accompanying consolidated statements of income, of changes
in stockholders' equity and of cash flows for Bristol Hotel Company and its
subsidiaries ("Company") and the combined statements of income and cash flows
for Harvey Hotel Companies ("Predecessor") present fairly, in all material
respects, the results of operations and cash flows of the Company and its
Predecessor for the eleven months ended December 31, 1995 and for the one month
ended January 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company
and its Predecessor's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of Bristol Hotel Company and its subsidiaries
for any period subsequent to December 31, 1995.
PRICE WATERHOUSE LLP
Dallas, Texas
February 23, 1996
F-2
<PAGE> 23
BRISTOL HOTEL COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents .......................................... $ 86,167 $ 4,666
Trading securities ................................................. 103 116
Accounts receivable (net of allowance of $2,259 and $344) ......... 31,305 10,501
Inventory .......................................................... 8,286 3,320
Deposits ........................................................... 7,569 5,404
Other current assets ............................................... 1,626 950
---------- ----------
Total current assets .................................... 135,056 24,957
---------- ----------
Property and equipment (net of accumulated depreciation
of $76,172 and $31,071) ........................................... 1,439,167 552,564
Other assets
Restricted cash .................................................... 9,283 3,069
Investments in joint ventures, net ................................. 12,396 --
Goodwill (net of accumulated amortization of $891) ................. 52,773 --
Deferred charges and other noncurrent assets (net of
accumulated amortization of $1,965 and $2,144) ................. 17,963 12,198
---------- ----------
Total assets ............................................ $1,666,638 $ 592,788
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt .................................. $ 8,455 $ 15,769
Accounts payable and accrued expenses .............................. 27,366 10,626
Accrued construction costs ......................................... 1,330 4,797
Accrued property, sales and use taxes .............................. 15,911 7,346
Accrued insurance reserves ......................................... 9,530 6,920
Advance deposits ................................................... 1,156 278
---------- ----------
Total current liabilities ............................... 63,748 45,736
---------- ----------
Long-term debt, excluding current portion ............................. 708,864 216,925
Deferred income taxes ................................................. 242,530 75,619
Other liabilities ..................................................... 2,702 2,351
---------- ----------
Total liabilities ....................................... 1,017,844 340,631
---------- ----------
Common stock ($.01 par value; 150,000,000 shares
authorized, 45,734,472 and 24,848,760 shares issued
at December 31, 1997 and 1996, respectively, and
43,641,401 and 24,848,760 shares outstanding at
December 31, 1997 and 1996, respectively) ......................... 436 166
Additional paid-in capital ............................................ 606,935 231,181
Cumulative translation adjustment ..................................... 286 --
Retained earnings ..................................................... 41,137 20,810
---------- ----------
Total stockholders' equity .............................. 648,794 252,157
---------- ----------
Total liabilities and stockholders' equity .............. $1,666,638 $ 592,788
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 24
BRISTOL HOTEL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
HARVEY HOTEL COMPANIES (PREDECESSOR)
COMBINED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
HARVEY HOTEL
BRISTOL HOTEL COMPANY COMPANIES
---------------------------------------------------------- -----------------
Eleven
Year Ended Year Ended Months Ended Month Ended
December 31, 1997 December 31, 1996 December 31, 1995 January 31, 1995
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUE:
Rooms ......................................... $ 377,380 $ 149,794 $ 115,771 $ 4,006
Food and beverage ............................. 92,596 44,344 36,070 1,505
Management fees ............................... 4,948 2,513 1,382 34
Other ......................................... 29,594 15,189 11,972 398
----------------- ----------------- ----------------- -----------------
Total revenue ............................... 504,518 211,840 165,195 5,943
----------------- ----------------- ----------------- -----------------
OPERATING COSTS AND EXPENSES:
Departmental expenses:
Rooms ....................................... 105,063 37,706 32,692 1,124
Food and beverage ........................... 69,766 31,282 27,118 1,006
Other ....................................... 9,326 4,528 4,258 49
Undistributed operating expenses:
Administrative and general .................. 44,255 18,266 16,184 186
Marketing ................................... 34,439 15,555 12,070 393
Property operating costs .................... 44,303 17,499 16,313 360
Property taxes, rent and insurance .......... 35,330 10,903 8,425 269
Depreciation and amortization ............... 39,690 18,377 13,505 309
Corporate expense ........................... 24,450 10,958 8,035 315
----------------- ----------------- ----------------- -----------------
Operating income ................................ 97,896 46,766 26,595 1,932
----------------- ----------------- ----------------- -----------------
Other (income) expense:
Interest expense .............................. 44,591 18,616 18,374 652
Equity in income of joint ventures ............ (1,916) -- -- --
Other ......................................... -- -- 257 --
----------------- ----------------- ----------------- -----------------
Income before minority interest, income taxes,
extra-ordinary items and pro forma income
taxes ........................................ 55,221 28,150 7,964 1,280
Minority interest ............................... -- -- 173 --
----------------- ----------------- ----------------- -----------------
Income before income taxes, extraordinary items
and pro forma income taxes ................... 55,218 28,150 7,791 1,280
Income taxes .................................... 22,007 10,401 2,822 --
----------------- ----------------- ----------------- -----------------
Income before extraordinary items and pro forma
income taxes ................................. 33,214 17,749 4,969 1,280
Extraordinary loss on early extinguishment
of debt, net of tax .......................... (12,741) -- (1,908) --
----------------- ----------------- ----------------- -----------------
Net income before pro forma income taxes ........ $ 20,473 $ 17,749 $ 3,061 1,280
================= ================= =================
Pro forma income taxes (Unaudited)............... 435
-----------------
Net income after pro forma income tax expense
(Unaudited) ................................. $ 845
=================
Earnings per common and common equivalent share:
Income before extraordinary item:
Basic ....................................... $ 0.89 $ 0.71 $ 0.28 --
Diluted ..................................... $ 0.87 $ 0.70 $ 0.28 --
Net income:
Basic ....................................... $ 0.55 $ 0.71 $ 0.17 --
Diluted ..................................... $ 0.53 $ 0.70 $ 0.17 --
Weighted average number of common and common
equivalent shares outstanding:
Basic ......................................... 37,359,364 24,848,760 17,857,936 --
Diluted ....................................... 38,332,302 25,526,413 17,908,955 --
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-4
<PAGE> 25
BRISTOL HOTEL COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNREALIZED CUMULATIVE RETAINED
---------------------- PAID-IN GAIN (LOSS) TRANSLATION EARNINGS
SHARES AMOUNT CAPITAL ON SECURITIES ADJUSTMENT (DEFICIT) TOTAL
---------- ---------- ---------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1995 ............ 9,856,178 $ 99 $ 123,104 $ -- $ -- $ -- $ 123,203
Unrealized gain on securities, net ... -- -- -- 262 -- -- 262
Issuance of common stock ............. 6,709,662 67 109,529 -- -- -- 109,596
Net of income ........................ -- -- -- -- -- 3,061 3,061
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1995 ........... 16,565,840 166 232,633 262 -- 3,061 236,122
Reclass securities to trading ........ -- -- -- (262) -- -- (262)
Employee stock options ............... -- -- 216 -- -- -- 216
Adjustment to offering costs for
1995 common stock issuance ......... -- -- (1,668) -- -- -- (1,668)
Net income ........................... -- -- -- -- -- 17,749 17,749
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1996 ........... 16,565,840 166 231,181 -- -- 20,810 252,157
Employee stock options ............... -- -- 296 -- -- -- 296
Exercise of employee stock options ... 6,619 -- 114 -- -- -- 114
Issuance of stock in Holiday Inn
Acquisition .......................... 9,361,308 93 267,874 -- -- -- 267,967
Issuance of common stock, net of
costs .............................. 3,162,500 31 107,470 -- -- -- 107,501
Stock split .......................... 14,545,134 146 -- -- -- (146) --
Foreign currency translation ......... -- -- -- -- 286 -- 286
Net income ........................... -- -- -- -- -- 20,473 20,473
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1997 ........... 43,641,401 $ 436 $ 606,935 $ -- $ 286 $ 41,137 $ 648,794
========== ========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-5
<PAGE> 26
BRISTOL HOTEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
HARVEY HOTEL COMPANIES (PREDECESSOR)
COMBINED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
HARVEY HOTEL
BRISTOL HOTEL COMPANY COMPANIES
--------------------------------------------------------- ------------------
Eleven
Year Ended Year Ended Months Ended Month Ended
December 31, 1997 December 31, 1996 December 31, 1995 January 31, 1995
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ..................................... $ 20,473 $ 17,749 $ 3,061 $ 1,280
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................ 39,690 18,377 13,505 309
Amortization of deferred financing fees ...... 2,749 2,062 -- --
Other ........................................ -- -- 602 --
Equity in earnings of joint ventures ......... (1,399) -- -- --
Compensation expense recognized for
employee stock options ..................... 410 216 -- --
Unrealized gain on marketable securities ..... -- (378) -- --
Non-cash portion of extraordinary item,
net of tax ................................. 11,009 -- 1,908 --
Changes in assets and liabilities:
Changes in working capital ................... 1,645 (684) (714) 641
Decrease (increase) in restricted cash ....... (6,214) (2,449) 2,860 (84)
Distributions from joint ventures ............ 650 -- -- --
Increase (decrease) in other liabilities ..... 217 (460) (4,260) 421
Deferred tax provision ....................... 5,805 6,171 (326) --
----------------- ----------------- ----------------- -----------------
Net cash provided by operating
activities .............................. 75,035 40,604 16,636 2,567
----------------- ----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to property and equipment ......... (54,071) (93,936) (60,941) (721)
Purchases of property and equipment,
net of associated debt ....................... (86,977) (6,300) (20,000) --
Sales of property and equipment ................ -- -- 4,711 --
Holiday Inn Acquisition, net of costs .......... (400,159) -- -- --
Sales of marketable securities ................. -- 726 -- 1,928
----------------- ----------------- ----------------- -----------------
Net cash provided by (used in)
investing activities .................... (541,207) (99,510) (76,230) 1,207
----------------- ----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Refinancing ...................... 600,000 -- -- --
Proceeds from New Credit Facility .............. 560,000 -- -- --
Repayment of New Credit Facility ............... (560,000) -- -- --
Paydown of Senior Notes ........................ (40,000) -- -- --
Proceeds from Offering, net of costs ........... 107,852 -- -- --
Early extinguishment of long-term debt ......... (133,540) -- -- --
Distributions to predecessor equity holders .... -- -- (4,140) (8,009)
Additions to notes receivable - partners ....... -- -- -- 488
Principal payments and extinguishment of
long-term debt ............................... (7,058) (4,826) (156,612) (121)
Proceeds from issuance of long-term debt ....... 43,410 66,976 123,387 --
Payment of offering costs ...................... -- (1,342) -- --
Proceeds from affiliate ........................ -- -- 19,900 --
Proceeds from initial public offering,
net of offering costs ........................ -- -- 88,557 --
Dividend paid to minority partner .............. -- -- (335) --
Decrease in accounts receivable affiliate ...... -- -- 542 --
Decrease (increase) in deferred charges
and other non-current assets .................. (22,991) (5,142) (9,212) 316
----------------- ----------------- ----------------- -----------------
Net cash provided by (used in)
financing activities .................... 547,673 55,666 62,087 (7,326)
----------------- ----------------- ----------------- -----------------
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-6
<PAGE> 27
BRISTOL HOTEL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
HARVEY HOTEL COMPANIES (PREDECESSOR)
COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
HARVEY HOTEL
BRISTOL HOTEL COMPANY COMPANIES
------------------------------------------------------- -----------------
Eleven
Year Ended Year Ended Months Ended Month Ended
December 31, 1997 December 31, 1996 December 31, 1995 January 31, 1995
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net increase (decrease) in cash and
cash equivalents ................................. $ 81,501 $ (3,240) $ 2,493 $ (3,552)
Cash and cash equivalents at beginning of period ... 4,666 7,906 5,413 4,118
----------------- ----------------- ----------------- -----------------
Cash and cash equivalents at end of period ......... $ 86,167 $ 4,666 $ 7,906 $ 566
================= ================= ================= =================
Supplemental cash flow information:
Interest paid .................................... $ 39,706 $ 17,696 $ 17,111 $ 330
================= ================= ================= =================
Income taxes paid ................................ $ 10,942 $ 3,543 $ 2,685 $ --
================= ================= ================= =================
Non-cash investing and financing activities:
Debt assumed to acquire property
and equipment .................................. $ 21,813 $ -- $ 12,100 $ --
================= ================= ================= =================
Sale of non-hotel properties for assumption
of liabilities ................................. $ -- $ -- $ 4,723 $ --
================= ================= ================= =================
Purchase of minority interest for common stock ... $ -- $ -- $ 1,110 $ --
================= ================= ================= =================
Common stock issued in Holiday Inn Acquisition ..... $ 267,967 $ -- $ -- $ --
================= ================= ================= =================
</TABLE>
The accompanying notes are an integral part of these consolidated and combined
financial statements.
F-7
<PAGE> 28
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION
Bristol Hotel Company (the "Company") is a Delaware corporation which was
incorporated in November 1994 and began operations after the acquisitions
of Harvey Hotel Company, Ltd. and its subsidiaries (together, "Harvey
Hotel Companies" or "Predecessor") and United Inns, Inc. ("United Inns")
(collectively, the "Combination"). The Company owns 86 hotels and
manages 15 additional hotels, two of which are owned by joint ventures in
which the Company owns a 50% interest. The properties, which contain
approximately 28,800 rooms, are located in 22 states, the District of
Columbia and Canada. The Company acquired the ownership and/or
management of 60 of these properties on April 28, 1997 (the "Holiday Inn
Acquisition"). The Combination and the Holiday Inn Acquisition are more
fully described in Note 3.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. The combined financial statements
of the Predecessor include the accounts of Harvey Hotel Company and
related entities, all of which were under common control. The owners of
these entities combined their interests for the purpose of forming a new
entity which was acquired by the Company. The accounts of United Inns
and its subsidiaries are included from February 1, 1995, the date of
acquisition. The results of operations of the hotels acquired in the
Holiday Inn Acquisition have been included in the Company's financial
statements since April 28, 1997. All significant intercompany accounts
and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include unrestricted cash in banks and cash on
hand. Liquid investments purchased with an original maturity of three
months or less are considered to be cash equivalents.
TRADING SECURITIES
Marketable securities consist primarily of equity securities and mutual
fund shares. Equity securities have been classified as either: (i)
available-for-sale, which are reported at fair value, with net unrealized
gains and losses excluded from earnings and reported as a separate
component of changes in equity; or (ii) trading securities, which are
reported at fair value, with unrealized holding gains and losses for
trading securities included in earnings. At December 31, 1997 and 1996,
all marketable securities owned by the Company were classified as trading
securities.
ACCOUNTS RECEIVABLE
Accounts receivable in the balance sheets are expected to be collected
within one year and are net of estimated uncollectible amounts of
$2,259,000 and $344,000, at December 31, 1997 and 1996, respectively.
Valuation and qualifying accounts consist of allowance for doubtful
accounts as follows (in thousands):
<TABLE>
<CAPTION>
Write-Off of
Balance at Charged to Amounts Balance at
Beginning Costs and Previously End of
of Period Expenses Reserved Period
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Company
Year ended December 31, 1997 ................. $ 344 $ 2,306 $ (391) $ 2,259
Year ended December 31, 1996 ................. 620 251 (527) 344
Eleven months ended December 31, 1995 ........ 221 796 (397) 620
</TABLE>
F-8
<PAGE> 29
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORY
Inventory, consisting primarily of food and beverage products as well as
consumable supplies, is carried at the lower of cost or market. Cost is
determined on the first-in, first-out basis.
DEFERRED CHARGES AND OTHER NONCURRENT ASSETS
Deferred charges and other noncurrent assets consist primarily of
financing costs which are amortized over the life of the related loan.
The amounts reported in the balance sheets at December 31, 1997 and 1996,
are net of accumulated amortization of $1,965,000 and $2,144,000,
respectively.
PROPERTY AND EQUIPMENT
The Company recorded the Combination and the Holiday Inn Acquisition on
the basis of an allocation of the purchase price based on the fair market
value of the assets acquired at the date of acquisition. Subsequent
additions and improvements are capitalized at their cost, including
interest costs associated with the renovation of certain hotels.
Interest capitalized during the years ended December 31, 1997 and 1996
was $1,628,000 and $2,100,000, respectively.
The cost of normal repairs and maintenance that does not significantly
extend the life of the property and equipment is expensed as incurred.
Depreciation is computed on a straight-line method over the estimated
useful lives of the assets, as follows:
<TABLE>
<CAPTION>
BRISTOL HOTEL COMPANY HARVEY HOTEL COMPANIES
--------------------- ----------------------
<S> <C> <C>
Buildings 35-40 years 31-35 years
Furniture, fixtures and equipment 3-15 years 7 years
Automobiles and trucks 3 years 3 years
Leasehold improvements Lease term or useful Lease term or useful
life, whichever is less life, whichever is less
</TABLE>
Depreciation and amortization expense recorded for the years ended
December 31, 1997 and 1996, and the eleven months ended December 31,
1995 was $39.7 million, $18.4 million, and $13.5 million, respectively.
The Company has adopted Statement of Financial Accounting Standards No.
121, "Accounting for Impairment of Long- Lived Assets and for Long-Lived
Assets to be Disposed of" ("SFAS 121"). As of December 31, 1997 and
1996, no impairment losses have been incurred. The assets, which were
classified as available for sale as of December 31, 1996, were
reclassified to held and used in the second quarter of 1997.
RESTRICTED CASH
Restricted cash consists of (i) funds placed in reserve for the
replacement of furniture, fixtures and equipment, and (ii) tax and
insurance reserves. The Company is required to deposit monthly with
various lenders amounts of three to four percent of hotel revenues for
replacement reserves plus the tax and insurance escrow. As tax and
insurance payments are made and improvements are completed, the Company
is reimbursed from the reserves.
F-9
<PAGE> 30
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADOPTION OF RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128") was issued. Under SFAS 128, basic
earnings per share ("EPS") is computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the
period. SFAS 128 replaces fully diluted EPS, which the Company was not
previously required to report, with EPS, assuming dilution ("diluted
EPS"). The Company calculates diluted EPS assuming all outstanding
options to purchase common stock have been exercised at the beginning of
the year (or the time of issuance, if later). The dilutive effect of the
outstanding options is reflected by application of the treasury stock
method, whereby the proceeds from the exercised options are assumed to be
used to purchase common stock at the average market price during the
period. The Company adopted SFAS 128 effective December 15, 1997. All
prior period EPS data have been restated. The effect of this accounting
change on previously reported EPS data is not significant. The following
table reconciles the computation of basic EPS to diluted EPS:
<TABLE>
<CAPTION>
PER SHARE
NET EARNINGS SHARES AMOUNT
------------ ---------- ---------
($ in thousands)
<S> <C> <C> <C>
For the year ended December 31, 1997:
Income before extraordinary item
per share ............................... $ 33,214 37,359,364 $ 0.89
Effect of options .......................... -- 972,938
---------- ----------
Income before extraordinary item per
share, assuming dilution ................ $ 33,214 38,332,302 $ 0.87
========== ==========
Net income per share ....................... $ 20,473 37,359,364 $ 0.55
Effect of options .......................... -- 972,938
---------- ----------
Net income per share, assuming dilution .... $ 20,473 38,332,302 $ 0.53
========== ==========
For the year ended December 31, 1996:
Income before extraordinary item
per share ............................... $ 17,749 24,848,760 $ 0.71
Effect of options .......................... -- 677,653
---------- ----------
Income before extraordinary item per
share, assuming dilution ................ $ 17,749 25,526,413 $ 0.70
========== ==========
Net income per share ....................... $ 17,749 24,848,760 $ 0.71
Effect of options .......................... -- 677,653
---------- ----------
Net income per share, assuming dilution .... $ 17,749 25,526,413 $ 0.70
========== ==========
For the 11 months ended December 31, 1995:
Income before extraordinary item
per share ............................... $ 4,969 17,857,936 $ 0.28
Effect of options .......................... -- 51,019
---------- ----------
Income before extraordinary item per
share, assuming dilution ................ $ 4,969 17,908,955 $ 0.28
========== ==========
Net income per share ....................... $ 3,061 17,857,936 $ 0.17
Effect of options .......................... -- 51,019
---------- ----------
Net income per share, assuming dilution .... $ 3,061 17,908,955 $ 0.17
========== ==========
</TABLE>
Earnings per share have been retroactively adjusted for the effect of stock
splits.
F-10
<PAGE> 31
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSACTIONS
As part of the Holiday Inn Acquisition, the Company acquired six hotels
in Canada. Results of operations for those hotels are maintained in
Canadian dollars and translated using average exchange rates during the
period. Currency transaction losses are included in net income and were
$303,000 for the year ended December 31, 1997. Assets and liabilities
are translated to U.S. dollars using the exchange rate in effect at the
balance sheet date. Resulting translation adjustments are reflected in
stockholders' equity as a cumulative foreign currency translation
adjustment. Cumulative currency translation gains included in
stockholders' equity at December 31, 1997 were $286,000.
INCOME TAXES
Company
The Company accounts for income taxes under the Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires the recognition of deferred
tax liabilities and assets for the expected future tax consequences
of events that have been included in the financial statements or tax
returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial statement
and tax basis of assets and liabilities using currently enacted tax
rates in effect for the years in which the differences are expected
to reverse.
Predecessor
Harvey Hotel Company and related entities are partnership or
S-Corporation entities, and income or loss for federal income tax
purposes is allocated to the individual partners or shareholders.
Accordingly, no recognition has been given to income taxes in the
combined financial statements. However, pro forma income tax
expense, at an effective rate of 34%, has been included in the
combined statements of income in order to reflect the impact on the
income of Harvey Hotel Companies.
Harvey Hotel Corporation accounted for the tax effect of net income
or loss in accordance with SFAS 109. However, because of the
changes in ownership (see Note 1), realization of the benefit of the
accumulated losses is uncertain and, therefore, has not been
recorded in the combined financial statements.
EARNINGS PER SHARE
Earnings per share is determined by dividing net income by the weighted
average number of common and common equivalent shares outstanding during
the year. The 1995 weighted average shares outstanding has been
calculated using the treasury stock method and as if Holdings' shares of
1,768,000 (see Note 3) had been outstanding since February 1, 1995. The
1997 and 1996 weighted average shares is calculated using the treasury
stock method, giving effect to the common equivalent shares outstanding
as of December 31, 1997 and 1996. The common equivalent shares include
officer and director stock options which have been deemed exercised at
the issue date using the treasury method for the purposes of computing
earnings per share. The Company has no other potentially dilutive
securities.
All weighted average share and per share data presented are calculated in
accordance with SFAS 128, which calls for both basic and diluted weighted
average share presentation. All prior period amounts have been restated
in accordance with SFAS 128. The Company believes that there has been no
impact on its financial statements from the implementation of SFAS 128,
as the weighted average shares previously used in calculating earnings
per share are the same as the diluted weighted average shares calculated
under SFAS 128.
F-11
<PAGE> 32
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE (continued)
On June 23, 1997, the Company's Board of Directors declared a
three-for-two stock split, effective in the form of a stock dividend for
shareholders of record June 30, 1997, which was distributed July 15, 1997
(the "Stock Split"). All per share data and the average common and
common equivalent shares issued and outstanding have been adjusted to
reflect the Stock Split for all periods presented.
USE OF ESTIMATES
The Company has made a number of estimates and assumptions relating to
the reporting of assets and liabilities, the disclosure of contingent
assets and liabilities and the reported amounts of revenues and expenses
to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
RECLASSIFICATIONS
Certain financial statement items from the prior years for the Company
and the Predecessor have been reclassified to conform with the current
presentation.
3. ACQUISITIONS
UNITED INNS ACQUISITION
On January 27, 1995, United/Harvey Holdings L.P. ("Holdings") acquired
the common stock of United Inns for an aggregate purchase price of $67
million plus the assumption of United Inns' liabilities. The acquisition
was accounted for as a purchase and the purchase price was allocated to
the net assets acquired. Under the acquisition agreement, Holdings,
Harvey Hotel Companies, H. K. Huie, Jr., the Harvey Management Equity
Holders and the other parties thereto, the following occurred: (1)
Holdings contributed to the Company all of the outstanding capital stock
of United Inns, approximately $15.1 million in cash and certain cash
advances previously made for the benefit of Harvey Hotel Companies in
exchange for an aggregate of 68.1% of the Company's Common Stock; (2) the
Harvey Management Equity Holders collectively contributed to the Company
46.4% of the outstanding partnership interests in Harvey Hotel Companies
in exchange for an aggregate of 20.6% of the Company's Common Stock; and
(3) Mr. Huie contributed 25.3% of his 50.6% outstanding partnership
interest in Harvey Hotel Companies for 11.3% of the Company's Common
Stock. In addition, Mr. Huie and two of his daughters sold to the
Company approximately 27.3% of the outstanding partnership interests in
Harvey Hotel Companies for approximately $15.1 million in cash plus
interest.
As a result of these transactions, Holdings, Mr. Huie and the Harvey
Management Equity Holders became the stockholders of the Company, the
Company became the sole stockholder of United Inns, the Company became
the indirect owner of 99% of the outstanding partnership interests in
Harvey Hotel Companies, and in connection therewith, a wholly owned
subsidiary of the Company became the managing general partner of Harvey
Hotel Companies. Subsequently, one of Mr. Huie's daughters, who did not
participate in the Combination, sold her 1.0% limited partnership
interest in Harvey Hotel Companies (See Note 15).
The aggregate purchase price for Harvey Hotel Companies of $55 million in
stock and cash including the interests contributed by the Harvey
Management Equity Holders and Mr. Huie has been allocated, along with
acquisition costs of $1 million, to the net assets acquired. The net
assets contributed were valued at their estimated fair value on the basis
of an independent valuation performed by Holdings and as a result of the
cash paid for the 27.3% owned by Mr. Huie and his two daughters. The
excess of the purchase price over the net assets acquired of $71.5
million was principally allocated to land and buildings in accordance
with the purchase method of accounting.
F-12
<PAGE> 33
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS (CONTINUED)
UNITED INNS ACQUISITION (continued)
The consolidated statements of income for the Company includes the
results of operations for United Inns from February 1, 1995.
The following unaudited pro forma summary presents the combined results
of Harvey Hotel Companies as if United Inns had been acquired at the
beginning of 1995. The pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of the
results of operations that would actually have resulted had the
acquisition been in effect on the date indicated (in thousands):
<TABLE>
<CAPTION>
(Unaudited)
Month Ended
January 31, 1995
----------------
<S> <C>
Total revenues ................................. $13,142
Net income after extraordinary gain and
pro forma income tax expense ................ $ 1,111
</TABLE>
HOLIDAY INN ACQUISITION
On April 28, 1997, the Company acquired the ownership of 45 full-service
Holiday Inns and the management of an additional 15 Holiday Inn
properties, three of which were owned by joint ventures in which the
Company acquired a 50% interest (the owned hotels, management contracts
and joint venture interests, collectively referred to as the "Holiday Inn
Assets"). As consideration for the Holiday Inn Acquisition, the Company
paid $398 million in cash and issued 9,381,308 shares (pre-Stock Split)
of its common stock. The acquisition has been accounted for as a
purchase and the results of operations of the Holiday Inn Assets have
been included in the consolidated financial statements since April 28,
1997. The purchase price, including liabilities assumed in the
acquisition (principally deferred tax liabilities) was allocated to the
assets acquired, based upon their fair market values. The excess of the
purchase price over the estimated fair market value of the net assets
acquired was recorded as goodwill and is being amortized over 40 years.
The following unaudited pro forma summary presents the results of the
Company as if the Holiday Inn Acquisition and related refinancing
pursuant to the New Credit Facility (see Note 6) had occurred at the
beginning of 1996. The pro forma results have been prepared for
comparative purposes only and are not indicative of the results of
operations that would have occurred had the Holiday Inn Acquisition
occurred on the date indicated.
<TABLE>
<CAPTION>
(Unaudited)
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Total revenues ................................. $626,047 $571,876
Income before extraordinary item ............... $ 41,165 $ 31,981
Net income ..................................... $ 29,762 $ 31,981
</TABLE>
F-13
<PAGE> 34
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS (CONTINUED)
OTHER ACQUISITIONS
In addition to the Holiday Inn Acquisition, the Company completed the
following single-asset acquisitions in 1997 and 1996:
<TABLE>
<CAPTION>
Mortgage
Date Number Purchase Debt
Acquired Location of Rooms Price Assumed
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
December 1997 Milpitas (San Jose), CA 305 $ 4.25 million(1) $ --
December 1997 Philadelphia, PA 364 $25.50 million $13.4 million
October 1997 St. Louis, MO 318 $18.00 million $ 8.4 million
January 1997 Chicago, IL 378 $35.00 million $ --
May 1996 Plano, TX 161 $ 6.30 million $ --
</TABLE>
(1) The Holiday Inn - Milpitas was previously owned by a joint venture
in which the Company owned a 50% interest. The Company purchased
the remaining 50% interest in the venture for $4.25 million and,
concurrently with the acquisition, repaid all outstanding debt
associated with the property of $25.7 million.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Land ....................................... $ 169,611 $ 50,528
Buildings .................................. 1,152,383 406,682
Furniture, fixtures and equipment .......... 162,045 74,827
----------- -----------
1,484,039 532,037
Less accumulated depreciation .......... (76,172) (26,091)
----------- -----------
1,407,867 505,946
Assets held for sale (net of accumulated
depreciation of $0 and $4,980) ....... -- 38,279
Construction in progress ................... 31,300 8,339
----------- -----------
$ 1,439,167 $ 552,564
=========== ===========
</TABLE>
The Company's properties are predominantly full-service hotels that
operate in the upscale and mid-price with food and beverage segments of
the lodging industry under franchise agreements primarily with Holiday
Inn. The Company seeks to maintain a geographically diverse portfolio of
hotels to offset the effects of regional economic cycles. The Company
operates properties in 22 states, the District of Columbia and Canada,
including 13 hotels in California, 11 in Georgia, 27 in Texas, seven in
Florida, and six in Canada.
During fiscal year 1996, the Company classified certain limited-service
hotels as assets held for sale pursuant to the provisions of SFAS 121.
During 1997, the Company reclassified these assets as held and used,
therefore recording depreciation expense on these assets. The results of
operations for these limited-service properties included in the income
statement for the years ended December 31, 1997, 1996 and 1995 were (in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Total revenues ......................... $ 13,464 $ 16,398 $ 14,552
Operating income ....................... 2,186 5,580 4,020
</TABLE>
F-14
<PAGE> 35
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. MARKETABLE SECURITIES
In 1995, the Company classified certain equity securities as
Available-for-Sale Securities (per Statement of Financial Accounting
Standard No. 115, "Accounting for Certain Investments in Debt and Equity
Securities"). Unrealized gains were reported as a separate component of
stockholders' equity. In May 1996, management resolved to sell the
equity securities, and accordingly, the securities were reclassified as
Trading Securities and an unrealized gain of approximately $450,000 was
recorded in earnings in 1996. These securities were sold in August 1996.
6. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Senior Notes
11.22% due December 18, 2000 (net of discount) ........ $ 29,469 $ 68,340
Mortgage loans
Fixed rate:
7.66% due October 27, 2009 ......................... 455,000 --
7.458% due November 11, 2007 ....................... 144,834 --
8% due December 31, 2002 ........................... 40,263 42,126
8.55% due January 11, 2016 ......................... 14,324 14,626
9% due October 1, 2005 ............................. 13,401 --
9.5% due August 1, 2005 ............................ 8,366 --
Non-interest bearing due December 31, 2002 ......... 7,950 9,086
7.25% due September 30, 1997 ....................... -- 8,110
Variable rate:
7.75% Senior Term Facility due December 18, 1998 ... -- 66,976
10.26% due January 31, 2000 ........................ -- 9,300
10.25% due December 31, 1999 ....................... -- 6,899
8.5% due September 30, 1997 ........................ -- 1,500
Other long-term debt ...................................... 345 4,329
Capital leases ............................................ 3,367 1,402
----------------- -----------------
717,319 232,694
Less current portion .................................. (8,455) (15,769)
----------------- -----------------
Long-term debt, excluding current portion ... $ 708,864 $ 216,925
================= =================
</TABLE>
The mortgages are amortized using varying methods as provided in the
individual debt agreements. Substantially all of the Company's properties
and equipment are pledged as collateral on mortgage obligations.
The Company obtained the financing for the Holiday Inn Acquisition under
a new senior term facility which provided for up to $560 million
aggregate amount of term loan borrowings (the "New Credit Facility").
The New Credit Facility was utilized to repay existing debt of
approximately $134 million, to fund the cash portion of the Holiday Inn
Acquisition and related closing costs. The Company repaid $108 million
of borrowings from the New Credit Facility in May 1997 with proceeds from
the Offering (as defined in Note 10). The treatment of the extraordinary
costs related to the repayment of debt is more fully described in Note 8.
On October 28, 1997, the Company completed the refinancing of the existing
$560 million New Credit Facility. The new financing (the "Refinancing")
has two tranches: (a) $145 million at a fixed interest rate of 7.458%, a
term of 10 years, and secured by 15 hotel properties; and, (b) $455
million at a fixed interest rate of 7.66%, a term of 12 years, and secured
by 62 hotel properties.
F-15
<PAGE> 36
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT (CONTINUED)
acquisitions and for other corporate purposes.
The Company prepaid $40 million of its 11.22% Senior Secured Notes (the
"Senior Notes") in December 1997. In conjunction with the prepayment,
the Company amended the Senior Note indenture to allow for a more
flexible prepayment schedule. In connection with the Refinancing,
Bristol Hotel Operating Company, a wholly owned subsidiary of the
Company, became a joint and several guarantor of the Senior Notes
along with Bristol Hotel Asset Company.
As discussed in Note 15, portions of the mortgage loans associated with
three of the Company's properties have been allocated to a third party.
The aggregate maturities of long-term debt for the five years subsequent
to December 31, 1997, are as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
<S> <C>
1998 ........................ $ 8,455
1999 ........................ 8,387
2000 ........................ 38,421
2001 ........................ 9,146
2002 ........................ 34,230
Thereafter ............. 618,680
--------
$717,319
========
</TABLE>
7. INCOME TAXES
Components of income tax expense from continuing operations for the years
ended December 31, 1997 and 1996 and the eleven months ended December 31,
1995, consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Federal:
Current......... $ 12,683 $ 4,486 $ 3,245
Deferred........ 4,637 5,301 (579)
State:
Current......... 1,837 282 190
Deferred........ 509 332 (34)
Canada:
Current......... 1,618 -- --
Deferred........ 723 -- --
-------- -------- --------
$ 22,007 $ 10,401 $ 2,822
======== ======== ========
</TABLE>
Components of income tax benefit from extraordinary items for the years
ended December 31, 1997 and 1996, consist of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Federal:
Current ............................ $ 7,358 $ --
Deferred ........................... -- --
State:
Current ............................ 1,098 --
Deferred ........................... -- --
-------- --------
$ 8,456 $ --
======== ========
</TABLE>
F-16
<PAGE> 37
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
The Company estimates that its effective tax rate for 1997 approximated
39.9%. The actual income tax expense for the year ended December 31,
1997, is computed by applying the U. S. federal statutory income tax
rate, adjusted as follows:
<TABLE>
<S> <C>
Income tax expense at the U. S. federal statutory rate ................... 35.0%
State income taxes, net of federal benefit ............................... 3.6%
Permanent differences and effect of higher Canadian tax rates ............ 1.3%
----
39.9%
====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1997
and December 31, 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Purchase accounting adjustments to
land and building ............................... $248,866 $ 85,134
Other .............................................. 994 --
-------- --------
Gross deferred tax liabilities ................. 249,860 85,134
-------- --------
Tax credit and NOL carryforwards ................... 4,011 5,502
Accrued reserves ................................... 1,823 2,192
Other .............................................. 1,496 1,821
-------- --------
Gross deferred tax asset ........................... 7,330 9,515
Valuation allowance ................................ -- --
-------- --------
Deferred tax asset ................................. 7,330 9,515
-------- --------
Net deferred tax liability ..................... $242,530 $ 75,619
======== ========
</TABLE>
The gross deferred tax liabilities relate principally to the temporary
differences caused by the purchase accounting adjustments recorded as a
result of the Combination and the Holiday Inn Acquisition. For financial
reporting purposes, the transactions were recorded under the principles
of purchase accounting and, accordingly, the basis of the assets have
been adjusted to fair market value. For tax reporting purposes, the
transactions resulted in the bases of the assets and liabilities being
carried forward at their adjusted bases with some adjustment for certain
gains recognized on the acquisition. This differing treatment has
created book bases in excess of tax bases and, accordingly, the related
deferred tax liabilities associated with these differences have been
recorded. As the Company depreciates and amortizes the bases of its
assets for book and tax purposes, it will record an expense for
depreciation and amortization in excess of that claimed for tax purposes.
This reversal of the temporary differences established through purchase
accounting will result in the Company recording a credit to deferred tax
expense for the tax effect of these differences.
The remaining deferred tax assets are expected to be realized in future
periods through use of existing tax NOL and tax credit carryforwards.
F-17
<PAGE> 38
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
For federal tax reporting purposes, net operating losses of $8,988,000
and tax credits of $657,000 generated by United Inns and Harvey Hotel
Corporation in prior years are available to be carried forward to periods
expiring as follows (in thousands):
<TABLE>
<CAPTION>
Year of Expiration Federal NOL Tax Credits
------------------ ----------- -----------
<S> <C> <C>
2001 ................... $ -- $ 142
2002 ................... -- 154
2003 ................... -- 158
2004 ................... -- 103
2005 ................... 3,924 58
2006 to 2010 ............... 5,064 42
----------- -----------
$ 8,988 $ 657
=========== ===========
</TABLE>
The losses and credits are subject to an annual loss limitation
equivalent of approximately $4.8 million due to the changes in ownership
of United Inns and Harvey Hotel Corporation which occurred in 1995.
These carryforwards are further limited as they were incurred prior to
the ownership of United Inns and Harvey Hotel Corporation by the Company.
Accordingly, these carryforwards are available only to offset income and
taxes associated with the operations of the hotels that generated them.
8. EXTRAORDINARY ITEMS
On April 28, 1997, the Company recognized an extraordinary loss of $2.2
million ($1.3 million, net of tax) related to the early extinguishment of
debt with proceeds from the New Credit Facility. The Company incurred
$479,000 of prepayment penalties and wrote off $1.7 million in deferred
financing costs.
The Company refinanced the New Credit Facility in October 1997 and
recognized an extraordinary loss of $14.0 million ($8.4 million, net of
tax) related to the early extinguishment of the New Credit Facility. The
loss on extinguishment reflects the write-off of deferred financing fees
related to the New Credit Facility.
The Company prepaid a portion of its Senior Notes on December 16, 1997.
The Company prepaid $40 million of principal, and recognized an
extraordinary loss of $5.0 million ($3.0 million, net of tax). The
extraordinary loss reflects the $2.4 million in prepayment penalties paid
by the Company for the Senior Notes, as well as the write-off of
approximately $2.6 million of deferred financing fees and discount on the
Senior Notes.
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Accounts payable ..................................... $ 2,921 $ 1,689
Accrued payroll, payroll taxes and benefits .......... 15,480 5,208
Accrued interest ..................................... 3,738 993
Accrued hotel operating expenses ..................... 1,405 858
Accrued Holiday Inn Acquisition
costs/conversion costs ........................... 1,104 --
Other ................................................ 2,718 1,878
----------------- -----------------
$ 27,366 $ 10,626
================= =================
</TABLE>
F-18
<PAGE> 39
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
10. STOCKHOLDERS' EQUITY
On April 28, 1997, the Company's shareholders voted to amend the
Company's certificate of incorporation to increase the number of
authorized shares of common stock from 75,000,000 to 150,000,000. As
part of the consideration for the Holiday Inn Acquisition, the Company
issued 9,381,308 shares (pre-split) of its common stock.
On May 16, 1997, the Company issued 2,750,000 (pre-Stock Split) shares of
its common stock at a price of $36 per share (the "Offering"). The
Company issued an additional 412,500 shares (pre-Stock Split) on May 28,
1997, pursuant to an over-allotment agreement with the underwriters of
the Offering. Proceeds from the issuances were approximately $108
million (net of costs of $6.3 million).
NON-EMPLOYEE DIRECTOR OPTIONS
The Company instituted a Stock Option Plan for Non-Employee Directors
(the "Director Plan") in 1995. Only members of the board who are not
employees of the Company or an employee of a 10% beneficial owner or an
affiliate thereof will be eligible for option grants thereunder (an
"Eligible Director"). An Eligible Director receives an option to
purchase 7,500 shares of Common Stock at an exercise price equal to the
market value on the date the individual becomes a director, and those
options shall become exercisable 34% at the first next annual
shareholders' meeting at which the individual is a director, and 33% at
each of the next two consecutive years during which the individual is a
director. In addition, the Eligible Director will receive options to
purchase 7,500 shares at each annual meeting during which the individual
is a director, exercisable on the date of the next annual shareholders'
meeting at which the individual is a director. As of December 31, 1997,
a total of 52,500 options had been granted to the three Eligible
Directors on the board, 25,050 of which are currently exercisable.
EMPLOYEE OPTIONS
Under the Amended and Restated 1995 Equity Incentive Plan, the Company
may award to participating officers and employees, options to purchase
the Company's stock. Employee stock options may be granted to officers
and employees with an exercise price generally not less than the fair
market value of the common stock at the date of grant. Options expire at
10 years from date of grant. Options issued prior to December 31, 1995,
have cliff vesting from 1998 - 2000 and options issued on or after
January 1, 1996, vest ratably over a four- or five-year period from the
date of the grant. There were 2,069,441 employee options outstanding at
December 31, 1997, of which 82,800 were exercisable.
SFAS 123 DISCLOSURE
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), effective for fiscal years
beginning after December 15, 1995. SFAS 123 encourages, but does not
require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to
account for stock-based compensation using the intrinsic value method
prescribed in Accounting Pronouncement Bulletin Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). Accordingly,
compensation cost for stock options is measured as the excess, if any, of
the market price of the Company's stock at the date of the grant over the
amount the employee must pay to acquire the stock. The Company,
therefore, does not believe that the implementation of SFAS 123 has had a
material adverse impact on the Company's financial position or results of
operations.
F-19
<PAGE> 40
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
10. STOCKHOLDERS' EQUITY (CONTINUED)
SFAS 123 DISCLOSURE (continued)
However, had compensation cost for these plans been determined consistent
with the method of SFAS No. 123, the Company's net income and earnings
per share would have been reduced to the following pro forma amounts
(dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED ELEVEN MONTHS ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Net Income As Reported $ 20,473 $ 17,749 $ 3,061
Pro Forma 19,060 16,865 2,621
Basic EPS As Reported 0.55 0.71 0.17
Pro Forma 0.51 0.68 0.15
Diluted EPS As Reported 0.53 0.70 0.17
Pro Forma 0.50 0.67 0.15
</TABLE>
A summary of the status of the Company's stock option plan at December
31, 1997, 1996 and 1995, (adjusted for Stock Split) and changes during
the years then ended is presented in the table and narrative below:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------- --------------------------- ----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- ---------------- ---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 ... 1,613,363 $ 10.57 1,190,766 $ 8.41 -- $ --
Options granted ............ 520,400 25.06 435,000 16.39 1,190,766 8.41
Options exercised .......... (6,929) 16.47 -- -- --
Options expired ............ (4,893) 9.78 (12,403) 8.33 -- --
---------- ---------- ---------- ---------- ---------- ----------
Options outstanding at
December 31 ............. 2,121,941 $ 14.10 1,613,363 $ 10.57 1,190,766 $ 8.41
========== ========== ========== ========== ========== ==========
Options exercisable at
December 31 ............. 107,850 $ 16.60 5,100 $ 15.00 -- --
========== ========== ========== ========== ========== ==========
Weighted average fair value
of options .............. $ 7.82 $ 5.76 $ 4.11
========== ========== ==========
</TABLE>
The 2,121,941 options outstanding at December 31, 1997, have exercise
prices between $8.33 and $28.25 with a weighted average exercise price of
$14.10 and a weighted average remaining contractual life of 8.1 years.
At December 31, 1997, 107,850 of these options (with a weighted average
exercise price of $16.60) are exercisable.
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1997, 1996 and 1995;
risk-free interest rates from 5.30% to 7.04%; no expected dividend
yields; expected lives of one to seven years; expected volatility of
33.37%.
F-20
<PAGE> 41
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
11. OPERATING LEASES
The Company leases certain land, office space and equipment under
noncancellable operating lease commitments. Minimum rentals due under
these agreements for the next five years and thereafter are as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C>
1998 ..................... $ 11,933
1999 ..................... 11,976
2000 ..................... 12,046
2001 ..................... 12,029
2002 ..................... 11,887
Thereafter .................. 216,075
---------
$ 275,946
=========
</TABLE>
Leases include long-term ground leases for certain hotels, generally with
renewal options. Certain leases contain provisions for the payment of
contingent rentals based on a percentage of sales.
The Company leases certain hotel space to third-party vendors. Future
minimum rentals to be received under noncancellable operating leases that
have initial or remaining lease terms in excess of one year are as
follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C>
1998 ..................... $ 3,582
1999 ..................... 3,562
2000 ..................... 3,289
2001 ..................... 3,116
2002 ..................... 2,720
Thereafter .................. 13,868
----------
$ 30,137
==========
</TABLE>
12. MANAGEMENT CONTRACTS
The Company acquired the management of 15 hotels in the Holiday Inn
Acquisition, three of which were owned by joint ventures in which the
Company owned a 50% interest. The purchase price allocated to these
contracts at April 28, 1997 was $4.4 million and is being amortized on a
straight-line basis over the remaining lives of the agreements, which
range from one to 11 years. The amortization of the purchase price
recorded in 1997 was $878,000. Management fee income was $4.9 million in
1997, $2.5 million in 1996, and $1.4 million in 1995. These management
contracts may contain provisions which allow the third- party owner to
terminate the contract for such reasons as sale of the property, for
cause or without cause. Therefore, the Company cannot guarantee that it
will continue to manage these properties to the contract expiration date.
The Company acquired the remaining 50% interest in one of the joint
ventures in which it was a partner in December 1997. (See Note 13.)
13. INVESTMENTS IN JOINT VENTURES
The Company acquired 50% interests in three joint ventures in the Holiday
Inn Acquisition. The purchase price allocated to these joint ventures
was approximately $12 million and is being amortized on a straight-line
basis over the estimated life of the assets acquired. Amortization
expense of $308,000 was recorded in 1997.
F-21
<PAGE> 42
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
13. INVESTMENTS IN JOINT VENTURES (CONTINUED)
On December 11, 1997, the Company acquired the remaining 50% interest in
the Milpitas Joint Venture for $4.25 million. Concurrently with the
acquisition, the Company paid off all outstanding debt related to the
property of $25.7 million. None of the original $12 million purchase
price allocated to the joint ventures in the Holiday Inn Acquisition was
attributed to the Milpitas Joint Venture.
14. BENEFITS
Health (including fully insured term life and accidental death and
dismemberment), dental and disability coverage is provided to the
Company's employees through the Welfare Benefit Trust (the "Trust"). The
Company maintains varying levels of stop-loss and umbrella insurance
policies to limit the Company's per occurrence and aggregate liability in
any given year. Actual claims and premiums on stop-loss insurance,
medical and disability policies are paid from the Trust. The Trust is
funded through a combination of employer and employee contributions. The
Trust also pays work-related injury claims which are funded by the
employer for its employees in Texas. Since April 1, 1995, all employees
have been eligible for participation in the benefits provided through the
Trust. The Company provided $6.1 million and $2.9 million related to
these benefits for the years ended December 31, 1997 and 1996,
respectively.
The Company offers a Profit Sharing Plan and Trust ("401(k) Plan") to
certain employees. The 401(k) Plan is designed to be a qualified trust
under Section 401(a) of the Internal Revenue Code. Under the 401(k)
Plan, eligible employees are allowed to defer up to 16% of their income
on a pretax basis through contributions to the Plan; however, only the
first 6% of pretax income is subject to matching by the Company. The
Company may elect to make matching contributions of up to 50% of the
employees' matchable contributions subject to certain performance
measures of the Company. The Company provided for matching contributions
for the years ended December 31, 1997 and 1996 totaling $1.5 million and
$135,000, respectively.
15. COMMITMENTS AND CONTINGENCIES
Substantially all of the Company's hotel properties are (or will be in
the next year) operated pursuant to franchise or license agreements
("Franchise Agreements"), primarily with Holiday Inn Franchising, Inc. or
its affiliates. The Company also operates hotels under franchise
agreements with Marriott International, Inc., Hampton Inn (a division of
Promus Hotels, Inc.), Ramada Franchise Systems, Inc. and Days Inn Inc. of
America Franchising Inc. The Franchise Agreements generally require the
payment of a monthly royalty fee based on gross room revenue and various
other fees associated with certain marketing or advertising and
centralized reservation services, also generally based on gross room
revenues. The Franchise Agreements have various durations through the
year 2017, and generally may not be terminated without the payment of
substantial fees. Franchise fees of $19.5 million and $4.1 million were
paid during the years ending December 31, 1997 and 1996, respectively.
The Franchise Agreements generally contain specific standards for, and
restrictions and limitations on, the operation and maintenance of the
hotels which are established by the franchisors to maintain uniformity in
the system created by each such franchisor. Such standards generally
regulate the appearance of the hotel, quality and type of goods and
services offered, signage and protection of trademarks. Compliance with
such standards may from time to time require significant expenditures for
capital improvements.
The Company is currently involved in certain guest and customer claims,
employee wage claims and other disputes arising in the ordinary course of
business. In the opinion of management, the pending litigation will not
have a materially adverse effect on the Company's financial position or
results of operations.
In connection with the administration of the Dallas County Probate Court
of the estate of the deceased wife of H.K. Huie, Jr., one of Mr. Huie's
daughters (the "Plaintiff"), alleged self dealing and breach of duty and
F-22
<PAGE> 43
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
15. COMMITMENTS AND CONTINGENCIES (CONTINUED)
trust by Mr. Huie as executor and testamentary trustee under his wife's
will and in connection with his actions as the managing general partner
of Harvey Hotel Company and related partnerships and ventures (the
"Probate Proceeding"). Several of the Company's officers and certain
subsidiaries were also named defendants in the Probate Proceeding. In
November 1995, the Company and the Plaintiff entered into a settlement
agreement and release (the "Settlement Agreement") pursuant to which
Plaintiff agreed to release the Company, including its subsidiaries, from
the lawsuit. Pursuant to the Settlement Agreement, the Company paid an
aggregate of $2.4 million for the Plaintiff's 1% interest in Harvey Hotel
Company and a full release from all claims and causes of action.
However, at that time, the named officers remained defendants in the
Probate Proceeding. In the summer of 1996, during continuing mediation
with the officers, the Plaintiff threatened the Company with further
action, claiming fraud and misrepresentation in the negotiation of the
November 1995 Settlement Agreement. In August 1996, there was a final
resolution of the Probate Proceeding, a result of which the Company paid
an additional $0.75 million for the full satisfaction of all claims and
causes of action which could be asserted against the Company, its
subsidiaries or its officers. The Company had reserved $1.65 million for
this litigation. As a result, the Company recognized $0.9 million ($0.6
million after tax) as other income during the third quarter of 1996.
On March 28, 1997, the Company paid approximately $663,000 to the State
of Tennessee Department of Revenue in full settlement of all claims for
franchise and excise tax related to United Inns, Inc.
All of the owned hotels of the Company have undergone Phase I
environmental assessments which generally provide a physical inspection
and data base search but not soil or groundwater analysis. In addition,
most of the Company's hotels have been inspected to determine the
presence of asbestos-containing materials ("ACM's"). While ACM's are
present in certain of the Company's properties, operations and
maintenance programs for maintaining such ACM's have been implemented, or
the ACM's have been scheduled to be or have been abated, at such hotels.
None of the environmental assessments conducted to date have revealed any
environmental condition that management believes would have a material
adverse effect on the Company's business, assets or results of
operations, nor is management aware of any such condition. However, it is
possible that these assessments have not revealed all potential
environmental liabilities or that there are material environmental
liabilities of which management is not aware.
In September 1995, the Company disposed of certain of its non-hotel
properties to HH Land Company, L.P. ("HH Land Company"). Upon
acquisition of the non-hotel properties, HH Land Company assumed all
liabilities associated with the non-hotel properties through a formal
indemnification agreement, including environmental liabilities associated
with the properties. The Company remains contingently liable for the
environmental costs associated with the properties. At such time that the
Company determines that it is not probable that HH Land Company will
fully pay the remediation costs related to the disposed properties, the
Company will recognize such liabilities.
The Company leases the land underlying several of its hotels under
various long-term leases through the year 2063. Lease payments under the
agreements were $11.0 million and $2.6 million in 1997 and 1996,
respectively.
F-23
<PAGE> 44
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
15. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company and Mr. Huie, representing various land ventures, are
co-borrowers of funds secured by Harvey Hotel - DFW Airport, Harvey Hotel
- Dallas, Bristol Suites, and the various related land parcels. The
Company and Mr. Huie agreed to an assignment of the debt to the various
unrelated land ventures resulting in the assignment of 23.73%, 24.24% and
22.18% of the debt associated with the borrowings for each property,
respectively. The related land parcels underlying each hotel are owned
by Mr. Huie through the land ventures. The total debt and the amount
allocated to Mr. Huie are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
Total Allocated Total Allocated
Debt to Huie Debt to Huie
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Harvey Hotel - DFW Airport ......... $ 24,275 $ 5,762 $ 25,581 $ 6,071
Harvey Hotel - Dallas .............. 7,442 1,802 7,600 1,843
Bristol Suites ..................... 19,378 4,298 20,756 4,604
</TABLE>
The Company is jointly and severally liable in the event of nonpayment by
Mr. Huie of the debt allocated. For December 31, 1997 and 1996, the
allocated amounts have not been reflected in the consolidated financial
statements of the Company. However, the Company does not record interest
expense on the allocated debt because payments made to Mr. Huie are
appropriately recorded as rental expense under the related land leases.
The land parcels at the respective hotels are security for the additional
liability.
16. RELATED PARTY TRANSACTIONS
HOTEL PROPERTIES AGREEMENT
Concurrently with the Holiday Inn Acquisition, the Company, and Holiday
Corporation and its affiliates (collectively, "HC") entered into a hotel
properties agreement (the "Hotel Properties Agreement"). Pursuant to the
Hotel Properties Agreement, the Company will offer to HC the opportunity
to enter into a standard HC franchise agreement for each hotel that
Bristol acquires, manages or develops that meets specified criteria. The
Hotel Properties Agreement requires that 85% of the rooms in the
Company's owned, leased and managed hotels be operated under a Holiday
Inn brand, subject to certain limitations and approvals. The above
provisions of the Hotel Properties Agreement will expire the earlier of
(i) the date that HC terminates its obligation at any time following 24
months after the Holiday Inn Acquisition (the "Holiday Notice") or (ii)
the date that HC no longer holds a controlling interest in the franchisor
of the Holiday Inn brands.
Additionally, the Company has a right of first refusal on any entity or
other interest meeting certain criteria that HC wishes to acquire or
develop, subject to certain limitations. HC can terminate its obligation
under this provision in accordance with the Holiday Notice.
The Company has agreed to enter into Franchise Agreements with HC
pursuant to which certain Bristol properties will be rebranded to Holiday
Inn brands, subject to normal franchising procedures. Franchise fees for
these rebranded hotels will equal 0% of room revenue for 1997, 1% in
1998, 3% in 1999 and 5% in 2000. Amounts paid to HC pursuant to
Franchise Agreements and related marketing, advertising and reservation
services were $21.8 million in 1997, including $13.1 million for
franchise royalty fees and $4.5 million of franchise marketing fees.
F-24
<PAGE> 45
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
16. RELATED PARTY TRANSACTIONS (CONTINUED)
INTERIM SERVICES AGREEMENT
The Company entered into an interim services agreement (the "ISA
Agreement") with Holiday Hospitality Corporation ("HHC") for HHC to
provide certain accounting, payroll, employee benefit, training,
treasury, management information and construction and design services to
Bristol for a transition period following the Holiday Inn Acquisition.
In consideration for such services, the Company reimbursed HHC for the
estimated cost incurred in connection with providing the services,
totaling $1.3 million for the year ended December 31, 1997. The ISA
Agreement expired in October 1997.
17. FAIR VALUE
The Company has estimated the fair value of its financial instruments at
December 31, 1997 and 1996, as required by Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of Financial
Instruments." The carrying values of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses are reasonable
estimates of their fair values. Marketable securities are carried at
fair value, which is determined based upon quoted market prices. The
carrying values of variable and fixed rate debt are reasonable estimates
of their fair values.
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
The unaudited consolidated quarterly results of operations for the
Company and the unaudited combined quarterly results of operations for
the Predecessor are as follows (in thousands):
<TABLE>
<CAPTION>
1995
---------------------------------------------------------------------
HARVEY HOTEL BRISTOL HOTEL COMPANY
COMPANIES FEBRUARY TO SECOND THIRD FOURTH
JANUARY 1995 MARCH QUARTER QUARTER QUARTER
------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues ...................................... $ 5,943 $ 29,910 $ 43,040 $ 46,205 $ 46,040
Operating income .............................. 1,932 6,221 8,016 5,484 6,874
Income (loss) before extraordinary item ....... 1,280 2,268 2,056 (290) 935
Net income (loss) ............................. 1,280 2,268 2,056 (290) (973)
Earnings per common share:
Income (loss) before extraordinary item:
Basic .................................. -- $ 0.13 $ 0.12 $ (0.02) $ 0.05
Diluted ................................ -- $ 0.13 $ 0.12 $ (0.02) $ 0.05
Net income (loss):
Basic .................................. -- $ 0.13 $ 0.12 $ (0.02) $ (0.05)
Diluted ................................ -- $ 0.13 $ 0.12 $ (0.02) $ (0.05)
Weighted average number of common and
common equivalent shares:
Basic .................................. -- 17,436,267 17,436,267 17,436,267 18,967,108
Diluted ................................ . -- 17,460,202 17,479,061 17,479,953 19,050,967
</TABLE>
F-25
<PAGE> 46
BRISTOL HOTEL COMPANY
HARVEY HOTEL COMPANIES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
18. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1996
--------------------------------------------------
BRISTOL HOTEL COMPANY
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues ..................................... $ 49,677 $ 51,237 $ 58,571 $ 52,355
Operating income ............................. 10,318 11,282 16,073 9,093
Income before extraordinary item ............. 3,863 4,375 6,835 2,676
Net income ................................... 3,863 4,375 6,835 2,676
Earnings per common share:
Income before extraordinary item:
Basic .................................. $ 0.16 $ 0.18 $ 0.28 $ 0.11
Diluted ................................ $ 0.15 $ 0.17 $ 0.27 $ 0.10
Net income:
Basic .................................. $ 0.16 $ 0.18 $ 0.28 $ 0.11
Diluted ................................ $ 0.15 $ 0.17 $ 0.27 $ 0.10
Weighted average number of common and
common equivalent shares:
Basic ..................................... 24,848,760 24,848,760 24,848,760 24,848,760
Diluted ................................... 25,511,455 25,552,515 25,530,737 25,524,361
</TABLE>
<TABLE>
<CAPTION>
1997
------------------------------------------------------
BRISTOL HOTEL COMPANY
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues ..................................... $ 58,261 $ 131,615 $ 163,005 $ 151,637
Operating income ............................. 13,301 26,909 32,252 25,434
Income before extraordinary item ............. 4,410 9,622 12,066 7,116
Net income (loss) ............................ 4,410 8,284 12,066 (4,287)
Earnings per common share:
Income (loss) before extraordinary item:
Basic .................................. $ 0.18 $ 0.26 $ 0.28 $ 0.16
Diluted ................................ $ 0.17 $ 0.25 $ 0.27 $ 0.16
Net income (loss):
Basic .................................. $ 0.18 $ 0.22 $ 0.28 $ (0.10)
Diluted ................................ $ 0.17 $ 0.22 $ 0.27 $ (0.10)
Weighted average number of common and
common equivalent shares:
Basic ..................................... 24,848,760 37,041,425 43,635,401 43,636,444
Diluted ................................... 25,796,808 37,997,744 44,643,133 44,629,022
</TABLE>
Earnings per common share amounts and weighted average number of common
and common equivalent shares have been retroactively adjusted to reflect
the July 15, 1997 Stock Split and calculated in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share." The sum of the earnings (loss) per common share for the four
quarters differs from the annual earnings per common share due to the
required method of computing the weighted average number of shares in
the respective periods.
19. SUBSEQUENT EVENT - OMAHA ACQUISITION
On February 2, 1998, the Company announced that it had entered into a
definitive agreement to acquire 20 midwestern hotels. Under the
transaction, the Company will acquire by merger Omaha Hotel, Inc. and
will purchase an individual hotel. The total consideration for these
assets is as follows: $19.1 million in cash, $40.9 million of assumed
debt and 1.43 million shares of the Company's common stock. The
portfolio consists of nine full-service Holiday Inns, five Holiday Inns
Express hotels, five Hampton Inns and one Homewood Suites with locations
in Omaha, Nebraska; Moline, Illinois; Davenport, Iowa; central Kansas
and Midland/Odessa, Texas. The acquisition is anticipated to close in
April 1998.
20. SUBSEQUENT EVENT - PROPOSED MERGER
On March 24, 1998, the Company announced a proposed merger with FelCor
Suite Hotels, Inc. ("FelCor"), subject to approval by shareholders of
both companies and final documentation. Under the terms of the proposed
merger, FelCor will acquire the real estate holdings and associated debt
of the Company in return for 31.7 million shares of newly issued FelCor
stock. Prior to the merger, the Company will spin off, as a taxable
dividend, all of its non-real estate holdings into a newly formed public
company to be known as Bristol Hotels & Resorts, Inc. ("New Bristol").
Each of the Company's outstanding common shares will be exchanged for
.685 shares of FelCor common stock. In addition, Bristol shareholders
will receive a taxable distribution of one share of New Bristol common
stock for each share of Bristol.
The merger is expected to close by the end of June 1998.
F-26
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Company has duly caused this Form 10-K to be signed on its behalf by
the undersigned, thereunto duly authorized, on this 30th day of March, 1998.
BRISTOL HOTEL COMPANY
BY: /s/ John D. Bailey
------------------------------------
John D. Bailey
Vice President, Controller and
Chief Accounting Officer
Pursuant to the requirements of the Securities Act of 1934, this Form 10-K has
been signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C>
/s/ Donald J. McNamara
------------------------------------------
Donald J. McNamara Chairman of the Board; Director
/s/ J. Peter Kline
------------------------------------------
J. Peter Kline President and Chief Executive Officer; Director
/s/ John A. Beckert
------------------------------------------
John A. Beckert Executive Vice President and
Chief Operating Officer; Director
/s/ Jeffrey P. Mayer
------------------------------------------
Jeffrey P. Mayer Senior Vice President and
Chief Financial Officer
/s/ John D. Bailey
------------------------------------------
John D. Bailey Vice President, Controller and
Chief Accounting Officer
/s/ David A. Dittman
------------------------------------------
David A. Dittman Director
/s/ Kurt C. Read
------------------------------------------
Kurt C. Read Director
/s/ Robert H. Lutz, Jr.
------------------------------------------
Robert H. Lutz, Jr. Director
/s/ Reginald K. Brack, Jr.
------------------------------------------
Reginald K. Brack, Jr. Director
/s/ Richard C. North
------------------------------------------
Richard C. North Director
/s/ Craig H. Hunt
------------------------------------------
Craig H. Hunt Director
</TABLE>
<PAGE> 48
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
2.1 Agreement and Plan of Merger dated as of December 15, 1996
among Holiday Corporation, Holiday Inns, Inc. and the Company
(incorporated by reference to Annex A of the Company's 1997
Proxy Statement).
2.2 Amendment No. 1 to Agreement and Plan of Merger dated as of
April 1, 1997 among Holiday Corporation, Holiday Inns, Inc.
and the Company (incorporated by reference to Exhibit 2.1.b of
the Company's Current Report on Form 8-K dated April 28,
1997).
2.3 Agreement and Plan of Merger dated as of January 30, 1998
among Bristol Hotel Company, Bristol Omaha Hotel Company, and
Omaha Hotel Inc., et al.
2.4 Agreement and Plan of Merger as of March 23, 1998 among
Bristol Hotel Company and FelCor Suites Hotel, Inc.
3.1 Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference Exhibit 4.1 of the
Company's Form S-8 Registration Statement [333-27633] dated
May 22, 1997).
3.2 Amended and Restated By laws of the Company as adopted and in
effect as of April 28, 1997 (incorporated by reference to
Exhibit 4.2 of the Company's Form S-8, Registration Statement
dated May 22, 1997).
4.1 Indenture, dated as of December 18, 1995, among the Company as
issuer, Bristol Hotel Asset Company as guarantor, and The Bank
of New York as trustee (incorporated by reference to Exhibit
4.1 of the Company's Annual Report of Form 10-K for the year
ended December 31, 1995).
4.2 Form of Old Notes (included in Exhibit 4.1).
4.3 Form of New Notes (included in Exhibit 4.1).
4.4 Exchange and Registration Rights Agreement, dated as of
December 18, 1995, among the Company, Bristol Hotel Asset
Company, Bankers Trust Company and New England Cayman
Corporation (incorporated by reference to Exhibit 4.4 to the
Form S-4).
10.1 Form of Indemnification Agreement among the Company and each
of its directors (incorporated herein by reference to Exhibit
10.1 of the Company's Registration Statement on Form S-1 [File
No. 33-97916], as amended [the "Registration Statement"]).
10.2 Registration Rights Agreement, dated as of February 27, 1995,
among the Company, United/Harvey Holdings, L.P. and the other
parties signatory thereto (incorporated by reference to
Exhibit 10.10 to the Registration Statement).
10.3 Stockholders' Agreement, dated as of February 27, 1995, among
the Company, United/Harvey Holdings, L.P. and the other
parties signatory thereto (incorporated by reference to
Exhibit 10.11 to the Registration Statement).
10.4 Put/Call Option Agreement, dated as of February 27, 1995,
between the Company and H. K. Huie, Jr. (incorporated by
reference to Exhibit 10.12 to the Registration Statement).
10.5 Management Bonus Plan (incorporated by reference to Exhibit
10.16 to the Registration Statement).
</TABLE>
<PAGE> 49
<TABLE>
<S> <C>
10.6 Amended and Restated 1995 Equity Incentive Plan (incorporated
by reference to Exhibit 10.15 to the Form S-4).
10.7 Stock Option Plan for Non-Employee Directors (incorporated
herein by reference to Exhibit 10.16 to the Form S-4).
10.8 Amended and Restated Put/Call Option Agreement, Amendment to
Combination Agreement, Stockholders' Agreement, and
Registration Rights Agreement and Termination of Consulting
Agreement, dated as of November 16, 1995, among the Company,
United/Harvey Holdings, L.P., J. Peter Kline, John A. Beckert,
Richard N. Beckert, Edward J. Rohling, Robert L. Miars, Harvey
Hotel Company, Ltd., Harvey HTS, Inc., Endlease, Inc. and
Harvey Hotel DFW, Inc. (incorporated by reference to Exhibit
10.19 to the Registration Statement).
10.9 Stockholders' Agreement dated as of April 28, 1997 by and
among United/Harvey Holdings, L.P., Holiday Corporation, Bass
America, Inc. Bass plc and the Company (incorporated by
reference to Exhibit 2 of Schedule 13-D filed May 8, 1997).
10.10 Loan Agreement dated as of October 10, 1997 among Bristol
Lodging Company, Bristol Lodging Holding Company, Nomura Asset
Capital Corporation as administrative agent and collateral
agent for Lenders and Bankers Trust Company as co-agent for
lenders.
10.11 Loan Agreement dated as of October 10, 1997 among Bristol
Hotel Asset Company, BHAC Canada, Inc., Nomura Asset Capital
Corporation as administrative agent and collateral agent for
Lenders and Bankers Trust Company as co-agent for Lenders.
10.12 Employment Agreement between the Company and J. Peter Kline
effective as of April 28, 1997.
10.13 Employment Agreement between the Company and John A. Beckert
effective as of April 28, 1997.
10.14 Earnest Money Contract by and between Highland Manor, Inc. and
Bristol Omaha Hotel Company dated as of January 30, 1998.
11.1 Computation of Earnings per Common Share.
16.1 Letter of Price Waterhouse LLP dated June 20, 1996 regarding
change in certifying accountant (incorporated by reference to
Exhibit 16.1 of the Current Report on Form 8-K dated June 17,
1996).
21.1 List of Subsidiaries of the Company.
27.1 Financial Data Schedule.
</TABLE>
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================================================================================
EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
AMONG
BRISTOL HOTEL COMPANY,
BRISTOL OMAHA HOTEL COMPANY,
OMAHA HOTEL, INC.,
AND
THE SHAREHOLDERS LISTED ON
THE SIGNATURE PAGES HEREOF
JANUARY 30, 1998
================================================================================
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TABLE OF CONTENTS
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ARTICLE 1
THE MERGER...............................................................................................2
1.1 The Merger.............................................................................2
1.2 Effective Time.........................................................................2
1.3 Effect of the Merger...................................................................2
1.4 Certificate of Incorporation: Bylaws...................................................2
1.5 Directors and Officers.................................................................2
1.6 Shares to be Issued; Effect on Capital Stock...........................................2
1.7 Dissenters' Shares.....................................................................5
1.8 Surrender of Certificates; Payment and Delivery of Merger Consideration................5
1.9 No Further Ownership Rights in Omaha Common Stock or
Omaha Preferred Stock..................................................................6
1.10 Tax Consequences Treatment.............................................................6
1.11 Working Capital Statement; Closing Working Capital Adjustment; Reserves................6
1.12 Earnest Money..........................................................................8
1.13 Taking of Necessary Action: Further Action.............................................8
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
OMAHA AND THE SHAREHOLDERS...............................................................................9
2.1 Organization of Omaha..................................................................9
2.2 Company Capital Structure..............................................................9
2.3 Subsidiaries...........................................................................9
2.4 Authority.............................................................................10
2.5 Omaha Financial Statements............................................................10
2.6 Indebtedness; No Undisclosed Liabilities..............................................10
2.7 No Changes............................................................................11
2.8 Tax and Other Returns and Reports.....................................................11
2.9 No Restrictions on Business Activities................................................12
2.10 Title to Properties; Absence of Liens and Encumbrances; Other Assets..................12
2.11 Intellectual Property.................................................................12
2.12 Material Agreements...................................................................13
2.13 Sufficiency of Certain Items..........................................................13
2.14 Governmental Authorization............................................................14
2.15 Litigation............................................................................14
2.16 Accounts Receivable...................................................................14
2.17 Minute Book...........................................................................14
2.18 Environmental and OSHA................................................................14
2.19 Brokers' and Finders' Fees............................................................15
2.20 Labor Matters.........................................................................15
2.21 Insurance.............................................................................16
2.22 Compliance with Laws..................................................................16
2.23 Other Rights/Commitments..............................................................17
2.24 FIRPTA................................................................................17
2.25 Employee Benefit Plans................................................................17
2.26 Assessments...........................................................................18
2.27 Condition of Improvements; Core Modernization/Product Improvement Plans...............18
2.28 ADA Compliance........................................................................19
2.29 Representations Complete..............................................................19
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2.30 Investment Representations............................................................19
2.31 Hart-Scott-Rodino Filing..............................................................21
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BRISTOL AND BRISTOL OMAHA.............................................21
3.1 Organization, Standing and Power......................................................21
3.2 Capital Structure.....................................................................21
3.3 Authority.............................................................................21
3.4 SEC Documents; Bristol Financial Statements...........................................22
3.5 Brokers and Finders' Fees.............................................................22
3.6 No Ownership of Omaha Common Stock or Omaha Preferred Stock...........................22
3.7 Litigation............................................................................23
3.8 Representations Complete..............................................................23
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME.....................................................................23
4.1 Surveys and Title Commitments.........................................................23
4.2 Inspection and Audit..................................................................23
4.3 Conduct of Business of Omaha Pending the Closing......................................24
4.4 No Solicitation.......................................................................27
ARTICLE 5
ADDITIONAL AGREEMENTS...................................................................................28
5.1 Shareholder Consent...................................................................28
5.2 Confidentiality.......................................................................28
5.3 Covenants Not to Compete..............................................................29
5.4 Continued Cooperation.................................................................29
5.5 Consents..............................................................................29
5.6 Compliance With Rule 144 and the Securities Act.......................................30
5.7 Legal Requirements....................................................................30
5.8 Best Efforts, Additional Documents and Further Assurances.............................30
5.9 Liquor Licenses.......................................................................30
5.10 Office Lease..........................................................................31
ARTICLE 6
CONDITIONS TO THE MERGER................................................................................31
6.1 Conditions to Obligations of Omaha and the Shareholders...............................31
6.2 Conditions to the Obligations of Bristol and Bristol Omaha............................32
ARTICLE 7
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION AND HOLDBACK............................................................................34
7.1 Survival of Representations and Warranties: Indemnification...........................34
7.2 Indemnification by Bristol............................................................37
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER.......................................................................37
8.1 Termination...........................................................................37
8.2 Effect of Termination.................................................................38
8.3 Amendment.............................................................................38
8.4 Extension; Waiver.....................................................................38
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ARTICLE 9
GENERAL PROVISIONS......................................................................................39
9.1 Notices...............................................................................39
9.2 Interpretation........................................................................40
9.3 Counterparts; Effectiveness...........................................................40
9.4 Miscellaneous.........................................................................40
9.5 Governing Law.........................................................................40
9.6 Attorneys' Fees.......................................................................40
9.7 Rules of Construction.................................................................40
9.8 Consents..............................................................................40
9.9 Definitions...........................................................................40
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LIST OF EXHIBITS
Exhibit 6.1(e) Form of Opinion of Counsel for Bristol
Exhibit 6.2(h) Form of Opinion of Counsel for Omaha and the Shareholders
LIST OF SCHEDULES
Schedule 1.11 Closing Working Capital Statement
Schedule 2.2 Capitalization
Schedule 2.3 Omaha Subsidiaries
Schedule 2.5 Omaha Financial Statements
Schedule 2.6 Omaha Indebtedness
Schedule 2.7 Changes Since Date of Omaha Balance Sheet
Schedule 2.8 Taxes
Schedule 2.10(a) Hotel Real Property
Schedule 2.10(b) Equipment Leases; Liens
Schedule 2.11 Intellectual Property
Schedule 2.12(a) Material Agreements
Schedule 2.12(b) Required Consents
Schedule 2.14 Governmental Authorizations
Schedule 2.15 Litigation
Schedule 2.20 Employees
Schedule 2.21 Insurance
Schedule 2.25 Employee Benefit Plans
Schedule 2.26 Assessments
Schedule 2.27(b) Core Modernization; Product Improvement Plans
Schedule 4.2(b) Due Diligence Deliveries
Schedule 4.3 Interim Conduct of Business
Schedule 5.10 Occupied Premises
Schedule 6.2(l) Title Policy Amounts
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and
entered into as of January 30, 1998, among BRISTOL HOTEL COMPANY, a Delaware
corporation ("BRISTOL"), BRISTOL OMAHA HOTEL COMPANY, a Delaware corporation and
a wholly owned subsidiary of Bristol ("BRISTOL OMAHA"), OMAHA HOTEL, INC., a
Kansas corporation ("OMAHA"), and the common and preferred shareholders of Omaha
listed on the signature pages of this Agreement, who constitute all of the
shareholders of Omaha (collectively, the "SHAREHOLDERS").
RECITALS:
A. Omaha and its subsidiaries own 19 hotels and motels and related
property and assets (collectively, the "HOTELS"). Omaha also owns or leases
other property and assets not related to or used in connection with the Hotels.
B. The Boards of Directors of each of Omaha, Bristol and Bristol Omaha
believe it is in the best interests of each company and their respective
shareholders that Omaha and Bristol Omaha combine into a single company through
the statutory merger of Omaha with and into the Bristol Omaha (the "MERGER"),
with Bristol Omaha surviving the Merger, and, in furtherance thereof, have
approved the Merger.
C. Pursuant to the Merger, among other things, the outstanding shares
of Omaha Common Stock (as hereinafter defined in Section 1.6) and Omaha
Preferred Stock (as hereinafter defined in Section 1.6) will be converted into
shares of Bristol Common Stock (as hereinafter defined in Section 1.6) at the
respective conversion ratios determined herein and, in addition thereto, cash
consideration will be paid to the Shareholders who own shares of Omaha Common
Stock, as specified herein.
D. Omaha, Bristol, Bristol Omaha and the Shareholders desire to make
certain representations and warranties and other agreements in connection with
the Merger.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
F. In connection with this Agreement, Highland Manor, Inc., a Kansas
corporation ("HIGHLAND"), and Bristol Omaha have entered into a Purchase and
Sale Agreement (the "GREAT BEND PURCHASE AGREEMENT") pursuant to which Bristol
Omaha will have the right to purchase from Highland, and Highland will sell to
Bristol Omaha, the Great Bend Holiday Inn in Great Bend, Kansas (the "GREAT BEND
HOTEL"). The Merger and other transactions contemplated by this Agreement and
the purchase of the Great Bend Hotel and other transactions contemplated by the
Great Bend Purchase Agreement are sometimes hereinafter collectively referred to
as the "OMAHA TRANSACTIONS."
AGREEMENT:
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
<PAGE> 7
ARTICLE 1
THE MERGER
1.1 The Merger. At the Effective Time (as hereinafter defined in
Section 1.2) and subject to and upon the terms and conditions of this Agreement
and the applicable laws of the States of Delaware and Kansas, Omaha will be
merged with and into Bristol Omaha, the separate corporate existence of Omaha
will cease and Bristol Omaha will continue as the surviving corporation. Bristol
Omaha, as the surviving corporation after the Merger, is hereinafter sometimes
referred to as the "SURVIVING CORPORATION."
1.2 Effective Time. As promptly as practicable after the satisfaction
or waiver of the conditions set forth in Article 6, the parties hereto will
cause the Merger to be consummated by filing a Certificate of Merger (the
"CERTIFICATE OF MERGER") with the Secretaries of State of Delaware and Kansas in
such form as required by, and executed in accordance with the relevant
provisions of, the laws of the States of Delaware and Kansas (the time at which
such filings have been made in Delaware and Kansas will be referred to herein as
the "EFFECTIVE TIME"). The closing of the transactions contemplated hereby (the
"CLOSING") will take place at 10:00 a.m. Central Time at such place as Bristol
and Omaha will determine, on the date of the Effective Time, but in any event on
or prior to the later of (a) 30 days after the expiration of the Due Diligence
Period (as hereinafter defined in Section 4.2(c)) and (b) April 30, 1998 (the
"CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger will be as provided in the applicable provisions of the laws of the
States of Delaware and Kansas. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time all the estate, assets, property,
rights, privileges, powers and franchises of Bristol Omaha and Omaha will vest
in the Surviving Corporation, and all debts, liabilities and obligations of
Bristol Omaha and Omaha will become the debts, liabilities and obligations of
the Surviving Corporation.
1.4 Certificate of Incorporation: Bylaws.
(a) The Certificate of Merger will be in substantially the
form agreed upon by the parties hereto and may provide that at the Effective
Time the Certificate of Incorporation of the Surviving Corporation be amended as
therein provided and may thereafter be amended as provided by law and such
Certificate of Incorporation.
(b) The Bylaws of Bristol Omaha, as in effect immediately
prior to the Effective Time, will be the Bylaws of the Surviving Corporation
until thereafter amended.
1.5 Directors and Officers. The directors and officers of the Surviving
Corporation will be the directors and officers of Bristol Omaha immediately
prior to the Merger, each such director to hold such position in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation, and
each such officer to hold such title until his or her respective successor is
duly elected or appointed and qualified.
1.6 Shares to be Issued; Effect on Capital Stock.
(a) Purchase Price: Assuming Closing Working Capital (as
defined below) is $0, the total value of the Omaha Transactions is $100,000,000,
consisting of: (i) the outstanding principal balance
2
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of the aggregate Omaha Indebtedness (as hereinafter defined in Section 2.6) and
all accrued but unpaid interest and other charges thereon on the Closing Date
(which amounts are expected to aggregate $40,914,332 on the Closing Date); (ii)
payment of the cash purchase price for the Great Bend Hotel under the Great Bend
Purchase Agreement equal to $3,500,000 (the "GREAT BEND PURCHASE PRICE"); (iii)
payment of the aggregate purchase price for all of the shares of preferred
stock, par value $100 per share, of Omaha (the "OMAHA PREFERRED STOCK") issued
and outstanding as of the Closing Date equal to $1,950,000 (the "PREFERRED STOCK
MERGER CONSIDERATION"); and (iv) payment of the aggregate purchase price for all
of the shares of issued and outstanding shares of common stock, par value $100
per share, of Omaha (the "OMAHA COMMON STOCK") as of the Closing Date in an
amount equal to the difference of (A) $100,000,000 less (B) the sum of the Omaha
Indebtedness plus the Great Bend Purchase Price plus the Preferred Stock Merger
Consideration (the "COMMON STOCK PURCHASE PRICE"). Pursuant to the Certificate
of Merger, at the Effective Time, all issued and outstanding shares of the Omaha
Preferred Stock, together with all accrued but unpaid dividends thereon, will be
converted into and exchangeable for that aggregate number of shares of the
common stock, par value $0.01 per share, of Bristol (the "BRISTOL COMMON STOCK")
that, subject to adjustment as described in Section 1.6(b), is equal to (i) the
Preferred Stock Merger Consideration divided by (ii) $28.00. In addition,
pursuant to the Certificate of Merger, at the Effective Time all issued and
outstanding shares of Omaha Common Stock will be converted into and exchangeable
for (i) that aggregate number of shares of Bristol Common Stock (such number of
shares being referred to herein as the "STOCK CONSIDERATION") that, subject to
adjustment as described in Section 1.6(b), is equal to the quotient of (A)
$38,050,000 (the "STOCK PURCHASE PRICE"), divided by (B) $28.00, and (ii) cash
in an amount equal to the excess of the Common Stock Purchase Price over
$38,050,000 (the "CASH CONSIDERATION" and, together with the Stock
Consideration, the "COMMON STOCK MERGER CONSIDERATION"). The Preferred Stock
Merger Consideration and the Common Stock Merger Consideration are sometimes
collectively referred to herein as the "MERGER CONSIDERATION." Subject to the
terms and conditions of this Agreement, as of the Effective Time, by virtue of
the Merger and without any action on the part of Bristol Omaha, Omaha or the
holder of any of the following securities, the following will occur:
(i) Conversion of Omaha Common Stock. Except as
provided in Section 1.6(a)(vi), each share of Omaha Common Stock issued
and outstanding immediately prior to the Effective Time (other than any
shares of Omaha Common Stock to be canceled pursuant to Section
1.6(a)(iii)) will be converted automatically into and exchangeable
automatically for the right to receive the amount of the Cash
Consideration and the Stock Consideration equal to the Conversion Ratio
(as defined below). Upon surrender of the certificate representing such
share of Omaha Common Stock in the manner provided in Section 1.8,
Bristol will pay to the surrendering Shareholder the amount of the Cash
Consideration to which such Shareholder is entitled and will, subject
to Section 1.8, instruct its transfer agent to issue to the
surrendering Shareholder certificates evidencing the number of shares
of Bristol Common Stock to which the surrendering Shareholder is
entitled. The "COMMON STOCK CONVERSION RATIO" will mean the quotient
(which will be rounded off at the nearest one hundred thousandth)
obtained by dividing (A) the Cash Consideration or the Stock
Consideration, as the case may be, by (B) the number of shares of Omaha
Common Stock issued and outstanding at the Closing.
(ii) Conversion of Omaha Preferred Stock. Except as
provided in Section 1.6(a)(vi), each share of Omaha Preferred Stock
issued and outstanding immediately prior to the Effective Time (other
than any shares of Omaha Preferred Stock to be canceled pursuant to
Section 1.6(a)(iii)), together with all accrued but unpaid dividends
thereon, will be converted automatically into and exchangeable
automatically for the right to receive the amount of the Preferred
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Stock Merger Consideration equal to the Preferred Stock Conversion
Ratio (as defined below). Upon surrender of the certificate
representing such share of Omaha Preferred Stock in the manner provided
in Section 1.8, Bristol will, subject to Section 1.8, instruct its
transfer agent to issue to the surrendering Shareholder certificates
evidencing the number of shares of Bristol Common Stock to which the
surrendering Shareholder is entitled. The "PREFERRED STOCK CONVERSION
RATIO" will mean the quotient (which will be rounded off at the nearest
one hundred thousandth) obtained by dividing (A) the Preferred Stock
Merger Consideration by (B) the number of shares of Omaha Preferred
Stock issued and outstanding at the Closing. The Common Stock
Conversion Ratio and the Preferred Stock Conversion Ratio are sometimes
collectively referred to herein as the "CONVERSION RATIOS."
(iii) Cancellation of Bristol-Owned and Omaha-Owned
Stock. Each share of Omaha Common Stock or Omaha Preferred Stock held
in treasury by Omaha or owned by Bristol Omaha, Bristol, or any direct
or indirect wholly owned subsidiary of Bristol or of Omaha immediately
prior to the Effective Time will be canceled and extinguished without
any conversion thereof.
(iv) Capital Stock of Bristol Omaha. Each share of
the common stock, par value $0.01 per share, of Bristol Omaha issued
and outstanding immediately prior to the Effective Time will remain
issued and outstanding without change or adjustment. Each stock
certificate of Bristol Omaha evidencing ownership of any such shares
will continue to evidence ownership of such shares of capital stock of
the Surviving Corporation.
(v) Adjustments to Conversion Ratios. The Conversion
Ratios will be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution
of securities convertible into Bristol Common Stock, Omaha Common Stock
or Omaha Preferred Stock), reorganization, recapitalization or other
like change with respect to Bristol Common Stock, Omaha Common Stock or
Omaha Preferred Stock occurring after the date hereof and prior to the
Effective Time.
(vi) Fractional Shares. No fraction of a share of
Bristol Common Stock will be issued, but in lieu thereof each holder of
shares of Omaha Common Stock or Omaha Preferred Stock who would
otherwise be entitled to a fraction of a share of Bristol Common Stock
(after aggregating all fractional shares of Bristol Common Stock to be
received by such holder) will be entitled to receive from Bristol
promptly after the Effective Time an amount of cash equal to the per
share market value of Bristol Common Stock (based on the Ten-Day
Average Price (as hereinafter defined in Section 1.6(b)) multiplied by
the fraction of a share of Bristol Common Stock to which such holder
would otherwise be entitled.
(b) Adjustments to Common Stock Consideration and Preferred
Stock Merger Consideration. Notwithstanding anything to the contrary contained
herein,
(i) in the event that the Ten-Day Average Price (as
defined below) for Bristol Common Stock is below $24.00, then the
condition to Closing set forth in Section 6.1(g) will not have been
satisfied and Omaha and the Shareholders will not be required to close;
provided, however, that if Bristol elects on or before the Closing Date
to make up such valuation shortfall by issuing additional shares of
Bristol Common Stock, then the condition to Closing set forth in
Section 6.1(g) will be inapplicable and, in such event, (A) the Stock
Consideration will consist of that aggregate number of shares of
Bristol Common Stock that is equal to the sum of (a) the Stock Purchase
Price divided by $28.00 (such number of shares being referred to herein
as the "COMMON BASE SHARES") plus (b) the
4
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Common Shortfall Amount (as defined below) divided by the Ten-Day
Average Price, and (B) the Preferred Stock Merger Consideration will
consist of that aggregate number of shares of Bristol Common Stock that
is equal to the sum of (a) the Preferred Stock Merger Consideration
divided by $28.00 (such number of shares being referred to herein as
the "PREFERRED BASE SHARES") plus (b) the Preferred Shortfall Amount
(as defined below) divided by the Ten-Day Average Price; and
(ii) in the event that the Ten-Day Average Price for
Bristol Common Stock is above $32.00, then the condition to Closing set
forth in Section 6.2(j) will not have been satisfied and Bristol and
Bristol Omaha will not be required to close; provided, however, that if
the Shareholders elect on or before the Closing Date to take less
shares of Bristol Common Stock to avoid any such valuation overage,
then the condition to Closing set forth in Section 6.2(j) will be
inapplicable and, in such event, (A) the Stock Consideration will
consist of the aggregate number of shares of Bristol Common Stock that
is equal to the difference of (a) the Common Base Shares, less (b) the
Common Overage Amount (as defined below) divided by the Ten-Day Average
Price, and (B) the Preferred Stock Merger Consideration will consist of
the aggregate number of shares of Bristol Common Stock that is equal to
the difference of (a) the Preferred Base Shares, less (b) the Preferred
Overage Amount (as defined below) divided by the Ten-Day Average Price.
For purposes of this Agreement, (i) the term "COMMON OVERAGE AMOUNT" will mean
the product of (A) the Common Base Shares multiplied by (B) the difference of
the Ten-Day Average Price less $32.00, (ii) the term "COMMON SHORTFALL AMOUNT"
will mean the product of (A) the Common Base Shares multiplied by (B) the
difference of $24.00 less the Ten-Day Average Price, (iii) the term "PREFERRED
OVERAGE AMOUNT" will mean the product of (A) the Preferred Base Shares
multiplied by (B) the difference of the Ten-Day Average Price less $32.00, (iv)
the term "PREFERRED SHORTFALL AMOUNT" will mean the product of (A) the Preferred
Base Shares multiplied by (B) the difference of $24.00 less the Ten-Day Average
Price, and (v) the term "TEN-DAY AVERAGE PRICE" will mean the average closing
price of a share of Bristol Common Stock for the ten trading day period ending
on (and including) the trading day immediately preceding the Closing Date, as
reported on the New York Stock Exchange.
1.7 Dissenters' Shares. Each Shareholder hereby waives any dissenter's
rights under Section 17- 6712 of the Kansas General Corporation Law (to the
extent such rights may be waived under Kansas law) and covenants that such
Shareholder will not object in writing to the Merger and will vote such
Shareholder's shares of Omaha Common Stock and Omaha Preferred Stock in favor of
the Merger.
1.8 Surrender of Certificates; Payment and Delivery of Merger
Consideration. At the Closing, each Shareholder will deliver to Bristol stock
certificates representing all outstanding shares of Omaha Common Stock and Omaha
Preferred Stock owned by such Shareholder and Bristol will immediately (a) pay
to each such Shareholder, by certified or bank check or by wire transfer (to an
account designated by such Shareholder at least two business days prior to the
Closing Date) of immediately available federal funds, the amount of the Cash
Consideration to which such Shareholder is entitled and (b) other than with
respect to shares held back pursuant to Section 7.1(c), instruct its transfer
agent to issue and deliver to each such Shareholder, within two business days
following the Closing, certificates representing the number of shares of Bristol
Common Stock as is determined by multiplying the shares of Omaha Common Stock
delivered by each such Shareholder by the Common Stock Conversion Ratio for the
Stock Consideration and multiplying the shares of Omaha Preferred Stock, if any,
delivered by each such Shareholder by the Preferred Stock Conversion Ratio for
the Preferred Stock Merger Consideration.
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1.9 No Further Ownership Rights in Omaha Common Stock or Omaha
Preferred Stock. The Common Stock Merger Consideration and the Preferred Stock
Merger Consideration paid upon the conversion of shares of Omaha Common Stock
and Omaha Preferred Stock, respectively, in accordance with the terms hereof
will be deemed to have been delivered and paid in full satisfaction of all
rights pertaining to such shares of Omaha Common Stock and the Omaha Preferred
Stock, respectively, and except as may be required by law, there will be no
further registration of transfers on the records of the Surviving Corporation of
shares of Omaha Common Stock and Omaha Preferred Stock which were outstanding
immediately prior to the Effective Time. Except as otherwise provided in Section
1.7, if after the Effective Time, certificates are presented to the Surviving
Corporation for any reason, they will be canceled and exchanged as provided in
this Article 1.
1.10 Tax Consequences Treatment. It is intended by the parties hereto
that the Merger will constitute a reorganization within the meaning of Section
368 of the Code. Omaha, Bristol, Bristol Omaha and the Shareholders each agree
that they will not take or omit to take any action at any time within five (5)
years after the date hereof which act or omission would cause the Merger not to
qualify as a reorganization within the meaning of Section 368 of the Code,
including without limitation:
(a) any sale, exchange, distribution, transfer or other
disposition of the assets of the Surviving Corporation that would cause the
Merger to fail to satisfy the "continuity of business enterprise" requirement of
Section 1.368-1(d) of the Income Tax Regulations or the "substantially all the
properties" requirement of Section 368(a)(2)(D) of the Code; and
(b) any issuance of additional shares of the Common Stock of
the Surviving Corporation that would result in Bristol failing to obtain or
losing control of the Surviving Corporation within the meaning of Section 368(c)
of the Code.
1.11 Working Capital Statement; Closing Working Capital Adjustment;
Reserves.
(a) Within 10 days after the Effective Time, the Shareholders
will cause to be prepared and delivered to Bristol, subject to Bristol's
reasonable approval, a preliminary closing working capital statement and
certificate setting forth the Shareholders' calculation of their estimate of the
difference obtained by subtracting the current consolidated liabilities of Omaha
from the current consolidated assets of Omaha, calculated and adjusted as set
forth in Schedule 1.11 hereto, immediately prior to the Effective Time ("CLOSING
WORKING CAPITAL"). The amount of such estimated Closing Working Capital that is
not reasonably disputed by Bristol is referred to herein as the "ESTIMATED
CLOSING WORKING CAPITAL." If the Estimated Closing Working Capital exceeds $0,
Bristol will pay to the Shareholders the amount of such excess and if Estimated
Closing Working Capital is less than $0 the Shareholders will pay to Bristol the
amount of such deficiency (any such payment being referred to herein as the
"INITIAL CLOSING WORKING CAPITAL PAYMENT"), which shall be made within 10 days
after the delivery of such statement to Bristol in the manner and with interest
as provided in Section 1.1(e); provided, however, that to the extent that any
Initial Closing Working Capital Payment made by Bristol to the Shareholders,
when aggregated with the Cash Consideration, exceeds 50% of the sum of such
Initial Closing Working Capital Payment and the aggregate Merger Consideration,
then the amount of such excess shall be paid to the Shareholders by delivery of
that number of shares of Bristol Common Stock equal to the quotient of the
amount of such excess divided by $28.00.
(b) As promptly as practicable and in any event within 90 days
after the Effective Time, Bristol will cause to be prepared and delivered to the
Shareholders a revised working capital statement (the "CLOSING WORKING CAPITAL
STATEMENT") and a certificate based on such Closing Working Capital Statement
6
<PAGE> 12
setting forth Bristol's calculation of Closing Working Capital. Bristol will
afford the Shareholders the opportunity to participate in and review Bristol's
preparation of the Closing Working Capital Statement.
(c) If the Shareholders disagree with Bristol's calculation of
Closing Working Capital, the Shareholders may, within 90 days after delivery of
the Closing Working Capital Statement, deliver a notice to Bristol disagreeing
with such calculation and setting forth the Shareholders' calculation of such
amount. Any such notice of disagreement will specify in reasonable detail those
items or amounts as to which the Shareholders disagree. In the event the
Shareholders deliver a notice of disagreement, Bristol and the Shareholders will
cause KPMG Peat Marwick, LLP or another firm of independent accountants of
nationally recognized standing reasonably satisfactory to Bristol and the
Shareholders (who will not have any material relationship with either) promptly
to review this Agreement and the disputed items or amounts for the purpose of
calculating Closing Working Capital. Such independent accountants will deliver
to Bristol and the Shareholders, as promptly as practicable, a report setting
forth such calculation. Such report will be final and binding upon Bristol and
the Shareholders. The cost of such review and report will be borne equally by
Bristol and the Shareholders.
(d) If Final Closing Working Capital (as defined below)
exceeds the Estimated Closing Working Capital, then Bristol will pay to the
Shareholders, in the manner and with interest as provided in Section 1.11(e),
the amount of such excess. If Final Closing Working Capital is less than
Estimated Closing Working Capital, then the Shareholders will pay to Bristol, in
the manner and with interest as provided in Section 1.11(e), the amount of such
deficiency. "FINAL CLOSING WORKING CAPITAL" means (i) the Closing Working
Capital as agreed upon by Bristol and the Shareholders pursuant to Section
1.11(b), or (ii) if a notice of disagreement is delivered pursuant to Section
1.11(c), the Closing Working Capital as shown in the independent accountants'
calculation delivered pursuant to Section 1.11(c); provided, that, in no event
will Final Closing Working Capital be more than the Shareholders' or less than
Bristol's calculation of Closing Working Capital delivered pursuant to Section
1.11(b) or Section 1.11(c), as applicable.
(e) Any payment due the Shareholders by Bristol pursuant to
Section 1.11(d) will be made within 10 days after the Final Closing Working
Capital has been determined by delivery by Bristol of a certified or official
bank check payable in immediately available federal funds to the Shareholders or
by causing such payments to be credited to the account of the Shareholders as
may be designated by them. Any payment due Bristol by the Shareholders pursuant
to Section 1.11(d) will be made within 10 days after Final Closing Working
Capital has been determined by delivery by the Shareholders of a certified or
official bank check in immediately available federal funds to Bristol or by
causing such payment to be credited to the account of Bristol designated by it.
The amount of any payment to be made pursuant to this Section 1.11(e) will bear
interest from and including the Effective Time to but excluding the date of
payment at a rate per annum equal to the Base Rate in effect from time to time
during the period from the Effective Time to the date of payment. Such interest
will be payable at the same time as the payment to which it relates and will be
calculated daily on the basis of a year of 365 days and the actual number of
days elapsed. To the extent that any payment due the Shareholders under this
Section 1.11(e), when aggregated with the Initial Closing Working Capital
Payment and the Cash Consideration, exceeds 50% of the sum of such payment, the
Initial Closing Working Capital Payment and the aggregate Merger Consideration,
then the amount of such excess shall be paid to the Shareholders by delivery of
that number of shares of Bristol Common Stock equal to the quotient of such
excess divided by $28.00.
(f) In connection with Omaha's Construction Obligations set
forth in Section 4.3(c), the Shareholders will reserve a sufficient amount of
cash in Omaha in addition to the Closing Working
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Capital as of the Effective Time necessary to complete any such Construction
Obligations, as reasonably determined by Bristol.
1.12 Earnest Money. Within three (3) business days after the date
hereof, Bristol will deliver its check in the amount of $1,000,000 (the "EARNEST
MONEY") to Stewart Title North Texas, 1700 Pacific Avenue, Suite 2900, Dallas,
Texas 75201 (Phone: 214/220-2060; Fax 214/969-7510) (attention: Joyce Beal) (the
"TITLE COMPANY"). The Title Company will deposit and invest the Earnest Money in
an insured, interest bearing account pursuant to the written direction of
Bristol. In the event the Closing occurs, the Earnest Money will be applied to
the Cash Consideration at Closing. In the event the Closing does not occur, then
the Title Company will disburse the Earnest Money in the manner provided for
elsewhere herein. All interest accruing on the Earnest Money will not constitute
additional Earnest Money but rather will be for the sole account of, and payable
to Bristol in all events, free and clear of any and all claims by Omaha and the
Shareholders.
1.13 Taking of Necessary Action: Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Omaha and Bristol Omaha, the officers and directors of
Omaha and Bristol Omaha are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
1.14 Surviving Corporation Not Responsible for Other Liabilities. It is
the intent of the parties that the Surviving Corporation should not incur or be
responsible for any greater Liabilities (as defined below) as a result of its
acquiring the Hotels from Omaha in the Merger than the Surviving Corporation
would have incurred or been responsible for had it simply purchased the Hotels
from Omaha. Accordingly, Section 7.1 and other provisions of this Agreement are
designed to ensure that (a) the Surviving Corporation receives the benefit only
of (i) Omaha's interests in the Hotels (and all accessory buildings and
structures, if any) and (ii) all inventories, furniture, furnishings, equipment,
supplies, intellectual property and other tangible and intangible property and
other assets owned or leased by Omaha and related to or used in connection with
the foregoing (collectively the "HOTEL ASSETS"), and (b) the Surviving
Corporation becomes liable and responsible as a result of the Merger only for
(i) the Omaha Indebtedness not to exceed $40,914,332 in aggregate amount
(including principal, accrued but unpaid interest and other amounts owing with
respect thereto), (ii) Liabilities of Omaha to the extent reflected in the Final
Closing Working Capital Statement, (iii) Liabilities of Omaha under the Material
Agreements (as hereinafter defined in Section 2.12) identified on Schedule
2.12(a) to the extent, and only to the extent, such Liabilities are not related
to or arise from any event, action or circumstance that existed prior to the
Effective Time, and (iv) Liabilities incurred by the Surviving Corporation in
connection with or relating to the Hotel Assets with respect to any event,
action or circumstance that first exists subsequent to the Effective Time (the
liabilities described in clauses (i) through (iv) are collectively referred to
herein as the "HOTEL LIABILITIES"). Such provisions are also designed to ensure
that (a) the Shareholders receive the benefit of agricultural land, personal
vehicles, life insurance policies, marketable securities, farm equipment,
cattle, oil, gas, other minerals and/or royalties (not a part of the Hotel Real
Property), service station sites and other assets and property owned or leased
by Omaha and that are not used in connection with or related to the Hotel Assets
(collectively, the "OTHER ASSETS"), and (b) the Shareholders become liable and
responsible hereunder for all Liabilities other than the Hotel Liabilities,
including, without limitation, any costs, expenses or liabilities incurred by
Omaha in connection with or related to the Other Assets or incurred by the
Surviving Corporation with respect to any event, action or circumstance that
existed prior to the Effective Time and related to the Hotel Assets
(collectively, the "OTHER LIABILITIES"). As used herein, the term "LIABILITIES"
means any and all debts, claims, actions, suits, demands, rights, costs,
expenses, liabilities,
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losses, damages, commitments and obligations, whether fixed, contingent or
absolute, matured, unmatured or inchoate, liquidated or unliquidated, accrued or
not accrued, known or unknown, whenever or however arising and whether or not
the same would be required by tax auditing principles, consistently applied, to
be reflected in the Omaha Financial Statements (as hereinafter defined in
Section 2.5) or disclosed in the notes thereto.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF
OMAHA AND THE SHAREHOLDERS
Omaha and the Shareholders, each jointly and severally, represents and
warrants to Bristol and Bristol Omaha as of the date hereof and as of the
Closing Date as set forth below, subject only to the exceptions specifically
disclosed in the schedules of Omaha and the Shareholders to be delivered to and
agreed upon by Bristol and Bristol Omaha and attached hereto within fifteen (15)
days after the date hereof (the "OMAHA SCHEDULES") (and unless the context
indicates otherwise, all of such representations and warranties shall be deemed
made with respect to Omaha, its subsidiaries and their respective predecessors).
2.1 Organization of Omaha. Omaha and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Omaha and each of its subsidiaries has
the corporate power to own its property and to carry on its business as now
being conducted and as proposed by Omaha and each of its subsidiaries to be
conducted. Omaha and each of its subsidiaries is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified could reasonably be expected to have a material
adverse effect on the business, assets (including intangible assets), financial
condition, results of operations or prospects (a "MATERIAL ADVERSE EFFECT") of
Omaha and its subsidiaries. Omaha and each of its subsidiaries has delivered (or
during the Due Diligence Period will deliver) a true, complete and correct copy
of the Articles of Incorporation and Bylaws for Omaha and its subsidiaries (or
similar governing instruments), each as amended to date, to counsel for Bristol.
2.2 Company Capital Structure.
The authorized capital stock of Omaha consists of 4,000 shares of
Common Stock, par value $100 per share, and 50,000 shares of Preferred Stock,
par value $100 per share. There are 2,625 shares of Omaha Common Stock issued
and outstanding and 1,950 shares of Omaha Preferred Stock issued and
outstanding, which are held beneficially and of record by the Shareholders as
set forth on Schedule 2.2 attached hereto. All outstanding shares of Omaha
Common Stock and Omaha Preferred Stock are duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights created by
statute, the Articles of Incorporation or Bylaws of Omaha or any agreement to
which Omaha is a party or is bound. As of the date hereof there are, and as of
the Closing Date there will be, no options, warrants, calls, rights, commitments
or agreements of any character to which Omaha or any subsidiary is a party or by
which it is bound obligating Omaha or any subsidiary to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of Omaha or any subsidiary or
obligating Omaha or any subsidiary to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. The Shareholders are the
record and beneficial owners of all of the shares of Omaha Common Stock and
Omaha Preferred Stock, free and clear of any liens, encumbrances, pledges,
security interests, voting agreements or claims of any nature whatsoever.
2.3 Subsidiaries. Except as set forth in Schedule 2.3, Omaha has no
subsidiaries or affiliated companies and does not otherwise own any shares of
stock, or any interest in, or control, directly or indirectly,
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any other corporation, partnership, association, joint venture or business
entity. Omaha owns all of the issued and outstanding capital stock of each of
its subsidiaries.
2.4 Authority. Omaha has all requisite corporate power and authority to
enter into this Agreement and to consummate the Merger and the other
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the Merger and the other transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Omaha, including but not limited to the approval by all of the Shareholders
without any dissenting votes. This Agreement has been duly executed and
delivered by Omaha and the Shareholders and constitutes the valid and binding
obligation of Omaha and the Shareholders. The execution and delivery of this
Agreement by Omaha and the Shareholders do not, and the consummation of the
Merger and the other transactions contemplated hereby will not, conflict with or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under (i) any
provision of the Articles of Incorporation or Bylaws of Omaha or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Omaha, the Shareholders or their
properties or assets. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("GOVERNMENTAL
ENTITY"), or other person or entity is required by or with respect to Omaha in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for the filing of the
Certificate of Merger with the Secretaries of State of Delaware and Kansas.
2.5 Omaha Financial Statements. Schedule 2.5 sets forth Omaha's
unaudited financial statements (balance sheets, income statements and statements
of cash flows) as of and for the fiscal years ended April 30, 1997, 1996 and
1995, and the six months ended October 31, 1997 (collectively, the "OMAHA
FINANCIAL STATEMENTS"). The Omaha Financial Statements are complete and correct
in all material respects and, except as set forth in Schedule 2.5, have been
prepared in accordance with tax auditing principles applied on a basis
consistent throughout the periods indicated and consistent with each other
(except that the unaudited Omaha Financial Statements do not contain the notes
necessary to be in accordance with tax auditing principles). The Omaha Financial
Statements present fairly the financial condition and operating results of Omaha
as of the dates and during the periods indicated therein. The unaudited balance
sheet of Omaha as of December 31, 1997 is hereinafter referred to as the "OMAHA
BALANCE SHEET." If at any time prior to or after the Closing Date, Bristol or
Bristol Omaha require the Omaha Financial Statements for any period(s) to be
audited for purposes of any SEC filing, Omaha and the Shareholders agree to
cooperate with Bristol and Bristol Omaha in the preparation, in accordance with
generally accepted accounting principles ("GAAP"), of such audited Omaha
Financial Statements, including making available to Bristol or Bristol Omaha or
their auditors all supporting documentation; provided, however, Bristol Omaha
will reimburse the Shareholders for all reasonable out-of-pocket expenses
incurred by them in connection therewith.
2.6 Indebtedness; No Undisclosed Liabilities. Schedule 2.6 sets forth
all of the indebtedness of Omaha and all its subsidiaries (collectively, the
"OMAHA INDEBTEDNESS") including a description of (a) the principal balance, (b)
the maturity date, (c) the collateral (if any), (d) the borrower, any guarantors
and any other obligated parties and (e) whether the consent of the lender is
required in connection with the Merger and the consummation of the other
transactions contemplated hereby. The outstanding balance of the Omaha
Indebtedness (including principal, accrued but unpaid interest and other amounts
owing with respect thereto) does not, and on the Closing Date will not, exceed
$40,914,332 in the aggregate. Neither Omaha nor, to Omaha's best knowledge, any
lender or any other party is in default under any instruments
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or documents representing, evidencing or relating to such Omaha Indebtedness and
no act or omission has occurred which, with the passing of time or the giving of
notice or both, could cause such a default to occur. Omaha does not have any
Liabilities or obligations, either accrued or contingent (whether or not
required to be reflected in financial statements in accordance with GAAP), and
whether due or to become due, except (i) Liabilities reflected in the Omaha
Balance Sheet, (ii) Liabilities specifically described in Schedule 2.6 and the
other Omaha Schedules or (iii) Liabilities not exceeding $25,000 in the
aggregate incurred in the ordinary course of business since the date of the
Omaha Balance Sheet. All of the Omaha Indebtedness relates to or is secured by
the Hotels and not by any Other Assets.
2.7 No Changes. Except as set forth in Schedule 2.7, since the date of
the Omaha Balance Sheet there has not been, occurred or arisen any transaction
by Omaha except in the ordinary course of business as conducted on that date or
any event or condition of any character relating to Omaha or Omaha's business
that has or that could be reasonably expected to have a Material Adverse Effect
on Omaha.
2.8 Tax and Other Returns and Reports.
(a) Tax Returns and Audits. Except as set forth in Schedule
2.8, Omaha has accurately prepared and filed all required federal, state, local
and foreign returns, estimates, information statements and reports ("RETURNS")
relating to any and all Taxes relating or attributable to Omaha, its assets, or
its operations and such Returns are true and correct and have been completed in
accordance with applicable law. For the purposes of this Agreement, a "TAX" or,
collectively, "TAXES" means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other person
with respect to such amounts. Except as set forth in Schedule 2.8, Omaha has
paid all Taxes required to be paid with respect to such Returns and has withheld
with respect to its employees all federal and state income taxes, FICA, FUTA and
other Taxes it is required to withhold. The accruals for Taxes on the books and
records of Omaha are sufficient to discharge the Taxes for all periods (or the
portion of any period) ending on or prior to the Closing Date. Omaha is not
delinquent in the payment of any Tax nor, except as set forth in Schedule 2.8,
is there any Tax deficiency outstanding, proposed or assessed against Omaha nor
has Omaha executed any waiver of any statute of limitations on or extending the
period for the assessment or collection of any Tax. Except as set forth in
Schedule 2.8, the audits of each Return that has been audited by the relevant
authorities or for which the statute of limitations has been waived or extended
with respect to each Return has been closed and Omaha has not received any
written or oral notification that an audit or other examination of any Return of
Omaha is presently in progress. All such returns that have been audited or for
which the statute of limitations has been waived are listed on Schedule 2.8.
Except as set forth in Schedule 2.8, Omaha does not have any liabilities for
unpaid federal, state, local and foreign Taxes, whether asserted or unasserted,
known or unknown, contingent or otherwise and Omaha does not have any knowledge
of any basis for the assertion of any such liability attributable to Omaha or
its assets or operations. None of Omaha and its subsidiaries (i) has been a
member of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was Omaha) or (ii) has any
liability for the Taxes of any person (other than any of Omaha and its
subsidiaries) under Section 1.1502-6 of the Income Tax Regulations (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract or otherwise. Omaha is not a party to or bound by any tax indemnity,
tax sharing or tax allocation agreement. There are (and as of immediately
following the Closing there will be) no liens on the assets of Omaha relating to
or
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<PAGE> 17
attributable to Taxes, except for liens for Taxes not yet due and payable and
neither Omaha nor any of the Shareholders has knowledge of any basis for the
assertion of any such claim which, if adversely determined, would result in
liens on the assets of Omaha. Omaha has not filed any consents under Section
341(f) of the Code. None of the assets of Omaha are treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code. There is no
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of Omaha
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to Sections 280G, 162 or 404 of the Code.
Omaha has not distributed to its shareholders, in connection with or in
contemplation of the Merger, an amount of its assets, including cash, with a
fair market value greater than 10% of the fair market value of the net assets or
30% of the fair market value of the gross assets (within the meaning of IRS
Revenue Procedure 86-42) held by Omaha immediately prior to any such
distribution.
(b) No Penalty. Omaha is not subject to any penalty by reason
of a violation of any order, rule or regulation of, or a default with respect to
any Return, report or declaration required to be filed with, any Governmental
Entity to which it is subject.
2.9 No Restrictions on Business Activities. There is no agreement
binding upon, or, judgment, injunction, order or decree entered against, Omaha
under which Omaha is prohibited from conducting or engaging in any line of
business.
2.10 Title to Properties; Absence of Liens and Encumbrances; Other
Assets.
(a) Schedule 2.10(a) sets forth a true and complete list of
the Hotels and other real property owned or leased by Omaha (the "HOTEL REAL
PROPERTY") that constitute Hotel Assets, including the year in which such Hotel
opened and the number of rooms available in such Hotel.
(b) Schedule 2.10(b) sets forth a list of all of Omaha's
equipment leases. Except as set forth in Schedule 2.10(b), Omaha holds good and
valid title to, or, in the case of leased properties and assets, valid leasehold
interests in, the Hotel Real Property and tangible properties and assets, real,
personal and mixed, used in its business, free and clear of any liens, charges,
pledges, security interests, restrictions on voting or transfer, conditional
sale agreement, capital lease, other title retention device, options, rights of
third parties to acquire interests therein or other encumbrances (collectively,
"LIENS") except for the Permitted Exceptions (as defined below) or as otherwise
described in this Agreement. As used herein, the term "PERMITTED EXCEPTIONS"
means (i) Liens securing the Omaha Indebtedness, (ii) Liens for Taxes not yet
due and payable or being contested in good faith and for which appropriate
reserves have been taken, (iii) mechanics' carriers; workers' or like Liens with
respect to obligations that are not overdue or are being contested in good faith
and for which appropriate reserves have been taken, (iv) leases or tenancies of
areas of the properties in question, (v) Liens created, suffered or assumed by
Bristol or Bristol Omaha, and (vi) Liens, easements, restrictions and other
items shown on each Title Commitment (as hereinafter defined in Section 4.1(b))
provided such items individually or in the aggregate would not and could not
reasonably be expected to have a Material Adverse Effect on the use or value of
the Hotel to which such item relates.
(c) Schedule 2.10(c) sets forth a true and complete list of
the Other Assets.
2.11 Intellectual Property. Omaha owns or possesses all necessary
licenses or other valid rights to use all material computer software and
firmware, patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, brand names, copyrights, service marks, trade secrets,
applications for trademarks
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and for service marks, know-how and other proprietary rights and information
used or held for use in connection with the business of Omaha as currently
conducted or as contemplated to be conducted, and, to the knowledge of Omaha,
except as described on Schedule 2.11 hereto, as of the date hereof, there has
been no assertion or claim challenging the ownership or validity of any of the
foregoing. Except as disclosed on Schedule 2.11 hereto, the conduct of the
business of Omaha and its subsidiaries as currently conducted does not, in any
material respect, conflict with or infringe any patent, patent right, license,
trademark, trademark right, trade name, trade name right, service mark,
copyright or any other intellectual property right of any third party, no
defaults exist thereunder, and no event with the passage of time or giving of
notice would constitute such a default. To the knowledge of Omaha, except as
described on Schedule 2.11 hereto, there are no infringements of any proprietary
rights owned by or licensed by or to Omaha.
2.12 Material Agreements.
(a) Schedule 2.12(a) describes all franchise agreements,
license agreements, ground leases, tenant leases, collective bargaining
agreements, employment contracts, stock option or other employee benefits plans
or arrangements, partnership agreements, joint venture agreements and other
agreements to which Omaha or any of its subsidiaries is bound that are material
to the Hotel business (collectively, the "MATERIAL AGREEMENTS"). All such
Material Agreements are in good standing, valid and effective in accordance with
their respective terms, and there is not with respect to Omaha and, to the
knowledge of Omaha, any other parties to such Material Agreements any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default). Omaha is not bound by any material contract,
agreement, license, or lease other than the Material Agreements. Omaha will
provide or make available to Bristol a copy of all Material Agreements during
the Due Diligence Period.
(b) Except for the consents listed on Schedule 2.12(b)
(collectively, the "REQUIRED CONSENTS"), no consents, waivers or approvals are
necessary in order to preserve the benefits under any Material Agreements for
the Surviving Corporation or otherwise to avoid any breach, default or right of
termination or other right as a result of the Merger.
2.13 Sufficiency of Certain Items. The Hotels contain not less than the
amount of the following items that is consistent with Omaha's past operating
history and in no event less than the amount of such items that would be found
in Hotels of similar quality in the geographic areas in which the Hotels are
located:
(a) a sufficient amount of kitchen equipment, bar equipment,
refrigeration equipment, paper goods and other such personal property to
efficiently operate each of the restaurants, bars and lounges, located upon or
within the Hotels, together with sufficient amount of china, dishes,
glassware, "small goods," napkins, tablecloths and silverware;
(b) a sufficient amount of furniture, furnishings, color
television sets, carpets, drapes, rugs, floor coverings, mattresses, pillows,
bedspreads and the like, to furnish each guest room, so that each such guest
room is, in fact, fully furnished; and
(c) a sufficient amount of towels, washcloths and bed linens,
so that there are three sets of towels, washcloths and linens for each guest
room (one on the beds, one on the shelves, and one in the laundry), together
with a sufficient amount of paper goods, soaps, cleaning supplies and other such
supplies and materials.
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2.14 Governmental Authorization. Schedule 2.14 accurately lists each
material federal, state county, local or foreign governmental consent, license,
permit, grant, or other authorization issued to Omaha (i) pursuant to which
Omaha currently operates or holds any interest in any of its properties or (ii)
which is required for the operation of its business or the holding of any such
interest, including liquor licenses (herein collectively called the "OMAHA
AUTHORIZATIONS"). The Omaha Authorizations are in full force and effect and
constitute all the authorizations required to permit Omaha to operate or conduct
its business or hold any interest in its properties.
2.15 Litigation. Schedule 2.15 attached hereto accurately lists all
suits, actions and legal, administrative, arbitration or other proceedings and
governmental investigations and all other claims, pending or, to the knowledge
of Omaha and the Shareholders, threatened or which Omaha expects will ultimately
be threatened or commenced. None of such suits, actions, proceedings,
investigations or claim seek to prevent the consummation of the Merger. There is
no judgment, decree or order enjoining Omaha in respect of, or the effect of
which is to prohibit, any business practice or the acquisition of any property
or the conduct of business of Omaha. Schedule 2.15 also lists all suits and
legal actions initiated by Omaha which are still pending or which have been
concluded in the last two years.
2.16 Accounts Receivable. All receivables of Omaha arose in the
ordinary course of business at the aggregate amounts thereof, are collectible
(except to the extent reserved against as reflected in the Omaha Financial
Statements) and are carried at values determined in accordance with tax auditing
principles consistently applied. To the knowledge of Omaha and the Shareholders,
none of the receivables of Omaha is subject to any claim of offset, recoupment,
set off or counterclaim and there are no facts or circumstances (whether
asserted or unasserted) that would give rise to any such claim. No person has
any lien, charge, pledge, security interest or other encumbrance on any of such
receivables and no agreement for deduction or discount has been made with
respect to any of such receivables.
2.17 Minute Books and Stock Records. The minute books of Omaha and its
subsidiaries made available to counsel for Bristol contain accurate minutes of
all meetings of directors and shareholders (or consents in lieu of such
meetings) since the respective times of incorporation of Omaha and its
subsidiaries, and describe all transactions referred to in such minutes
accurately in all material respects. The stock records of Omaha and its
subsidiaries made available to counsel for the Bristol contain an accurate
record of all stock issuances and stock transfers of Omaha Common Stock, Omaha
Preferred Stock and the capital stock of Omaha's subsidiaries.
2.18 Environmental and OSHA. Except as disclosed in such environmental
site assessments and engineering reports furnished to Bristol at least thirty
(30) days prior to the expiration of the Due Diligence Period, to the best of
Omaha's and the Shareholders' knowledge:
(a) Omaha has complied with all laws (including rules and
regulations thereunder) of federal, state and local Governmental Entities
concerning the environment, public health and safety, and employee health and
safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced against
Omaha alleging any failure to comply with any such law or regulation;
(b) Omaha has no obligation to take remedial action with
respect to any conditions nor does Omaha have any liability, and there is no
basis related to Omaha's past or present operations, for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation, claim, or
demand giving rise to any liability or obligation to take any remedial action
under the Comprehensive Environmental
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Response, Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Federal Water Pollution Control Act of 1972, the Clean
Air Act of 1970, the Safe Drinking Water Act of 1974, the Toxic Substances
Control Act of 1976, or the Emergency Planning and Community Right-to-Know Act
of 1986 (each as amended), or any other law (or rule or regulation thereunder)
of any federal, state or local Governmental Entity, concerning the release or
the threatened release of hazardous substances, public health and safety,
pollution or protection of the environment;
(c) Omaha has no liability relating to, and it has not handled
or disposed of any substance, arranged for the disposal of any substance, or
owned or operated any property or facility in any manner that could form the
basis for any present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand (under the common law or pursuant to
any statute) against Omaha, giving rise to any liability for damage to any site,
location, or body of water (surface or subsurface) or for illness or personal
injury;
(d) Omaha has no liability for, and there is no basis for, any
present or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against Omaha giving rise to any liability under
the Occupational Safety and Health Act, as amended, or any other law (or rule or
regulation thereunder) of any federal, state or local Governmental Entity
concerning employee health and safety;
(e) Omaha has no liability relating to, and Omaha has not
exposed any of Omaha's employees to any substances or conditions that could form
the basis for, any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand (under the common law or
pursuant to statute) against Omaha giving rise to liability for any illness of
or personal injury to any employee;
(f) Omaha has been in compliance with all the terms and
conditions of all permits, licenses, and other authorizations of Governmental
Entities which are required under, and have complied with all other requirements
and prohibitions which are contained in federal, state and local laws (including
rules, regulations and codes thereunder) relating to public health and safety,
worker health and safety, and/or pollution or the protection of the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, chemicals, or industrial, hazardous, or
toxic materials or wastes into the air, surface water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes; and
(g) All properties and equipment used by Omaha are free of
asbestos, PCB's and other Extremely Hazardous Substances (as defined in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended). No pollutant, contaminant, chemical, or industrial, hazardous, or
toxic material or waste has been buried, stored, spilled, leaked, discharged,
emitted, or released on any real property that Omaha has ever owned, or that
Omaha now leases or has ever leased.
2.19 Brokers' and Finders' Fees. Omaha has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders, fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby; provided Bristol will be responsible for
its obligations under Section 3.5 of this Agreement.
2.20 Labor Matters. Omaha is in compliance with all currently
applicable laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment and wages and hours and
occupational safety and health and employment practices, and is not engaged in
any unfair labor
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practice. Omaha has not received any notice from any Governmental Entity, and to
the knowledge of Omaha and the Shareholders, there has not been asserted before
any Governmental Entity, any claim, action or proceeding to which Omaha is a
party or involving Omaha, and there is neither pending nor, to the knowledge of
Omaha and the Shareholders, threatened any investigation or hearing concerning
Omaha arising out of or based upon any such laws, regulations or practices.
There are no pending material claims against Omaha under any workers
compensation plan or policy or for long term disability. Omaha has complied in
all material respects with all applicable health care benefit continuation
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and has no obligations with respect to any former employees or
qualifying beneficiaries thereunder. Schedule 2.20 lists all current employees
of Omaha and their current salary and vacation accruals. Notwithstanding
anything to the contrary herein, Omaha will terminate all employees who are not
employed on site at a Hotel and whose responsibilities do not directly relate to
the operation of such Hotel prior to the Effective Time unless Bristol otherwise
gives notice that such employees should be retained by the Surviving
Corporation. Bristol and/or Bristol Omaha shall not be responsible for any
liabilities, costs or expenses arising from or with respect to any such
terminated employees of Omaha.
2.21 Insurance. Schedule 2.21 lists all insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
software, errors and omissions, employees, officers and directors of Omaha as
well as all claims made under any insurance policy by Omaha since December 31,
1995 (other than claims under Omaha's medical and dental insurance plans). There
is no claim by Omaha pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. Omaha has provided (or during the Due Diligence Period will
provide) Bristol with copies of all such insurance policies and fidelity bonds
and all claims made by Omaha under its insurance policies (other than claims
under Omaha's medical and dental plans of less than $5,000 per claimant per
year). All premiums payable under all such policies and bonds have been paid and
Omaha is otherwise in compliance in all material respects with the terms of such
policies and bonds. Such policies of insurance and bonds are of the type and in
amounts customarily carried by persons conducting businesses similar to those of
Omaha. Neither Omaha nor the Shareholders knows of any threatened termination of
or material premium increase with respect to any of such policies. Omaha has
never been denied insurance coverage nor has any insurance policy of Omaha ever
been canceled for any reason.
2.22 Compliance with Laws.
(a) Omaha has complied with, is not in violation of, and has
not received any notices of violation with respect to, any federal, state or
local statute, law or regulation with respect to the conduct of its business, or
the ownership or operation of its business, assets or properties. No charge,
complaint, action, suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced against alleging any failure to comply with
any such law or regulation.
(b) Omaha has not violated in any respect, or received a
notice or charge asserting any violation of the Sherman Act, the Clayton Act,
the Robinson-Patman Act, or the Federal Trade Commission Act, each as amended.
(c) Omaha has not, and to the knowledge of the Shareholders,
none of the officers, directors, shareholders or employees of Omaha have, on
behalf of Omaha: (i) made or agreed to make any contribution, payment or gift of
funds or property to any governmental official, employee, or agent where either
the contribution, payment, or gift or the purpose thereof was illegal under the
laws of any federal, state or local jurisdiction; (ii) established or maintained
any unrecorded fund or asset for any purpose, or intentionally made any false or
inaccurate entries on any of its books and/or records; (iii) made or agreed to
make any contribution,
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or reimbursed any political gift or contribution made by any other person, to
any candidate for federal, state or local public office; or (iv) been involved
in the disbursement or receipt of funds outside of the normal internal control
systems of accountability or been involved in the improper or inaccurate
recording of material payments, disbursements or receipts.
2.23 Other Rights/Commitments. There are no agreements or leases with
respect to all or any part of the Hotel Real Property which give any right to
purchase the Hotel Real Property and/or Hotel Assets or any part thereof. No
commitments have been made to any governmental authority, utility company,
school board, church or other religious body, or any homeowners' association or
any other organization, group or individual, relating to the Hotel Real Property
and/or Hotel Assets which would impose an obligation upon Bristol or Bristol
Omaha to make any contribution or dedication of money or land or to construct,
install or maintain any improvements of a public or private nature on or off of
the Hotel Real Property.
2.24 FIRPTA. Omaha is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
2.25 Employee Benefit Plans.
(a) Schedule 2.25 lists all employee benefit plans (as defined
in Section 3(3)) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and all bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, and any current or
former employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of Omaha, any trade
or business (whether or not incorporated) which is a member or which is under
common control with Omaha (an "ERISA AFFILIATE") within the meaning of Section
414 of the Code, or any subsidiary of Omaha (together, the "EMPLOYEE PLANS"),
and a copy of each such Employee Plan has been provided (or during the Due
Diligence Period will be provided) to Bristol.
(b) (i) None of the Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person except as
required by applicable law, including but not limited to COBRA; (ii) all
Employee Plans are in compliance in all material respects with the requirements
prescribed by any and all applicable statutes (including ERISA and the Code),
orders, or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification to
participants-or beneficiaries or the Department of Labor, Internal Revenue
Service (the "IRS") or Secretary of the Treasury), and Omaha has performed in
all material respects all obligations required to be performed by it under, is
not in default under or violation of, and has no knowledge of any default or
violation by any other party to, any of the Employee Plans; (iii) each Employee
Plan intended to qualify under Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code either has received a
favorable determination letter with respect to each such Employee Plan from the
IRS or still has a remaining period of time under applicable Treasury
Regulations or IRS pronouncements in which to apply for such a determination
letter and to make any amendments necessary to obtain a favorable determination;
and (iv) no Employee Plan is or within the prior six (6) years has been subject
to, and Omaha has not incurred and does not expect to incur any liability under,
Title IV of ERISA or Section 412 of the Code and (v) nothing in any Employee
Plan precludes or interferes with Bristol's ability to cause the Surviving
Corporation to terminate (or consolidate, at Bristol's option) any Employee Plan
after the Closing, provided that (A) the Employee Plans may be terminated
prospectively only, subject to rights accrued by Omaha's employees at the time
of such termination and (B) not more than sixty days notice may be required to
terminate certain Employee Plans.
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(c) None of the following now exists or has existed within the
six-year period ending on the date hereof with respect to any Employee Plan: (i)
any act or omission by Omaha constituting a violation of Section 402 or 403 or,
to the knowledge of Omaha, Section 404 or 405 of ERISA; (ii) to the knowledge of
Omaha, any act or omission by Omaha which constitutes a violation of Sections
406 and 407 of ERISA and is not exempted by Section 408 of ERISA or which
constitutes a violation of Section 4975(c) of the Code and is not exempted by
Section 4975(d) of the Code; (iii) any act or omission by Omaha constituting a
violation of Section 503 or 511 or, to the knowledge of Omaha, Section 510 of
ERISA; or (iv) any act or omission by Omaha which could give rise to liability
under Section 502 of ERISA or under Sections 4979 or 4975 through 4980 of the
Code or any other provisions of ERISA or the Code.
(d) Each Employee Plan has been maintained in substantial
compliance with its terms, and all contributions, premiums or other payments due
from Omaha or any of its subsidiaries to (or under) any such Employee Plan have
been fully paid or adequately provided for on the Omaha Financial Statements for
the most recently ended fiscal year. All accruals thereon (including, where
appropriate proportional accruals for partial periods) have been made in
accordance with generally accepted accounting principles consistently applied on
a reasonable basis. There has been no amendment, written interpretation or
announcement (whether or not written) by Omaha with respect to, or change in
employee participation or coverage under, any Employee Plan that would increase
materially the expense of maintaining such plans or arrangements, individually
or in the aggregate, above the level of expense incurred with respect thereto
for the most recently ended fiscal year.
(e) Omaha has made available (or during the Due Diligence
Period will make available) to Bristol complete, accurate and current copies of
all Employee Plans and all amendments, documents, correspondence and filings
relating thereto, including but not limited to any statements, filings, reports
or returns filed with any governmental agency with respect to the Employee Plans
at any time within the three-year period ending on the date hereof.
2.26 Assessments. Except as described on Schedule 2.26 attached hereto:
there are no unpaid assessments for public improvements against the Hotel Real
Property; the Hotel Real Property is not subject to assessments for any street
paving or curbing heretofore laid; sewer, water, gas and electric lines adequate
to service the Hotel Real Property are located on or adjacent to the Hotel Real
Property, and there are no unpaid assessments or charges for the installation of
such utilities or for making connection thereto that have not been fully paid;
there are no public plans or proposals for changes in road grade, access or
other municipal improvements which would affect the Hotel Real Property or
result in any assessment; no ordinance authorizing improvements, the cost of
which might be assessed against Bristol or the Hotel Real Property, is pending;
and there is no tax certiorari proceeding pending for the reduction or increase
of the assessed real estate tax evaluation to the Hotel Real Property or any
portion thereof.
2.27 Condition of Improvements; Core Modernization/Product Improvement
Plans.
(a) To the best knowledge of Omaha and the Shareholders, the
structural features (excluding the roofs and parking lots) and major systems
such as heating and air conditioning, electrical and plumbing equipment,
elevators, pool and pool equipment constituting a part of the Hotel Real
Property and Hotel Assets are in good working order and contain no material
defects except inconsequential items calling for repair due to normal wear and
tear. Omaha and the Shareholders are not aware of any condition or circumstance
which would prevent or unreasonably delay the renovation of the Hotels after the
Closing Date.
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(b) Schedule 2.27(b) contains a true and correct list of (1)
all core modernization or product improvement plan requirements of any
franchisors for each of the Hotels, and (2) the budgeted cost of completion of
each such core modernization and product improvement plan requirement from and
after the date hereof (the "BUDGETED PIP COMPLETION AMOUNT"). There are no core
modernization or product improvement plan requirements for the Hotels except as
listed on Schedule 2.27(b).
2.28 ADA Compliance. To Omaha's and Shareholders' best knowledge, the
Hotel Real Property and the Hotels comply with the Americans With Disability Act
of 1991 in all material respects.
2.29 Representations Complete. None of the representations or
warranties made by Omaha and the Shareholders in this Agreement, nor any
statement made in any Schedule, Exhibit or certificate furnished by Omaha
pursuant to this Agreement, when read in their entirety, contains or will
contain any untrue statement of a material fact at the Effective Time, or omits
or will omit to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading. No warranty or representation will be deemed to have
been made by Omaha and/or the Shareholders except for the warranties and
representations set forth in this Agreement and the exhibits, schedules and
certificates delivered pursuant hereto.
2.30 Investment Representations. Each Shareholder hereby represents and
warrants to Bristol and Bristol Omaha as of the date hereof and as of the
Closing Date as set forth below:
(a) Investment Intent. The Shareholder is acquiring shares of
Bristol Common Stock for his own account for investment and not with a view to,
or for sale or other disposition in connection with, any distribution of all or
any part thereof, except (i) in an offering covered by a registration statement
filed with the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), covering the such
shares, or (ii) pursuant to an applicable exemption under the Securities Act. In
acquiring the shares of Bristol Common Stock, the Shareholder is not offering or
selling, and will not offer or sell, for Bristol in connection with a
distribution of Bristol Common Stock and does not have a participation and will
not participate in any such undertaking or in any underwriting of such an
undertaking except in compliance with applicable federal and state securities
laws.
(b) Disclosure of Information. The Shareholder acknowledges
that he or his representatives have been furnished with substantially the same
kind of information regarding Bristol and its business, assets, results of
operation, and financial condition as would be contained in a registration
statement prepared in connection with a public sale of Bristol Common Stock.
(c) Investment Experience. The Shareholder acknowledges that
he is able to fend for himself, can bear the economic risk of his investment in
shares of Bristol Common Stock and has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of an investment in shares of Bristol Common Stock.
(d) Restricted Securities. The Shareholder understands that
the shares of Bristol Common Stock acquired by him in the Merger are expected to
be exempt from registration under the Securities Act by virtue of Section 4(2)
thereof and, accordingly, will not have been registered pursuant to the
Securities Act or any applicable state securities laws, will be characterized as
"restricted securities" under federal securities laws, and that, under such laws
and applicable regulations, cannot be sold or otherwise disposed of without
registration under the Securities Act or an exemption therefrom. In this
connection, the Shareholder represents that he is familiar with Rules 144 and
145 promulgated under the Securities Act, as currently in effect, and
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understands the resale limitations imposed thereby and by the Securities Act.
Stop transfer instructions may be issued to the transfer agent for securities of
Omaha (or a notation may be made in the appropriate records of Omaha) in
connection with such shares.
(e) Legend. It is agreed and understood by the Shareholder
that the certificates representing shares of Bristol Common Stock acquired by
him in the Merger will each conspicuously set forth on the face or back thereof,
in addition to any legends required by applicable law or other agreement, a
legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED
UNLESS THEY ARE FIRST REGISTERED PURSUANT TO THAT ACT AND APPLICABLE
STATE SECURITIES LAWS OR UNLESS THE CORPORATION RECEIVES A WRITTEN
OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE SATISFACTORY TO THE
CORPORATION, TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
(f) Access to Information. The Shareholder hereby acknowledges
that Bristol has not made any representations or warranties to him with respect
to the value of the Bristol Common Stock, and the actual value of the Bristol
Common Stock may be more or less than the value of the shares of Omaha Common
Stock or Omaha Preferred Stock being converted in the Merger. The Shareholder
has had an opportunity to review all such information about Bristol as he
desires and he has been given an opportunity to ask questions and receive
answers about Bristol. The Shareholder has been represented by an attorney of
his choice or has waived his right to do so, and he has had an opportunity to
review and discuss this Agreement with an attorney. The Shareholder understands
the contents and effect of this Agreement and he has signed this Agreement and
any documents executed in connection therewith to which he is a party, as his
own free act.
(g) Representations and Warranties of the Shareholders Related
to Tax Effects of the Merger.
(i) The Shareholder is the beneficial owner of all of
the shares of Omaha Common Stock or Omaha Preferred Stock held of
record by him and did not acquire any shares of Omaha Common Stock or
Omaha Preferred Stock in contemplation of the Merger.
(ii) The Shareholder has not engaged in a Sale (as
defined below) of any shares of Omaha Common Stock (or other securities
of Omaha) in contemplation of the Merger.
(iii) The Shareholder has no plan or intention (a
"PLAN") to engage in a sale, exchange, transfer, redemption or
reduction in any way of the Shareholder's risk of ownership by short
sale or otherwise, or other disposition, directly or indirectly (such
actions being collectively referred to herein as a "SALE") of any
shares of Bristol Common Stock to be received by the Shareholder in the
Merger.
(iv) The Shareholder is not aware of, or
participating in, any Plan on the part of the shareholders of Omaha to
engage in a Sale or Sales of the Bristol Common Stock to be received in
the Merger such that the aggregate fair market value, as of the
Effective Time, of the shares not
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subject to such Sales would be less than 50% of the aggregate fair
market value of all shares of outstanding Omaha Common Stock and Omaha
Preferred Stock immediately prior to the Merger.
(h) Reliance. The Shareholder acknowledges and understands
that the representations and warranties of the Shareholder contained in this
Section 2.30 and the covenants by Shareholder set forth in Section 5.6 will be
relied upon by Bristol and Bristol Omaha and that substantial losses and damages
may be incurred by these persons if the Shareholder's representations,
warranties or covenants are breached. The Shareholder has carefully read this
Agreement and has discussed the requirements of this Agreement with his
professional advisors, who are qualified to advise him with regard to such
matters.
2.31 Hart-Scott-Rodino Filing. The aggregate fair market value of the
Other Assets is less than $15 million. Omaha and the Shareholders have advised
Bristol that, based upon such valuation of the Other Assets, no filings or
approvals are required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, in connection with the Merger and the other transactions
contemplated hereby, and Omaha and the Shareholders acknowledge and understand
that Bristol has relied upon the representations and warranties contained in
this Section 2.31 in making its determination to not make any such filings or
seek any such approvals.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BRISTOL AND BRISTOL OMAHA
Bristol and Bristol Omaha each jointly and severally represents and
warrants to Omaha and the Shareholders as of the date hereof and as of the
Closing Date as set forth below, subject only to the exceptions specifically
disclosed in the schedules of Bristol and Bristol Omaha to be delivered to, and
agreed upon by, Omaha and attached hereto within fifteen (15) days after the
date hereof (the "BRISTOL SCHEDULES").
3.1 Organization, Standing and Power. Bristol is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Bristol Omaha is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Bristol and
Bristol Omaha has the corporate power to own its properties and to carry on its
business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified could have a Material Adverse Effect on Bristol
and Bristol Omaha taken as a whole. Bristol has delivered (or during the Due
Diligence Period will deliver) a true and correct copy of the Certificate of
Incorporation and Bylaws of each of Bristol and Bristol Omaha, as amended to
date, to counsel for Omaha.
3.2 Capital Structure. The authorized stock of Bristol consists of
150,000,000 shares of Common Stock, par value $0.01 per share, of which
43,641,401 shares were issued and outstanding as of December 31, 1997, and
50,000,000 shares of preferred stock, of which no shares are issued and
outstanding as of the date hereof. The authorized capital stock of Bristol Omaha
consists of 1,000 shares of Common Stock, par value $.01 per share, 1,000 shares
of which as of the date hereof are issued and outstanding and are held by
Bristol. All such shares have been duly authorized, and all such issued and
outstanding shares have been validly issued, are fully paid and nonassessable
and are free of any liens or encumbrances other than any liens or encumbrances
created by or imposed upon the holders thereof. The shares of Bristol Common
Stock to be issued pursuant to the Merger will be duly authorized, validly
issued, fully paid, and nonassessable.
3.3 Authority. Bristol and Bristol Omaha have all requisite corporate
power and authority to enter into this Agreement and to consummate the Merger
and the other transactions contemplated hereby. The
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execution and delivery of this Agreement and the consummation of the Merger and
the other transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Bristol and Bristol Omaha. This
Agreement has been duly executed and delivered by Bristol and Bristol Omaha and
constitutes the valid and binding obligation of Bristol and Bristol Omaha. The
execution and delivery of this Agreement do not, and the consummation of the
Merger and the other transactions contemplated hereby will not, result in any
violation of, or default (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under (i) any provision of the
Certificate of Incorporation or Bylaws of Bristol and Bristol Omaha or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Bristol or its properties or assets,
other than any such violations, defaults, terminations, cancellations or
accelerations which individually or in the aggregate would not have a material
adverse effect on the ability of Bristol to consummate the transactions
contemplated hereby or which have been consented to or waived on or prior to the
Closing Date (including the consents referred to in Section 6.2(f)). No consent,
approval, order or authorization of, or registration, declaration or filing with
any Governmental Entity is required by or with respect to Bristol and Bristol
Omaha in connection with the execution and delivery of this Agreement by Bristol
and Bristol Omaha or the consummation by Bristol and Bristol Omaha of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger with the Secretaries of State of Delaware and Kansas, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state and federal securities laws
and with the New York Stock Exchange and (iii) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not have a material adverse effect on the ability of Bristol to
consummate the transactions contemplated hereby.
3.4 SEC Documents; Bristol Financial Statements. Bristol has furnished
or made available to Omaha a true and complete copy of its Form 10-K for the
year ended December 31, 1996 and its Form 10-Q for the quarter ended September
30, 1997 (collectively, the "SEC DOCUMENTS"), which Bristol filed under the
federal securities laws with the SEC. As of their respective filing dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading, except to the extent corrected by a
subsequently filed document with the SEC. The financial statements of Bristol,
including the notes thereto, included in the SEC Documents comply as to form in
all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
consistently applied (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
present the consolidated financial position of Bristol at the dates thereof and
of its operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal, recurring audit adjustments).
3.5 Brokers and Finders' Fees. Bristol has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement,
the Merger or any transaction contemplated hereby, except for commissions which
may be owed to Property Specialists, Inc. under a separate agreement between
Bristol and Property Specialists, Inc.
(which will be the sole responsibility of the Surviving Corporation).
3.6 No Ownership of Omaha Common Stock or Omaha Preferred Stock. As of
the date of execution of this Agreement, Bristol does not own any shares of
Omaha Common Stock or Omaha Preferred Stock.
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3.7 Litigation. Except as set forth in the SEC Documents, there are no
suits, actions or legal, administrative, arbitration or other proceedings or
governmental investigations against Bristol pending or, to Bristol's knowledge,
threatened, which (i) if determined adversely to Bristol, could reasonably be
expected to have a Material Adverse Effect on Bristol, or (ii) seek to prevent
the consummation of the Merger.
3.8 Representations Complete. None of the representations or warranties
made by Bristol or Bristol Omaha in this Agreement nor any statement made in any
Schedule, Exhibit, or certificate furnished by Bristol or Bristol Omaha pursuant
to this Agreement, when read in their entirety, contains or will contain any
untrue statement of a material fact at the Effective Time, or omits or will omit
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading. No warranty or representation will be deemed to have been made by
Bristol or Bristol Omaha except for the warranties and representations set forth
in this Agreement and the exhibits, schedules and certificates delivered
pursuant hereto.
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Surveys and Title Commitments.
(a) Survey. Bristol will obtain a survey (herein the "SURVEY")
of each Hotel Real Property, dated subsequent to the date hereof, by a licensed
surveyor or Registered Professional Engineer acceptable to Bristol and the Title
Company. Each Survey will be sufficient to permit the Title Company to modify
the standard printed exception in the Owner's Policy of Title Insurance
pertaining to discrepancies in area or boundary lines, encroachments,
overlapping of improvements or similar matters (herein called the "SURVEY
EXCEPTION"). The costs of the Surveys shall be shared equally at the Closing by
Bristol Omaha and the Shareholders. The survey plats furnished to Bristol will
indicate and the surveyor will certify to Bristol and Title Company the
following, as well as such other things as Bristol will reasonably request: (i)
that the corners of the Hotel Real Property have been properly monumented; (ii)
the perimeter boundaries of the Hotel Real Property and any encroachments or
protrusions thereon; (iii) the location of all improvements upon or bounding the
Hotel Real Property and all set-back lines, fences, evidence of abandoned
fences, ponds, creeks, streams and rivers; (iv) the number of parking spaces in
all parking areas on the Hotel Real Property, including a designation of
handicapped parking spaces; (v) the location of all easements within or
traversing the Hotel Real Property, if any; (vi) the location of all roadways,
traversing, adjoining or bounding the Hotel Real Property; (vii) the number of
square feet of the land; and (viii) that portion of the Hotel Real Property, if
any, situated within a flood hazardous or flood prone area as designated by
applicable governing authority.
(b) Title Commitments. Bristol will obtain current commitments
(the "TITLE COMMITMENTS") for the issuance of Owner's Policies of Title
Insurance (the "TITLE POLICIES") to Bristol and/or Bristol Omaha from the Title
Company for each Hotel Real Property, together with good legible copies of all
documents constituting conditions or exceptions to Omaha's title as reflected in
the Title Commitment (the "EXCEPTION DOCUMENTS"). The costs of the Title
Policies shall be shared equally at the Closing by Bristol Omaha and the
Shareholders.
4.2 Inspection and Audit.
(a) Access. Omaha agrees that prior to the Effective Time,
Bristol and/or its authorized agents, representatives, accountants or attorneys,
will be entitled to enter upon each Hotel Real Property
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(including the Hotels) and all improvements at all reasonable times, so long as
such activities do not unreasonably interfere with Omaha's use of or operations
at the Hotel, for the purpose of making such tests and inspections as Bristol
may, in its sole discretion, require including but not limited to engineering,
structural and environmental studies. Bristol will make reasonable efforts to
notify Omaha by telephone prior to entering upon any Hotel Real Property;
provided, however, that Bristol's failure to provide such prior notice shall not
constitute a breach of or a default under this Agreement. Furthermore, Omaha
agrees to make available for inspection or copying to Bristol, or to its duly
authorized agents, representatives, accountants or attorneys, all Material
Agreements and all books and records relating to Omaha and its business, and the
Hotel Assets and the operation and maintenance thereof, for audit by Bristol.
Such books and records may be examined at all reasonable times. In connection
with such tests, inspections and audit taking place at each Hotel, Omaha agrees
to provide, at no cost, rooms to Bristol and its duly authorized agents,
representatives, accountants and attorneys, to the extent the same are
available. Bristol agrees to indemnify and hold Omaha harmless of and from any
costs, expenses or damages arising from Bristol's inspection of the Hotel
Assets; provided, however, Bristol will not be responsible for any economic
damage resulting from the discovery of structural or environmental conditions
existing at any Hotel Real Property.
(b) Deliveries. Within five (5) days after the date hereof,
Omaha will use its best efforts to furnish or make available to Bristol the
items listed on Schedule 4.2(b).
(c) Due Diligence Period. Bristol will have 60 days from the
date hereof (the "DUE DILIGENCE PERIOD") within which to make all audits,
inspections or investigations desired by Bristol. If, within such period,
Bristol determines in its sole discretion that it does not desire to close this
Agreement, Bristol may give notice of such fact to Omaha and the Shareholders.
In that event, this Agreement will immediately terminate without further
liability on the part of Bristol or Omaha, and the Earnest Money will be
immediately returned to Bristol by the Title Company (less $1,000, which will be
retained by the Shareholders and Omaha as independent consideration for their
execution of this Agreement).
4.3 Conduct of Business of Omaha Pending the Closing.
(a) Affirmative Covenants. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Omaha agrees (except to the extent that Bristol
will otherwise consent in writing), to carry on its business in the usual
regular and ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent with such business, use all commercially
reasonable efforts consistent with past practice and policies to preserve intact
Omaha's present business organizations, keep available the services of its
present officers and key employees and preserve their relationships with guests,
customers, suppliers, licensors, licensees and others having business dealings
with it, and will:
(i) Manage, operate, repair and maintain the Hotel
Real Property (including the Hotels) in the same manner as it managed,
operated, repaired and maintained the same prior to the date hereof and
will keep the Hotel Real Property in its present state of repair
subject to normal wear and tear, exercising the same degree of care in
such matters as Omaha has previously exercised;
(ii) Keep in full force and effect all existing fire,
casualty, liability, and extended coverage and other insurance policies
which are presently in effect for the Hotel Real Property;
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(iii) Use its best efforts to renew all of the
licenses and permits applicable to the Hotel Real Property and will
notify Bristol at least thirty (30) days prior to the expiration date
or threatened cancellation date of any license or operating permit;
(iv) Comply with all terms and provisions of the
Material Agreements in a timely manner, including without limitation,
the core modernization and product improvement plan requirements under
any franchise agreement;
(v) Use its best efforts to obtain all the Required
Consents, Omaha Authorizations and estoppel letters from all
Governmental Entities and all third parties to the Material Agreements,
including lenders and franchisors, as required by Bristol prior to the
end of the Due Diligence Period (and in any event prior to the
Effective Time);
(vi) Use reasonable efforts to complete all core
modernization and product improvement plan requirements to the
satisfaction of the applicable franchisor prior to the Effective Time (
unless Bristol otherwise instructs Omaha by written notice); and
(vii) Use reasonable efforts to facilitate the
closing of the Great Bend Purchase Agreement.
Omaha will promptly notify Bristol of any event or occurrence not in
the ordinary course of business of Omaha, and any event which could have a
Material Adverse Effect on Omaha.
(b) Negative Covenants. Except as expressly contemplated by
this Agreement or set forth in Schedule 4.3 or as required by Section 4.3(d),
Omaha will not, without the prior written consent of Bristol:
(i) Enter into any commitment or transaction (i) to
be performed over a period longer than six months in duration, or (ii)
to purchase fixed assets for a purchase price in excess of $25,000;
(ii) Grant any severance or termination pay (i) to
any director or (ii) to any employee, except payments made pursuant to
written agreements outstanding on the date hereof and described in the
Omaha's Schedules;
(iii) Transfer to any person or entity any rights to
Omaha's intellectual property;
(iv) Violate, amend or otherwise modify the terms of
any of the contracts or agreements required to be set forth in the
Omaha Schedules;
(v) Commence any litigation;
(vi) Declare or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of
any of its capital stock, or split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
capital stock of Omaha, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
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(vii) Issue, deliver or sell or authorize or propose
the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other
agreements or commitments of any character obligating it to issue any
such shares or other convertible securities;
(viii) Except as provided in the Certificate of
Merger, cause or permit any amendments to its Articles of Incorporation
or Bylaws;
(ix) Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the business of Omaha;
(x) Sell, lease, license or otherwise dispose of any
of its properties or assets which are material individually or in the
aggregate, to the business of Omaha, except in the ordinary course of
business;
(xi) Incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities of
Omaha or guarantee any debt securities of others;
(xii) Adopt or amend any employee benefit plan, or
enter into any employment contract, pay any special bonus or special
remuneration to any director or employee, or increase the salaries or
wage rates of its employees;
(xiii) Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business;
(xiv) Pay, discharge or satisfy in an amount in
excess of $10,000 in any one case (or $25,000 in the aggregate) any
claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction in the ordinary course of business of liabilities
reflected or reserved against in the Omaha Financial Statements;
(xv) Make or change any material election in respect
of Taxes, adopt or change any accounting method in respect of Taxes,
file any material Return or any amendment to a material Return, enter
into any closing agreement, settle any claim or assessment in respect
of Taxes, or consent to any extension or waiver of the limitation
period applicable to any claim or assessment in respect of Taxes;
(xvi) Accept any advance room or event reservations
during the Due Diligence Period other than in a manner consistent with
Omaha's historical course of conduct in operating the Hotel Real
Property. After the expiration of the Due Diligence Period, in addition
to the standard of the preceding sentence, Omaha will accept no advance
room or event reservations of more than 50 group rooms per event
without Bristol's prior written approval;
(xvii) Enter into or record any easement, covenant,
license, permit, agreement or other instrument against the Hotel Real
Property or any portion thereof except as may be required to enable
Omaha to perform its obligations under this Agreement; or
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(xviii) Take, or agree in writing or otherwise to
take any action which would make any of the representations or
warranties or covenants of Omaha contained in this Agreement materially
untrue or incorrect.
(c) Construction Obligations. Prior to the Effective Time,
Omaha shall complete in a good and workmanlike manner, and lien-free condition,
the following construction obligations ("CONSTRUCTION OBLIGATIONS") to the
reasonable satisfaction of Bristol unless Bristol otherwise instructs Omaha by
written notice:
(i) The core modernization and product improvement
plan requirements of the franchisors under any franchise or license
agreement on the Hotels as set forth on Schedule 2.27(b), to the extent
Omaha has commenced the same as of the date of this Agreement,
excluding, however, any additional work (such as certain bathroom
upgrades) requested by Bristol and/or currently contemplated by Omaha
which is not otherwise contemplated by such core modernization or
product improvement plan, unless Bristol agrees in writing to pay the
incremental cost of such additional work; and
(ii) The construction of the Holiday Inn Express,
Colby, Kansas, including any punch-list items, issuance of a
certificate of occupancy and equipping the same as necessary and
required for the operation of such Hotel, including without limitation,
the items set forth in Section 2.13. In addition to the foregoing,
Bristol shall have the right to elect to lease such telephone and front
desk equipment, consistent with the terms of similar leases at the
Hotels; provided that if Bristol elects not to lease the same, then the
down-payments which would have been paid under such leases will be
deemed a "current liability" of Omaha for purposes of calculating
Closing Working Capital.
To the extent Omaha fails to complete any of the Construction Obligations by the
Effective Time, as reasonably determined by Bristol, then (i) Omaha shall make
adequate reserves of cash in addition to the Closing Working Capital for the
total costs and expenses needed to complete the Construction Obligations, as
reasonably determined by Bristol and provided in Section 1.11(f) and (ii)
Leonard F. Harper, II ("HARPER") dba Harper Construction agrees to enter into a
development and construction agreement with the Surviving Corporation in form
reasonably required by Bristol to complete all such construction obligations at
a fixed cost equal to the reserves referenced in Section 1.11(f).
(d) Actions to be Taken With Respect to the Other Assets. On
or prior to the Closing Date, Omaha shall, with respect to the Other Assets, use
all commercially reasonable efforts to sell all of the Other Assets to bona fide
purchasers in arms'-length transactions for consideration of cash or cash
equivalents (and not for any other type of property or securities). Any Other
Assets not so sold shall be purchased by Harper prior to the Closing Date for a
purchase price mutually agreed upon by Omaha and Harper, which purchase price
shall be, in Omaha's and Bristol's reasonable determination, reasonably
equivalent to the fair market value of such Other Assets and paid in cash or
cash equivalents to Omaha. Omaha will repay any indebtedness secured by or
relating to the Other Assets prior to the Closing Date.
4.4 No Solicitation. Prior to the Effective Time, neither the
Shareholders nor Omaha will (nor will Omaha permit any of Omaha's officers,
directors, shareholders affiliated with any officer or director or Omaha's
agents, representatives or affiliates to) directly or indirectly, take any of
the following actions with any party other than Bristol and its designees:
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(a) solicit, encourage, initiate, accept or participate in any
negotiations or discussions with respect to, any offer or proposal to acquire
all or substantially all of Omaha's Hotel Real Property, Hotels, business and
properties or capital stock (other than the Other Assets) whether by merger,
purchase of assets, tender offer or otherwise, or agree to any such offer or
proposal,
(b) except for disclosures made to financial institutions and
others in the ordinary course of business, disclose any information not
customarily disclosed to any person other than its attorneys or financial
advisors concerning Omaha's business and properties or afford to any person or
entity access to its properties, books or records, or
(c) assist or cooperate with any person to make any proposal
to purchase all or any part of Omaha's capital stock or assets or agree to any
such proposal.
In the event Omaha receives any offer or proposal, directly or
indirectly, of the type referred to in clause (a) or (c) above, or any request
for disclosure or access pursuant to clause (b) above, such party will
immediately inform Bristol as to any such offer or proposal and will cooperate
with Bristol by furnishing any information it may reasonably request.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Shareholder Consent. Omaha and the Shareholders will promptly after
the date hereof take all action necessary in accordance with the laws of the
States of Delaware and Kansas and Omaha's Articles of Incorporation and Bylaws
to obtain unanimous written consent of the shareholders of Omaha. The
Shareholders agree to consent to the transactions contemplated hereto and to
sign all consents and other documents reasonably requested by Bristol or Omaha
to evidence such consent. Bristol agrees to consent to (or to cause the
appropriate Bristol subsidiary to consent to) this Agreement and the
transactions contemplated hereby in Bristol's (or such subsidiary's) capacity as
the sole shareholder of Bristol Omaha.
5.2 Confidentiality. From the date hereof to and including the
Effective Time, the parties hereto will maintain, and cause their directors,
employees, agents and advisors to maintain, in confidence and not disclose or
use for any purpose, except the evaluation of the transactions contemplated
hereby and the accuracy of the respective representations and warranties of the
parties hereto contained herein, information concerning the other parties hereto
and obtained directly or indirectly from such parties, or their directors,
employees, agents or advisors, except such information as is or becomes (a)
available to the non-disclosing party from third parties not subject to an
undertaking of confidentiality or secrecy; (b) generally available to the public
other than as a result of a breach by the non-disclosing party hereunder; or (c)
required to be disclosed under applicable law, or by applicable self regulatory
organizations (including disclosures required by state or federal securities
laws or the New York Stock Exchange); and except such information as was in the
possession of such party prior to obtaining such information from such other
party as to which the fact of prior possession such possessing party will have
the burden of proof. In the event that the transactions contemplated hereby will
not be consummated, all such information which will be in writing will be
returned to the party furnishing the same, including to the extent reasonably
practicable, copies or reproductions thereof which may have been prepared. In
addition, unless otherwise required by law, prior to the Effective Time no press
release or similar public disclosure (whether or not in response to an inquiry)
of the subject matter of this Agreement will be made by any party hereto unless
approved by Bristol and Omaha prior to
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release, provided that such approval will not be unreasonably withheld.
Notwithstanding the above, the Bristol may make such press releases or other
public disclosures (including pursuant to SEC filings) without the consent of
Omaha to the extent reasonably necessary as determined by Bristol.
5.3 Covenants Not to Compete. Harper recognizes that his willingness to
enter into the restrictive covenants contained in this Section 5.3 is a critical
condition precedent in Bristol's willingness to enter into and perform under
this Agreement. In addition, Harper acknowledges that pursuant to this
Agreement, Bristol is issuing shares of Bristol Common Stock to Harper with a
substantial fair market value, and that giving effect to the restrictions
contained in this Section 5.3 will not materially or unreasonably interfere with
Harper's ability to earn a living. Accordingly, Harper agrees that, except as
set forth below, during the Non-Competition Period (defined below) he will not
in any capacity, either separately, jointly, or in association with others,
directly or indirectly, as an officer, director, consultant, agent, employee,
owner, partner, distributor, dealer, representative, shareholder or otherwise,
engage or have a financial interest in any business located anywhere in the
Restricted Area (as herein defined) which competes with the Business (as defined
herein) of Bristol, the Surviving Corporation or with any affiliate of Bristol
or the Surviving Corporation (excepting only (a) the ownership and operation of
the Economy Hotel in Great Bend, Kansas and (b) the ownership of not more than
five percent of the outstanding securities of any class listed on a national
securities exchange or regularly traded in the over-the-counter market). For
purposes of this Section 5.3, "Business" shall mean owning, operating or
managing hotels, motels, lodging facilities, guest quarters and other businesses
involving principally the overnight rental of rooms or other quarters.
"RESTRICTED AREA" means each and every standard metropolitan statistical area in
which any Hotel is currently located. The "Non-Competition Period" is the period
commencing on the date hereof and ending two (2) years after the Closing Date.
Harper further agrees that during the Non-Competition Period he will not in any
capacity, either separately, jointly or in association with others, directly or
indirectly, solicit for employment or employ or otherwise contract with any
person (including, without limitation, any general manager, sales manager or
marketing or engineering personnel) employed by Bristol or the Surviving
Corporation (or employed by any other person in connection with the operation of
the Hotels) during the Non-Competition Period or during the twelve (12) month
period immediately preceding the Effective Time. If a court determines that the
foregoing restrictions are too broad or otherwise too restrictive under
applicable law, including with respect to time or space, the court is hereby
requested and authorized by the parties hereto to revise the foregoing
restrictions to include the maximum restrictions allowed under the applicable
law. Harper expressly agrees that breach of the foregoing would result in
irreparable injuries to Bristol and the Surviving Corporation, that the remedy
at law for any such breach will be inadequate and that upon breach of this
provision, Bristol and/or the Surviving Corporation, in addition to all other
available remedies, shall be entitled as a matter of right to injunctive relief
in any court of competent jurisdiction without the necessity of proving the
actual damage to Bristol and/or the Surviving Corporation.
5.4 Continued Cooperation. The Shareholders agree to cooperate with
Bristol and Bristol Omaha for a reasonable period of time following the
Effective Time to the extent reasonably necessary or desirable.
5.5 Consents. Omaha will promptly apply for or otherwise seek, and use
its best efforts to obtain, all consents and approvals required to be obtained
by it for the consummation of the Merger (including any Required Consents under
Material Agreements), and Omaha will use its best efforts to obtain all
consents, waivers and approvals under any of Omaha's agreements, contracts,
licenses, debt or leases in order to preserve the benefits thereunder for the
Surviving Corporation and otherwise in connection with the Merger.
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5.6 Compliance With Rule 144 and the Securities Act. Each Shareholder
has been advised that (a) the issuance of shares of Bristol Common Stock in
connection with the Merger is expected to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act and,
consequently, such shares will be deemed "restricted securities" within the
meaning of Rule 144 promulgated thereunder and resale of such shares will be
subject to the restrictions set forth in Rule 144 of the Securities Act unless
otherwise transferred pursuant to an effective registration statement under the
Securities Act or an appropriate exemption from registration, and (b) such
Shareholder may be deemed to be an affiliate of Company and/or Bristol for
purposes of Rules 144 and 145 of the Securities Act. Each Shareholder
accordingly agrees not to sell transfer or otherwise dispose of unregistered
Bristol Common Stock issued to such Shareholder in the Merger unless (a) such
sale, transfer or other disposition is made in conformity with the requirements
of Rule 144 promulgated under the Securities Act, or (b) such Shareholder
delivers to Bristol a written opinion of counsel, reasonably acceptable to
Bristol in form and substance, that such sale, transfer or other disposition is
otherwise exempt from registration under the Securities Act. Bristol will give
stop transfer instructions to its transfer agent with respect to the Bristol
Common Stock received by each Shareholder pursuant to the Merger, and there will
be placed on the certificates representing such Bristol Common Stock, or any
substitutions therefor, the legend described in Section 2.30(e). The legend set
forth in Section 2.30(e) will be removed (by delivery of a substitute
certificate without such legend) and Bristol will so instruct its transfer agent
if any such Shareholder sells shares pursuant to an effective registration
statement under the Securities Act or delivers to Bristol (a) satisfactory
written evidence that such shares have been sold in compliance with Rule 144 (in
which case, the substitute certificate will be issued in the name of the
transferee), or (b) an opinion of counsel in form and substance reasonably
satisfactory to Bristol, to the effect that public sale of such shares by the
holder thereof is no longer subject to Rule 144.
5.7 Legal Requirements. Each of Bristol, Bristol Omaha, Omaha and the
Shareholders will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on them with respect to the
consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to any party hereto in
connection with any such requirements imposed upon such other party in
connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.8 Best Efforts, Additional Documents and Further Assurances. Each of
the parties to this Agreement will use its best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement. Each party hereto, at the request of
another party hereto, will execute and deliver such other instruments and do and
perform such other acts and things as may be reasonably necessary or desirable
for effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
5.9 Liquor Licenses. If permitted by applicable law, Omaha and the
Trust will transfer to Bristol Omaha, or cause to be transferred to Bristol
Omaha, all liquor licenses and alcoholic beverage licenses ("LIQUOR LICENSES")
necessary to operate the restaurant, bars and lounges presently located within
the Hotels. If such transfer is not permitted by applicable law, then Bristol
Omaha agrees to make diligent efforts to apply for and procure new Liquor
Licenses in Bristol Omaha's name. In either event, the parties agree to
cooperate each with the other, and each will execute such forms, license
applications and other documents as may be necessary. The parties agree to
execute and file all necessary forms, applications and papers with the
appropriate liquor and alcoholic beverage authorities prior to the Effective
Time, to the end that the transfer
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of existing Liquor Licenses or new Liquor Licenses will take effect, if
possible, at the Effective Time. If such transfer of existing Liquor Licenses or
new Liquor Licenses have not been issued by the Effective Time, then the parties
agree to promptly execute all forms, applications and other documents required
by the liquor authorities in order to effect such transfer of existing Liquor
Licenses or new Liquor Licenses at the earliest possible date after the
Effective Time, consistent with the applicable laws, in order that all Liquor
Licenses may be transferred from or procured at the earliest possible time after
the Effective Time. If under the applicable laws such Liquor Licenses cannot be
so transferred or procured until after the Effective Time, then Omaha and the
Trust will cooperate with Bristol Omaha in keeping open the bars and lounges and
liquor facilities of the Hotels for Bristol Omaha's account between the
Effective Time and the time when such Liquor License transfers or procurement
actually become effective by exercising management and supervision of such
facilities until such time under the existing Liquor Licenses; provided,
however, that Bristol Omaha will indemnify and hold Omaha and/or the Trust
harmless from any expense, loss, liability, damage or claim encountered in
connection with such operations during said period of time, except for Omaha
and/or the Trust's gross negligence or willful misconduct.
5.10 Office Lease. For a period of forty-eight (48) months following
the Effective Time, the Surviving Corporation shall lease to Harper such office
space as Harper presently occupies as set forth on Schedule 5.10 attached hereto
(the "PREMISES"). Harper shall pay to the Surviving Corporation an amount equal
to all HVAC, utility costs, ad valorem taxes and other costs and expenses
reasonably incurred as a result of Harper's continued occupancy of such space
but will not otherwise be required to pay rental for such space. Such lease
shall be in a form reasonably agreed upon between Harper and Bristol.
Notwithstanding anything to the contrary contained herein, the lease for any
part of the Premises shall immediately terminate upon the sale or conveyance of
the Hotel Real Property containing such Premises to a third party.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Omaha and the Shareholders. The
obligations of Omaha and the Shareholders to consummate and effect this
Agreement and the Merger will be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by Omaha:
(a) No Injunctions or Restraints; Legality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger will be in effect, nor will any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor will there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(b) Representations, Warranties and Covenants. The
representations and warranties of Bristol and Bristol Omaha in this Agreement
will be true and correct in all material respects on and as of the Effective
Time as though such representations and warranties were made on and as of such
time and Bristol will have performed and complied in all material respects with
all covenants, obligations and conditions of this Agreement required to be
performed and complied with by them as of the Effective Time.
(c) Certificate of Bristol. Omaha will have been provided with
a certificate executed on behalf of Bristol by its President or its Chief
Financial Officer to the effect that, as of the Effective Time:
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(i) all representations and warranties made by
Bristol and Bristol Omaha under this Agreement are true and complete in
all material respects; and
(ii) all covenants, obligations and conditions of
this Agreement to be performed by Bristol and Bristol Omaha on or
before such date have been so performed in all material respects.
(d) Third Party Consents for Bristol. Any and all consents,
waivers and approvals required from third parties by reason of the Merger and
relating to the contracts and agreements of Bristol will have been obtained.
(e) Legal Opinion. Omaha will have received a legal opinion
from Munsch Hardt Kopf Harr & Dinan, P.C., counsel to Bristol, substantially in
the form of Exhibit 6.1(e) hereto.
(f) Satisfactory Form of Legal and Tax Matters. The form,
scope and substance of all legal and tax matters contemplated hereby and all
closing documents and other papers delivered hereunder will be reasonably
acceptable to Omaha's counsel and accountants and to the Shareholders and their
legal counsel.
(g) Bristol Share Price. Subject to Section 1.6(b), the
Ten-Day Average Price will be equal to or greater than $24.00.
(h) Great Bend Hotel Closing. The closing under the Great Bend
Purchase Agreement will have occurred.
6.2 Conditions to the Obligations of Bristol and Bristol Omaha. The
obligations of Bristol and Bristol Omaha to consummate and effect this Agreement
and the Merger will be subject to the satisfaction at or prior to the Effective
Time of each of the following conditions, any of which may be waived, in
writing, exclusively by Bristol:
(a) No Injunctions or Restraints; Legality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger will be in effect, nor will any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor will there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(b) Shareholder Approval. The Shareholders will have executed
a written consent approving this Agreement, the Merger and the other
transactions contemplated hereby.
(c) Representations, Warranties and Covenants. The representations
and warranties of Omaha and the Shareholders in this Agreement will be true and
correct in all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time and Omaha and
the Shareholders will have performed and complied in all material respects with
all covenants, obligations and conditions of this Agreement required to be
performed and complied with by it as of the Effective Time.
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(d) Certificate of Omaha. Bristol will have been provided with
a certificate executed on behalf of Omaha by its President and executed by
Harper in his individual capacity to the effect that, as of the Effective Time:
(i) all representations and warranties made by Omaha
and the Shareholders under this Agreement are true and complete in all
material respects; and
(ii) all covenants, obligations and conditions of
this Agreement to be performed by Omaha or the Shareholders on or
before such date have been so performed in all material respects.
(e) Third Party Consents of Omaha. Any and all consents,
waivers and approvals required from third parties relating to the contracts,
agreements and licenses of Omaha so that the Merger and other transactions
contemplated hereby do not adversely affect the rights of, and benefits to,
Omaha thereunder will have been obtained, including, without limitation, the
Required Consents and Omaha Authorizations.
(f) Third Party Consents for Bristol. Any and all consents,
waivers and approvals required from third parties relating to the contracts and
agreements of Bristol so that the Merger and other transactions contemplated
hereby do not adversely affect the rights of, and benefits to, Bristol
thereunder will have been obtained.
(g) Satisfactory Form of Legal and Tax Matters. The form,
scope and substance of all legal and tax matters contemplated hereby and all
closing documents and other papers delivered hereunder will be reasonably
acceptable to Bristol's counsel and accountants.
(h) Legal Opinion. Bristol will have received a legal opinion
from Hugh D. Mauch, Esq., legal counsel to Omaha and the Shareholders, in
substantially the form of Exhibit 6.2(h) hereto.
(i) No Material Adverse Changes. There will not have occurred
any event, fact or condition which has had or reasonably would be expected to
have a Material Adverse Effect on Omaha.
(j) Bristol Share Price. Subject to Section 1.6(b), the
Ten-Day Average Price will be less than or equal to $32.00.
(k) Taxes. Omaha will have obtained such evidence as Bristol
may deem necessary or desirable indicating that all Taxes and assessments
imposed by any Taxing authority on Omaha or its assets have been paid in full as
of the Closing.
(l) Title Policies. Omaha will have furnished Bristol with an
extended coverage Owner's Policy of Title Insurance for each Hotel Real Property
in the amounts set forth in Schedule 6.2(l) issued by the Title Company on the
standard form in use in the States in which the Hotel Real Properties are
located, on the policy of a title insurance company satisfactory to Bristol,
insuring good and marketable title to the Hotel Real Property in the Surviving
Corporation, subject only to the Permitted Exceptions and the standard printed
exceptions, except: (i) the exception relating to restrictions against the Hotel
Real Property will be deleted or endorsed by the Title Company to specify such
restrictions as may be included in the Permitted Exceptions; (ii) the exception
relating to discrepancies, conflicts or shortages in area or boundary lines, or
any encroachment or any overlapping of improvements which a survey might show
will be modified to delete such exception, except as to shortages in area; (iii)
the exception relating to ad valorem taxes will except only to standby fees and
taxes owing for the current and subsequent years; (iv) there will be no general
exception for
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visible and apparent easements or roads and highways or similar items (with any
specific exception to be specifically referenced to and shown on the Survey and
identified by any applicable recording data); and (vi) there will be no
exception for parties in possession except for recorded leases and/or rights of
tenants in possession as tenants only under the terms of any unrecorded leases
or rental agreements (in which case, at Bristol's option, the Title Commitment
will list each such unrecorded lease).
(m) UCC Search. Bristol will have received or obtained an
updated UCC Search dated within three (3) days of the date of Closing,
reflecting no financing statements or other filings pursuant to the Uniform
Commercial Code against the Hotel Assets, other than those securing the
Permitted Exceptions.
(n) Reservations. Omaha will have delivered to Bristol a
current listing of all reservations and bookings for each of the Hotels.
(o) Great Bend Hotel Closing. The closing under the Great Bend
Purchase Agreement will have occurred.
(p) Omaha Indebtedness. The aggregate amount of the Omaha
Indebtedness (including the principal amount thereof, all accrued but unpaid
interest thereon, and all other amounts or fees due and owing with respect
thereto) will not exceed $40,914,332, none of which will relate to or be secured
by any Other Assets, and Omaha will not have any indebtedness other than Omaha
Indebtedness.
(q) Sale of Other Assets. All of the Other Assets will have
been sold or otherwise liquidated, either to Harper or other bona fide third
party purchasers, pursuant to Section 4.3(c) hereof.
(r) Security Agreement. Each Shareholder shall have executed
and delivered to Bristol a security agreement (a "SECURITY AGREEMENT") in form
and substance reasonably satisfactory to Bristol relating to the pledge by such
Shareholder to Bristol of the shares of Bristol Common Stock acquired by such
Shareholder hereunder.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION AND HOLDBACK
7.1 Survival of Representations and Warranties: Indemnification.
(a) Survival. All covenants to be performed prior to the
Effective Time, and all representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement will survive the Merger and
continue until two years following the Effective Time, provided that any
representation or warranty relating or pertaining to Omaha's Taxes will
terminate upon the expiration of all applicable statutes of limitations relevant
to Omaha's Taxes or Tax matters. All covenants to be performed after the
Effective Time will continue indefinitely.
(b) Indemnification. The Shareholders hereby agree to
indemnify Bristol and Bristol Omaha against any and all claims, losses,
expenses, liabilities or other damages, including reasonable attorneys' fees
("LOSSES"), that Bristol or any of its affiliates has incurred or reasonably
anticipates incurring by reason of, arising out of or relating to (i) the breach
by Omaha or the Shareholders of any representation, warranty, covenant or
agreement of Omaha or the Shareholders contained herein, including without
limitation the Shareholders' payment obligations under Sections 1.11(a) and
1.11(e) and Harper's obligations with respect
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to the Holiday Inn Express, Colby, Kansas under Section 4.3(c)(ii), and (ii) the
Other Assets or the Other Liabilities; provided, however, no indemnitee may make
a claim for indemnification hereunder unless the aggregate amount of such Losses
(together with all concurrent or prior claims hereunder) exceeds $100,000 (the
"INDEMNIFICATION THRESHOLD") in which case the Shareholders will be liable for
the full amount of such Losses (without regard to the Indemnification
Threshold); provided further that any claim relating to a breach by any
Shareholder of its or his payment obligation under Sections 1.11(a) and 1.11(e)
and/or Harper's obligations with respect to the Holiday Inn Express, Colby,
Kansas under Section 4.3(c)(ii) shall not be subject to the Indemnification
Threshold. The Shareholders' indemnification obligations under this Section
7.1(b) will be "several" (rather than "joint and several") with each
Shareholder's share of the Losses being equal to the percentage ownership of
each Shareholder of the Omaha Common Stock and Omaha Preferred Stock, as
applicable (except for Harper's obligations with respect to the Holiday Inn
Express, Colby, Kansas, the liability for which will be solely Harper's) and the
aggregate liability of the Shareholders hereunder will not in any event exceed
the Merger Consideration. Bristol and Bristol Omaha will be entitled to seek
indemnification for Losses against any Shareholder hereunder without first
having to seek indemnification against any other Shareholder.
(c) Holdback for Claims.
(i) Recourse to Holdback Account. At the Effective
Time, all of the shares of Bristol Common Stock to be issued to the
Shareholders in the Merger (plus any additional New Shares (as defined
below) as may be issued in respect thereof after the Closing)
(collectively, the "HOLDBACK SHARES"), will be issued in the name of
the Shareholders and will be pledged and delivered to Bristol pursuant
to the Security Agreement executed by the Shareholders to secure the
indemnification obligations of the Shareholders under Section 7.1(b).
Subject to the Security Agreement and the following requirements, the
Holdback Shares shall be retained by Bristol for a period of one year
after the Effective Time (the "HOLDBACK PERIOD"). Upon the expiration
of the Holdback Period, and in accordance with the Security Agreement,
Omaha will deliver to the Shareholders their respective Holdback
Shares; provided, however, that the number of Holdback Shares with a
value (determined as set forth in Section 7.1(c)(iii)) equal to the
amount of the Losses or other indemnification obligations as to which
the Bristol has properly made a claim under Section 7.1(c)(iii), shall
be retained by Bristol until such claims have been resolved.
(ii) Distributions; Voting. Any shares of Bristol
Common Stock or other equity securities issued or distributed by
Bristol (including shares issued upon a stock split) ("NEW SHARES") in
respect of Holdback Shares which have not been released to the
Shareholders shall be added to the Holdback Shares and become a part
thereof. New Shares issued in respect of Holdback Shares which have
been released shall not be added to the Holdback Shares, but shall be
distributed to the holders thereof. When and if cash dividends on
Holdback Shares shall be declared and paid, they shall not be added to
the Holdback Shares but shall be paid to those on whose behalf such
Bristol Common Stock is held. The Shareholders shall be the record
owner of the Holdback Shares and shall have voting rights with respect
to the Holdback Shares (including any New Shares that are voting
securities) so long as such Holdback Shares are retained by Bristol.
(iii) Claim Upon Holdback Shares. Upon notification
to the Shareholders by Bristol at any time on or before the last day of
any Holdback Period that Bristol has paid or properly accrued or
reasonably anticipates that it will have to pay or accrue Losses in an
aggregate stated amount to which Bristol is entitled to indemnity
pursuant to this Agreement, then Bristol shall, in accordance with the
Security Agreement and unless the Shareholders object in accordance
with the
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provisions of Section 7.1(c)(iv) hereof, retain shares of Bristol
Common Stock having a value equal to such Losses (which shall be
deducted from the Holdback Shares). For the purposes of determining the
number of shares of Bristol Common Stock to be retained by Bristol from
the Holdback Shares pursuant to this Section 7.1(c)(iii), the shares of
Bristol Common Stock shall be valued at the Ten-Day Average Price
calculated as of the date such notice of a claim is delivered to the
Shareholders. The Shareholders shall have, at their sole election, the
option to substitute cash for the Bristol Common Stock held in the
Holdback Shares in respect of such claims.
(iv) Objections to Claims. At the time of receipt of
any notification as set forth in Section 7.1(c)(iii), the Shareholders
shall have a period of thirty (30) days after such delivery to object
in a written statement to the claim made in the notification, and such
statement shall have been delivered to Bristol prior to the expiration
of such thirty (30) day period. If Bristol does not receive any such
objection within such thirty (30) day period, Bristol may retain the
shares of Bristol Common Stock and deduct them from the Holdback
Shares. If Bristol receives such objection, Bristol will not deduct any
shares from the Holdback Shares until the matter is resolved pursuant
to Section 7.1(c)(v).
(v) Resolution of Conflicts; Arbitration. In case the
Shareholders shall so object in writing to any claim or claims made in
any notification, the Shareholders and Bristol shall attempt in good
faith to agree upon the rights of the respective parties with respect
to each of such claims. If the Shareholders and Bristol should so
agree, a memorandum setting forth such agreement shall be prepared and
signed by both parties. If no such agreement can be reached after good
faith negotiation, either Bristol or the Shareholders may demand
arbitration of the matter, unless (in the case of Losses) the amount of
the damage or loss is at issue in pending litigation with a third
party, in which event arbitration shall not be commenced until such
amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration conducted
by three arbitrators. Bristol and the Shareholders shall each select
one arbitrator, and the two arbitrators so selected shall select a
third arbitrator. The decision of a majority of the three arbitrators
as to the validity and amount of any claim in such notification shall
be binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 7.1(c)(iv) hereof, Bristol shall be
entitled to act in accordance with such decision and retain shares of
Bristol Common Stock, which shall be deducted from the Holdback Shares,
in accordance therewith. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in Dallas, Texas under the rules then in
effect of the American Arbitration Association. Each party to an
arbitration shall pay its own expenses and Bristol and the Shareholders
shall bear equally the fees of the arbitrators.
(d) Third Party Claims. In the event a third-party claim is
asserted which Bristol believes may result in a Loss, Bristol will promptly
notify the Shareholders of such claim, and the Shareholders will have the right
to defend against such claim; provided, however, that if (i) such third party
claim is made by a person with which the Bristol has a business relationship
that Bristol deems important to Bristol's business or (ii) the amount of the
claim (when added together with all other Losses claimed by the Bristol) exceeds
by more than $100,000 at the time the Bristol receives the claim, Bristol will
have the right to control and direct the defense of such claim (including any
settlement thereof) and the Shareholders will be entitled, at their expense, to
participate in any defense of such claim. No settlement of any such claim with
third-party claimants by Bristol without a Shareholder's consent will alone be
determinative of the validity of any claim by the Bristol for indemnification of
such Shareholder. In the event that a Shareholder has consented to any such
settlement, such Shareholder will have no power or authority to object under any
provision of this Article
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7 to the amount of any claim by Bristol against such Shareholder with respect to
such settlement or to the deduction by Bristol of shares of Bristol Common Stock
from the Holdback Shares to satisfy such claim.
(e) No Claims by Shareholder Against the Surviving
Corporation. The parties acknowledge that inasmuch as the Surviving Corporation
will be a wholly owned subsidiary of Bristol after the Effective Time, in the
event that Bristol makes a claim for indemnification against any Shareholder
pursuant to this Article 7, such Shareholder will have no right to make any
claim, cross claim or counter claim against the Surviving Corporation for
indemnification, contribution or otherwise.
7.2 Indemnification by Bristol. To the extent, and solely to the
extent, that (a) any Omaha Indebtedness is not paid off in full on or prior to
the Closing Date and (b) any Shareholder has executed a personal guaranty with
respect to such Omaha Indebtedness that has not been discharged or released on
or prior to the Closing Date, then in such event the Surviving Corporation
(and/or an affiliate thereof (other than Bristol) with the financial wherewithal
reasonably satisfactory to the Shareholders to perform the indemnification
obligations under this Section 7.2) shall indemnify any such Shareholder against
any Losses incurred by such Shareholder under such personal guaranty at any time
with respect to any default first occurring from and after the Closing Date.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and the Merger
abandoned at any time by Bristol pursuant to Section 4.2(c) hereof by delivering
to Omaha on or before the end of the Due Diligence Period a written termination
of this Agreement. In addition, this Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual consent of Omaha, Bristol and the Shareholders;
(b) by Bristol if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Omaha or the Shareholders and such breach has not been cured within
15 days after notice to Omaha;
(c) by Omaha, if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Bristol or Bristol Omaha and such breach has not been cured within
15 days after notice to Bristol;
(d) by Bristol or Omaha if: (i) there is a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger; (ii) there is any action taken, or any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental Entity which would make consummation of the Merger illegal; or
(iii) there is any action taken, or any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental Entity, which would (A) prohibit Bristol's or the Surviving
Corporation's ownership or operation of all or a material portion of the
business of the Surviving Corporation, or compel Bristol or the Surviving
Corporation to dispose of or hold separate all or a material portion of the
business or assets of the Surviving Corporation or Bristol as a result of the
Merger or (B) render Bristol, Bristol Omaha or Omaha unable to consummate the
Merger, except for any waiting period provisions;
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(e) by Bristol pursuant to any section hereof that provides
for such termination; or
(f) by Bristol or Omaha if the Merger has not become effective
on or prior to July 1, 1998.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it will be sufficient for such action to be authorized by the Board
of Directors (as applicable) of the party taking such action.
8.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided
in Section 8.1, this Agreement will forthwith become void and there will be no
liability or obligation on the part of Bristol, Bristol Omaha or Omaha or their
respective officers, directors or shareholders, including the Shareholders,
except as otherwise set forth in this Section 8.2 or if such termination results
from the breach by a party hereto of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
(b) In the event all conditions of this Agreement are
satisfied and in the event all covenants and agreements to be performed by Omaha
prior to Closing are fully performed, and in the event that performance of this
Agreement is tendered by Omaha and the Merger is not consummated through default
on the part of Bristol or Bristol Omaha on the Closing Date, then the Earnest
Money will be paid to Omaha by the Title Company as liquidated damages for
Bristol's default. Such amount is agreed upon by and between Omaha and Bristol
as liquidated damages, due to the difficulty and inconvenience of ascertaining
and measuring actual damages, and the uncertainty thereof; and no other damages,
rights or remedies will in any case be collectible, enforceable or available to
Omaha other than in this Article VIII, but Omaha will accept said cash payment
as Omaha's total damages and relief.
(c) In the event that any of Omaha's representations or
warranties contained herein are untrue or if Omaha will have failed to have
performed any of the covenants or agreements contained herein which are to be
performed by Omaha for any reason, Bristol may, at its option: (i) terminate
this Agreement by giving written notice of termination to Omaha, receive a full
and immediate refund of the Earnest Money (less $1,000, which will be paid to
Omaha and the Shareholders as independent consideration for its execution of
this Agreement) and seek damages for breach of this Agreement by Omaha, or (ii)
seek to enforce specific performance of this Agreement and recover all attorneys
fees, court costs and other costs and expenses incurred by Bristol in connection
with the pursuit of such specific performance action.
8.3 Amendment. This Agreement may be amended by the parties, at any
time, but only by a written document signed by Omaha, Bristol and the
Shareholders who, immediately prior to the Effective Time, owned a majority of
the issued and outstanding shares of the Omaha Common Stock. Additionally,
notices or consents by Shareholders hereunder shall be deemed to be given when
delivered by Shareholders owning a majority of the issued and outstanding shares
of the Omaha Common Stock.
8.4 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to
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any such extension or waiver will be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder will be in
writing and will be deemed given and received if delivered personally or by
commercial delivery service, or mailed by registered or certified mail (return
receipt requested) or sent via telecopy to the parties at the following
addresses (or at such other address for a party as will be specified by like
notice):
(a) if to Bristol or Bristol Omaha, to:
Bristol Hotel Company
14295 Midway Road
Dallas, TX 75244
Attention: Joel M. Eastman. Esq.
Telephone: (972) 391-3050
Facsimile: (972) 391-1515
with a copy to:
Munsch Hardt Kopf Harr & Dinan
4000 Fountain Place
1445 Ross Avenue
Dallas, TX 75202-2790
Attention: William T. Cavanaugh Jr., Esq.
Telephone: (214) 855-7500
Facsimile: (214) 855-7584
(b) if to Omaha or to any Shareholder, to:
Omaha Hotel, Inc.
3111 10th Street
Great Bend, KS 67530
Attention: Leonard F. Harper, II
Telephone: (402) 331-5531
Facsimile: (402) 331-4010
with a copy to:
Hugh D. Mauch, Esq.
Attorney at Law
3111 10th Street
Great Bend, Kansas 67530-1444
Telephone: (316) 792-2472
Facsimile: (316) 792-3354
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9.2 Interpretation. When a reference is made in this Agreement to
Schedules or Exhibits, such reference will be to a Schedule or Exhibit to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein will be deemed in each case to be followed by the
words "without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement.
9.3 Counterparts; Effectiveness. This Agreement may be executed in one
or more counterparts, all of which will be considered one and the same agreement
and will become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart. In addition, notwithstanding nothing
to the contrary contained herein, this Agreement shall become effective and
binding upon all signatories hereto at the time counterpart signature pages have
been executed by Bristol, Bristol Omaha, Omaha and Shareholders who own at least
a majority of the issued and outstanding shares of the Omaha Common Stock as of
the date hereof (and so long as such majority of Shareholders sign this
Agreement, the failure of one or more other Shareholders to sign this Agreement
shall not affect its effectiveness, and this Agreement shall still be binding
upon those Shareholders and other parties who do sign this Agreement).
9.4 Miscellaneous. This Agreement and the documents and instruments and
other agreements among the parties hereto (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral among the parties
with respect to the subject matter hereof, including the parties' letter of
intent with respect to this transaction; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) will not be assigned by
operation of law or otherwise except as otherwise specifically provided.
9.5 Governing Law. This Agreement will be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Texas. All parties hereto agree to submit to the jurisdiction of the federal and
state courts of the State of Texas, and further agree that service of documents
commencing any suit therein may be made as provided in Section 9.1.
9.6 Attorneys' Fees. If any party to this Agreement brings an action
against another party to this Agreement to enforce its rights under this
Agreement, the prevailing party will be entitled to recover its reasonable costs
and expenses, including reasonable attorneys' fees and costs, incurred in
connection with such action, including any appeal of such action.
9.7 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.8 Consents. Any consent, approval or waiver provided hereunder by or
on behalf of Bristol or Bristol Omaha will only be valid if in writing and if
executed by or on behalf of Bristol or Bristol Omaha by Joel M. Eastman or John
Beckert.
9.9 Definitions. Terms used herein with initial capital letters will
have the respective meanings set forth below:
"Agreement" will have the meaning set forth in the introductory
paragraph of this Agreement.
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"Base Rate" will mean a floating interest rate equal at all times to
the rate of interest that the Bankers Trust Company announces from time to time
as its prime rate of interest.
"Bristol" will have the meaning set forth in the introductory paragraph
of this Agreement.
"Bristol Common Stock" will have the meaning set forth in
Section 1.6(a).
"Bristol Omaha" will have the meaning set forth in the introductory
paragraph of this Agreement.
"Bristol Schedules" will have the meaning set forth in the introductory
paragraph of Article 3.
"Budgeted PIP Completion Amount" will have the meaning set forth in
Section 2.27(b).
"Business" will have the meaning set forth in Section 5.3.
"Cash Consideration" will have the meaning set forth in Section 1.6(a).
"Certificate of Merger" will have the meaning set forth in Section 1.2.
"Closing" will have the meaning set forth in Section 1.2.
"Closing Date" will have the meaning set forth in Section 1.2.
"Closing Working Capital" will have the meaning set forth in
Section 1.11(a).
"Closing Working Capital Statement" will have the meaning set forth in
Section 1.11(b).
"COBRA" will have the meaning set forth in Section 2.20.
"Code" will have the meaning set forth in Recital E.
"Common Base Shares" will have the meaning set forth in Section 1.6(b).
"Common Overage Amount" will have the meaning set forth in
Section 1.6(b).
"Common Shortfall Amount" will have the meaning set forth in
Section 1.6(b).
"Common Stock Conversion Ratio" shall have the meaning set forth in
Section 1.6(a).
"Common Stock Merger Consideration" will have the meaning set forth in
Section 1.6(a).
"Common Stock Purchase Price" will have the meaning set forth in
Section 1.6(a).
"Construction Obligation" will have the meaning set forth in
Section 4.3(c).
"Conversion Ratios" will have the meaning set forth in Section 1.6(a).
"Due Diligence Period" will have the meaning set forth in
Section 4.2(c).
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"Earnest Money" will have the meaning set forth in Section 1.12.
"Effective Time" will have the meaning set forth in Section 1.2.
"Employee Plans" will have the meaning set forth in Section 2.25(a).
"ERISA" will have the meaning set forth in Section 2.25(a).
"ERISA Affiliates" will have the meaning set forth in Section 2.25(a).
"Estimated Closing Working Capital" will have the meaning set forth in
Section 1.11(a).
"Exception Documents" will have the meaning set forth in
Section 4.1(b).
"Final Closing Working Capital" will have the meaning set forth in
Section 1.11(d).
"GAAP" will have the meaning set forth in Section 2.5.
"Governmental Entity" will have the meaning set forth in Section 2.4.
"Great Bend Hotel" will have the meaning set forth in Recital F.
"Great Bend Purchase Agreement" will have the meaning set forth in
Recital F.
"Great Bend Purchase Price" will have the meaning set forth in Section
1.6(a).
"Harper" will have the meaning set forth in Section 4.3(c).
"Highland" will have the meaning set forth in Recital F.
"Holdback Period" will have the meaning set forth in Section 7.1(c).
"Holdback Shares" will have the meaning set forth in Section 7.1(c).
"Hotel Assets" will have the meaning set forth in Section 1.14.
"Hotel Liabilities" will have the meaning set forth in Section 1.14.
"Hotel Real Property" will have the meaning set forth in
Section 2.10(a).
"Hotels" will have the meaning set forth in Recital A.
"Housekeeping Services" will have the meaning set forth in Schedule
1.11 attached hereto.
"Indemnification Threshold" will have the meaning set forth in
Section 7.1(b).
"Initial Closing Working Capital Payment" will have the meaning set
forth in Section 1.11(a).
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"IRS" will have the meaning set forth in Section 2.25(b).
"Liabilities" will have the meaning set forth in Section 1.14.
"Liens" will have the meaning set forth in Section 2.10(b).
"Liquor Licenses" will have the meaning set orth in Section 5.9.
"Losses" will have the meaning set forth in Section 7.1(b).
"Material Adverse Effect" will have the meaning set forth in
Section 2.1.
"Material Agreements" will have the meaning set forth in Section 2.12.
"Merger" will have the meaning set forth in Recital B.
"Merger Consideration" will have the meaning set forth in
Section 1.6(a).
"New Shares" will have the meaning set forth in Section 7.1(c).
"Non-Competition Period" will have the meaning set forth in
Section 5.3.
"Omaha" will have the meaning set forth in the introductory paragraph
of this Agreement.
"Omaha Authorizations" will have the meaning set forth in Section 2.14.
"Omaha Balance Sheet" will have the meaning set forth in Section 2.5.
"Omaha Common Stock" will have the meaning set forth in Section 1.6(a).
"Omaha Financial Statements" will have the meaning set forth in
Section 2.5.
"Omaha Indebtedness" will have the meaning set forth in Section 2.6.
"Omaha Preferred Stock" will have the meaning set forth in
Section 1.6(a).
"Omaha Schedules" will have the meaning set forth in the introductory
paragraph of Article 2.
"Omaha Transactions" will have the meaning set forth in Recital F.
"Other Assets" will have the meaning set forth in Section 1.14 .
"Other Liabilities" will have the meaning set forth in Section 1.14.
"Permitted Exceptions" will have the meaning set forth in
Section 2.10(b).
"Plan" will have the meaning set forth in Section 2.30(g).
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"Preferred Base Shares" will have the meaning set forth in
Section 1.6(b).
"Preferred Overage Amount" will have the meaning set forth in
Section 1.6(b).
"Preferred Shortfall Amount" will have the meaning set forth in
Section 1.6(b).
"Preferred Stock Conversion Ratio" will have the meaning set forth in
Section 1.6(a).
"Preferred Stock Merger Consideration" will have the meaning set forth
in Section 1.6(a).
"Premises" will have the meaning set forth in Section 5.10.
"Required Consents" will have the meaning set forth in Section 2.12.
"Restricted Area" will have the meaning set forth in Section 5.3.
"Returns" will have the meaning set forth in Section 2.8(a).
"Revenues" will have the meaning set forth in Schedule 1.11 attached
hereto.
"Sale" will have the meaning set forth in Section 2.30(g).
"SEC" will have the meaning set forth in Section 2.30(a).
"Securities Act" will have the meaning set forth in Section 2.30(a).
"Security Agreement" will have the meaning set forth in Section 6.2(r).
"SEC Documents" will have the meaning set forth in Section 3.4.
"Shareholders" will have the meaning set forth in the introductory
paragraph of this Agreement.
"Stock Consideration" will have the meaning set forth in
Section 1.6(a).
"Stock Purchase Price" will have the meaning set forth in
Section 1.6(a).
"Survey" will have the meaning set forth in Section 4.1(a).
"Survey Exception" will have the meaning set forth in Section 4.1(a).
"Surviving Corporation" will have the meaning set forth in Section 1.1.
"Tax" or "Taxes" will have the meaning set forth in Section 2.8(a).
"Ten-Day Average Price" will have the meaning set forth in
Section 1.6(b).
"Title Commitment" will have the meaning set forth in Section 4.1(b).
44
<PAGE> 50
"Title Company" will have the meaning set forth in Section 1.12.
"Title Policy" will have the meaning set forth in Section 4.1(b).
45
<PAGE> 51
IN WITNESS WHEREOF, Bristol, Bristol Omaha, Omaha and the Shareholders
have caused this Agreement to be signed by themselves or their duly authorized
respective officers, all as of the date first written above.
BRISTOL HOTEL COMPANY
By:
--------------------------------
Its:
-------------------------------
BRISTOL OMAHA HOTEL COMPANY
By:
--------------------------------
Its:
-------------------------------
OMAHA HOTEL, INC.
By:
--------------------------------
Its:
-------------------------------
46
<PAGE> 52
COMMON SHAREHOLDERS:
---------------------------------------------
LEONARD F. HARPER, II
---------------------------------------------
LARRY J. KRUCKENBERG, TRUSTEE OF THE L.F.
HARPER TRUST
---------------------------------------------
JOHN W. POOS, TRUSTEE OF THE L.F. HARPER
TRUST
---------------------------------------------
LARRY J. KRUCKENBERG, TRUSTEE OF THE
DOROTHY R. HARPER TRUST
---------------------------------------------
JOHN W. POOS, TRUSTEE OF THE DOROTHY R.
HARPER TRUST
---------------------------------------------
ALLYN B. HARPER
47
<PAGE> 53
---------------------------------------------
L.F. HARPER, II, TRUSTEE OF THE AARON HARPER
G.S.T. TRUST
---------------------------------------------
LARRY J. KRUCKENBERG, TRUSTEE OF THE
AARON HARPER G.S.T. TRUST
---------------------------------------------
JOHN W. POOS, TRUSTEE OF THE AARON HARPER
G.S.T. TRUST
---------------------------------------------
L.F. HARPER, II, TRUSTEE OF THE ZACHARY
HARPER G.S.T. TRUST
---------------------------------------------
LARRY J. KRUCKENBERG, TRUSTEE OF THE
ZACHARY HARPER G.S.T. TRUST
---------------------------------------------
JOHN W. POOS, TRUSTEE OF THE ZACHARY
HARPER G.S.T. TRUST
---------------------------------------------
L.F. HARPER, II, TRUSTEE OF THE JACOB HARPER
G.S.T. TRUST
---------------------------------------------
LARRY J. KRUCKENBERG, TRUSTEE OF THE
JACOB HARPER G.S.T. TRUST
---------------------------------------------
JOHN W. POOS, TRUSTEE OF THE JACOB HARPER
G.S.T. TRUST
48
<PAGE> 54
---------------------------------------------
L.F. HARPER, II, TRUSTEE OF THE MALLORY
HARPER G.S.T. TRUST
---------------------------------------------
LARRY J. KRUCKENBERG, TRUSTEE OF THE
MALLORY HARPER G.S.T. TRUST
---------------------------------------------
JOHN W. POOS, TRUSTEE OF THE MALLORY
HARPER G.S.T. TRUST
---------------------------------------------
AARON HARPER
---------------------------------------------
L.F. HARPER, II, CUSTODIAN FOR ZACHARY
HARPER UNDER KANSAS UNIFORM TRANSFERS
TO MINORS ACT
---------------------------------------------
L.F. HARPER, II, CUSTODIAN FOR JACOB HARPER
UNDER KANSAS UNIFORM TRANSFERS TO
MINORS ACT
---------------------------------------------
L.F. HARPER, II, CUSTODIAN FOR MALLORY
HARPER UNDER KANSAS UNIFORM TRANSFERS
TO MINORS ACT
49
<PAGE> 55
PREFERRED SHAREHOLDERS:
----------------------------------------------
L.F. HARPER, II, TRUSTEE OF THE LEONARD F.
HARPER TRUST
----------------------------------------------
LARRY J. KRUCKENBERG, TRUSTEE OF THE
LEONARD F. HARPER TRUST
----------------------------------------------
JOHN W. POOS, TRUSTEE OF THE LEONARD F.
HARPER TRUST
----------------------------------------------
L.F. HARPER, II, TRUSTEE OF THE L.F. HARPER II
TRUST
----------------------------------------------
LARRY J. KRUCKENBERG, TRUSTEE OF THE L.F.
HARPER II TRUST
----------------------------------------------
JOHN W. POOS, TRUSTEE OF THE L.F. HARPER II
TRUST
50
<PAGE> 56
SCHEDULE 1.11
CLOSING WORKING CAPITAL
Closing Working Capital consists of the following current assets and liabilities
of Omaha, immediately prior to the Effective Time, calculated in accordance with
Bristol's normal accounting practice, provided that such practice and proration
practice, as set forth below, is in accordance with the Uniform System of
Accounts for Hotels and GAAP:
Current Assets:
1. Cash and cash equivalents at the Hotels and at the hotel bank accounts
and cash and cash equivalents from the sale of any Other Assets to
Harper or any third party on or prior to the Closing Date, but
excluding: (a) any reserves created under Sections 1.11(f) and
4.3(c)(ii) in connection with any Construction Obligations, and (b) the
excess of the Budgeted PIP Completion Amount for all the Hotels over
the actual amount spent or incurred by Omaha to the Effective Time in
connection with the core modernization and product improvement plan
requirements described in Section 2.27(b) for all the Hotels,
regardless of the reason for such excess).
2. Hotel receivables (net of GAAP allowances and further reserves for all
balances aged in excess of 90 days), including: (a) Guest ledger; (b)
City ledger; (c) Credit card receivables; (d) Property rent
receivables; and (e) Other miscellaneous hotel receivables.
3. Management contract advances and receivables (net of required
allowances).
4. Hotel inventories (food, beverage, and supplies - excluding china,
glass, silver and linen).
5. Hotel prepaid assets, deposits and licenses (excluding pre-opening),
but only to the extent it is reasonable to expect that they will be
actually realized by Bristol within 12 months after the Effective Time.
6. The land located in Moline, Illinois, located adjacent to the Holiday
Inn, which shall have an agreed upon value for purposes of calculating
Closing Working Capital of $236,500.
Current Liabilities:
1. Hotel accounts payable, including any liability under any welfare plan
for events occurring prior to the Effective Time.
2. Hotel accrued liabilities.
3. Advance deposits.
1
<PAGE> 57
4. Unpaid accrued benefits, deferred compensation and other liabilities,
costs or expenses incurred by Omaha with respect to (a) any employees
of Omaha on the Closing Date and (b) any employees of Omaha terminated
prior to the Closing Date.
5. The tax effect of the above-mentioned items, to the extent not taken
into account in determining taxable income for any period prior to the
Effective Time.
6. All costs and expenses incurred by Omaha in connection with Merger
prior to the Effective Time.
7. The tax liability of Omaha for its final taxable year ending on the
Closing Date, including without limitation, with respect to any capital
gains recognized on the sale of any Other Assets to Harper or any third
parties on or prior to the Closing Date.
8. The excess, if any, of the cost to complete the Construction
Obligations over the reserves created therefor pursuant to Sections
1.11(f) and 4.3(c)(ii).
9. The down-payment that would have been payable under an equipment lease
for the Holiday Inn Express, Colby, Kansas as and to the extent set
forth in Section 4.3(c)(ii).
Proration of Revenues and Expenses. Notwithstanding the foregoing, the
calculation of Closing Working Capital will include any asset or obligation
which would customarily be prorated on a closing statement for the sale of a
hotel as of the close of business on the Closing Date, including real estate,
personal property and other taxes and assessments, utilities, rent, service
contracts and other property-related expenses, as follows:
1. Revenues. Current revenues including, but not limited to, room and
function revenues and deposits and food and beverage revenues generated
by the Hotels ("REVENUES"), will be prorated as follows:
a. Revenues attributable to room use for the night prior to the
Effective Time will be evenly split between the Shareholders
and the Surviving Corporation.
b. Revenues attributable to room use prior to the night prior to
the Effective Time or functions having occurred prior to 12:00
a.m. on the day of the Effective Time will belong to and be
retained by the Shareholders.
c. Revenues attributable to room use for the night of the
Effective Time, and thereafter, and functions occurring at or
after 12:00 a.m. on the day of the Effective Time and any
subsequent date will belong and be paid to the Surviving
Corporation.
d. Revenues attributable to the operation of any other facilities
operated on the Hotels and relating to any activity taking
place prior to 12:00 a.m. on the day of the Effective Time
will belong to and be retained by the Shareholders.
e. Revenues attributable to the operation of any other facilities
operated on the Hotels relating to any activity taking place
after 12:00 a.m. on the day of the Effective Time will belong
and be paid to the Surviving Corporation.
f. Revenues representing advance payments or deposits which are
allocable in part to the period prior to and in part following
12:00 a.m. on the day of the Effective Time will be prorated
between the parties on per diem basis or on such other
equitable basis as agreed by the parties.
2
<PAGE> 58
To the extent Revenues are in the possession of the Shareholders which
are owing to the Surviving Corporation, then the same will be credited
against the Cash Consideration portion of the Purchase Price at the
Effective Time.
2. Accounts. The Shareholders will furnish to Bristol a schedule of all
room charges which are then due and payable, but which have not been
paid. The Surviving Corporation will, at the Effective Time, retain
such accounts and the same will be subject to adjustment under Section
1.11 and this Schedule 1.11. The Shareholders will remit to the
Surviving Corporation any payments on such accounts made directly to
it, whenever the same may be collected.
3. Cash on Hand. The Shareholders will deliver to the Surviving
Corporation at the Effective Time, a schedule showing all cash on hand
in the Hotels as of the Effective Time.
4. Taxes and Assessments. Ad valorem taxes and personal property taxes (if
any), sewer rents and charges and other state, county and municipal
taxes (special or otherwise) and assessments assessed against the
Hotels for the current calendar year will be prorated to the Effective
Time, and the Shareholders's pro-rata portion of such taxes will be
offset against the Cash Consideration. The Shareholders' pro rata
portion of such taxes will be based upon taxes actually assessed for
the current calendar year. If, for any reason, ad valorem taxes and
personal property taxes (if any) for the current calendar year have not
been assessed on the Hotels, such proration will be estimated based
upon ad valorem taxes and personal property taxes (if any) for the
immediately preceding calendar year, and adjusted when actual amounts
are available. Any transfer taxes owing as a result of the Omaha
Transactions shall be shared equally as between Shareholders and the
Surviving Corporation. The Shareholders will provide to the Surviving
Corporation at the Effective Time tax statements verifying that all
taxes due and owing with respect to the Hotels have been paid.
5. Expenses. Expenses for housekeeping services for the Closing Date will
be evenly split between the Shareholders and the Surviving Corporation.
All other income and ordinary operating expenses for or pertaining to
the Hotels, including, but not limited to, public utility charges,
maintenance, service charges, and all other normal operating charges of
the Hotels will be prorated as of 12:00 a.m. on the day of the
Effective Time . All utility meters will be read on the Effective Time
and any utility charges incurred or accrued up to the reading of such
utility meters will be offset against the Cash Consideration. In the
event the meter readings are not available at the Effective Time,
utility costs will be prorated based on the best information available.
For the purposes hereof, the definition of "HOUSEKEEPING SERVICES"
shall mean the costs and expenses of housekeeping labor, including
payroll taxes and benefits, and costs of laundry services and supplies.
3
<PAGE> 59
SCHEDULE 2.2
CAPITALIZATION
OMAHA HOTEL, INC.
<TABLE>
<CAPTION>
COMMON STOCK SHAREHOLDERS:
PERCENT OF
STOCK
NAME SHARES OWNED
---- ------ ----------
<S> <C> <C>
L.F. Harper II 1259 47.9
Larry J. Kruckenberg, John W. Poos, Trustees of the L.F. Harper Trust 233 8.8
dated 6-25-87
Larry J. Kruckenberg, John W. Poos, Trustees of the Dorothy R. 173 6.6
Harper Trust dated 6-25-87
Allyn B. Harper 60 2.3
L.F. Harper II, Larry J. Kruckenberg, John W. Poos, Trustees of the 165 6.3
Aaron Harper G.S.T. Trust dated 12-21-90
L.F. Harper II, Larry J. Kruckenberg, John W. Poos, Trustees of the 165 6.3
Zachary Harper G.S.T. Trust dated 12-21-90
L.F. Harper II, Larry J. Kruckenberg, John W. Poos, Trustees of the 165 6.3
Jacob Harper G.S.T. Trust dated 12-21-90
L.F. Harper II, Larry J. Kruckenberg, John W. Poos, Trustees of the 165 6.3
Mallory Harper G.S.T. Trust dated 12-21-90
Aaron Harper 60 2.3
L.F. Harper II, Custodian for Zachary Harper, Under Kansas Uniform 60 2.3
Transfers to Minors Act
L.F. Harper II, Custodian for Jacob Harper, Under Kansas Uniform 60 2.3
Transfers to Minors Act
L.F. Harper II, Custodian for Mallory Harper, Under Kansas Uniform 60 2.3
Transfers to Minors Act
2625 100.0
PREFERRED STOCK SHAREHOLDERS:
John Poos, Larry J. Kruckenberg, L.F. Harper II, Trustees of the 15,000
Leonard F. Harper Trust under Agreement 12-29-77
John Poos, Larry J. Kruckenberg, L.F. Harper II, Trustees of the L.F. 4,500
Harper II Trust under Agreement dated 7-18-80
</TABLE>
1
<PAGE> 60
SCHEDULE 2.10(a)
HOTEL REAL PROPERTY
Nebraska:
1. Holiday Inn Central 72nd, Omaha, Nebraska (400 rooms).
2. Hampton Inn Central, Omaha, Nebraska (132 rooms).
3. Homewood Suites, Omaha, Nebraska (108 rooms).
4. Holiday Inn, Old Mill NW, Omaha, Nebraska (215 rooms).
5. Hampton Inn SW, Omaha, Nebraska (135 rooms).
6. Holiday Inn Express, Omaha, Nebraska (78 rooms).
Illinois:
7. Holiday Inn, Moline, Illinois (215 rooms).
8. Hampton Inn, Moline, Illinois (138 rooms).
9. Holiday Inn Express, Moline, Illinois (112 rooms).
Iowa:
10. Holiday Inn, Davenport, Iowa (300 rooms).
11. Hampton Inn, Davenport, Iowa (136 rooms).
Texas:
12. Holiday Inn, Midland, Texas (250 rooms).
13. Holiday Inn Odessa Centre, Odessa, Texas (250 rooms).
14. Holiday Inn Express Odessa Parkway, Odessa, Texas (186 rooms).
Kansas:
15. Holiday Inn, Hays, Kansas (190 rooms).
16. Hampton Inn, Hays, Kansas (116 rooms).
17. Holiday Inn, Salina, Kansas (192 rooms).
18. Holiday Inn Express, Salina, Kansas (93 rooms).
19. Holiday Inn, Colby, Kansas (72 rooms).
1
<PAGE> 61
SCHEDULE 4.2(b)
DUE DILIGENCE DELIVERIES
1. Financial Statements. Unaudited financial statements showing the income
and expense for the prior three (3) years of operation of the Hotels.
If audited financial statements are required by Bristol for any SEC
filing after the Effective Time, Omaha agrees to provide Bristol and an
independent accounting firm with access to financial and other
information relating to the Hotels sufficient to prepare such audited
financial statements, in conformity with GAAP, as well as such other
statements, reports and disclosures requested by Bristol. Omaha shall
also provide to Bristol's independent accounting firm a signed
representation letter which would be sufficient to enable an
independent public accountant to render an opinion on the financial
statements related to the Hotels. Omaha shall authorize any attorneys
who have represented Omaha in material litigation pertaining to or
affecting the Hotels to respond, at Bristol's expense, to inquiries
from Bristol's representatives and independent accounting firm. This
agreement to cooperate will survive the Effective Time. Additionally,
Omaha agrees to furnish an operating statement for the current year
(through the end of the month most recently ended), detailing all
income and expense items for the Hotels, as well as any and all
schedules that support the working capital items as shown on Schedule
1.11 for individual Hotels. All financial and operating statements will
be accompanied by Omaha's signed certificate that such materials are
true, correct and complete and that Omaha does not know or have any
reason to know of any increase in expense items for such current year
except for increases which may result from increased occupancy of the
Hotels.
2. Management/Franchise Agreements. A list and copies of any and all
management and/or franchise agreements affecting the Hotels.
3. Material Agreements. Copies of all of the Material Agreements,
including, without limitation, any operating agreements, employment
agreements, service and maintenance contracts, equipment leases,
vehicle leases, supply contracts, leases of space for restaurant or
other retail uses, billboard, signage, promotional or other advertising
agreements or leases, liquor, food, hotel or operational permits or
licenses affecting or used in connection with the operation of the
Hotels.
4. Insurance Policies. A list of all insurance policies covering or
affecting the Hotels, both casualty and liability, together with copies
of such policies, certified by Omaha, that the same are true, correct
and complete as of the date of the certificate.
5. Tax Statements. Copies of the most recent tax statements on the Hotel
Real Properties and the Hotel Assets.
6. Certificate of Occupancy. The Certificate(s) of Occupancy for the
Hotels and any amendments thereto, together with Omaha's signed
certification that no repair or renovation to the Improvements has been
undertaken in violation of or which would result in a revocation of the
Certificate(s) of Occupancy.
7. Zoning Letter. A letter dated within thirty (30) days of the date
hereof addressed to Bristol and its successors and assigns from each
city where each Hotel Real Property is located duly executed on behalf
of such city wherein such city states the zoning designation for the
Hotels together with a copy of the applicable zoning ordinance listing
the uses permitted therein; provided, however, if Omaha is unable to
obtain such a letter from such city, Omaha may furnish in lieu thereof
a certificate of an
1
<PAGE> 62
architect or engineer reasonably acceptable to Bristol duly licensed in
the state where each Hotel Real Property is located stating such facts
and including a copy of such zoning ordinance listing the uses
permitted therein.
8. Survey/Plans. The existing survey and "as built" plans and
specifications for any and all portions of the Hotels.
9. Technical Reports. Copies of any and all environmental, ADA,
mechanical, electrical, structural, soils or other similar reports
covering all or any portion of the Hotels, to the extent such reports
are in Omaha's possession and copies of any and all notices Omaha has
received from any governmental authority with respect to the Hotels.
10. Reservations. A listing of any advance reservations for rooms in the
Hotels (including guest rooms, conference rooms and any other
facilities, together with records showing the date and individual
making such reservation.
11. Employment. A list, together with any copies, of all employment and/or
union contracts for employees working at the Hotels.
12. Utility Bills. Copies of statements from each of the utility providers
for the Hotels covering the most recent three (3) months prior to the
date of this Agreement.
2
<PAGE> 63
SCHEDULE 5.10
OFFICE LEASE PREMISES
1. Suite(s) _________ in the office building located adjacent to the Great
Bend Holiday Inn and Convention Center, Great Bend, Kansas.
2. Suite(s) _________ in the office building located adjacent to the
Holiday Inn Express, Omaha, Nebraska.
1
<PAGE> 1
EXHIBIT 2.4
================================================================================
AGREEMENT AND PLAN OF MERGER
BETWEEN
BRISTOL HOTEL COMPANY
AND
FELCOR SUITE HOTELS, INC.
DATED MARCH 23, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
I. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Pre-Merger Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5. Articles of Amendment and Restatement of Surviving
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6. Bylaws of Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7. Directors and Officers of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8. Effect of the Merger on the Capital Stock of FelCor and Bristol. . . . . . . . . . . . . . . . 4
1.9. Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10. Bristol Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
II. REPRESENTATIONS AND WARRANTIES OF FELCOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1. Organization, Standing and Power of FelCor . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2. FelCor Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3. Capital Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4. Authority; Noncontravention; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.5. SEC Documents; Financial Statements; Undisclosed
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.7. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.8. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.9. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.10. Absence of Changes in Benefit Plans; ERISA
Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.12. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.13. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.14. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.15. Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.16. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.17. State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.18. Proxy and Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.19. Definition of Knowledge of FelCor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
III. REPRESENTATIONS AND WARRANTIES OF BRISTOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.1. Organization, Standing and Power of Bristol . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2. Bristol Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.3. Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.4. Authority; Noncontravention; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.5. SEC Documents; Financial Statements; Undisclosed
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.6. Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.7. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.8. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.9. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.10. Absence of Changes in Benefit Plans; ERISA
Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.12. No Payments to Employees, Officers or Directors . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.13. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.14. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.15. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.16. Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.17. Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.18. State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.19. Proxy and Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.20. Definition of Knowledge of Bristol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
IV. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.1. Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.2. Conduct of FelCor's and Bristol's Business Pending Merger . . . . . . . . . . . . . . . . . . . . 38
4.3. Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
V. ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.1. Preparation of the Registration Statements and
the Proxy Statement; FelCor Stockholders Meeting
and Bristol Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.2. Access to Information; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.3. Consents; Notifications; Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.4. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.5. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.6. Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.7. Transfer and Gains Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.9. Spin-Off Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.10. Declaration of Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.11. Affiliates; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.12. Bristol's Accumulated and Current Earnings and
Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.13. REIT-Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.14 Interim Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
VI. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.1. Conditions To Each Party's Obligation To Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.2. Conditions To Obligations of FelCor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.3. Conditions To Obligations of Bristol. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.4. Frustration of Closing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
VII. TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.2. Certain Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.3. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.4. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.5. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
VIII. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.1. Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
8.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.3. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.4. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.6. Entire Agreement; No Third-party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.9. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
LIST OF EXHIBITS
(Not a part of the Agreement)
-----------------------------
EXHIBIT
-------
Form of Affiliate's Agreement . . . . . . . . . . . . . . . . . . . . . A
Form of Tax Letters . . . . . . . . . . . . . . . . . . . . . . . . . . B
Form of REIT Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . C
LIST OF SCHEDULES
(Not a part of the Agreement)
-----------------------------
SCHEDULE
--------
Modifications to Articles of Amendment and
Restatement of FelCor . . . . . . . . . . . . . . . . . . . . . 1.5
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . 1.7
Joint Operating Committee . . . . . . . . . . . . . . . . . . . . . . . 4.2
Form of Bristol E&P Statement . . . . . . . . . . . . . . . . . . . . . 5.12
</TABLE>
iii
<PAGE> 5
LIST OF SCHEDULES TO FELCOR DISCLOSURE LETTER
(Not a part of the Agreement)
<TABLE>
<CAPTION>
SCHEDULE
--------
<S> <C>
Name, Formation Jurisdiction and
Ownership of Subsidiaries . . . . . . . . . . . . . . . . . . . 2.2
Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Conflicts with Laws or Agreements and
Necessary Consents . . . . . . . . . . . . . . . . . . . . . . . 2.4
SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
Material Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 2.7
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8
Changes in Benefit Plans and Compliance
with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.10
Tax Liabilities; Qualified REIT Subsidiaries . . . . . . . . . . . . . . 2.11
Union Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14
Defaults in Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 2.15
Individuals Having "Knowledge" . . . . . . . . . . . . . . . . . . . . . 2.19
Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
Exceptions to Pre-Closing Covenants . . . . . . . . . . . . . . . . . . 4.2
</TABLE>
LIST OF SCHEDULES TO BRISTOL DISCLOSURE LETTER
(Not a part of the Agreement)
<TABLE>
<CAPTION>
SCHEDULE
--------
<S> <C>
Bristol Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2
Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3
Authority; Noncontravention; Consents . . . . . . . . . . . . . . . . . 3.4
SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5
Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . 3.6
Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8
Absence of Changes in Benefit Plans;
Environmental Issues . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9
ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11
No Payments to Employees, Officers
or Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.12
Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15
Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . 3.16
Definition of Knowledge of Bristol . . . . . . . . . . . . . . . . . . . 3.20
Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
Conduct of Bristol's Business Pending Merger . . . . . . . . . . . . . . 4.2
</TABLE>
iv
<PAGE> 6
INDEX OF DEFINED TERMS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Acquisition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Amended Bristol Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Amended Bristol Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Articles of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Bankruptcy Exception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Base Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
BHMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BHR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BHR Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BHR Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Break-Up Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Break-Up Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Break-Up Fee Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Bristol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bristol Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Bristol Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bristol Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Bristol Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Bristol Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Bristol Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bristol Corporate Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bristol Director Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Bristol Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Bristol Filed SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Bristol Financial Statement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Bristol Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Bristol Hotel Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Bristol Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Bristol Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Bristol Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Bristol Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Bristol Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Bristol SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Bristol Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Bristol Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Bristol Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Cash Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Confidentiality Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Drop Dead Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
E&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
</TABLE>
v
<PAGE> 7
INDEX OF DEFINED TERMS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Excess Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Expense Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Federal Legislative or Regulatory Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Felcor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FelCor 1994 Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
FelCor 1995 Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
FelCor 1998 Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
FelCor Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FelCor Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Felcor Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FelCor Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FelCor Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
FelCor Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FelCor Filed SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
FelCor Financial Statement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Felcor Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
FelCor Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
FelCor OP Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
FelCor Operating Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FelCor Operating Partnership Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FelCor Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
FelCor Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
FelCor SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
FelCor Series A Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
FelCor Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
FelCor Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
FelCor Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
First Dividend Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Joint Operating Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Knowledge of Bristol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Knowledge of Felcor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Leasing Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Measurement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merrill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
MGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
</TABLE>
vi
<PAGE> 8
INDEX OF DEFINED TERMS
(Not a part of the Agreement)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Non-Corporate Bristol Hotel Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Original Bristol Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Payor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Preliminary E&P Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Property Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Qualifying Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
REA Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Recipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Registration Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
REIT Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Spin-Off Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Spin-Off Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Stockholder Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Superior Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Superior Proposal Transaction Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Surviving Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Surviving Corporation Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Trading Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Transfer and Gains Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Valuation Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Volume Weighted Average Trading Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
</TABLE>
vii
<PAGE> 9
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated March 23,
1998, is by and between Bristol Hotel Company, a Delaware corporation
("Bristol"), and FelCor Suite Hotels, Inc., a Maryland corporation ("FelCor").
RECITALS:
A. The Board of Directors of Bristol (the "Bristol Board") and
the Board of Directors of FelCor (the "FelCor Board") deem it advisable and in
the best interests of their respective companies that, subject to the
conditions and other provisions contained herein, Bristol merge with and into
FelCor (the "Merger"), with FelCor as the surviving corporation in the Merger
(as such, the "Surviving Corporation");
B. For federal income tax purposes, it is intended that the
Merger qualify as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
C. FelCor has advised Bristol that, in order for FelCor to
maintain its status as a real estate investment trust following the Merger,
FelCor must not acquire certain assets and liabilities of the hotel management
and operation business of Bristol and the Bristol Subsidiaries as a result of
the Merger. Accordingly, prior to and as a condition precedent to the Merger,
(i) Bristol will, or will cause the Bristol Subsidiaries to, (a) reorganize
internally and contribute to Bristol Hotel Management Corporation ("BHMC"), or
another subsidiary of BHR certain of the assets and liabilities of Bristol and
the Bristol Subsidiaries and contribute to Bristol Hotels & Resorts, Inc., a
Delaware corporation ("BHR"), all the capital stock of BHMC, and (b) distribute
to the holders of common stock, par value of $0.01 per share, of Bristol
("Bristol Common Shares") all of the outstanding shares of common stock, par
value of $0.01 per share, of BHR (the "BHR Common Shares") in a transaction
expected to be treated for federal income tax purposes as a taxable dividend of
Bristol's earnings and profits, (ii) Bristol and/or the Bristol Hotel
Subsidiaries, as the case may be, will enter into leases with one or more
wholly owned subsidiaries of BHR and will cancel certain existing management
contracts (the "Leasing Transactions"), and (iii) Bristol will cause those
Bristol Hotel Subsidiaries that are taxable as corporations under the Code
("Bristol Corporate Subsidiaries") to merge with and into one or more
Non-Corporate Bristol Hotel Subsidiaries, all as provided in the Spin-Off
Agreement entered into by Bristol, BHMC and BHR contemporaneously with this
Agreement (the "Spin-Off Agreement");
D. Contemporaneously with the execution of this Agreement,
Bristol, FelCor and certain other Persons (such other Persons, collectively,
the "Principal Stockholders") have entered into a Voting and Cooperation
Agreement (the "Voting Agreement")
<PAGE> 10
pursuant to which the Principal Stockholders have agreed to vote their capital
stock holdings for adoption of the Merger Agreement and to refrain from taking
certain actions; and
E. In connection with the transactions contemplated hereby, (i)
the Bristol Board has approved the Voting Agreement and other transactions
contemplated hereby so as to render inapplicable the special stockholder voting
requirements of Section 203 of the DGCL and (ii) the FelCor Board has adopted
resolutions relating to ownership of FelCor Common Shares by the Principal
Stockholders.
Now, therefore, in consideration of the foregoing and the
representations, warranties and covenants contained herein, the parties hereto
hereby agree as follows:
I. THE MERGER AND CERTAIN RELATED TRANSACTIONS
1.1. The Merger. (a) On the terms and subject to the conditions
of this Agreement, and in accordance with the Maryland General Corporation Law
(the "MGCL") and the Delaware General Corporation Law (the "DGCL"), at the
Effective Time, Bristol will be merged with and into FelCor, whereupon the
separate corporate existence of Bristol will cease and FelCor will be the
Surviving Corporation.
(b) From and after the Effective Time, the Surviving Corporation
will possess all the rights, privileges and powers and will assume all of the
liabilities, obligations and duties of Bristol and FelCor, all as provided
under the MGCL and the DGCL.
1.2. Pre-Merger Transactions. Prior to the Effective Time, Bristol
will cause BHMC, BHR and the Bristol Subsidiaries to consummate the
transactions contemplated by the Spin-Off Agreement and take such actions as
are required under the Spin-Off Agreement to be taken by it, in each case on
the terms and subject to the conditions thereof.
1.3. Closing. The closing of the Merger (the "Closing") will take
place at a date and time to be specified by the parties, which (subject to
satisfaction or waiver of the conditions set forth in Article VI) will be no
later than the third Business Day after satisfaction or waiver of the
conditions set forth in Article VI (the "Closing Date") at the offices of
Jones, Day, Reavis & Pogue, 2300 Trammell Crow Center, 2001 Ross Avenue,
Dallas, Texas, unless another time, date or place is agreed to in writing by
the parties.
1.4. Effective Time. As soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VI, (i) the
parties will execute and file articles of merger (the "Articles of Merger")
with the State Department of Assessments and Taxation of the State of Maryland
(the "Department") in accordance with the MGCL, (ii) the Surviving Corporation
will
2
<PAGE> 11
execute and file a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware in accordance with the DGCL, and
(iii) the parties will make any other filings and recordings required under the
MGCL and the DGCL. The Merger will become effective (the "Effective Time") at
9:00 a.m., New York City time, on the Trading Day immediately following the
Closing Date or, if later, such date and time as the Department accepts the
Articles of Merger for recording and the Certificate of Merger is duly filed
with the Secretary of State of the State of Delaware, or at such other time as
Bristol and FelCor agree should be specified in the Articles of Merger and
Certificate of Merger (not to exceed 30 calendar days after the Articles of
Merger are accepted for recording by the Department and the Certificate of
Merger is accepted for filing by the Secretary of State of the State of
Delaware). Unless otherwise agreed, the parties will cause the Effective Time
to occur at 9:00 a.m., New York City time, on the Trading Day immediately
following the Closing Date.
1.5. Articles of Amendment and Restatement of Surviving
Corporation. The Articles of Amendment and Restatement of FelCor will be
amended and restated at the Effective Time in the manner specified in Schedule
1.5 or as otherwise agreed between FelCor and Bristol, and will be the Articles
of Amendment and Restatement of the Surviving Corporation from and after the
Effective Time until further amended or restated in accordance therewith and
the MGCL.
1.6. Bylaws of Surviving Corporation. From and after the Effective
Time, the Bylaws of the Surviving Corporation will be the Bylaws of FelCor as
in effect immediately prior to the Effective Time, until further amended or
restated in accordance therewith and the MGCL.
1.7. Directors and Officers of Surviving Corporation. From and
after the Effective Time, the individuals identified on or determined in
accordance with Schedule 1.7 will serve as directors of the Surviving
Corporation and will be divided into "Class I", "Class II" and "Class III"
directors as specified on Schedule 1.7 until the earlier of the resignation or
removal of any such individual or until their respective successors are duly
elected and qualified, as the case may be. In the event that any such person
is unable or unwilling to serve as a director at the Effective Time, the party
that designated such individual will have the right to designate a replacement
for such individual, which right of replacement will terminate at the Effective
Time and is subject to approval of the other party hereto, which approval may
not be unreasonably withheld or delayed. Upon such replacement, Schedule 1.7
will be, without further action, deemed to have been amended to reflect such
selection. The officers of FelCor immediately prior to the Effective Time will
be the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected
and qualified, as the case may be.
3
<PAGE> 12
1.8. Effect of the Merger on the Capital Stock of FelCor and
Bristol. At the Effective Time, by virtue of the Merger and without any action
by the holder of any Bristol Common Shares, FelCor Common Shares or FelCor
Series A Preferred Shares:
(a) Each FelCor Common Share and FelCor Series A
Preferred Share outstanding immediately prior to the Effective Time
will remain outstanding, and each certificate representing outstanding
FelCor Common Shares and FelCor Series A Preferred Shares will
thereafter represent an equal number of Surviving Corporation Common
Shares and Surviving Corporation Series A Preferred Shares, as the
case may be;
(b) Subject to the provisions of Sections 1.8(c) and
1.8(d), each Bristol Common Share outstanding immediately prior to the
Effective Time will be converted into the right to receive 0.685 (the
"Exchange Ratio") of a validly issued, fully paid and nonassessable
share of common stock, par value of $0.01 per share, of the Surviving
Corporation ("Surviving Corporation Common Shares"), and each Bristol
Common Share theretofore outstanding will cease to be outstanding and
will cease to exist, and each holder of a Bristol Certificate will
thereafter cease to have any rights with respect to such shares,
except the right to receive, without interest, the Surviving
Corporation Common Shares as calculated pursuant to this Section
1.8(b) and cash in lieu of fractional Surviving Corporation Common
Shares in accordance with Section 1.8(c) or Section 1.8(d), upon the
surrender of such Bristol Certificate in accordance with Section 1.9;
(c) Notwithstanding any other provision hereof, no
fractional Surviving Corporation Common Shares will be issued in
connection with the Merger. No such holder will be entitled to
dividends, voting rights or any other stockholder rights in respect of
any fractional share. Instead, as soon as practicable after the
Effective Time, the Exchange Agent will determine the excess of (i)
the number of whole Surviving Corporation Common Shares delivered to
the Exchange Agent by FelCor pursuant to Section 1.9(a) over (ii) the
aggregate number of whole Surviving Corporation Common Shares to be
distributed to holders of Bristol Common Shares pursuant to Section
1.8(b) (such excess, the "Excess Shares"). FelCor will instruct the
Exchange Agent (i) to sell the Excess Shares at then-prevailing prices
on the New York Stock Exchange (the "NYSE") through one or more member
firms of the NYSE and (ii) to use reasonable efforts to complete the
sale of the Excess Shares as promptly following the Effective Time as,
in the Exchange Agent's sole judgment, is practicable consistent with
obtaining the best execution of such sales in light of prevailing
market conditions, and in any event, within 90 calendar days following
the Effective Time. The Exchange Agent will hold such proceeds in
trust for the
4
<PAGE> 13
holders of Bristol Common Shares who would otherwise be entitled to
receive a fraction of a Surviving Corporation Common Share, and will
determine the portion of the proceeds to which each such holder is
entitled, if any, by multiplying the amount of the aggregate net
proceeds of such sale by a fraction, the numerator of which is the
amount of the fractional share interest to which such holder is
entitled, and the denominator of which is the aggregate amount of
fractional share interests to which all such holders of Bristol Common
Shares are entitled. The Surviving Corporation will pay all
commissions, transfer taxes, Exchange Agent's fees and other
out-of-pocket transaction costs incurred in connection with the sale
of such Excess Shares;
(d) Notwithstanding the provisions of Section 1.8(c),
FelCor may elect at its option, exercised prior to the Effective Time,
in lieu of the issuance and sale of Excess Shares and the making of
payments pursuant to Section 1.8(c), to pay each holder of Bristol
Common Shares who would otherwise be entitled to receive a fraction of
a Surviving Corporation Common Share, an amount in cash equal to the
Closing Price immediately preceding the Effective Time multiplied by
the fraction of a Surviving Corporation Common Share to which such
holder would otherwise be entitled. For purposes of this Agreement,
"Closing Price" means the closing price of the FelCor Common Shares
(as reported in the New York Stock Exchange, Inc. Composite Tape) on
the Closing Date and "Trading Day" means any day on which the NYSE is
open for trading; and
(e) Each Bristol Common Share issued and held in
Bristol's treasury or by FelCor or any wholly owned FelCor Subsidiary
at the Effective Time, if any, will cease to be outstanding and will
be canceled and retired and will cease to exist without payment of any
consideration therefor.
1.9. Exchange of Certificates. (a) As of the Effective Time,
FelCor will deposit with FelCor's transfer agent (the "Exchange Agent"), for
the benefit of the holders of certificates (the "Bristol Certificates")
representing Bristol Common Shares for exchange in accordance with this Section
1.9, certificates (the "Surviving Certificates") representing Surviving
Corporation Common Shares to be issued pursuant to Article I.
(b) Promptly after the Effective Time, the Surviving Corporation
will cause the Exchange Agent to mail to each holder of record of Bristol
Common Shares as of the Effective Time a letter of transmittal which will
specify (i) that delivery will be effected, and risk of loss and title to
Bristol Certificates will pass, only upon delivery of such Bristol Certificates
to the Exchange Agent, and will be in such form and have such other provisions
as the Surviving Corporation may reasonably specify, and (ii) instructions for
use in effecting the surrender of such
5
<PAGE> 14
Bristol Certificates in exchange for Surviving Certificates and cash in lieu of
fractional shares. In addition, the Surviving Corporation will enter into such
other arrangements as Bristol may reasonably request prior to the Effective
Time to permit hand delivery of Bristol Certificates in exchange for Surviving
Certificates at the office of the Exchange Agent maintained for such purposes
in New York City commencing promptly after the Effective Time. Upon surrender
of a Bristol Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of such Bristol Certificate will be entitled
to receive in exchange therefor (A) a Surviving Certificate representing the
number of whole Surviving Corporation Common Shares, (B) a check representing
the amount of unpaid dividends and distributions, if any, which such holder has
the right to receive pursuant to the provisions of Section 1.9(c) in respect of
the Bristol Certificate surrendered, and (C) a check or the right to receive a
check representing the amount of cash in lieu of a fractional Surviving
Corporation Common Share, if any, which such holder has the right to receive
pursuant to the provisions of Section 1.8 in respect of the Bristol Certificate
surrendered, in each case, after giving effect to any required withholding Tax,
and the Bristol Certificates so surrendered will forthwith be canceled. No
interest will be paid or accrued on the cash in lieu of fractional Surviving
Corporation Common Shares and unpaid dividends and distributions, if any,
payable to holders of Bristol Certificates. In the event of a transfer of
rights to receive the consideration provided herein with respect to Bristol
Common Shares which is not registered in the transfer records of Bristol, a
Surviving Certificate representing the proper number of Surviving Corporation
Common Shares, together with a check for the cash to be paid in lieu of any
fractional Surviving Corporation Common Shares, if any, and unpaid dividends
and distributions, if any, which such holder has the right to receive pursuant
to the provisions of Section 1.8 and Section 1.9(c), respectively, in respect
of the Bristol Certificate so surrendered, after giving effect to any required
withholding Tax, may be issued to such transferee if the Bristol Certificate is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer Taxes have been paid. All Bristol Certificates so surrendered will be
canceled forthwith.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions on Surviving Corporation Common Shares will be
paid with respect to any Bristol Common Shares represented by a Bristol
Certificate until the Bristol Certificate is surrendered for exchange as
provided herein. Subject to the effect of applicable escheat and other Laws,
following surrender of any Bristol Certificate, there will be paid to the
holder of the Surviving Certificate issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions with a
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record date after July 15, 1998 (the "First Dividend Date") theretofore payable
with respect to such whole Surviving Corporation Common Shares and not paid,
less the amount of withholding Taxes, if any, which may be required thereon,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the First Dividend Date but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Surviving Corporation Common Shares, less the amount of withholding
Taxes, if any, which may be required thereon.
(d) From and after the Effective Time, there will be no transfers
on the stock transfer books of Bristol of the Bristol Common Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Bristol Certificates are presented to the Surviving Corporation, they
will be canceled and exchanged for certificates for Surviving Corporation
Common Shares and cash in lieu of fractional Surviving Corporation Common
Shares, if any, and unpaid dividends and distributions deliverable in respect
thereof pursuant to this Agreement in accordance with the procedures set forth
in Section 1.8 and this Section 1.9. Bristol Certificates surrendered for
exchange by any Person constituting an "affiliate" of Bristol for purposes of
Rule 145(c) under the Securities Act of 1933, as amended (the "Securities
Act"), will not be exchanged until the Surviving Corporation has received a
written agreement from such Person as contemplated by Section 5.11.
(e) Any portion of the Surviving Certificates made available to
the Exchange Agent pursuant to Section 1.9(a) which remains unclaimed by the
holders of Bristol Common Shares for 180 calendar days after the Effective Time
will be delivered to the Surviving Corporation, upon demand of the Surviving
Corporation, and any former Bristol stockholders who have not theretofore
complied with this Section 1.9 may look only to the Surviving Corporation for
payment of their Surviving Corporation Common Shares, cash in lieu of
fractional shares and unpaid dividends and distributions on the Surviving
Corporation Common Shares deliverable in respect of each Bristol Common Share
such stockholder holds as determined pursuant to this Agreement, in each case,
without any interest thereon.
(f) None of FelCor, Bristol, the Exchange Agent or any other
Person will be liable to any former holder of Bristol Common Shares for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar Laws.
(g) In the event any Bristol Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
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<PAGE> 16
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent or the Surviving Corporation will issue in exchange for such
lost, stolen or destroyed Bristol Certificate the Surviving Corporation Common
Shares and cash in lieu of fractional Surviving Corporation Common Shares, and
unpaid dividends and distributions on Surviving Corporation Common Shares as
provided in Section 1.8 and Section 1.9(c), respectively, deliverable in
respect thereof pursuant to this Agreement.
1.10. Bristol Stock Options. (a) At the Spin-Off Time (as defined
in the Spin-Off Agreement), each outstanding option (each, an "Original Bristol
Option") to purchase Bristol Common Shares under Bristol's Amended and Restated
1995 Equity Incentive Plan (the "Bristol Incentive Plan") or Stock Option Plan
for Non-Employee Directors (the "Bristol Director Plan"), whether or not then
exercisable or vested, all of which Original Bristol Options that are
outstanding as of the Measurement Date are listed in Schedule 3.3 to the
Bristol Disclosure Letter, will continue to have, and be subject to, the same
terms and conditions as set forth in the Bristol Incentive Plan or the Bristol
Director Plan (as the case may be) and related option agreements pursuant to
which the Original Bristol Options were granted, provided that each Original
Bristol Option will be redenominated into two options which will be
continuations of the Original Bristol Options, effected through amendment of
Original Bristol Options to an "Amended Bristol Option" and a "BHR Option,"
each having identical terms and conditions to the Original Bristol Options
except: (i) the BHR Option will be an option to purchase that number of BHR
Common Shares equal to the product of the number of Bristol Common Shares
covered by such Original Bristol Option immediately prior to the Spin-Off Time
and the Spin-Off Conversion Ratio (as defined in the Spin-Off Agreement),
rounded to the nearest whole number of BHR Common Shares, (ii) service with
either Bristol, BHR or their respective Subsidiaries following the Effective
Time will satisfy the vesting requirements and termination terms thereof, (iii)
the per share exercise price for each BHR Option will be an amount equal to the
quotient of (A) the product of (x) 0.11385, subject to adjustment if and to the
extent necessary to ensure that no additional compensation expense results as
specified in accordance with Emerging Issues Task Force 90-9 (the "Valuation
Ratio"), and (y) the exercise price for the Original Bristol Options, divided
by (B) the Spin-Off Conversion Ratio, (iv) the per share exercise price for the
Amended Bristol Options will be the product of (x) 1 minus the Valuation Ratio
and (y) the exercise price for the Original Bristol Options (the "Amended
Bristol Exercise Price"), and (v) all references to the Bristol Board or
Bristol will, with respect to the BHR Options, be deemed to be references to
the Board of Directors of BHR and BHR, respectively. Effective as of the
Spin-Off Time, (A) BHR will assume all obligations with respect to each BHR
Option, (B) BHR will reserve for issuance the number of BHR Common Shares that
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<PAGE> 17
become issuable upon the exercise of such BHR Options, and (C) Bristol will
have no obligations with respect to any BHR Options. Not later than the
Spin-Off Time, Bristol and BHR will amend (and each may restate) the Bristol
Incentive Plan and the Bristol Director Plan to effect the foregoing changes to
such Plans.
(b) At the Effective Time, the Surviving Corporation will
expressly assume the Bristol Incentive Plan and the Bristol Director Plan and
Bristol's obligations under the Amended Bristol Options on and after the
Effective Time. Each Amended Bristol Option will continue to have, and be
subject to, the same terms and conditions as set forth in the Bristol Incentive
Plan or the Bristol Director Plan (as the case may be) and related option
agreements as modified by Section 1.10(a), provided that the Amended Bristol
Options will be further amended to provide that, (i) all references to Bristol
Common Shares will be deemed to be references to Surviving Corporation Common
Shares, (ii) service with either BHR, the Surviving Corporation or their
respective Subsidiaries following the Effective Time will satisfy the vesting
requirements and termination terms thereof, (iii) each Amended Bristol Option
will be exercisable for that number of whole Surviving Corporation Common
Shares equal to the product of the number of Bristol Common Shares covered by
the Amended Bristol Option immediately prior to the Effective Time and the
Exchange Ratio, rounded to the nearest whole number of Surviving Corporation
Common Shares, (iv) the exercise price per Surviving Corporation Common Share
under each Amended Bristol Option will be equal to the Amended Bristol Exercise
Price divided by the Exchange Ratio, rounded to the nearest cent, and (v) all
references to the Bristol Board or Bristol will be deemed to be references to
the Board of Directors of the Surviving Corporation and the Surviving
Corporation, respectively; provided, however that all decisions relating to the
interpretation or amendment of the Amended Bristol Options will require the
approval of the Compensation Committee of BHR, except for adjustments to the
exercise price or nature of securities to be awarded upon exercise of an
Amended Bristol Option in connection with a transaction in which the Amended
Bristol Options are treated in the same manner as options under other FelCor
Option Plans. The Surviving Corporation will reserve for issuance the number
of Surviving Corporation Common Shares that become issuable upon the exercise
of such Amended Bristol Options. As soon as practicable, the Surviving
Corporation will (i) amend (and each may restate) the Bristol Incentive Plan
and the Bristol Director Plan to effect the foregoing changes to such Plans,
effective as of the Effective Time and (ii) file with the SEC a registration
statement on Form S-8 or other appropriate form with respect to the Surviving
Corporation Common Shares issuable pursuant to the Amended Bristol Options.
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<PAGE> 18
II. REPRESENTATIONS AND WARRANTIES OF FELCOR
Except as set forth in the letter of even date herewith signed by the
President or Vice President of FelCor in his capacity as such and delivered to
Bristol simultaneously with the execution and delivery of this Agreement (the
"FelCor Disclosure Letter"), FelCor represents and warrants to Bristol as
follows:
2.1. Organization, Standing and Power of FelCor. FelCor is a
corporation duly incorporated, validly existing and in good standing under the
Laws of the State of Maryland and has the requisite corporate power and
authority to carry on its business as now being conducted. FelCor is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed, individually or in the aggregate, could not be
reasonably expected to have a material adverse effect on the business,
financial condition or results of operations of FelCor and the FelCor
Subsidiaries, taken as a whole (a "FelCor Material Adverse Effect"). FelCor
has delivered to Bristol complete and correct copies of its Articles of
Amendment and Restatement, its Bylaws and the Amended and Restated Agreement of
Limited Partnership of FelCor Suites Limited Partnership, a Delaware limited
partnership (the "FelCor Operating Partnership"), in each case as amended or
supplemented to the date of this Agreement and currently in force and effect
(respectively, the "FelCor Articles", the "FelCor Bylaws" and the "FelCor
Operating Partnership Agreement").
2.2. FelCor Subsidiaries. (a) Schedule 2.2 to the FelCor
Disclosure Letter sets forth (i) the name and jurisdiction of incorporation or
formation of each Subsidiary of FelCor and of each other Person in which FelCor
owns, directly or indirectly, an equity or ownership interest (collectively,
the "FelCor Subsidiaries"), (ii) the name of the FelCor Hotel, if any, in which
any FelCor Subsidiary owns or holds an interest and the nature of that
ownership or other interest, and (iii) if such FelCor Subsidiary is not wholly
owned (directly or indirectly) by FelCor, (A) the percentage of capital stock
or other equity interests held by FelCor, and (B) the record owners (or class
of owners with respect to the FelCor Operating Partnership) of outstanding
shares of its capital stock or other equity interests.
(b) All the outstanding shares of capital stock of each FelCor
Subsidiary that is a corporation have been validly issued and are fully paid
and nonassessable. Except as set forth in Schedule 2.2 to the FelCor
Disclosure Letter, (i) all the outstanding shares of capital stock of each
FelCor Subsidiary that is a corporation are owned by FelCor or by another
FelCor Subsidiary free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature
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whatsoever (collectively, "Liens"), and (ii) all equity interests of each
FelCor Subsidiary that is a partnership, joint venture, limited liability
company or trust are owned by FelCor or by another FelCor Subsidiary free and
clear of all Liens. Each FelCor Subsidiary that is a corporation is duly
incorporated, validly existing and in good standing under the Laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to carry on its business as now being conducted, and each FelCor
Subsidiary that is a partnership, limited liability company or trust is duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization and has the requisite partnership, limited
liability company or trust power and authority to carry on its business as now
being conducted. Each FelCor Subsidiary is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed, individually or in the aggregate,
could not reasonably be expected to have a FelCor Material Adverse Effect.
FelCor has delivered or made available to Bristol complete and correct copies
of the articles or certificate of incorporation, bylaws, partnership, joint
venture and operating agreements and other organizational documents of each
FelCor Subsidiary, in each case, as amended or supplemented to the date of this
Agreement and currently in force and effect.
2.3. Capital Structures. (a) The authorized capital stock of
FelCor consists of 110,000,000 shares of capital stock, of which 100,000,000
are shares of Common Stock, par value $0.01 per share ("FelCor Common Shares"),
and 10,000,000 are FelCor Preferred Shares, 6,050,000 of which have been
designated as $1.95 Series A Cumulative Convertible Preferred Stock, par value
of $0.01 per share (the "FelCor Series A Preferred Shares"). As of the close
of business on March 20, 1998 (the "Measurement Date"), (i) 36,591,080 FelCor
Common Shares and 6,050,000 FelCor Series A Preferred Shares were issued and
outstanding, (ii) 1,212,500 FelCor Common Shares and no FelCor Series A
Preferred Shares were held in the treasury of FelCor, (iii) no more than
400,000 FelCor Common Shares were reserved for issuance pursuant to FelCor's
1994 Restricted Stock and Stock Option Plan (the "FelCor 1994 Option Plan"),
(iv) no more than 1,400,000 FelCor Common Shares were reserved for issuance
pursuant to FelCor's 1995 Restricted Stock and Stock Option Plan (the "FelCor
1995 Option Plan"), (v) no more than 1,000,000 FelCor Common Shares were
reserved for issuance pursuant to FelCor's 1998 Restricted Stock and Stock
Option Plan (the "FelCor 1998 Option Plan", and together with the FelCor 1995
Option Plan and the FelCor 1994 Option Plan, the "FelCor Option Plans"), (vi)
since December 31, 1997, FelCor has not granted options to purchase more than
400,000 FelCor Common Shares pursuant to the FelCor Option Plans and (vii) a
sufficient number of FelCor Common Shares were reserved for issuance to permit
the conversion of the then-outstanding FelCor Series A Preferred Shares and the
redemption
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of the then-outstanding units of limited partner interest ("FelCor OP Units")
of the FelCor Operating Partnership. As of the Measurement Date, except as set
forth in this Section 2.3, no shares of capital stock or other voting
securities of FelCor were issued, reserved for issuance or outstanding and
during the period from and following the Measurement Date to the Effective
Time, there will be no change in the issued and outstanding FelCor Common
Shares and FelCor Series A Preferred Shares other than pursuant to (A) the
exercise of options to purchase FelCor Common Shares issued pursuant to the
FelCor Option Plans and referred to in this Section 2.3, (B) the exercise of
conversion or redemption rights with respect to the FelCor Series A Preferred
Shares and the FelCor OP Units referred to in this Section 2.3, or (C) the
issuance of FelCor OP Units in connection with transactions referred to on
Schedule 4.2 to the FelCor Disclosure Letter. Without limiting the generality
or effect of any other provision hereof, neither the Merger nor any other
transaction contemplated hereby will accelerate the vesting of or have any
other effect under any options or other rights relating to the acquisition of
equity or other securities of FelCor or the FelCor Operating Partnership.
(b) All of the issued and outstanding shares of capital stock of
FelCor are duly authorized, validly issued, fully paid and nonassessable and
are not subject to preemptive rights. Except as set forth in this Section 2.3
or in Schedule 2.3 to the FelCor Disclosure Letter, as of the date of this
Agreement, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which FelCor or any FelCor Subsidiary is a party or by which such entity is
bound obligating FelCor or any FelCor Subsidiary to issue, deliver, sell,
repurchase, redeem or otherwise acquire, or cause to be issued, delivered,
sold, repurchased, redeemed or acquired, additional shares of capital stock,
voting securities or other ownership interests of FelCor or any FelCor
Subsidiary (or securities convertible into or exchangeable for such ownership
interests) or obligating FelCor or any FelCor Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking (other than to FelCor or a
FelCor Subsidiary). There are no bonds, debentures, notes or other
Indebtedness of FelCor having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of FelCor may vote.
(c) As of the Measurement Date, the partnership interests in the
FelCor Operating Partnership consist of (i) the 36,591,080 units of general
partner interest and (ii) 2,897,019 FelCor OP Units. All of the units of
general partner interest in FelCor Operating Partnership are owned by FelCor,
free and clear of all Liens.
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<PAGE> 21
2.4. Authority; Noncontravention; Consents. (a) FelCor has
the requisite corporate power and authority (i) to enter into this Agreement and
each Transaction Document to which FelCor is a party, (ii) to perform its
obligations hereunder and thereunder, and (iii) subject to the requisite
approval of the Merger by the holders of a majority of the FelCor Common Shares
outstanding as of the Record Date (the "FelCor Stockholder Approval"), to
consummate the transactions contemplated hereunder and thereunder. The
execution and delivery by FelCor of this Agreement and each Transaction Document
to which FelCor is a party and the consummation by FelCor of the transactions
contemplated hereunder and thereunder have been duly authorized by the FelCor
Board, the FelCor Board has recommended adoption of this Agreement by its
stockholders and directed that this Agreement be submitted to a meeting of its
stockholders for their consideration, and no other corporate proceedings on the
part of FelCor or its stockholders are necessary to authorize any of the
foregoing, other than the FelCor Stockholder Approval. This Agreement and each
Transaction Document to which FelCor is a party have been duly executed and
delivered by FelCor and constitute valid and binding obligations of FelCor,
enforceable against FelCor in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws relating to the enforcement of
creditors' rights and by general principles of equity (the foregoing exception,
the "Bankruptcy Exception").
(b) Except as set forth in Schedule 2.4 to the FelCor Disclosure
Letter, the execution and delivery by FelCor of this Agreement and each
Transaction Document to which FelCor is a party do not, and the consummation of
the transactions contemplated hereunder and thereunder and compliance by FelCor
with the provisions hereof and thereof will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any material obligation or to loss of a material benefit under, or result in
the creation of any Lien upon any of the properties or assets of FelCor or any
FelCor Subsidiary under (i) the FelCor Articles or the FelCor Bylaws or the
comparable charter or organizational documents or partnership or similar
agreement (as the case may be) of any FelCor Subsidiary, including without
limitation the FelCor Operating Partnership, each as amended or supplemented,
(ii) any loan or credit agreement, note, bond, mortgage, indenture or any other
agreement evidencing, Indebtedness, reciprocal easement agreement, lease,
management or other agreement, instrument or Permit applicable to FelCor or any
FelCor Subsidiary or their respective properties or assets, or (iii) subject to
the governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation (collectively, "Laws") applicable to FelCor or any FelCor Subsidiary
or their respective properties or assets, other than, in the case of clause
(ii) or (iii), any such conflicts, violations, defaults, rights, loss or Liens
that, individually or
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in the aggregate, could not reasonably be expected to (A) have a FelCor
Material Adverse Effect or (B) prevent or delay in any material respect the
consummation of the transactions contemplated by this Agreement and the
Transaction Documents or otherwise prevent FelCor from performing its
obligations hereunder or thereunder in any material respect. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any federal, state or local government or any court, administrative or
regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required by or with respect
to FelCor or any FelCor Subsidiary, including without limitation the FelCor
Operating Partnership, in connection with the execution and delivery by FelCor
of this Agreement or any of the Transaction Documents to which FelCor is a
party or the consummation by FelCor of the transactions contemplated hereunder
or thereunder, except for (i) the filing with the Securities and Exchange
Commission (the "SEC") of (A) a joint proxy statement relating to the approval
by FelCor's stockholders and Bristol's stockholders of the transactions
contemplated by this Agreement (as amended or supplemented from time to time,
the "Proxy Statement"), (B) registration statements on appropriate forms under
the Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (as amended or supplemented from time to time, the
"Registration Statements"), and (C) such reports under the Exchange Act as may
be required in connection with this Agreement and the Transaction Documents and
the transactions contemplated hereunder and thereunder, (ii) the filing of
listing applications with the NYSE with respect to the Surviving Corporation
Common Shares to be issued in the Merger, (iii) the filing of the Articles of
Merger with the Department, the Certificate of Merger with the Secretary of
State of the State of Delaware and other appropriate merger documents and
filings with any local recording office or authorities of other states in which
FelCor or Bristol is qualified to do business, and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations and filings (A)
as are set forth in Schedule 2.4 to the FelCor Disclosure Letter or (B) which,
if not obtained or made, could not reasonably be expected to prevent or delay
in any material respect the consummation of any of the transactions
contemplated by this Agreement or any of the Transaction Documents or otherwise
prevent FelCor from performing its obligations hereunder or thereunder in any
material respect or have, individually or in the aggregate, a FelCor Material
Adverse Effect or a Bristol Material Adverse Effect.
2.5. SEC Documents; Financial Statements; Undisclosed Liabilities.
(a) FelCor and the FelCor Subsidiaries have filed all required reports,
schedules, forms, statements and other documents with the SEC from July 28,
1994 through the date hereof (the "FelCor SEC Documents"). Schedule 2.5 to the
FelCor Disclosure Letter contains a complete list of all FelCor SEC Documents
filed by FelCor and the FelCor Subsidiaries with the SEC since January 1, 1996
and on or prior to the date of this
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Agreement (the "FelCor Filed SEC Documents"). All of the FelCor SEC Documents
(other than preliminary material), as of their respective filing dates,
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and, in each case, the rules and
regulations promulgated thereunder applicable to such FelCor SEC Documents.
None of the FelCor SEC Documents at the time of filing contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
to the extent such statements have been modified or superseded by later FelCor
Filed SEC Documents.
(b) The consolidated financial statements of FelCor and the FelCor
Subsidiaries included in the FelCor SEC Documents (i) complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, (ii) have been prepared
in accordance with United States generally accepted accounting principles
("GAAP") (except, in the case of unaudited statements, as permitted by the
applicable rules and regulations of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto
included in or incorporated into any FelCor Filed SEC Documents), and (iii)
present fairly, in all material respects, the consolidated financial position
of FelCor and the FelCor Subsidiaries as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal and immaterial
year-end audit adjustments). Except as set forth in Schedule 2.5 to the FelCor
Disclosure Letter, FelCor has no Subsidiaries which are not consolidated for
accounting purposes.
(c) Except for liabilities and obligations set forth in the FelCor
Filed SEC Documents or in Schedule 2.5 to the FelCor Disclosure Letter or for
liabilities and obligations specifically contemplated to be incurred in
connection with this Agreement, neither FelCor nor any of the FelCor
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth on a
consolidated balance sheet of FelCor or in the notes thereto and which,
individually or in the aggregate, could be reasonably expected to have a FelCor
Material Adverse Effect.
(d) Each of the operating statements for the FelCor Hotels
provided or to be provided by FelCor to Bristol or its advisors was prepared in
the ordinary course of business consistent with past practice and was derived
from the books and records for the applicable FelCor Hotel.
2.6. Absence of Certain Changes or Events. Except as disclosed in (i)
the FelCor Filed SEC Documents or (ii) Schedule 2.6 to the FelCor Disclosure
Letter, since
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December 31, 1997 (the "FelCor Financial Statement Date"), FelCor and the
FelCor Subsidiaries have conducted their business only in the ordinary course
thereof, and there has not been (a) any material adverse change, event or
development in the business, financial condition or results of operations of
FelCor and the FelCor Subsidiaries, taken as a whole (a "FelCor Material
Adverse Change"), nor has there been any occurrence or circumstance that with
the passage of time could reasonably be expected to result in a FelCor Material
Adverse Change, (b) except for regular quarterly distributions (in the case of
FelCor) not in excess of $0.55 per FelCor Common Share, $0.55 per FelCor OP
Unit and $.4875 per FelCor Series A Preferred Share, in each case with
customary record and payment dates, any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property) with
respect to any of FelCor's capital stock, (c) any split, combination or
reclassification of any of FelCor's capital stock, (d) any damage, destruction
or loss, whether or not covered by insurance, that, individually or in the
aggregate, could be reasonably expected to have a FelCor Material Adverse
Effect, or (e) any change in accounting methods, principles or practices by
FelCor or any FelCor Subsidiary materially affecting its assets, liabilities or
business, except insofar as may have been disclosed in the FelCor Filed SEC
Documents or required by a change in GAAP. There are no accrued and unpaid
dividends on the FelCor Series A Preferred Shares that have not been paid on
the date such payment is due.
2.7. Litigation. Except as disclosed in the FelCor Filed SEC
Documents or in Schedule 2.7 to the FelCor Disclosure Letter, and other than
personal injury and other routine personal injury litigation arising from the
ordinary course of operations of FelCor and the FelCor Subsidiaries and which
are covered by adequate insurance, there is no suit, action, proceeding or
investigation pending or, to the Knowledge of FelCor, threatened against or
affecting FelCor or any FelCor Subsidiary that, individually or in the
aggregate, if decided adversely to FelCor, could be reasonably expected to (i)
have a FelCor Material Adverse Effect or (ii) prevent or delay in any material
respect the consummation of any of the transactions contemplated by this
Agreement or any of the Transaction Documents or otherwise prevent FelCor from
performing its obligations hereunder or thereunder in any material respect, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against FelCor or any FelCor Subsidiary which,
individually or in the aggregate, could reasonably be expected to have any such
effect.
2.8. Properties. (a) All of the real estate properties owned or
leased by FelCor and the FelCor Subsidiaries are listed on Schedule 2.8 to the
FelCor Disclosure Letter (the "FelCor Properties"). FelCor has no direct or
indirect ownership interest in any real property as of the date hereof other
than the FelCor Properties.
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(b) Except as disclosed on Schedule 2.8 to the FelCor Disclosure
Letter, FelCor or one of the FelCor Subsidiaries owns fee simple title to, or a
valid leasehold or joint venture interest in, each of the FelCor Properties,
free and clear of all Liens, security interests or other encumbrances on title
("Encumbrances"), except for such Encumbrances which, individually and in the
aggregate, could not be reasonably expected to have a FelCor Material Adverse
Effect. Except as disclosed on Schedule 2.8 to the FelCor Disclosure Letter,
the FelCor Properties are not subject to any easements, rights of way,
covenants, conditions, restrictions or other written agreements or Laws
affecting building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions") or Encumbrances, except for (i)
Property Restrictions imposed or promulgated by Law or any Governmental Entity
with respect to real property, including zoning regulations, that do not
adversely affect the current use of the property, materially detract from the
value of or materially interfere with the present use of the property, (ii)
Encumbrances and Property Restrictions disclosed on existing title policies,
commitments (and the documents listed as exceptions therein) or surveys (in
each case copies of which title policies, commitments (and the documents listed
as exceptions therein) and surveys have been delivered or made available to
Bristol), (iii) leases between FelCor and DJONT Operations, L.L.C., a Delaware
limited liability company and its subsidiaries, which are described on Schedule
2.8 to the FelCor Disclosure Letter, (iv) retail leases, including restaurant,
gift shop and roof top leases, and (v) mechanics', carriers', supplier's,
workmen's or repairmen's Liens and other Encumbrances, Property Restrictions
and other limitations of any kind, if any, which, individually and in the
aggregate, could not be reasonably expected to have a FelCor Material Adverse
Effect.
(c) Except for such matters as, individually and in the aggregate,
could not be reasonably expected to have a FelCor Material Adverse Effect,
valid policies of title insurance have been issued insuring FelCor's or the
applicable FelCor Subsidiary's title to or interest in each of the FelCor
Properties, and such policies are, at the date hereof, in full force and effect
and no claim has been made against any such policy and FelCor has no Knowledge
of any facts or circumstances which would constitute the valid basis for such a
claim.
(d) Except for such of the following as, individually and in the
aggregate, could not be reasonably expected to have a FelCor Material Adverse
Effect, to the Knowledge of FelCor, (i) no certificate, Permit or license from
any Governmental Entity having jurisdiction over any of the FelCor Properties
or any agreement, easement or other right which is necessary to permit the
lawful use and operation of the buildings and improvements on any of the FelCor
Properties as currently operated or which is necessary to permit the lawful use
and operation of all driveways, roads and other means of egress and
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ingress to and from any of the FelCor Properties (an "REA Agreement") has not
been obtained and is not in full force and effect, and there is no pending
threat of modification or cancellation of any of the same, nor is FelCor or any
of the FelCor Subsidiaries currently in default under any REA Agreement and the
FelCor Properties are in full compliance with all Permits; (ii) no written
notice of any violation of any Law affecting any portion of any of the FelCor
Properties has been issued by any Governmental Entity; (iii) there are no
material structural defects relating to any of the FelCor Properties; (iv)
there is no FelCor Property whose building systems are not in working order;
and (v) there is no physical damage to any FelCor Property in excess of
$500,000 for which there is no insurance in effect (other than reasonable and
customary deductibles) covering the full cost of the restoration. Except for
such of the following as, individually and in the aggregate, could not be
reasonably expected to have a FelCor Material Adverse Effect, the use and
occupancy of each of the FelCor Properties complies in all material respects
with all applicable Laws, and FelCor has no Knowledge of any pending or
threatened proceeding or action that will in any manner affect the size of, use
of, improvements on, construction on, or access to any of the FelCor
Properties, with such exceptions as are not material and do not interfere with
the use made and proposed to be made of such FelCor Properties. Except for
such of the following as, individually and in the aggregate, could not be
reasonably expected to have a FelCor Material Adverse Effect, neither FelCor
nor any of the FelCor Subsidiaries has received any written notice to the
effect that (x) any betterment assessments have been levied against, or any
condemnation or rezoning proceedings are pending or threatened with respect to
any of the FelCor Properties or (y) any zoning, building or similar Law is or
will be violated by the continued maintenance, operation or use of any
buildings or other improvements on any of the FelCor Properties or by the
continued maintenance, operation or use of the parking areas. Except for such
of the following as, individually and in the aggregate, could not be reasonably
expected to have a FelCor Material Adverse Effect, following a casualty, each
of the FelCor Properties could be reconstructed and used for hotel purposes
under applicable zoning laws and regulations, except that in certain
circumstances such reconstruction would have to comply with the dimensional
requirements of applicable zoning Laws and regulations in effect at the time of
reconstruction.
(e) Except as otherwise could not be reasonably expected to have a
FelCor Material Adverse Effect, there are no outstanding abatement proceedings
or appeals with respect to the assessment of any FelCor Property for the
purpose of real property Taxes, and there are no agreements with any
Governmental Entity with respect to such assessments or Tax rates on any FelCor
Property.
2.9. Environmental Matters. None of FelCor, any of the FelCor
Subsidiaries or, to FelCor's Knowledge, any other Person has caused or
permitted (a) the unlawful presence of any
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Hazardous Materials on any of the FelCor Properties or (b) any unlawful spills,
releases, discharges or disposal of Hazardous Materials to have occurred or be
presently occurring on or from the FelCor Properties, which presence or
occurrence, individually or in the aggregate, could reasonably be expected to
have a FelCor Material Adverse Effect; and, in connection with the construction
on or operation and use of the FelCor Properties, FelCor and the FelCor
Subsidiaries have not failed to comply in any material respect with all
applicable Environmental Laws, except to the extent such failure to comply,
individually or in the aggregate, could not be reasonably expected to have a
FelCor Material Adverse Effect. No notice, notification, demand, request for
information, citation, summons, complaint or order has been received by or is
pending, or to the Knowledge of FelCor, is threatened by, any Person against
FelCor or any FelCor Subsidiary, other than where such notice, notification,
demand, request for information, citation, summons, complaint or order has been
fully resolved, or where such resolution, individually and in the aggregate,
could not be reasonably expected to result in a FelCor Material Adverse Effect.
FelCor has previously delivered or made available to Bristol or its counsel
true and complete copies of all internally prepared or commissioned
environmental studies, assessments and reports in the possession or under the
control of FelCor that relate to the FelCor Properties and/or FelCor's
compliance with Environmental Laws.
2.10. Absence of Changes in Benefit Plans; ERISA Compliance. (a)
Except as disclosed in the FelCor Filed SEC Documents or in Schedule 2.10 to
the FelCor Disclosure Letter and except as specifically contemplated by this
Agreement, since the FelCor Financial Statement Date, there has not been any
adoption or amendment in any material respect by FelCor or any FelCor
Subsidiary of any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other employee benefit plan, arrangement or
understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of FelCor, any FelCor
Subsidiary or any Person Affiliated with FelCor under Section 414 (b), (c), (m)
or (o) of the Code (collectively, "FelCor Benefit Plans").
(b) Except as described in the FelCor Filed SEC Documents or in
Schedule 2.10 to the FelCor Disclosure Letter, (i) all FelCor Benefit Plans,
including any such plan that is an "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), are in compliance in all material respects with all applicable
requirements of Law, including without limitation ERISA and the Code, and (ii)
neither FelCor nor any FelCor Subsidiary has any material liabilities or
obligations with respect to any such FelCor Benefit Plan, whether accrued,
contingent or otherwise, except for any such noncompliance or
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liabilities that could not be reasonably expected to have a FelCor Material
Adverse Effect. Except as set forth in Schedule 2.10 to the FelCor Disclosure
Letter, the execution of, and performance of the transactions contemplated in,
this Agreement and the Transaction Documents to which FelCor is a party will
not (either alone or upon the occurrence of any additional or subsequent
events) constitute an event under any FelCor Benefit Plan, policy, arrangement
or agreement or any trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee, officer or director of FelCor or any
FelCor Subsidiary. The only severance agreements or severance policies
applicable to officers or directors of FelCor or any of the FelCor Subsidiaries
are the agreements and policies specifically referred to in Schedule 2.10 to
the FelCor Disclosure Letter.
2.11. Taxes. (a) Each of FelCor and the FelCor Subsidiaries has
timely filed all Tax returns and reports required to be filed by it and for any
partnerships for which any of them is a general partner (after giving effect to
any filing extension properly granted by a Governmental Entity having authority
to do so) and has paid (or FelCor has paid on its behalf) all Taxes shown on
such returns and reports as required to be paid by it and all such Tax returns
and reports are complete and accurate in all material respects, except where
the failure to file such Tax returns or reports, the failure to pay such Taxes
and the failure to be complete and accurate in all material respects could not
be reasonably expected to have a FelCor Material Adverse Effect. The most
recent audited financial statements contained in the FelCor Filed SEC Documents
reflect in accordance with GAAP an adequate accrual for Taxes and for all
deferred Taxes payable by FelCor and the FelCor Subsidiaries for all taxable
periods and portions thereof through the date of such financial statements.
Since the FelCor Financial Statement Date, FelCor has incurred no liability for
Taxes under Sections 857(b), 860(c) or 4981 of the Code, including without
limitation any Tax arising from a prohibited transaction described in Section
857(b)(6) of the Code, and neither FelCor nor any FelCor Subsidiary has
incurred any liability for Taxes other than in the ordinary course of business.
No event has occurred, and no condition or circumstance exists, which presents
a material risk that any material Tax described in the preceding sentence will
be imposed upon FelCor. To the Knowledge of FelCor, (i) no deficiencies for
any Taxes have been proposed, asserted or assessed against FelCor or any of the
FelCor Subsidiaries, (ii) no requests for waivers of the time to assess any
such Taxes are pending, and (iii) no Tax returns of FelCor or any of the FelCor
Subsidiaries are currently being audited by any applicable taxing authority or
threatened with any such audit. There are no Tax Liens on any assets of FelCor
or the FelCor Subsidiaries other than Liens for current Taxes not past due.
All payments for withholding Taxes,
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unemployment insurance and other amounts required to be withheld and deposited
or paid to all taxing authorities have been so deposited or paid by FelCor and
the FelCor Subsidiaries.
(b) FelCor (and its predecessors) (i) for all taxable years
commencing with its taxable year beginning July 28, 1994 and ended December 31,
1994, and through the most recent December 31, has been subject to taxation as
a real estate investment trust (a "REIT") within the meaning of Section 856 of
the Code and has satisfied all requirements to qualify as a REIT for such
years, (ii) has operated, and will continue to operate, in such a manner as to
qualify as a REIT for the taxable year ending December 31, 1998, and (iii) to
FelCor's Knowledge, no action, proceeding or investigation that could
reasonably be expected to result in the termination of FelCor's status as a
REIT is pending or threatened. No FelCor Subsidiary has since its formation
owned any assets (including without limitation securities) that would cause
FelCor to incur tax under Section 857(b)(4) of the Code. Except as set forth
in Schedule 2.11 to the FelCor Disclosure Letter, each FelCor Subsidiary which
is a corporation has been since its formation a qualified REIT subsidiary under
Section 856(i) of the Code.
(c) Neither FelCor nor any of its Subsidiaries has taken any
action that would create a material risk that the Merger would not qualify as a
tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Code.
2.12. Brokers. No broker, investment banker, financial advisor or
other Person, other than BT Wolfensohn, the fees and expenses of which will be
paid by FelCor, is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of FelCor or
any FelCor Subsidiary. FelCor has furnished to Bristol true and complete
copies of all agreements under which any such fees or expenses are payable and
all indemnification and other agreements related to the engagement of BT
Wolfensohn.
2.13. Compliance with Laws. Except as disclosed in the FelCor Filed
SEC Documents, neither FelCor nor any of the FelCor Subsidiaries has violated
or failed to comply with any Law, Permit, judgment, decree or order of any
Governmental Entity applicable to its business, properties or operations,
except to the extent that such violation or failure could not be reasonably
expected to have a FelCor Material Adverse Effect. Each of FelCor and each
FelCor Subsidiary has all licenses, franchises, permits, concessions, orders,
approvals or registrations from, of or with any applicable Governmental Entity
(collectively, "Permits") that are required in order to permit it to carry on
its business as it is presently conducted, except those Permits which the
failure to have could not, individually or in the aggregate, reasonably be
expected to have a FelCor Material Adverse Effect. All such Permits are in
full force and effect,
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except for any such Permit as to which the failure so to be in full force and
effect could not, individually or in the aggregate, reasonably be expected to
have a FelCor Material Adverse Effect.
2.14. Labor Matters. Schedule 2.14 to the FelCor Disclosure Letter
sets forth a true and complete list as of the Measurement Date of each labor
union or collective bargaining agreement to which FelCor or any of the FelCor
Subsidiaries is a party or which governs the terms of employment of any of
their respective employees. There is no labor strike or work stoppage pending
or, to the Knowledge of FelCor, threatened against FelCor, any FelCor
Subsidiary or any of the FelCor Properties, except as could not reasonably be
expected to have a FelCor Material Adverse Effect.
2.15. Compliance with Agreements. Neither FelCor nor any FelCor
Subsidiary has received a written notice that FelCor or any FelCor Subsidiary
is in violation of or in default under (nor to the Knowledge of FelCor does
there exist any condition which upon the passage of time or the giving of
notice or both would cause such a violation of or default under) any material
loan or credit agreement, note, bond, mortgage, indenture or other agreement
evidencing Indebtedness, lease, Permit, concession, franchise, management,
license or any other material contract, agreement, arrangement or
understanding, to which it is a party or by which it or any of its properties
or assets is bound, except to the extent that such violation or default,
individually or in the aggregate, could not reasonably be expected to have a
FelCor Material Adverse Effect or as set forth in Schedule 2.15 to the FelCor
Disclosure Letter.
2.16. Opinion of Financial Advisor. FelCor has received the opinion
of BT Wolfensohn, dated as of the date hereof, a copy of which has been
provided to Bristol, to the effect that, as of the date hereof, the
consideration to be paid by FelCor pursuant to the Merger is fair, from a
financial point of view, to FelCor.
2.17. State Takeover Statutes. FelCor has taken all action necessary
to exempt the transactions contemplated by this Agreement from the operation of
any "fair price," "moratorium," "control share acquisition" or any other anti-
takeover requirement existing under the Laws of the State of Maryland.
2.18. Proxy and Registration Statements. None of the information
supplied or to be supplied by FelCor or any of its representatives for
inclusion or incorporation by reference in the Proxy Statement or the
Registration Statements will at the time such Proxy Statement or Registration
Statements are filed with the SEC and at the time of the mailing of the Proxy
Statement or Registration Statements to the stockholders of FelCor and Bristol
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of
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the circumstances under which they were made, not misleading. No
representation is made by FelCor with respect to statements made in the Proxy
Statement or Registration Statements based on information supplied by Bristol
or any of its Affiliates for inclusion therein, or with respect to information
concerning Bristol or any of its Subsidiaries incorporated by reference
therein.
2.19. Definition of Knowledge of FelCor. As used in this Agreement,
the phrase to the "Knowledge of FelCor" (or words of similar import) means the
actual knowledge of those individuals identified in Schedule 2.19 to the FelCor
Disclosure Letter.
III. REPRESENTATIONS AND WARRANTIES OF BRISTOL
Except as set forth in the letter of even date herewith signed by the
President of Bristol in his capacity as such and delivered to FelCor
simultaneously with the execution and delivery of this Agreement (the "Bristol
Disclosure Letter"), Bristol represents and warrants to FelCor as follows:
3.1. Organization, Standing and Power of Bristol. Bristol is a
corporation duly incorporated, validly existing and in good standing under the
Laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now being conducted. Bristol is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed, individually or in the aggregate, could not reasonably
be expected to have a material adverse effect on the business, financial
condition or results of operations of Bristol and the Bristol Subsidiaries,
taken as a whole; provided, however, that any determination of whether any
state of facts, event, change or event would have a Bristol Material Adverse
Effect will be made after giving pro-forma effect to the Spin-Off (a "Bristol
Material Adverse Effect"). Bristol has delivered to FelCor complete and
correct copies of its Fourth Amended and Restated Certificate of Incorporation
and its Amended and Restated Bylaws, in each case as amended or supplemented to
the date of this Agreement and currently in force and effect (respectively, the
"Bristol Certificate" and the "Bristol Bylaws").
3.2. Bristol Subsidiaries. (a) Schedule 3.2 to the Bristol
Disclosure Letter sets forth (i) the name and jurisdiction of incorporation or
formation of each Subsidiary of Bristol and of each other Person in which
Bristol owns, directly or indirectly, an equity or ownership interest
(collectively, the "Bristol Subsidiaries"), (ii) the name of the Bristol Hotel,
if any, in which any Bristol Subsidiary owns or holds an interest and the
nature of that ownership or other interest, and (iii) if
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such Bristol Subsidiary is not wholly owned (directly or indirectly) by
Bristol, (A) its authorized capital stock or other equity interests, (B) the
number of issued and outstanding shares of its capital stock or other equity
interests, and (C) the record owners of outstanding shares of its capital stock
or other equity interests.
(b) All the outstanding shares of capital stock of each Bristol
Subsidiary that is a corporation have been validly issued and are fully paid
and nonassessable. Except as set forth in Schedule 3.2 to the Bristol
Disclosure Letter, (i) all the outstanding shares of capital stock of each
Bristol Subsidiary that is a corporation are owned by Bristol or by another
Bristol Subsidiary free and clear of all Liens, and (ii) all equity interests
of each Bristol Subsidiary that is a partnership, joint venture, limited
liability company or trust are owned by Bristol or by another Bristol
Subsidiary free and clear of all Liens. Each Bristol Subsidiary that is a
corporation is duly incorporated, validly existing and in good standing under
the Laws of its jurisdiction of incorporation and has the requisite corporate
power and authority to carry on its business as now being conducted, and each
Bristol Subsidiary that is a partnership, limited liability company or trust is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization and has the requisite partnership, limited
liability company or trust power and authority to carry on its business as now
being conducted. Each Bristol Subsidiary is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed, individually or in the aggregate,
could not reasonably be expected to have a Bristol Material Adverse Effect.
Bristol has delivered to FelCor complete and correct copies of the articles or
certificate of incorporation, bylaws, partnership, joint venture and operating
agreements and other organizational documents of each Bristol Subsidiary, in
each case, as amended or supplemented to the date of this Agreement and
currently in force and effect.
(c) Following completion of the Spin-Off Transactions and
immediately prior to the Effective Time, except for interests in the
Non-Corporate Bristol Hotel Subsidiaries, Bristol will not own, directly or
indirectly, any interest or investment (whether equity or debt) in any
corporation, partnership, joint venture, trust or other entity.
3.3. Capital Structure. (a) The authorized capital stock of
Bristol consists of 200,000,000 shares of capital stock, of which 150,000,000
are Bristol Common Shares and 50,000,000 are preferred shares, par value of
$0.01 per share ("Bristol Preferred Shares"). As of the Measurement Date, (i)
43,800,401 Bristol Common Shares and no Bristol Preferred Shares were issued
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and outstanding, (ii) no Bristol Common Shares were held in the treasury of
Bristol, (iii) 1,950,000 Bristol Common Shares were reserved for issuance
pursuant to the Bristol Incentive Plan, (iv) 150,000 Bristol Common Shares were
reserved for issuance pursuant to the Bristol Director Plan, and (v) 1,869,941
Bristol Common Shares were issuable upon the exercise of outstanding Bristol
Options. As of the Measurement Date, except as set forth in this Section 3.3,
no shares of capital stock or other voting securities of Bristol were issued,
reserved for issuance or outstanding, and during the period from and following
the Measurement Date to the Effective Time, there will be no change in the
issued and outstanding Bristol Common Shares and Bristol Preferred Shares other
than pursuant to the exercise of outstanding Bristol Options referred to in
this Section 3.3 or Schedule 3.3 to the Bristol Disclosure Letter. Without
limiting the generality or effect of any other provision hereof, except as
described in this Section 3.3 or Schedule 3.3 to the Bristol Disclosure Letter,
neither the Merger nor any other transaction contemplated hereby will
accelerate the vesting of or have any other effect under any options or other
rights relating to the acquisition of equity or other securities of Bristol.
(b) All of the issued and outstanding shares of capital stock of
Bristol are duly authorized, validly issued, fully paid and nonassessable and
are not subject to preemptive rights. Except as set forth in this Section 3.3
or in Schedule 3.3 to the Bristol Disclosure Letter, as of the date of this
Agreement, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which Bristol or any Bristol Subsidiary is a party or by which such entity is
bound obligating Bristol or any Bristol Subsidiary to issue, deliver, sell,
repurchase, redeem or otherwise acquire, or cause to be issued, delivered,
sold, repurchased, redeemed or acquired, additional shares of capital stock,
voting securities or other ownership interests of Bristol or of any Bristol
Subsidiary (or securities convertible into or exchangeable for such ownership
interests) or obligating Bristol or any Bristol Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking (other than to Bristol or a
Bristol Subsidiary). There are no bonds, debentures, notes or other
Indebtedness of Bristol having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of Bristol may vote.
3.4. Authority; Noncontravention; Consents. (a) Bristol has
the requisite corporate power and authority (i) to enter into this Agreement
and each Transaction Document to which Bristol is a party, (ii) to perform its
obligations hereunder and thereunder, and (iii) subject to the adoption of the
Merger Agreement by the holders of a majority of the Bristol Common Shares
outstanding as of the Record Date (the "Bristol Stockholder Approval" and,
together with the FelCor Stockholder
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Approval, the "Stockholder Approvals"), to consummate the transactions
contemplated hereunder and thereunder. The execution and delivery by Bristol
of this Agreement and each Transaction Document to which Bristol is a party and
the consummation by Bristol of the transactions contemplated hereunder and
thereunder have been duly authorized by the Bristol Board, the Bristol Board
has recommended adoption of this Agreement by its stockholders and directed
that this Agreement be submitted to a meeting of its stockholders for their
consideration, and no other corporate proceedings on the part of Bristol or its
stockholders are necessary to authorize any of the foregoing, other than the
Bristol Stockholder Approval. This Agreement and each Transaction Document to
which Bristol is a party have been duly executed and delivered by Bristol and
constitute valid and binding obligations of Bristol, enforceable against
Bristol in accordance with their respective terms, except as enforceability may
be limited by the Bankruptcy Exception.
(b) Except as set forth in Schedule 3.4 to the Bristol Disclosure
Letter, the execution and delivery by Bristol of this Agreement and each
Transaction Document to which Bristol is a party do not, and the consummation
of the transactions contemplated hereunder and thereunder and compliance by
Bristol with the provisions hereof and thereof will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any material obligation or to loss of a material benefit under,
or result in the creation of any Lien upon any of the properties or assets of
Bristol or any Bristol Subsidiary under (i) the Bristol Certificate or the
Bristol Bylaws or the comparable charter or organizational documents or
partnership or similar agreement (as the case may be) of any Bristol
Subsidiary, each as amended or supplemented to the date of this Agreement, (ii)
any loan or credit agreement, note, bond, mortgage, indenture or any other
agreement evidencing, Indebtedness, reciprocal easement agreement, lease,
management or other agreement, instrument or Permit applicable to Bristol or
any Bristol Subsidiary or their respective properties or assets, or (iii)
subject to the governmental filings and other matters referred to in the
following sentence, any Laws applicable to Bristol or any Bristol Subsidiary or
their respective properties or assets, other than, in the case of clause (ii)
or (iii), any such conflicts, violations, defaults, rights, loss or Liens that,
individually or in the aggregate, could not reasonably be expected to (A) have
a Bristol Material Adverse Effect or (B) prevent or delay in any material
respect the consummation of the transactions contemplated by this Agreement and
the Transaction Documents or otherwise prevent Bristol from performing its
obligations hereunder or thereunder in any material respect. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Bristol or any
Bristol Subsidiary in connection with the execution and delivery by Bristol of
this Agreement or any of
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the Transaction Documents to which Bristol is a party or the consummation by
Bristol of any of the transactions contemplated hereunder or thereunder, except
for (i) the filing with the SEC of (A) the Proxy Statement, (B) the
Registration Statements, and (C) such reports under the Exchange Act as may be
required in connection with this Agreement and the Transaction Documents and
the transactions contemplated hereunder and thereunder, (ii) the filing of
listing applications with the NYSE with respect to the BHR Common Shares to be
distributed in the Spin-Off, (iii) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware and other appropriate merger
documents and filings with any local recording office or authorities of other
states in which FelCor or Bristol is qualified to do business, (iv) the filing
of a premerger notification and report form under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") with respect to
the Spin-Off, and (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings (A) as are set forth in Schedule 3.4 to
the Bristol Disclosure Letter or (B) which, if not obtained or made, could not
reasonably be expected to prevent or delay in any material respect the
consummation of any of the transactions contemplated by this Agreement or any
of the Transaction Documents or otherwise prevent Bristol from performing its
obligations hereunder or thereunder in any material respect or have,
individually or in the aggregate, a Bristol Material Adverse Effect or a FelCor
Material Adverse Effect.
(c) Each of the Bristol Corporate Subsidiaries will, at the time
of its merger with and into one of the Non-Corporate Bristol Hotel
Subsidiaries, be duly authorized and empowered to enter into such merger, and
except as set forth on Schedule 3.4 to the Bristol Disclosure Letter, none of
such mergers will conflict with or violate the terms of (i) any charter or
bylaws of such Bristol Corporate Subsidiary or (ii) any material agreement,
mortgage, note, material contract, deed of trust or security interest by which
the Bristol Corporate Subsidiary or its assets or properties are bound.
3.5. SEC Documents; Financial Statements; Undisclosed Liabilities.
(a) Bristol and the Bristol Subsidiaries have filed all required reports,
schedules, forms, statements and other documents with the SEC from December 13,
1995 through the date hereof (the "Bristol SEC Documents"). Schedule 3.5 to
the Bristol Disclosure Letter contains a complete list of all Bristol SEC
Documents filed by Bristol and the Bristol Subsidiaries with the SEC since
January 1, 1996 and on or prior to the date of this Agreement (the "Bristol
Filed SEC Documents"). All of the Bristol SEC Documents (other than
preliminary material), as of their respective filing dates, complied in all
material respects with all applicable requirements of the Securities Act and
the Exchange Act and, in each case, the rules and regulations promulgated
thereunder applicable to such Bristol SEC Documents. None of the Bristol SEC
Documents at the time of filing contained
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any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent such statements have been modified or
superseded by later Bristol Filed SEC Documents.
(b) The consolidated financial statements of Bristol and the
Bristol Subsidiaries included in the Bristol SEC Documents (i) complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (ii) have been
prepared in accordance with GAAP (except, in the case of unaudited statements,
as permitted by the applicable rules and regulations of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto included in or incorporated into any Bristol Filed SEC
Documents), and (iii) present fairly, in all material respects, the
consolidated financial position of Bristol and the Bristol Subsidiaries as of
the dates thereof and the consolidated results of operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
and immaterial year-end audit adjustments). Bristol has no Subsidiaries which
are not consolidated for accounting purposes.
(c) Except for liabilities and obligations set forth in (i) the
Bristol Filed SEC Documents, (ii) the draft copy of Bristol's Annual Report on
Form 10-K for the year ended December 31, 1997 provided to FelCor on the date
of this Agreement, or (iii) in Schedule 3.5 to the Bristol Disclosure Letter or
for liabilities and obligations specifically contemplated to be incurred in
connection with this Agreement, neither Bristol nor any Bristol Subsidiary has
any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of Bristol or in the notes thereto and which, individually or in
the aggregate, could be reasonably expected to have a Bristol Material Adverse
Effect.
(d) Each of the operating statements for the Bristol Hotels
provided or to be provided by Bristol to FelCor or its advisors was prepared in
the ordinary course of business consistent with past practice and was derived
from the books and records for the applicable Bristol Hotel.
3.6. Absence of Certain Changes or Events. Except as disclosed in
(i) the Bristol Filed SEC Documents, (ii) Schedule 3.6 to the Bristol
Disclosure Letter, or (iii) the draft copy of Bristol's Annual Report on Form
10-K for the year ended December 31, 1997 provided to FelCor on the date of
this Agreement, since December 31, 1997 (the "Bristol Financial Statement
Date"), Bristol and the Bristol Subsidiaries have conducted their business only
in the ordinary course thereof and there has not been (a) any material adverse
change, event or
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development in the business, financial condition or results of operations of
Bristol and the Bristol Subsidiaries, taken as a whole (a "Bristol Material
Adverse Change"), nor has there been any occurrence or circumstance that with
the passage of time could reasonably be expected to result in a Bristol
Material Adverse Change, (b) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to any of Bristol's capital stock, (c) any split, combination or
reclassification of any of Bristol's capital stock, (d) any damage, destruction
or loss, whether or not covered by insurance, that, individually or in the
aggregate, could be reasonably expected to have a Bristol Material Adverse
Effect, or (e) any change in accounting methods, principles or practices by
Bristol or any Bristol Subsidiary materially affecting its assets, liabilities
or business, except insofar as may have been disclosed in the Bristol Filed SEC
Documents or required by a change in GAAP.
3.7. Litigation. Except as disclosed in (i) the Bristol Filed SEC
Documents, (ii) the draft copy of Bristol's Annual Report on Form 10-K for the
year ended December 31, 1997 provided to FelCor on the date of this Agreement,
or (iii) in Schedule 3.7 to the Bristol Disclosure Letter, and other than
personal injury and other routine personal injury litigation arising from the
ordinary course of operations of Bristol and the Bristol Subsidiaries and which
are covered by adequate insurance, there is no suit, action, proceeding or
investigation pending or, to the Knowledge of Bristol, threatened against or
affecting Bristol or any Bristol Subsidiary that, individually or in the
aggregate, if determined adversely to Bristol, could be reasonably expected to
(i) have a Bristol Material Adverse Effect or (ii) prevent or delay in any
material respect the consummation of any of the transactions contemplated by
this Agreement or any of the Transaction Documents or otherwise prevent Bristol
from performing its obligations hereunder or thereunder in any material
respect, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Bristol or any Bristol
Subsidiary which, individually or in the aggregate, could reasonably be
expected to have any such effect.
3.8. Properties. (a) All of the real estate properties owned or
leased by Bristol and the Bristol Subsidiaries are listed on Schedule 3.8 to
the Bristol Disclosure Letter (the "Bristol Properties"). Bristol has no
direct or indirect ownership interest in any real property as of the date
hereof other than the Bristol Properties.
(b) Except as disclosed on Schedule 3.8 to the Bristol Disclosure
Letter, Bristol or one of the Bristol Subsidiaries owns fee simple title to, or
a valid leasehold interest or joint venture interest in, each of the Bristol
Properties, free and clear of all Encumbrances, except for such Encumbrances
which, individually and in the aggregate, could not be reasonably
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expected to have a Bristol Material Adverse Effect. Except as disclosed on
Schedule 3.8 to the Bristol Disclosure Letter, the Bristol Properties are not
subject to any Encumbrances or Property Restrictions, except for (i) Property
Restrictions imposed or promulgated by Law or any Governmental Entity with
respect to real property, including zoning regulations, that do not adversely
affect the current use of the property, materially detract from the value of or
materially interfere with the present use of the property, (ii) Encumbrances
and Property Restrictions disclosed on existing title policies, commitments
(and the documents listed as exceptions therein) or surveys (in each case
copies of which title policies, commitments (and the documents listed as
exceptions therein) and surveys have been delivered or made available to
FelCor), (iii) retail leases, including restaurant, gift shop and roof top
leases, and (iv) mechanics', carriers', supplier's, workmen's or repairmen's
Liens and other Encumbrances, Property Restrictions and other limitations of
any kind, if any, which, individually and in the aggregate, could not be
reasonably expected to have a Bristol Material Adverse Effect.
(c) Except for such matters as, individually and in the aggregate,
could not be reasonably expected to have a Bristol Material Adverse Effect,
valid policies of title insurance have been issued insuring Bristol's or the
applicable Bristol Subsidiary's title to or interest in each of the Bristol
Properties, and such policies are, at the date hereof, in full force and effect
and no claim has been made against any such policy and Bristol has no Knowledge
of any facts or circumstances which would constitute the valid basis for such a
claim.
(d) Except for such of the following as, individually and in the
aggregate, could not be reasonably expected to have a Bristol Material Adverse
Effect, to the Knowledge of Bristol, (i) no REA Agreement has not been obtained
and is not in full force and effect, and there is no pending threat of
modification or cancellation of any of the same, nor is Bristol or any of the
Bristol Subsidiaries currently in default under any REA Agreement and the
Bristol Properties are in full compliance with all Permits; (ii) no written
notice of any violation of any Law affecting any portion of any of the Bristol
Properties has been issued by any Governmental Entity; (iii) there are no
material structural defects relating to any of the Bristol Properties; (iv)
except as set forth on Schedule 3.8 to the Bristol Disclosure Letter, there is
no Bristol Property whose building systems are not in working order; and (v)
there is no physical damage to any Bristol Property in excess of $500,000 for
which there is no insurance in effect (other than reasonable and customary
deductibles) covering the full cost of the restoration. Except for such of the
following as, individually and in the aggregate, could not be reasonably
expected to have a Bristol Material Adverse Effect, the use and occupancy of
each of the Bristol Properties complies in all material respects with all
applicable Laws, and Bristol has no Knowledge of any pending or
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threatened proceeding or action that will in any manner affect the size of, use
of, improvements on, construction on, or access to any of the Bristol
Properties, with such exceptions as are not material and do not interfere with
the use made and proposed to be made of such Bristol Properties. Except for
such of the following as, individually and in the aggregate, could not be
reasonably expected to have a Bristol Material Adverse Effect, neither Bristol
nor any of the Bristol Subsidiaries has received any written notice to the
effect that (x) any betterment assessments have been levied against, or any
condemnation or rezoning proceedings are pending or threatened with respect to
any of the Bristol Properties or (y) any zoning, building or similar Law is or
will be violated by the continued maintenance, operation or use of any
buildings or other improvements on any of the Bristol Properties or by the
continued maintenance, operation or use of the parking areas. Except for such
of the following as, individually and in the aggregate, could not be reasonably
expected to have a Bristol Material Adverse Effect, following a casualty, each
of the Bristol Properties could be reconstructed and used for hotel purposes
under applicable zoning laws and regulations, except that in certain
circumstances such reconstruction would have to comply with the dimensional
requirements of applicable zoning Laws and regulations in effect at the time of
reconstruction.
(e) Except as otherwise could not be reasonably expected to have a
Bristol Material Adverse Effect, there are no outstanding abatement proceedings
or appeals with respect to the assessment of any Bristol Property for the
purpose of real property Taxes, and there are no agreements with any
Governmental Entity with respect to such assessments or Tax rates on any
Bristol Property.
3.9. Environmental Matters. Except as disclosed in Schedule 3.9 to
the Bristol Disclosure Letter, none of Bristol, any of the Bristol Subsidiaries
or, to Bristol's Knowledge, any other Person has caused or permitted (a) the
unlawful presence of any Hazardous Materials on any of the Bristol Properties
or (b) any unlawful spills, releases, discharges or disposal of Hazardous
Materials to have occurred or be presently occurring on or from the Bristol
Properties, which presence or occurrence could, individually or in the
aggregate, be reasonably expected to have a Bristol Material Adverse Effect;
and, in connection with the construction on or operation and use of the Bristol
Properties, Bristol and the Bristol Subsidiaries have not failed to comply in
any material respect with all applicable Environmental Laws, except to the
extent such failure to comply, individually or in the aggregate, could not be
reasonably expected to have a Bristol Material Adverse Effect. No notice,
notification, demand, request for information, citation, summons, complaint or
order has been received by or is pending, or to the Knowledge of Bristol, is
threatened by, any Person against Bristol or any Bristol Subsidiary, other than
where such notice, notification, demand, request for information, citation,
summons, complaint or order has been fully resolved, or where such
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resolution, individually and in the aggregate, could not be reasonably expected
to result in a Bristol Material Adverse Effect. Bristol has previously
delivered or made available to FelCor or its counsel true and complete copies
of all internally prepared or commissioned environmental studies, assessments
and reports in the possession or under the control of Bristol that relate to
the Bristol Properties and/or Bristol's compliance with Environmental Laws.
3.10. Absence of Changes in Benefit Plans; ERISA Compliance. (a)
Except as disclosed in the Bristol Filed SEC Documents or in Schedule 3.10 to
the Bristol Disclosure Letter and except as specifically contemplated by this
Agreement, since the Bristol Financial Statement Date, there has not been any
adoption or amendment in any material respect by Bristol or any Bristol
Subsidiary of any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other employee benefit plan, arrangement or
understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of Bristol, any Bristol
Subsidiary or any Person Affiliated with Bristol under Section 414 (b), (c),
(m) or (o) of the Code (collectively, "Bristol Benefit Plans").
(b) Except as described in the Bristol Filed SEC Documents or in
Schedule 3.10 to the Bristol Disclosure Letter, (i) all Bristol Benefit Plans,
including any such plan that is an "employee benefit plan" as defined in
Section 3(3) of the ERISA, are in compliance in all material respects with all
applicable requirements of Law, including without limitation ERISA and the
Code, and (ii) neither Bristol nor any Bristol Subsidiary has any material
liabilities or obligations with respect to any such Bristol Benefit Plan,
whether accrued, contingent or otherwise, except for any such noncompliance or
liabilities that could not be reasonably expected to have a Bristol Material
Adverse Effect. Except as set forth in Schedule 3.10 to the Bristol Disclosure
Letter, the execution of, and performance of the transactions contemplated in,
this Agreement and the Transaction Documents to which Bristol is a party will
not (either alone or upon the occurrence of any additional or subsequent
events) constitute an event under any Bristol Benefit Plan, policy, arrangement
or agreement or any trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee, officer or director of Bristol or any
Bristol Subsidiary. The only severance agreements or severance policies
applicable to officers or directors of Bristol or any of the Bristol
Subsidiaries are the agreements and policies specifically referred to in
Schedule 3.10 to the Bristol Disclosure Letter.
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3.11. Taxes. (a) Each of Bristol and the Bristol Subsidiaries has
timely filed all Tax returns and reports required to be filed by it and for any
partnerships for which any of them is a general partner (after giving effect to
any filing extension properly granted by a Governmental Entity having authority
to do so) and has paid (or Bristol has paid on its behalf) all Taxes shown on
such returns and reports as required to be paid by it and all such Tax returns
and reports are complete and accurate in all material respects, except where
the failure to file such Tax returns or reports, the failure to pay such Taxes
and the failure to be complete and accurate in all material respects could not
be reasonably expected to have a Bristol Material Adverse Effect. The most
recent audited financial statements contained in the Bristol Filed SEC
Documents reflect in accordance with GAAP an adequate accrual for Taxes and for
all deferred Taxes payable by Bristol and the Bristol Subsidiaries for all
taxable periods and portions thereof through the date of such financial
statements. To the Knowledge of Bristol, (i) no deficiencies for any Taxes
have been proposed, asserted or assessed against Bristol or any of the Bristol
Subsidiaries, (ii) no requests for waivers of the time to assess any such Taxes
are pending, and (iii) no Tax returns of Bristol or any of the Bristol
Subsidiaries are currently being audited by any applicable taxing authority or
threatened with any such audit. There are no Tax Liens on any assets of
Bristol or the Bristol Subsidiaries other than Liens for current Taxes not past
due. All payments for withholding Taxes, unemployment insurance and other
amounts required to be withheld and deposited or paid to all taxing authorities
have been so deposited or paid by Bristol and the Bristol Subsidiaries.
(b) Bristol (i) has not made or entered into, and does not own any
asset subject to, a consent filed pursuant to Section 341(f) of the Code or a
"safe harbor lease" subject to Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended before the Tax Reform Act of 1984, (ii) is not required to
include in income any amount for an adjustment pursuant to Section 481 of the
Code, and (iii) is neither a party to nor obligated under any agreement or
other arrangement providing for the payment of any amount that would be an
"excess parachute payment" under Section 280G of the Code.
(c) Neither Bristol nor any of its Subsidiaries has taken any
action that would create a material risk that the Merger would not qualify as a
tax-free reorganization within the meaning of Section 368(a)(1)(A) of the Code.
(d) Assuming that the Spin-Off had been completed prior to the
date hereof and the Effective Time occurred on the date hereof, Bristol's E&P
would not be materially in excess of $125.0 million.
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3.12. No Payments to Employees, Officers or Directors. Schedule 3.12
to the Bristol Disclosure Letter sets forth a true
and complete list of all cash and non-cash payments which will become payable to
each employee, officer or director of Bristol or any Bristol Subsidiary as a
result of the Merger, other than the distribution of BHR Common Shares in the
Spin-Off. Except as described in Schedule 3.12 to the Bristol Disclosure
Letter, or as otherwise provided for in this Agreement, there is no employment
or severance contract, or other agreement requiring payments, cancellation of
indebtedness or other obligation to be made on a change of control or otherwise
as a result of the consummation of any of the transactions contemplated by this
Agreement and the Transaction Documents, with respect to any employee, officer
or director of Bristol or any Bristol Subsidiary.
3.13. Brokers. No broker, investment banker, financial advisor or
other Person, other than Merrill, Lynch, Pierce, Fenner & Smith Incorporated
("Merrill"), the fees and expenses of which will be paid by Bristol, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Bristol or any Bristol Subsidiary.
Bristol has furnished to FelCor true and complete copies of all agreements
under which any such fees or expenses are payable and all indemnification and
other agreements related to the engagement of Merrill.
3.14. Compliance with Laws. Except as disclosed in the Bristol Filed
SEC Documents, neither Bristol nor any of the Bristol Subsidiaries has violated
or failed to comply with any Law, Permit, judgment, decree or order of any
Governmental Entity applicable to its business, properties or operations,
except to the extent that such violation or failure could not be reasonably
expected to have a Bristol Material Adverse Effect. Each of Bristol and each
Bristol Subsidiary has all Permits that are required in order to permit it to
carry on its business as it is presently conducted, except those Permits which
the failure to have could not, individually or in the aggregate, reasonably be
expected to have a Bristol Material Adverse Effect. All such Permits are in
full force and effect, except for any such Permit as to which the failure so to
be in full force and effect could not, individually or in the aggregate,
reasonably be expected to have a Bristol Material Adverse Effect.
3.15. Labor Matters. Schedule 3.15 to the Bristol Disclosure Letter
sets forth a true and complete list as of the Measurement Date of each labor
union or collective bargaining agreement to which Bristol or any of the Bristol
Subsidiaries is a party or which governs the terms of employment of any of
their respective employees. There is no labor strike or work stoppage pending
or, to the Knowledge of Bristol, threatened against Bristol, any Bristol
Subsidiary or any of the Bristol Properties, except as could not reasonably be
expected to have a Bristol Material Adverse Effect.
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3.16. Compliance with Agreements. Neither Bristol nor any Bristol
Subsidiary has received a written notice that Bristol or any Bristol Subsidiary
is in violation of or in default under (nor to the Knowledge of Bristol does
there exist any condition which upon the passage of time or the giving of
notice or both would cause such a violation of or default under) any material
loan or credit agreement, note, bond, mortgage, indenture or other agreement
evidencing Indebtedness, lease, Permit, concession, franchise, management,
license or any other material contract, agreement, arrangement or
understanding, to which it is a party or by which it or any of its properties
or assets is bound, except to the extent such violation or default,
individually or in the aggregate, could not be reasonably expected to have a
Bristol Material Adverse Effect or as set forth in Schedule 3.16 to the Bristol
Disclosure Letter.
3.17. Opinion of Financial Advisor. Bristol has received the opinion
of Merrill, dated the date hereof, a copy of which has been provided to FelCor,
to the effect that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of Bristol Common Shares.
3.18. State Takeover Statutes. Bristol has taken all action
necessary to exempt the transactions contemplated by this Agreement from the
operation of any "fair price," "moratorium," "control share acquisition" or any
other anti- takeover requirement existing under the Laws of the State of
Delaware.
3.19. Proxy and Registration Statements. None of the information
supplied or to be supplied by Bristol or any of its representatives for
inclusion or incorporation by reference in the Proxy Statement or the
Registration Statements will at the time such Proxy Statement or Registration
Statements are filed with the SEC and at the time of the mailing of the Proxy
Statement or Registration Statements to the stockholders of FelCor and Bristol
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of its circumstances under which they were made, not misleading. No
representation is made by Bristol with respect to statements made in the Proxy
Statement or Registration Statements based on information supplied by FelCor or
any of its Affiliates for inclusion therein, or with respect to information
concerning FelCor or any of its Subsidiaries incorporated by reference therein.
3.20. Definition of Knowledge of Bristol. As used in this Agreement,
the phrase to the "Knowledge of Bristol" (or words of similar import) means the
actual knowledge of those individuals identified in Schedule 3.20 to the
Bristol Disclosure Letter.
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IV. COVENANTS
4.1. Acquisition Proposals. (a) Prior to the Effective Time,
each of FelCor and Bristol agrees that:
(i) Neither it nor any of its Subsidiaries will (A) initiate
or solicit, directly or indirectly by furnishing any information or
the making of any proposal or offer (including without limitation any
proposal or offer to its stockholders), any Acquisition Proposal or
(B) engage in any negotiations concerning, provide any confidential
information in connection with or have any discussions with any Person
relating to an Acquisition Proposal. For purposes of this Agreement,
"Acquisition Proposal" means any proposal or offer from any Person
(other than the transactions contemplated by this Agreement or
described in Schedule 4.1 to the FelCor Disclosure Letter or Schedule
4.1 to the Bristol Disclosure Letter) relating to a merger,
acquisition, tender offer, exchange offer, business combination,
consolidation, sale of assets or similar transaction involving more
than 10% of the equity securities of Bristol or FelCor or a
substantial portion of the assets or equity securities of Bristol and
the Bristol Subsidiaries or FelCor and the FelCor Subsidiaries
(provided that, as to any sale or exchange of assets, the transaction
involves a total value including assumed debt in excess of $100
million);
(ii) It will cause each of its officers, directors,
employees, financial advisors, attorneys, accountants and other
representatives retained by it or any of its Subsidiaries not to
engage in any of the activities described in Section 4.1(a)(i);
(iii) It will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any Persons
conducted heretofore with respect to any Acquisition Proposal and will
take the necessary steps to inform the Persons referred to in Section
4.1(a)(ii) of the obligations undertaken in this Section 4.1; and
(iv) It will notify the other immediately if it receives any
such proposals or offers relating to an Acquisition Proposal, or any
requests for such information, which notice will describe the terms of
any such proposal, offer or request in reasonable detail, or if any
such negotiations or discussions relating to an Acquisition Proposal
are sought to be initiated or continued with it.
(b) Except as otherwise provided in Section 4.1(c), and in
accordance with Section 7.2, if applicable, neither the Bristol Board, the
FelCor Board nor any committee thereof may (i) withdraw or modify, or propose
publicly to withdraw or modify, in
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a manner adverse to the other party the approval or recommendation by the
Bristol Board or the FelCor Board or such committee thereof of the Merger or
this Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Acquisition Proposal, or (iii) authorize or otherwise cause
Bristol or FelCor, as applicable, to enter into any letter of intent, agreement
in principle, acquisition agreement or other similar agreement related to any
Acquisition Proposal (each, an "Acquisition Agreement").
(c) Notwithstanding the foregoing, if, in response to an
unsolicited Acquisition Proposal, the Bristol Board, the FelCor Board or a
committee thereof, as applicable, determines after consultation with its
financial advisors that such Acquisition Proposal is reasonably capable of
being completed on the terms proposed and would, if consummated, result in a
transaction more favorable to such company's stockholders than the Merger and
the other transactions contemplated by this Agreement (taking into account the
nature of the proposed transaction, the nature and amount of the consideration,
the likelihood of completion and any other factors deemed appropriate by such
Board) (a "Superior Proposal"), such Board or committee may, or cause its
representatives to, engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any Person relating
to the Superior Proposal or otherwise facilitate any effort or attempt to make
or implement the Superior Proposal; provided further, however, that, upon
either party's engaging in such negotiations or discussions, providing such
information or otherwise facilitating any effort or attempt to make or
implement a Superior Proposal, such party gives notice to the other party of
its engagement in such activities (a "Superior Proposal Transaction Notice").
Prior to furnishing confidential information to, or entering into discussions
or negotiations with, any other Persons with respect to a Superior Proposal,
such party must obtain from such other Persons an executed confidentiality
agreement with terms no more favorable, taken as a whole, to such Person than
those contained in the applicable Confidentiality Agreements, but which
confidentiality agreement may not include any provision calling for an
exclusive right to negotiate with such Persons, and such party must advise the
other party of the nature of such confidential information delivered to such
other Person reasonably promptly following its delivery to the requesting
party. With respect to any Superior Proposal, the Bristol Board or the FelCor
Board, as applicable, may, subject to compliance with Section 7.2, on or after
the fifth Trading Day following its giving of a Superior Proposal Transaction
Notice, (i) withdraw or modify its approval or recommendation of the Merger or
this Agreement, (ii) approve or recommend such Superior Proposal, (iii)
authorize or otherwise cause the company of which it is the Board to enter into
an Acquisition Agreement, and/or (iv) terminate this Agreement pursuant to
Section 7.1(h) or Section 7.1(i), as applicable.
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(d) Nothing contained in this Section 4.1 will prohibit Bristol or
FelCor from taking and disclosing to its stockholders a position contemplated
by Rule 14e-1 under the Exchange Act or from making any disclosure to its
stockholders if such Board determines that such disclosure is necessary in
order to comply with such Board's fiduciary duties under applicable Law;
provided, however, that neither Bristol nor FelCor nor either of their
respective Boards nor any committee thereof may, except in accordance with
Section 4.1(c), withdraw or modify, or propose publicly to withdraw or modify,
its position with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, an Acquisition
Proposal.
4.2. Conduct of FelCor's and Bristol's Business Pending Merger.
Prior to the Effective Time, except as (i) contemplated by this Agreement, (ii)
necessary to accomplish the Spin-Off Transactions, (iii) set forth on Schedule
4.2 to the Bristol Disclosure Letter or Schedule 4.2 to the FelCor Disclosure
Letter, or (iv) consented to in writing by a majority of the individuals
identified on Schedule 4.2 or if either such individual is unable to serve in
such capacity, a replacement identified by the party that designated such
individual (the "Joint Operating Committee"), each of FelCor and Bristol will,
and will cause each of their respective Subsidiaries to:
(a) Conduct its business only in the usual, regular and
ordinary course and in substantially the same manner as heretofore;
(b) Use reasonable efforts to preserve intact its
business organization and goodwill and keep available the services of
its officers and key employees;
(c) Confer on a regular basis with one or more
representatives of the other party to report operational matters of
materiality and, subject to Section 4.1, any proposals to engage in
material transactions;
(d) Promptly notify the other party of any material
emergency or other material change in its business, financial
condition, results of operations or prospects;
(e) Promptly deliver to the other party true and correct
copies of any report, statement or schedule filed with the SEC by such
party subsequent to the date of this Agreement;
(f) Maintain its books and records in accordance with
GAAP, consistently applied, and not change in any material manner any
of its methods, principles or practices of accounting in effect at the
applicable Financial Statement Date, except as may be required by
applicable Law or GAAP;
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(g) Duly and timely file all reports, Tax returns and
other documents required to be filed with federal, state, local and
other authorities, subject to extensions permitted by Law, provided
such extensions do not adversely affect FelCor's status as a qualified
REIT under the Code;
(h) Not make or rescind any express or deemed election
relative to Taxes (unless required by Law or necessary to preserve
FelCor's status as a REIT or the status of any Subsidiary as a
partnership for federal income Tax purposes or as a qualified REIT
subsidiary under Section 856(i) of the Code, as the case may be);
(i) Not (i) acquire (other than pursuant to an existing
agreement), sell, lease, enter into any option to acquire, sell or
lease, or exercise an option or contract to acquire, sell or lease,
additional real property, (ii) make any loans, or advances to any
other Person, except loans or advances to employees in the ordinary
course of business and except as contemplated by Section 5.14, (iii)
incur additional Indebtedness for borrowed money other than under
existing agreements or as permitted or contemplated by this Agreement,
(iv) encumber or subject to any Lien any of its properties or assets,
or (v) enter into any new agreement or commitment, or amend any
existing agreement or commitment, to improve, develop or construct
real estate projects or to make any other capital expenditure after
the date of this Agreement other than (A) with respect to FelCor,
expenditures that are within FelCor's 1998 budget attached to Schedule
4.2 to the FelCor Disclosure Letter and (B) with respect to Bristol,
(1) in respect of transactions, projects or other capital expenditures
relating to the improvement, development or construction of real
estate projects, expenditures that are within Bristol's 1998 budget
attached to Schedule 4.2 to the Bristol Disclosure Letter as to which
Bristol or any of its Subsidiaries have either commenced the
expenditure of money to third parties or entered into agreements or
obligations to do so, (2) in respect of transactions, projects or
other capital expenditures approved by the Joint Operating Committee,
which approval may not be unreasonably withheld or delayed, and (3)
amounts not otherwise covered by subclauses (1) or (2) involving
capital expenditures for purposes other than the improvement,
development or construction of real estate projects of, in the
aggregate, less than $1.0 million;
(j) Use reasonable efforts to enter into agreements to
sell assets of Bristol and the Bristol Subsidiaries as agreed from
time to time by the Joint Operating Committee on terms authorized by
it, and to permit FelCor and its financial and legal advisors a
reasonable opportunity to participate in such process; provided
however, that (i) such agreements may provide at Bristol's election
that any such sale or disposition will not be consummated until the
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Effective Time and that Bristol may terminate such agreement if this
Agreement is terminated for any reason and (ii) in no event will any
party bind Bristol or its Subsidiaries to any liability or obligation
with respect to a sale of any assets in respect of any transaction not
approved by the Joint Operating Committee in the sole discretion of
the members thereof;
(k) Except as contemplated by Section 1.5, not amend its
articles or certificate of incorporation, bylaws or comparable charter
or organizational document or the certificate or articles of
incorporation, bylaws, partnership agreement, operating agreement,
joint venture agreement or comparable charter or organizational
document of any FelCor Subsidiary or Bristol Hotel Subsidiary without
the other party's prior written consent, which consent will not be
unreasonably withheld or delayed;
(l) Not amend any material terms of any contract of such
party in a manner adverse to the Surviving Corporation in order to
obtain the consent of the other party or parties to such contract to
any of the transactions contemplated by this Agreement or the Spin-Off
Agreement without obtaining the prior written consent of the other
party hereto, which consent may not be unreasonably withheld or
delayed;
(m) Make no change in the number of shares of capital
stock, membership interests or units of limited partnership interest
issued and outstanding, other than pursuant to (i) the exercise of
options disclosed in the FelCor Filed SEC Documents, the Bristol Filed
SEC Documents, Schedule 3.3 to the Bristol Disclosure Letter or
Schedule 2.3 to the FelCor Disclosure Letter, (ii) the conversion of
FelCor Series A Preferred Shares pursuant to the terms of the FelCor
Series A Preferred Shares, and (iii) the redemption of FelCor OP Units
for FelCor Common Shares pursuant to the terms of the FelCor OP Units;
(n) Grant no options or other right or commitment
relating to its capital stock, membership interests or units of
limited partnership interest or any security convertible into its
capital stock, membership interests or units of limited partnership
interest, or any security the value of which is measured by shares of
capital stock, or any security subordinated to the claim of its
general creditors;
(o) Not (i) authorize, declare, set aside or pay any
dividend or make any other distribution or payment with respect to any
shares of its capital stock or change such party's normal record date
for the payment of any permitted dividend or distribution, other than
as provided in Schedule 4.2 to the FelCor Disclosure Letter or (ii)
directly or indirectly redeem, purchase or otherwise acquire any
shares of capital stock, membership interests or
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units of partnership interest or any option, warrant or right to
acquire, or security convertible into, shares of capital stock,
membership interests or units of partnership interest, other than
pursuant to (A) the conversion of FelCor Series A Preferred Shares
pursuant to the terms of the FelCor Series A Preferred Shares and (B)
the redemption of FelCor OP Units for FelCor Common Shares pursuant to
the terms of the FelCor OP Units;
(p) Not adopt any new employee benefit plan or amend any
existing plans or rights, except for changes which are required by Law
or changes which are not more favorable to participants than
provisions presently in effect;
(q) Not settle any stockholder derivative or class action
claims arising out of or in connection with any of the transactions
contemplated by this Agreement and the Transaction Documents;
(r) Not change the ownership of any of its Subsidiaries
except pursuant to the Spin-Off Agreement;
(s) Not amend any of the Transaction Documents in any
material respect;
(t) Not take any action that would cause the Merger not
to qualify as a tax-free reorganization under Section 368(a)(1)(A) of
the Code;
(u) Promptly notify the other party of any action, suit,
proceeding, claim or audit pending against or with respect to such
party or its Subsidiaries in respect of any Taxes where there is a
reasonable possibility of a determination or decision which would
materially increase the Tax liabilities of such party, and not change
any of the Tax elections, accounting methods, conventions or
principals which relate to such party or its Subsidiaries that could
reasonably be expected to increase such party's liabilities;
(v) Continue to maintain and repair all of its assets and
properties in a manner consistent with past practices; and
(w) Maintain all licenses and Permits as may be required
by any Governmental Entity administering Laws regulating the sale of
alcoholic beverages at the Bristol Hotels or the FelCor Hotels and
take whatever actions are necessary to maintain the continuity of
service of alcoholic beverage at the Bristol Hotels or the FelCor
Hotels.
4.3. Other Actions. Each of FelCor and Bristol will not, and will
use commercially reasonable efforts to cause its respective Subsidiaries not
to, take any action that would result in (i) any of the representations and
warranties of such party
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(without giving effect to any "Knowledge" qualification) set forth in this
Agreement that are qualified as to materiality becoming untrue, (ii) any of
such representations and warranties (without giving effect to any "Knowledge"
qualification) that are not so qualified becoming untrue in any material
respect, or (iii) except as contemplated by Section 4.1, any of the conditions
to the Merger set forth in Article VI not being satisfied.
V. ADDITIONAL COVENANTS
5.1. Preparation of the Registration Statements and the Proxy
Statement; FelCor Stockholders Meeting and Bristol Stockholders Meeting. (a)
As soon as practicable following the date of this Agreement, FelCor and Bristol
will prepare and file with the SEC a preliminary Proxy Statement in form and
substance satisfactory to each of Bristol and FelCor and such Registration
Statements as may be required to effect the Merger and the Spin-Off. To the
extent practicable, the parties will utilize one document for transmittal to
their respective stockholders to meet applicable legal requirements. Each of
FelCor and Bristol will use its reasonable best efforts to (i) prepare and
provide the other party as promptly as practicable the financial information
required to be disclosed in the Proxy Statement, (ii) cause Merrill and BT
Wolfensohn, as appropriate, to bring-down the opinions referred to in Section
2.16 and Section 3.17 to the date of the Proxy Statement, (iii) respond to any
comments of the SEC, and (iv) have the Registration Statements declared
effective under the Securities Act and the rules and regulations promulgated
thereunder as promptly as practicable after such filing and to keep the
Registration Statements effective as long as is necessary to consummate the
Merger and the Spin-Off. Each of FelCor and Bristol will use its reasonable
best efforts to cause the Proxy Statement to be mailed to FelCor's stockholders
and Bristol's stockholders, respectively, as promptly as practicable after the
Registration Statements are declared effective under the Securities Act. Each
party agrees to date its Proxy Statement as of the same date, which will be the
approximate date of mailing to the stockholders of the respective parties.
Each party will notify the other promptly of the receipt of any comments from
the SEC and of any request by the SEC for amendments or supplements to the
Registration Statements or the Proxy Statement or for additional information
and will supply the other with copies of all correspondence between such party
or any of its representatives and the SEC with respect to the Registration
Statements or the Proxy Statement. The Registration Statements and the Proxy
Statement will comply in all material respects with all applicable requirements
of Law. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Registration Statements or the Proxy Statement,
Bristol or FelCor, as the case may be, will promptly inform the other of such
occurrences and cooperate in filing with the SEC and/or mailing to the
stockholders of Bristol and the stockholders of FelCor such amendment or
supplement to the Registration Statements or the Proxy Statement.
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(b) Bristol will, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Bristol Stockholders Meeting") for the purpose of obtaining
the Bristol Stockholder Approval. Bristol will, through the Bristol Board,
recommend to its stockholders adoption of this Agreement; provided that,
notwithstanding any other provision of this Agreement, prior to the Bristol
Stockholders Meeting, such recommendation may be withdrawn, modified or amended
to the extent that, as a result of a Superior Proposal, the Bristol Board
determines that such withdrawal, modification or amendment is appropriate.
(c) FelCor will, as soon as practicable following the date of this
Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "FelCor Stockholders Meeting") for the purpose of obtaining
the FelCor Stockholder Approval. FelCor will, through the FelCor Board,
recommend to its stockholders adoption of this Agreement and the transactions
contemplated by this Agreement; provided that, notwithstanding any other
provision of this Agreement, prior to the FelCor Stockholders Meeting, such
recommendation may be withdrawn, modified or amended to the extent that, as a
result of a Superior Proposal, the FelCor Board determines that such
withdrawal, modification or amendment is appropriate.
(d) Bristol and FelCor will use their respective best efforts to
hold their respective stockholder meetings on the same day.
(e) If on the date for the Bristol Stockholders Meeting and FelCor
Stockholders Meeting established pursuant to Section 5.1(d), either Bristol or
FelCor has not received a sufficient number of proxies to approve the adoption
of this Agreement, then both parties will adjourn their respective stockholders
meetings until the first to occur of (i) the date ten calendar days after the
originally scheduled date of the stockholders meetings or (ii) the date on
which the requisite number of proxies approving the Merger has been obtained.
5.2. Access to Information; Confidentiality. Subject to the
requirements of confidentiality agreements with third parties, each of FelCor
and Bristol will, and will cause each of its Subsidiaries to, afford to the
other party and to the officers, employees, accountants, counsel, financial
advisors and other representatives of such other party, reasonable access
during normal business hours prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records
and, during such period, each of FelCor and Bristol will, and will cause each
of its Subsidiaries to, furnish promptly to the other party (a) a copy of each
report, schedule, registration statement and other document filed by it during
such
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period pursuant to the requirements of federal or state securities Laws and (b)
all other information concerning its business, properties and personnel as such
other party may reasonably request. Each of FelCor and Bristol will, and will
cause its Subsidiaries to, and will use commercially reasonable efforts to
cause its officers, employees, accountants, counsel, financial advisors and
other representatives and Affiliates to, hold any nonpublic information in
confidence to the extent required by, and in accordance with, and will comply
with the provisions of the letter agreements, dated as of January 14, 1998 and
February 27, 1998, between FelCor and Bristol (the "Confidentiality
Agreements").
5.3. Consents; Notifications; Other Actions. (a) Subject to the
terms and conditions herein provided, FelCor and Bristol will (i) use all
reasonable best efforts to cooperate with one another in (A) determining which
filings are required to be made prior to the Effective Time with, and which
consents, approvals, Permits or authorizations are required to be obtained
prior to the Effective Time from, any Governmental Entity and any third parties
in connection with the execution and delivery of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby and (B) timely making all such filings and timely seeking
all such consents, approvals, Permits and authorizations, (ii) use all
reasonable best efforts to obtain in writing any consents required from third
parties to effectuate the Merger, such consents to be in such form and
substance as may be reasonably satisfactory to FelCor and Bristol, and in
connection therewith, not pay any consent fees unless approved by FelCor, and
(iii) use all reasonable best efforts to take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement and the Transaction Documents. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of FelCor and
Bristol will take all such necessary action.
(b) Each of Bristol and FelCor will give prompt notice to the
other (i) if any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becomes untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becomes untrue or inaccurate in any material respect or (ii) of the failure by
it to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement;
provided, however, that no such notification will affect the representations,
warranties or covenants of the parties or the conditions to the obligations of
the parties under this Agreement.
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(c) Bristol will use all reasonable efforts to cause each of the
directors and officers of Bristol and the Bristol Subsidiaries (other than BHMC,
BHR and their respective Subsidiaries) to resign as a director or officer of
each applicable company effective as of the Effective Time.
5.4. Tax Treatment. Each of Bristol and FelCor will use its
reasonable best efforts to cause the Merger to qualify as a tax-free
reorganization under the provisions of Section 368(a)(1)(A) of the Code and to
obtain the opinions of counsel referred to in Sections 6.1(e), 6.1(f) and
6.2(f).
5.5. Public Announcements. Bristol and FelCor will consult with
each other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other written public statements with respect
to the transactions contemplated by this Agreement and the Transaction
Documents, including the Merger and the Spin-Off, and will not issue any such
press release or make any such written public statement prior to such
consultation, except to the extent it may be advised by counsel that it is
required by applicable Law or legal process. The parties agree that the
initial press release to be issued with respect to the transactions
contemplated by this Agreement will be in the form agreed to by the parties
hereto prior to the execution of this Agreement.
5.6. Listing. Prior to the Effective Time, (a) FelCor will use its
best efforts to have the NYSE approve for listing, upon official notice of
issuance, the Surviving Corporation Common Shares to be issued in the Merger
and (b) Bristol will cause BHR to use reasonable efforts to have the NYSE, the
NASDAQ or another national securities exchange approve for listing, upon
official notice of issuance, the BHR Common Shares to be distributed in the
Spin-Off.
5.7. Transfer and Gains Taxes. Bristol and FelCor will cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp Taxes, any
transfer, recording, registration and other fees and any similar Taxes which
become payable in connection with the transactions contemplated by this
Agreement (together with any related interests, penalties or additions to Tax,
"Transfer and Gains Taxes"). From and after the Effective Time, the Surviving
Corporation will, or will cause FelCor Operating Partnership, as appropriate,
to pay or cause to be paid, without deduction or withholding from any amounts
payable to the holders of Surviving Corporation Common Shares, all Transfer and
Gains Taxes.
5.8. Indemnification. (a) From and after the Effective Time, the
Surviving Corporation will provide exculpation and indemnification for each
individual who is now or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, an officer or director of Bristol or any
Bristol Subsidiary (the "Indemnified Parties") which is the same as the
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exculpation and indemnification provided to the Indemnified Parties by Bristol
and the Bristol Subsidiaries immediately prior to the Effective Time in the
Bristol Certificate and Bylaws or the applicable charter or other
organizational document of such Bristol Subsidiary, as in effect on the date
hereof; provided, that such exculpation and indemnification covers actions on
or prior to the Effective Time, including without limitation all transactions
contemplated by this Agreement and the Transaction Documents. In no event will
the Surviving Corporation be obligated to provide directors' and officers'
liability insurance. If the Surviving Corporation has directors' and officers'
insurance, such insurance will apply to all directors and officers of the
Surviving Corporation serving as such during the period such coverage is in
effect. Notwithstanding anything in this Agreement to the contrary, Bristol
will purchase insurance coverage for the directors and officers of Bristol who
are covered under Bristol's directors' and officers' insurance policy as of the
Effective Time for claims made after the Effective Time with respect to
liabilities arising or relating to periods prior to the Effective Time, which
insurance coverage will provide that FelCor is a named insured thereunder.
(b) The Surviving Corporation will continue in force and effect
after the Effective Time each indemnification agreement between Bristol or any
Bristol Subsidiary, on the one hand, and any Person, on the other hand, which
was in force and effect immediately prior to the Effective Time.
(c) The provisions of this Section 5.8 are intended to be for the
benefit of, and will be enforceable by, each Indemnified Party or other Person
referred to in this Section 5.8, his or her heirs, and his or her personal
representatives and will be binding on all successors and assigns of Bristol
and FelCor.
(d) In the event that the Surviving Corporation or any of its
respective successors or assigns (i) consolidates with or merges into any other
Person and will not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case the successors
and assigns of such entity will assume the obligations set forth in this
Section 5.8, which obligations are expressly intended to be for the irrevocable
benefit of, and will be enforceable by, each Person covered hereby.
5.9. Spin-Off Transactions. (a) Bristol will diligently seek and
use reasonable best efforts to obtain prior to the Closing Date all material
consents required to be obtained by BHMC and BHR to perform their respective
obligations under the Spin-Off Agreement and the other agreements contemplated
hereby to which BHMC and BHR is a party. Bristol will keep FelCor apprised in
reasonable detail of its progress in obtaining such consents.
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(b) Bristol will furnish to FelCor copies of all documentation
relating to or to be delivered in connection with the Spin-Off Transactions.
Without limiting the generality or effect of the foregoing, Bristol will
furnish to FelCor copies of all documentation relating to (i) the transfers to
BHR of the Spin-Off Assets (as defined in the Spin- Off Agreement) and the
assumptions by BHR of the Spin-Off Liabilities (as defined in the Spin-Off
Agreement), (ii) the formation and organizational documents for the
Non-Corporate Bristol Hotel Subsidiaries, and (iii) the merger documents
between the Bristol Corporate Subsidiaries and the Non-Corporate Bristol Hotel
Subsidiaries, and provide FelCor an opportunity to comment thereon and consent
to any of such documentation.
5.10. Declaration of Dividends and Distributions. From and after the
date of this Agreement, except for the Spin-Off, Bristol will not declare or
pay any dividend or distribution to its stockholders. From and after the date
of this Agreement, FelCor will not declare or pay any dividend or other
distribution to the stockholders except in accordance with Schedule 4.2 to the
FelCor Disclosure Letter.
5.11. Affiliates; Etc. Prior to the Closing Date, Bristol will
deliver to FelCor a letter identifying all Persons who are, at the time this
Agreement is submitted for adoption by to the stockholders of Bristol,
"affiliates" of Bristol for purposes of Rule 145 under the Securities Act.
Bristol will use reasonable efforts to cause each such Person to deliver to
FelCor on or prior to the Closing Date a written agreement substantially in the
form attached as Exhibit A.
5.12. Bristol's Accumulated and Current Earnings and Profits.
Bristol will use all reasonable efforts to assist FelCor and Arthur Andersen
LLP in the calculation of the current and accumulated earnings and profits (as
determined for federal income Tax purposes) ("E&P") of Bristol as of the
Closing Date, giving effect to the Spin-Off. Bristol will deliver to FelCor
not later than 21 calendar days prior to the expected Closing Date, (i) a
statement of accumulated and current E&P of Bristol as of a date not more than
30 calendar days prior to the Closing Date but after giving effect to the
Spin-Off and (ii) a statement of estimated accumulated and current E&P of
Bristol as of the Closing Date after giving effect to the Spin-Off (together,
the "Preliminary E&P Statement"). Bristol will use reasonable efforts to
obtain from Arthur Andersen LLP (i) upon delivery of the Preliminary E&P
Statement, such firm's computation, or confirmation of Bristol's computation,
of accumulated and current E&P of Bristol as set forth in the Preliminary E&P
Statement and (ii) an undertaking to provide within three months after the
Closing Date, such firm's final computation, or confirmation of Bristol's
computation, of accumulated and current E&P of Bristol as of the Closing Date,
in substantially the form set forth on Schedule 5.12 (with such changes thereto
as FelCor may reasonably request and to which Arthur Andersen LLP may agree).
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5.13. REIT-Related Matters. (a) Bristol will take such further
actions and engage in such further transactions as determined by FelCor, based
on written advice of FelCor's counsel, as may be reasonably necessary to
preserve FelCor's status as a REIT under the Code, provided that no such
actions could reasonably be expected to have a material adverse economic effect
on Bristol or its stockholders if the Merger is not consummated or on BHR
following the Spin-Off Transactions.
(b) At the Closing, FelCor will deliver to each of the Principal
Stockholders an exemption from the stock ownership limitations in the FelCor
Articles that permits each of the Principal Stockholders to own at any time up
to 15% of the FelCor Common Shares outstanding (the "Exemptions"). The
Exemptions will be conditioned upon the continuing accuracy of the
representations provided by the Principal Stockholders as to their ownership of
FelCor Common Shares and BHR Common Shares in connection with obtaining the
Exemptions. The percentage of FelCor Common Shares that each Principal
Stockholder may own under the Exemption will be reduced automatically (i) to
the extent FelCor issues additional FelCor Common Shares which entitle such
Principal Stockholder to purchase additional FelCor Common Shares to maintain
its percentage ownership and such Principal Stockholder elects not to maintain
its percentage ownership of FelCor Common Shares by acquiring additional shares
in connection with such issuance and (ii) to the extent necessary for FelCor to
maintain its REIT status.
5.14 Interim Credit Facility. As promptly as practicable and in
any event not later than April 15, 1998, the parties will enter into an interim
credit facility providing for loans of (i) $25.0 million to fund a portion of
the cash required in connection with the Omaha Hotel, Inc. acquisition as
described in Schedule 4.2 to the Bristol Disclosure Letter, and (ii) $31.2
million to fund the prepayment on June 15, 1998 of the $30 million Senior
Secured Notes described in Schedule 3.4 to the Bristol Disclosure Letter. Such
loans will be secured by certain of the Omaha assets so acquired or other real
estate acceptable to FelCor, will bear a market rate of interest and be on
other commercially reasonable terms and conditions. The loans will be due and
payable 120 days following the termination of this Agreement pursuant to
Section 7.1 hereof ; provided, however, that (i) if FelCor is obligated to pay
the Break-up Fee in connection with such termination, the maturity date of such
loan will be extended to the date on which FelCor pays the Break-up Fee (but in
no event beyond December 31, 2003) and (ii) if this Agreement is terminated
prior to the Effective Time pursuant to Section 7.1(f), any loans then
outstanding will be converted into unsecured indebtedness of Bristol, will bear
a market rate of interest and be on other commercially reasonable terms and
will be due and payable on December 31, 2003.
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VI. CONDITIONS
6.1. Conditions To Each Party's Obligation To Effect the Merger.
The obligations of each party to effect the Merger will be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) Stockholder Approvals. The Bristol Stockholder Approval and
the FelCor Stockholder Approval shall have been obtained;
(b) Listing of Shares. The NYSE shall have approved for listing
the Surviving Corporation Common Shares to be issued in the Merger, subject to
official notice of issuance;
(c) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings by the SEC seeking a stop order;
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger, the Spin-Off or any of the other transactions
contemplated hereby shall be in effect;
(e) Tax Opinion. Bristol and FelCor shall have received an
opinion, dated the Closing Date, from Hunton & Williams, Jenkens & Gilchrist or
Jones, Day, Reavis & Pogue, based upon certificates and letters substantially
in the form set forth in Exhibit B hereto and dated the Closing Date (and which
the parties agree to provide as reasonably requested by counsel), to the effect
that the Merger will qualify as a tax-free reorganization under the provisions
of Section 368(a)(1)(A) of the Code;
(f) Opinion Relating to REIT Status and Partnership Status.
Bristol and FelCor shall have received an opinion of Hunton & Williams, counsel
to FelCor, or Jones, Day, Reavis & Pogue, counsel to Bristol, in each case in
substantially the form set forth in Exhibit C hereto dated the Closing Date to
the effect that (i) commencing with its taxable year ended December 31, 1994,
FelCor was organized and has operated in conformity with the requirements for
qualification as a REIT under the Code,(ii) FelCor Operating Partnership has
been since its formation in 1994 and continues to be treated for federal income
Tax purposes as a partnership, and not as a corporation or association taxable
as a corporation, and (iii) the Merger will not prevent FelCor from continuing
to operate in conformity with the requirements for qualification as a REIT
under the Code; and
(g) Change in Tax Laws. There shall not have been any Federal
Legislative or Regulatory Change. For purposes of this Agreement, the term
"Federal Legislative or Regulatory Change"
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means any enacted, promulgated or proposed legislative, administrative or
judicial action, interpretation or decision that causes or if effected could be
reasonably expected to cause FelCor to cease to qualify as a REIT for federal
income tax purposes.
6.2. Conditions To Obligations of FelCor. The obligations of
FelCor to effect the Merger and to consummate the other transactions
contemplated to occur on the Closing Date is further subject to the following
conditions, any one or more of which may be waived by FelCor:
(a) Representations and Warranties of Bristol. The
representations and warranties of Bristol set forth in this Agreement shall be
true and correct as of the date of this Agreement and as of the Closing Date
(other than changes thereto which occurred solely by reason of the Spin-Off
Transactions), as though made on and as of the Closing Date, except to the
extent the representation or warranty is expressly limited by its terms to
another date, and FelCor shall have received a certificate (which certificate
may be qualified by Knowledge to the same extent as the representations and
warranties of Bristol contained herein are so qualified) signed on behalf of
Bristol by the President of Bristol, in such capacity, to such effect. For the
purposes of Section 6.2(a), the representations and warranties of Bristol will
be deemed true and correct unless the breach of such representations and
warranties, in the aggregate, could reasonably be expected to have a Bristol
Material Adverse Effect; provided, however, that for purposes of this Section
6.2(a), the representation and warranty of Bristol set forth in Section 3.11(d)
will be deemed to be true and correct unless the breach thereof would have a
FelCor Material Adverse Effect;
(b) Performance of Covenants of Bristol. Bristol shall have
performed in all material respects all covenants required to be performed by it
under this Agreement at or prior to the Effective Time, and FelCor shall have
received a certificate signed on behalf of Bristol by the President of Bristol,
in such capacity, to such effect;
(c) Material Adverse Change. Since the date of this Agreement,
there shall have been no Bristol Material Adverse Change and FelCor shall have
received a certificate of the President of Bristol, in such capacity,
certifying to such effect;
(d) Spin-Off Transactions. The Spin-Off Transactions shall have
been completed and all documents required to be delivered in connection with
the Spin-Off Transactions pursuant to the Spin-Off Agreement shall have been
executed and delivered by all parties thereto;
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(e) Delivery of E&P Statement. Arthur Andersen LLP shall have
delivered to FelCor its confirmation of Bristol's E&P set forth in the
Preliminary E&P Statement as required by Section 5.12; and
(f) Other Opinions. Bristol shall have received an opinion of
Jones, Day, Reavis & Pogue to the effect that (i) the Merger will not result in
either (A) the merger of Holiday Inns, Inc. with and into Bristol pursuant to
that certain Agreement and Plan of Merger dated as of December 15, 1996, as
amended as of April 1, 1997, among Holiday Corporation, Holiday Inns, Inc., and
Bristol or (B) the Exchange (as that term is defined in that Agreement and Plan
of Merger) failing to qualify for tax free treatment under Section 368(a)(1)(D)
of the Code and Section 355 of the Code and Section 368(a)(1)(A) of the Code,
respectively, and (ii) the distribution to the holders of Bristol Common Shares
of all of the BHR Common Shares as provided in the Spin-Off Agreement will be
treated for federal income tax purposes as a taxable dividend by Bristol to the
holders of Bristol Common Shares.
6.3. Conditions To Obligations of Bristol. The obligations of
Bristol to effect the Merger and to consummate the other transactions
contemplated to occur on the Closing Date is further subject to the following
conditions, any one or more of which may be waived by Bristol:
(a) Representations and Warranties of FelCor. The representations
and warranties of FelCor set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date, as though made on
and as of the Closing Date, except to the extent the representation or warranty
is expressly limited by its terms to another date, and Bristol shall have
received a certificate (which certificate may be qualified by Knowledge to the
same extent as the representations and warranties of FelCor contained herein
are so qualified) signed on behalf of FelCor by the President of FelCor, in
such capacity, to such effect. For the purposes of this Section 6.3(a), the
representations and warranties of FelCor will be deemed true and correct unless
the breach of such representations and warranties, in the aggregate, could
reasonably be expected to have a FelCor Material Adverse Effect;
(b) Performance of Covenants of FelCor. FelCor shall have
performed in all material respects all covenants required to be performed by it
under this Agreement at or prior to the Effective Time, and Bristol shall have
received a certificate signed on behalf of FelCor by the President of FelCor,
in such capacity, to such effect; and
(c) Material Adverse Change. Since the date of this Agreement,
there shall have been no FelCor Material Adverse Change and Bristol shall have
received a certificate of the President of FelCor, in such capacity, certifying
to such effect.
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6.4. Frustration of Closing Conditions. Neither FelCor nor Bristol
may rely on the failure of any condition set forth in Section 6.1, 6.2 or 6.3,
as the case may be, to be satisfied if such failure was caused by such party's
failure to use reasonable efforts to consummate the Merger, the Spin-Off and
the other transactions contemplated by this Agreement and the Spin-Off
Agreement, as required by and subject to Sections 5.3 and 5.9.
VII. TERMINATION, AMENDMENT AND WAIVER
7.1. Termination. This Agreement may be terminated at any time
prior to the filing of the Articles of Merger with the Department, whether
before or after either of the Stockholder Approvals are obtained:
(a) By mutual written consent duly authorized by the
FelCor Board and the Bristol Board;
(b) By FelCor, upon a breach of any representation,
warranty or covenant on the part of Bristol set forth in this
Agreement, in any case such that the conditions set forth in Section
6.2(a) or Section 6.2(b), as the case may be, would be incapable of
being satisfied by the Drop-Dead Date;
(c) By Bristol, upon a breach of any representation,
warranty or covenant on the part of FelCor set forth in this
Agreement, in any case such that the conditions set forth in Section
6.3(a) or Section 6.3(b), as the case may be, would be incapable of
being satisfied by the Drop-Dead Date;
(d) By either Bristol or FelCor, if any judgment,
injunction, order, decree or action by any Governmental Entity of
competent authority preventing the consummation of the Merger or the
Spin-Off shall have become final and nonappealable;
(e) By either FelCor or Bristol, if the Merger is not
consummated by September 30, 1998 or such later date to which the
parties may agree in their respective sole discretion (the "Drop Dead
Date"); provided, in the case of termination pursuant to this Section
7.1(e), the terminating party shall not have breached in any material
respect its obligations under this Agreement in any manner that shall
have proximately contributed to the occurrence of the failure referred
to in this Section;
(f) By either Bristol or FelCor if, upon a vote at a duly
held FelCor Stockholders Meeting or any adjournment thereof, the
FelCor Stockholder Approval shall not have been obtained;
(g) By either Bristol or FelCor if, upon a vote at a duly
held Bristol Stockholders Meeting or any adjournment thereof, the
Bristol Stockholder Approval shall not have been obtained;
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(h) By Bristol, if (i) prior to the FelCor Stockholders
Meeting, the FelCor Board shall have withdrawn or modified in any
manner adverse to Bristol, or failed within ten Business Days of a
request therefor to reconfirm, its approval or recommendation of the
Merger or this Agreement, or approved or recommended or resolved to
approve or recommend any Superior Proposal, (ii) FelCor shall have
entered into an Acquisition Agreement, or (iii) FelCor or any of its
officers, directors, employees or representatives shall have taken any
action that would be prohibited by Section 4.1 but for the exceptions
therein allowing certain actions to be taken pursuant to Section
4.1(c);
(i) By FelCor, if (i) prior to the Bristol Stockholders
Meeting, the Bristol Board shall have withdrawn or modified in any
manner adverse to FelCor, or failed within ten Business Days of a
request therefor to reconfirm, its approval or recommendation of the
Merger or this Agreement, or approved or recommended or resolved to
approve or recommend any Superior Proposal, (ii) Bristol shall have
entered into an Acquisition Agreement, or (iii) Bristol or any of its
officers, directors, employees or representatives shall have taken any
action that would be prohibited by Section 4.1 but for the exceptions
therein allowing certain actions to be taken pursuant to Section
4.1(c); and
(j) By Bristol if the Volume Weighted Average Trading
Price for FelCor Common Shares as reported in the NYSE Composite
Transactions Report for any ten Trading Day period prior to the
Effective Time is less than $28.00 per share.
7.2. Certain Fees and Expenses. (a) If this Agreement shall be
terminated (i) pursuant to Section 7.1(c) or 7.1(h), then FelCor will pay
Bristol (provided FelCor was not entitled to terminate this Agreement pursuant
to Section 7.1(b) at the time of such termination) a fee equal to the Break-Up
Fee and (ii) pursuant to Section 7.1(b) or 7.1(i), then Bristol will pay FelCor
(provided Bristol was not entitled to terminate this Agreement pursuant to
Section 7.1(c) at the time of such termination) an amount equal to the Break-Up
Fee. If this Agreement shall be terminated (i) pursuant to Section 7.1(g),
then Bristol will pay FelCor (provided Bristol was not entitled to terminate
this Agreement pursuant to Section 7.1(c) at the time of such termination), an
amount equal to the Break-Up Expenses, and (ii) pursuant to Section 7.1(f),
then FelCor will pay Bristol (provided FelCor was not entitled to terminate
this Agreement pursuant to Section 7.1(b) at the time of such termination), an
amount equal to the Break-Up Expenses. Notwithstanding the foregoing, if the
Merger is not consummated (other than due to the termination of this Agreement
pursuant to Section 7.1(a), 7.1(d) or 7.1(j) or Bristol's failure to perform
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its obligations under this Agreement in such a manner so as to entitle FelCor
to terminate this Agreement pursuant to Section 7.1(b)) and at the time of the
termination of this Agreement an Acquisition Proposal has been received by
FelCor, and either prior to the termination of this Agreement or within 12
months thereafter FelCor or any FelCor Subsidiary enters into any agreement
providing for an Acquisition Proposal which is subsequently consummated
(whether or not such Acquisition Proposal is the same Acquisition Proposal
which had been received at the time of the termination of this Agreement), then
FelCor will pay the Break-Up Fee and the Break-Up Expenses to Bristol. If the
Merger is not consummated (other than due to the termination of this Agreement
pursuant to Section 7.1(a), 7.1(d) or 7.1(j) or FelCor's failure to perform its
obligations under this Agreement in such a manner so as to entitle Bristol to
terminate this Agreement pursuant to Section 7.1(c)) and at the time of the
termination of this Agreement an Acquisition Proposal has been received by
Bristol, and either prior to the termination of this Agreement or within 12
months thereafter Bristol or any Bristol Subsidiary enters into any agreement
providing for an Acquisition Proposal which is subsequently consummated
(whether or not such Acquisition Proposal is the same Acquisition Proposal
which had been received at the time of the termination of this Agreement), then
Bristol will pay the Break-Up Fee and the Break-Up Expenses to FelCor.
(b) Any payment of the Break-Up Fee and, if applicable, Break-Up
Expenses, as aforesaid, will be compensation and liquidated damages for the
loss suffered by Bristol or FelCor, as applicable, as a result of the failure
of the Merger to be consummated and to avoid the difficulty of determining
damages under the circumstances, and neither party will have any other
liability to the other after such payment. The Break-Up Fee and/or the
Break-Up Expenses will be paid by FelCor to Bristol or Bristol to FelCor (as
applicable), in immediately available funds within 10 Business Days after the
date the event giving rise to the obligation to make such payment occurred,
provided, however, that neither party may enter into any agreement providing
for an Acquisition Proposal unless, prior thereto, this Agreement is terminated
in accordance with its terms and the required Break-Up Fee and Break-Up
Expenses are paid or otherwise provided for. As used in this Agreement,
"Break-Up Fee" will be an amount equal to the lesser of (i) $60 million plus
Break-Up Expenses (the "Base Amount") and (ii) in the case of FelCor, the sum
of (A) the maximum amount that can be paid to FelCor without causing it to fail
to meet the requirements of Sections 856(c)(2) and (3) of the Code determined
as if the payment of such amount did not constitute income described in
Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code ("Qualifying
Income"), as determined by independent accountants to FelCor, and (B) in the
event FelCor receives a letter from outside counsel (the "Break-Up Fee Tax
Opinion") indicating that FelCor has received a ruling from the Internal
Revenue Service ("IRS") holding that FelCor's receipt of the Base Amount would
either constitute Qualifying Income or
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would be excluded from gross income within the meaning of Sections 856(c)(2)
and (3) of the Code (the "REIT Requirements") (and therefore would not cause
FelCor to fail to satisfy the REIT Requirements) or that the receipt by FelCor
of the remaining balance of the Base Amount following the receipt of and
pursuant to such ruling would not be deemed constructively received prior
thereto, the Base Amount less the amount payable under clause (A) above.
Bristol's obligation to pay any unpaid portion of the Break-Up Fee will
terminate five years from the date of this Agreement. In the event that FelCor
is not able to receive the full Base Amount, Bristol will place the unpaid
amount in escrow and will not release any portion thereof to FelCor unless and
until Bristol receives any one or combination of the following: (i) a letter
from FelCor's independent accountants indicating the maximum amount that can be
paid at that time to FelCor without causing FelCor to fail to meet the REIT
Requirements or (ii) a Break-Up Fee Tax Opinion, in which event Bristol will
pay to FelCor the lesser of the unpaid Base Amount or the maximum amount stated
in the letter referred to in clause (i) above.
(c) The "Break-Up Expenses" payable to Bristol or FelCor, as the
case may be (the "Recipient"), will be an amount equal to the lesser of (i) $5
million as payment for all of the Recipient's out-of-pocket costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including without limitation all attorneys', consultants', accountants'
and investment bankers' fees and expenses and all other costs and expenses such
as travel, fax, long-distance telephone and other costs) (the "Expense Fee")
and (ii) in the case of FelCor, the sum of (A) the maximum amount that can be
paid to the Recipient without causing it to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute Qualifying Income, as determined by independent
accountants to the Recipient, and (B) in the event the Recipient receives a
Break-Up Fee Tax Opinion indicating that the Recipient has received a ruling
from the IRS holding that the Recipient's receipt of the Expense Fee would
either constitute Qualifying Income or would be excluded from gross income
within the meaning of the REIT Requirements (and therefore would not cause
FelCor to fail to satisfy the REIT Requirements) or that receipt by the
Recipient of the remaining balance of the Expense Fee following the receipt of
and pursuant to such ruling would not be deemed constructively received prior
thereto, the Expense Fee less the amount payable under clause (A) above. The
obligation of Bristol or FelCor, as applicable ("Payor"), to pay any unpaid
portion of the Break-Up Expenses will terminate five years from the date of
this Agreement. In the event that the Recipient is not able to receive the
full Expense Fee, the Payor will place the unpaid amount in escrow and will not
release any portion thereof to the Recipient unless and until the Payor
receives any one or combination of the following: (i) a letter from the
Recipient's independent accountants indicating the maximum amount that can be
paid at that time to the Recipient without causing the Recipient
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to fail to meet the REIT Requirements or (ii) a Break-Up Fee Tax Opinion, in
which event the Payor will pay to the Recipient the lesser of the unpaid
Expense Fee or the maximum amount stated in the letter referred to in clause
(i) above.
(d) Following the Effective Time, FelCor and BHR will each
reasonably consult with the other as to the computation of the contemplated
distribution of cash (the "Cash Distribution") sufficient, after giving effect
to the Spin-Off, to effect the complete elimination of Bristol's historical and
current E&P accumulated since the formation of Bristol until the Effective
Time, such Cash Distribution to be made on or before December 31, 1998. In the
event that it is determined, subsequent to the making of the Cash Distribution,
that the Cash Distribution did not eliminate Bristol's E&P as contemplated
above, BHR will (i) to the extent of any such shortfall, indemnify FelCor for
an amount equal to the costs incurred (including Tax payments and any
associated interest and penalties and reasonable accounting, legal and other
out-of-pocket expenses) in disputing any claim that the E&P had not been
completely eliminated upon payment of the Cash Distribution, provided, however,
that BHR will be solely responsible under this sentence for costs incurred up
to a maximum of $5 million, and (ii) if such costs exceed $5 million, (A) BHR
will be responsible for 10% of any such costs exceeding $5 million, up to a
total of $5 million of additional payments by BHR, and (B) any excess costs of
this nature will be borne solely by FelCor.
7.3. Effect of Termination. In the event of termination of this
Agreement by either FelCor or Bristol as provided in Section 7.1, this
Agreement will forthwith become void and have no effect, without any liability
or obligation on the part of Bristol or FelCor (other than the last sentence of
Section 5.2, Section 7.2, this Section 7.3 and Article VIII); provided that (a)
if this Agreement is terminated by FelCor pursuant to Section 7.1(b), Bristol
will not be entitled to any of the benefits of Section 7.2, or (b) if this
Agreement is terminated by Bristol pursuant to Section 7.1(c), FelCor will not
be entitled to any of the benefits of Section 7.2.
7.4. Amendment. This Agreement may be amended by the parties in
writing by action of their respective Boards at any time before or after any
Stockholder Approvals are obtained and prior to the filing of the Articles of
Merger with the Department or the Certificate of Merger with the Secretary of
State of the State of Delaware; provided, however, that, after the Stockholder
Approvals are obtained, no such amendment, modification or supplement will be
made which by Law requires the further approval of stockholders without
obtaining such further approval.
7.5. Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in the
representations and warranties of
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the other party contained in this Agreement or in any document delivered
pursuant to this Agreement, or (c) subject to the proviso of Section 7.4, waive
compliance with any of the agreements or conditions of the other party
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver will be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise will not constitute
a waiver of those rights.
VIII. GENERAL PROVISIONS
8.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement confirming the representations and warranties in
this Agreement will survive the Effective Time. This Section 8.1 will not
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
8.2. Notices. All notices, requests, claims, demands and other
communications under this Agreement will be in writing and will be delivered
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by fax (providing confirmation of transmission) at the
following addresses or fax numbers (or at such other address or fax number for
a party as will be specified by like notice):
(a) if to Bristol, to:
Bristol Hotel Company
14295 Midway Road
Dallas, Texas 75244
Attention: President
Attention: General Counsel
Telecopy: (972) 391-1515
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek
Telecopy: (212) 755-7306
(b) if to FelCor, to:
FelCor Suite Hotels, Inc.
545 E. John Carpenter Freeway
Suite 1300
Irving, Texas 75062
Attention: President
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Attention: General Counsel
Telecopy: (972) 444-4949
with a copy to:
Jenkens & Gilchrist, P.C.
1445 Ross Avenue
Suite 3200
Dallas, Texas 75202
Attention: Robert W. Dockery
Telecopy: (214) 855-4300
All notices will be deemed given only when actually received.
8.3. Certain Definitions. As used in this Agreement, the following
terms have the following meanings when used herein with initial capital
letters:
(a) "Affiliate" (or words of similar import) has the same meaning
as such term is defined in Rule 405 promulgated under the Securities Act.
(b) "Bristol Hotel" means each of the hotels listed in Schedule
3.2 to the Bristol Disclosure Letter, which constitutes all of the hotels in
which Bristol owns, directly or indirectly, an ownership interest.
(c) "Bristol Hotel Subsidiaries" means the Bristol Subsidiaries
that own or hold, directly or indirectly, an interest in a Bristol Hotel.
(d) "Business Day" means a day other than Saturday, Sunday or any
day on which commercial banks in New York, New York or Dallas, Texas are
authorized or obligated to close.
(e) "Environmental Law" means any Law or order of any Governmental
Entity relating to the regulation or protection of human health, safety or the
environment or to emissions, discharges, releases or threatened releases of
Hazardous Materials into the environment (including without limitation, ambient
air, soil, surface water, ground water, wetlands, land or subsurface strata),
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
(f) "FelCor Hotel" means each of the hotels listed in Schedule 2.2
to the FelCor Disclosure Letter, which constitutes all of the hotels in which
FelCor owns, directly or indirectly, an ownership interest.
(g) "Hazardous Material" means (i) any petroleum or petroleum
products, flammable explosives, radioactive materials, asbestos in any form
that is or could become friable, urea formaldehyde foam insulation and
transformers or other equipment
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that contain dielectric fluid containing levels of polychlorinated biphenyls
(PCBs), (ii) any chemicals or other materials or substances which are now or
hereafter become defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants"
or words of similar import under any Environmental Law, and (iii) any other
chemical or other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental Entity under any
Environmental Law.
(h) "Indebtedness" means, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money, whether
secured or unsecured, (ii) all obligations of such Person under conditional
sale or other title retention agreements relating to property purchased by such
Person, (iii) all capitalized lease obligations of such Person, (iv) all
obligations of such Person under interest rate cap, swap, collar or similar
transaction or currency hedging transactions (valued at the termination value
thereof), and (v) all guarantees of such Person of any such indebtedness of any
other Person.
(i) "Non-Corporate Bristol Hotel Subsidiaries" means those of the
Bristol Hotel Subsidiaries that are taxable as partnerships or are disregarded
as entities under the Code.
(j) "Person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(k) "Record Date" means the date determined by the Bristol Board
or the FelCor Board as the record date for determining the stockholders
entitled to notice of, and to vote at, the Bristol Stockholders Meeting or the
FelCor Stockholders Meeting, as applicable.
(l) "Spin-Off Transactions" means, collectively, the
Reorganization, the Contribution, the Subsidiary Mergers, the Holdings
Distribution, the Excess Shares Redemption and the Spin-Off, each as defined in
the Spin-Off Agreement, and the Leasing Transactions.
(m) "Subsidiary" of any Person means another Person, at least 50%
of the equity or voting securities of which is owned, directly or indirectly,
by such first Person.
(n) "Taxes" means all federal, state, local and foreign income,
property, sales, franchise, employment, excise and other taxes, tariffs or
governmental charges of any nature whatsoever, together with penalties,
interest or additions to Tax with respect thereto.
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(o) "Transaction Documents" means this Agreement, the Spin-Off
Agreement, the Voting Agreement, the FelCor Stockholders and Registration
Rights Agreement (as defined in the Voting Agreement), the BHR Stockholders
Agreement (as defined in the Voting Agreement), the BHR Registration Rights
Agreement (as defined in the Voting Agreement), the New Leases (as defined in
the Spin-Off Agreement), the Hotel Properties Agreement (as defined in the
Voting Agreement), the Articles of Merger, the Certificate of Merger and each
other agreement, document, certificate or instrument delivered in connection
with any of the foregoing and to which either FelCor, Bristol, BHR, BHMC or any
FelCor Subsidiary or Bristol Subsidiary is a party.
(p) "Volume Weighted Average Trading Price" means, during any
relevant period, the quotient of (i) the sum of the product of (A) the number
of shares sold at a particular price per share during such period and (B) such
per share trading price over (ii) the total number of shares sold during such
period.
8.4. Interpretation. When a reference is made in this Agreement to
a Section, Exhibit or Schedule such reference will be to a Section, Exhibit or
Schedule of or to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and will not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they will be deemed to be followed by the words "without
limitation."
8.5. Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
8.6. Entire Agreement; No Third-party Beneficiaries. This
Agreement, the FelCor Disclosure Letter, the Bristol Disclosure Letter, the
Confidentiality Agreement and the Transaction Documents (a) constitute the
entire agreement of the parties and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement and (b) except as provided in Article I and
Sections 5.8 and 5.9, are not intended to confer upon any Person other than the
parties hereto any rights or remedies.
8.7. Governing Law. This Agreement will be governed by, and
construed in accordance with, the Laws of the State of Delaware, regardless of
the Laws that might otherwise govern under applicable conflict of laws
principles thereof.
8.8. Assignment. Neither this Agreement, nor any of the rights,
interests or obligations under this Agreement, may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties
without the prior written
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consent of the other party. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of, and be enforceable by, the
parties and their respective successors and assigns.
8.9. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Texas or Delaware or in any Texas or Delaware State
court, this being in addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties hereto (a) consents to
submit itself (without making such submission exclusive) to the personal
jurisdiction of any federal court located in the State of Texas or Delaware or
any Texas or Delaware State court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement and (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court.
8.10. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision will be
interpreted to be only so broad as is enforceable.
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IN WITNESS WHEREOF, Bristol and FelCor have caused this Agreement to
be signed by their respective officers thereunto duly authorized all as of the
date first written above.
BRISTOL HOTEL COMPANY
By: /s/ Joel M. Eastman
-------------------------
Vice President
FELCOR SUITE HOTELS, INC.
By: /s/ Lawrence D. Robinson
-------------------------
Senior Vice President
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EXHIBIT 10.10
================================================================================
LOAN AGREEMENT
Dated as of October 10, 1997
Among
BRISTOL LODGING COMPANY,
as Borrower
BRISTOL LODGING HOLDING COMPANY,
as Guarantor
NOMURA ASSET CAPITAL CORPORATION,
as Administrative Agent and Lender
BANKERS TRUST COMPANY,
as Co-Agent and Lender
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 PRINCIPLES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
II. GENERAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.1 LOAN COMMITMENT; DISBURSEMENT TO BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.1.1 THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.1.2 Disbursement to Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.1.3 THE NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 2.2 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.3 LOAN PREPAYMENT AND DEFEASANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.3.1 REPAYMENT AND PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.3.2 CASUALTY/CONDEMNATION PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.3.3 VOLUNTARY DEFEASANCE OF THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 2.4 RELEASE OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.4.1 RELEASE OF ENTIRE PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.4.2 SUCCESSOR BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.4.3 RELEASE OF AN ASSET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 2.4.4 SUBSTITUTION OF AN ASSET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 2.5 ASSUMPTION OF LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 2.6 INTEREST AND PRINCIPAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.6.1 GENERALLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.6.2 DEFAULT RATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 2.7 PAYMENTS AND COMPUTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.7.1 MAKING OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.7.2 COMPUTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.7.3 LATE PAYMENT CHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
2.7.4 PAYMENTS RECEIVED IN THE DEPOSIT ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.7.5 APPORTIONMENT OF PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
2.7.6 DISTRIBUTION TO LENDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
III. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.1 CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 3.2 CONDITIONS PRECEDENT TO ANY SUBSTITUTION EVENT . . . . . . . . . . . . . . . . . . . . . . . . 52
IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.1 REPRESENTATIONS OF BORROWER AND PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 4.2 SURVIVAL OF REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
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V. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 5.1 BORROWER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
VI. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 6.1 BORROWER'S NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
VII. CASUALTY; CONDEMNATION; ESCROWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 7.1 INSURANCE; CASUALTY AND CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.1.1 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
7.1.2 CASUALTY AND APPLICATION OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
7.1.3 CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 7.2 REQUIRED REPAIRS; REQUIRED REPAIR FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
7.2.1 REQUIRED REPAIRS; DEPOSITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
7.2.2 RELEASE OF REQUIRED REPAIR FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
7.2.3 FAILURE TO PERFORM REQUIRED REPAIRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 7.3 TAX AND INSURANCE ESCROW FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
SECTION 7.4 REPLACEMENTS AND REPLACEMENT RESERVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
7.4.1 REPLACEMENT RESERVE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
7.4.2 DISBURSEMENTS FROM REPLACEMENT RESERVE SUBACCOUNT . . . . . . . . . . . . . . . . . . . . . . 103
7.4.3 PERFORMANCE OF REPLACEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
7.4.4 FAILURE TO MAKE REPLACEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
7.4.5 BALANCE IN THE REPLACEMENT RESERVE SUBACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . 107
7.4.6 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 7.5 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 7.6 GROUND RENT ESCROW FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
VIII. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
SECTION 8.1 EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 8.2 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Section 8.3 REMEDIES CUMULATIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
IX. SPECIAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
SECTION 9.1 SALE OF NOTES AND SECURITIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
SECTION 9.2 SECURITIZATION INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
SECTION 9.3 RATING SURVEILLANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Section 9.4 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
SECTION 9.6 INDEMNIFICATION AGAINST TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Section 9.5 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
SECTION 9.7 SPLITTING THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
X. CENTRAL CASH MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
SECTION 10.1 SERVICER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
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SECTION 10.2 ESTABLISHMENT OF ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
10.2.1 ESTABLISHMENT OF CLEARING ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
10.2.2 ESTABLISHMENT OF DEPOSIT ACCOUNT AND SUBACCOUNTS . . . . . . . . . . . . . . . . . . . . . . 121
SECTION 10.3 DEPOSITS INTO CLEARING ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
SECTION 10.4 TRANSFERS TO DEPOSIT ACCOUNT AND CLEARING ACCOUNT B . . . . . . . . . . . . . . . . . . . . . 123
10.4.1 TRANSFERS FROM CLEARING ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
10.4.2 INSUFFICIENT FUNDS IN THE DEPOSIT ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . 124
SECTION 10.5 INITIAL DEPOSITS INTO THE SUBACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
SECTION 10.6 PLEDGE OF ACCOUNTS; EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
SECTION 10.7 INVESTMENT OF ACCOUNT FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
SECTION 10.8 REQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
10.8.1 SUBMISSION OF REQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
10.8.2 CONTENT OF REQUISITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
SECTION 10.9 DISBURSEMENTS FROM THE DEPOSIT ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
10.9.1 PRIOR TO THE OPTIONAL PREPAYMENT DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
10.9.2 AFTER THE OPTIONAL PREPAYMENT DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
10.9.3 UPON EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
SECTION 10.10 DISBURSEMENTS FROM CERTAIN SUBACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
10.10.1 DISBURSEMENTS FROM THE TAX AND INSURANCE ESCROW SUBACCOUNT . . . . . . . . . . . . . . . . 131
10.10.2 DISBURSEMENTS FROM THE REPLACEMENT RESERVE SUBACCOUNT . . . . . . . . . . . . . . . . . . . 131
10.10.3 DISBURSEMENTS FROM THE SECURITY DEPOSIT SUBACCOUNT . . . . . . . . . . . . . . . . . . . . 131
10.10.4 DISBURSEMENTS FROM THE LOSS PROCEEDS SUBACCOUNT . . . . . . . . . . . . . . . . . . . . . . 131
10.10.5 DISBURSEMENTS FROM THE REQUIRED REPAIR SUBACCOUNT . . . . . . . . . . . . . . . . . . . . . 132
10.10.6 DISBURSEMENTS FROM THE BORROWER REMAINDER SUBACCOUNT . . . . . . . . . . . . . . . . . . . 132
10.10.7 DISBURSEMENTS FROM THE MONTHLY DEBT SERVICE SUBACCOUNT . . . . . . . . . . . . . . . . . . 132
10.10.8 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
10.10.9 DISBURSEMENTS FROM THE GROUND RENT SUBACCOUNT . . . . . . . . . . . . . . . . . . . . . . . 132
10.10.10 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
SECTION 10.11 LOCK-BOX AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
SECTION 10.12 REQUIRED RATIO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
SECTION 11.1 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
SECTION 11.2 INTENTIONALLY DELETED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
SECTION 11.3 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
SECTION 11.4 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
SECTION 11.5 DELAY NOT A WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
SECTION 11.6 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
SECTION 11.7 TRIAL BY JURY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
SECTION 11.8 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
SECTION 11.9 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
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SECTION 11.10 PREFERENCES/MARSHALLING PREFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
SECTION 11.11 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
SECTION 11.12 REMEDIES OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
SECTION 11.13 EXPENSES; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
SECTION 11.14 EXHIBITS AND SCHEDULES INCORPORATED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Section 11.15 SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
SECTION 11.16 RATABLE SHARING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
SECTION 11.17 OFFSETS, COUNTERCLAIMS AND DEFENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Section 11.18 NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY BENEFICIARIES; INDEPENDENT NATURE OF
LENDERS' RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Section 11.19 PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
SECTION 11.20 WAIVER OF COUNTERCLAIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
SECTION 11.21 CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE . . . . . . . . . . . . . . . . . . . . . . . 144
SECTION 11.22 BROKERS AND FINANCIAL ADVISORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
SECTION 11.23 PRIOR AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
SECTION 11.24 APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
SECTION 11.25 RELIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
SECTION 11.26 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
SECTION 11.27 ADMINISTRATIVE AGENT'S DISCRETION; SUCCESSOR AGENTS . . . . . . . . . . . . . . . . . . . . 146
SECTION 11.28 MAXIMUM AMOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
XII. AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
SECTION 12.1 APPOINTMENT OF THE ADMINISTRATIVE AGENT AND COLLATERAL AGENT . . . . . . . . . . . . . . . . 147
SECTION 12.2 APPOINTMENT OF SUPPLEMENTAL COLLATERAL AGENTS . . . . . . . . . . . . . . . . . . . . . . . . 148
SECTION 12.3 POWERS; DUTIES SPECIFIED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
SECTION 12.4 NO RESPONSIBILITY FOR CERTAIN MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
SECTION 12.5 EXCULPATORY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Section 12.6 ADMINISTRATIVE AGENT ENTITLED TO ACT AS LENDER . . . . . . . . . . . . . . . . . . . . . . . 150
Section 12.7 INDEPENDENT CREDIT ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Section 12.8 DELIVERY OF CERTAIN DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Section 12.9 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Section 12.10 SUCCESSOR ADMINISTRATIVE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Section 12.11 SECURITY DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
SECTION 12.12 PAYEE OF NOTE TREATED AS OWNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
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SCHEDULES
Schedule I - Initial Deposits on the Closing Date
Schedule II - Required Repairs
Schedule III - Rent Roll
Schedule IV - Allocated Loan Amount
Schedule V - Franchise Agreements
Schedule VI - Liquor Licenses, Liquor Agreements & Property
Management Agreements
Schedule VII - Assets
Schedule VIII - Intentionally Deleted
Schedule IX - Intentionally Deleted
Schedule X - Intentionally Deleted
Schedule XI - IP License Agreements
Schedule XII - Intellectual Property
Schedule XIII - Subsidiaries
Schedule XIV - Tenant Leases
Schedule XV - Existing Debt
Schedule XVI - Taxes and Assessments
Schedule XVII - Mortgage Caps
Schedule XVIII - Lender's Share
Schedule XIX - Principal Places of Business
Schedule XX - Intentionally Deleted
Schedule XXI - Prior Assignments of Collateral
Schedule XXII - Assets Located in Flood Zones
Schedule XXIII - Leasing Requirements
Schedule XXIV - Casualties
Schedule XXV - Tax and Insurance Amounts
Schedule XXVI - Insurance Variations
EXHIBITS
Exhibit A - Payment Direction Letter
Exhibit B - Credit Card Payor Payment Direction Letter
v
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EXHIBIT 10.10
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of October 10, 1997 (as amended,
restated, replaced, supplemented or otherwise modified from time to time, this
"AGREEMENT"), is among BRISTOL LODGING COMPANY, a Delaware corporation, having
an address at 14295 Midway Road, Dallas, Texas 75244 ("BORROWER") and BRISTOL
LODGING HOLDING COMPANY, a Delaware corporation, having an address at 14295
Midway Road, Dallas, Texas 75244 ("PARENT"), THE LENDERS LISTED ON THE
SIGNATURE PAGES HEREOF (individually referred to as "LENDER" and collectively
as "LENDERS"), NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having
an address at Two World Financial Center, Building B, New York, New York 10281
as administrative agent and collateral agent for Lenders (in such capacity, the
"Administrative Agent") and BANKERS TRUST COMPANY, a New York banking
corporation, having an address at 130 Liberty Street, New York, New York 10006
as co-agent for Lenders, in such capacity, the "Co-Agent").
All capitalized terms used herein shall have the respective
meanings set forth in Article I hereof.
W I T N E S S E T H:
WHEREAS, Borrower desires to obtain the Loan from Lenders; and
WHEREAS, Lenders are willing to make the Loan to Borrower,
subject to and in accordance with the terms of this Agreement and the other
Loan Documents.
NOW, THEREFORE, in consideration of the making of the Loan by
Lenders to Borrower and the covenants, agreements, representations and
warranties set forth in this Agreement, the parties hereto hereby covenant,
agree, represent and warrant as follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1 DEFINITIONS.
For all purposes of this Agreement, except as otherwise
expressly required or unless the context clearly indicates a contrary intent:
"ABM" shall have the meaning set forth in Section 3.1(bb).
"ACCOUNT PROCEEDS" shall mean all Mortgaged Property Gross
Cash Flow and any and all other sums in any Clearing Account A or the Deposit
Account, as applicable, from time to time.
<PAGE> 8
"ACCRUED INTEREST" shall have the meaning set forth in Section
2.6.1.
"ACH" shall have the meaning set forth in Section 10.4.1.
"ACQUISITION DOCUMENTS" shall mean the Acquisition Credit
Facility Agreement and those certain other documents executed in connection the
Acquisition Facility, each such document being in a form and substance as
approved by the Administrative Agent on or prior to the Closing Date, in each
case as such agreement and other documents shall be amended, restated,
supplemented or otherwise modified from time to time pursuant to the terms of
this Agreement.
"ACQUISITION FACILITY CREDIT AGREEMENT" shall mean that
certain Credit Agreement, dated as of October 10, 1997 among BHOC and Bristol
Hospitality Holding Company, as borrowers, the lenders party thereto, Bankers
Trust Company, as agent, and Bank One, Texas, N.A. and Wells Fargo Bank,
National Association, as co-agents, as such agreement shall be amended,
restated, supplemented or otherwise modified from time to time pursuant to the
terms of this Agreement.
"ACQUISITION FACILITY" shall mean that certain credit facility
to be advanced pursuant to the Acquisition Credit Facility Agreement.
"ADJUSTED INTEREST RATE" shall mean a rate per annum equal to
the greater of (a) the Treasury Rate plus five percent (5%) and (b) the Initial
Interest Rate plus five percent (5%).
"AFFILIATE" shall mean, as to any Person, any other Person
that, directly or indirectly, is in control of, is controlled by or is under
common control with such Person or is a director or officer of such Person or
of an Affiliate of such Person.
"AFFILIATE GUARANTY" shall mean that certain Affiliate
Guaranty, dated the date hereof, executed by Parent and each Subsidiary as such
Affiliate Guaranty may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
"AGGREGATE AMOUNTS DUE" shall have the meaning set forth in
Section 11.16.
"ALLOCATED LOAN AMOUNT" shall mean for a particular Asset the
dollar amount set forth on Schedule IV for such Asset or with respect to a
Substitution Added Asset, the dollar amount determined by Administrative Agent
in accordance with Section 3.2(d)(ii) hereof.
"ALTA" shall mean American Land Title Association, or any
successor thereto.
"ANNUAL OPERATING BUDGET" shall have the meaning specified in
Section 5.1(q).
2
<PAGE> 9
"APPLICABLE INTEREST RATE" shall mean (a) from the date of
each Note to November 11, 2007, a rate equal to the Initial Interest Rate and
(b) from November 11, 2007 through but not including the date each Note is paid
in full, a rate equal to the Adjusted Interest Rate.
"APPROVED ANNUAL OPERATING BUDGET" shall have the meaning set
forth in Section 5.1(q).
"APPROVED PROPERTY MANAGER STANDARD" shall mean the standard
of business operations, practices and procedures customarily employed by
entities having a senior executive with at least ten (10) years' experience in
the management of hotels substantially similar to such Asset in the regions
where such Asset is located and that manages or has managed not less than ten
(10) such hotels.
"ASSET" shall mean individually, at any time, each real
property and hotel and other improvements thereon and FF&E and personal
property in connection therewith then owned by Borrower or in which Borrower
owns a Leasehold Estate now or hereafter encumbered by a Mortgage, together
with all rights pertaining thereto which collectively comprise the Asset as
more particularly described in each Mortgage and referred to therein as the
"Mortgaged Property".
"ASSIGNMENT OF LEASES" shall mean with respect to each of the
Assets, the certain first priority Assignment of Leases and Rents, dated as of
the date hereof (or with respect to a Substitution Added Asset, dated as of the
Substitution Date), from Borrower, as assignor, to Administrative Agent, as
assignee, assigning to Administrative Agent, as agent for Lenders, all of
Borrower's interest in and to the Tenant Leases and Rents of each such Asset as
security for the Loan, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"ASSUMPTION AGREEMENTS" shall have the meaning set forth in
Section 6.1(j)(vii)(F).
"AUTHORIZATION" means any authorization, approval, franchise,
license, variance, land use entitlement, sewer and waste water discharge
permit, storm water discharge permit, air pollution authorization to operate,
certificate of occupancy, municipal water and sewer connection permit, and any
like or similar permit now or hereafter required for the construction or
renovation of any Improvements located on any Asset or for the use, occupancy
or operation of any Asset and all amendments, modifications, supplements and
addenda thereto.
"AWARD" shall have the meaning set forth in Section 7.1.3(b).
"BANKRUPTCY CODE" shall mean Title 11 of the United States
Code, as amended.
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"BASIC CARRYING COSTS" shall mean, with respect to each Asset,
the sum of the following costs associated with such Asset for the relevant
Fiscal Year or payment period: (i) real property taxes with respect to such
Asset and (ii) insurance premiums with respect to such Asset.
"BHAC" shall mean Bristol Hotel Asset Company, a Delaware
corporation.
"BHOC" shall mean Bristol Hotel Operating Company, a Delaware
corporation.
"BIG SIX ACCOUNTING FIRM" shall mean Ernst and Young, Coopers
and Lybrand, Price Waterhouse, Deloitte & Touche, KPMG Peat Marwick or Arthur
Andersen & Co. or any successor entity.
"BORROWER" shall mean Bristol Lodging Company, a Delaware
corporation, together with its successors and assigns.
"BORROWER CONTRIBUTION DEPOSITS" shall have the meaning set
forth in Section 10.4.2.
"BORROWER NON-DEFEASANCE CONDITION" shall mean a material
adverse effect as determined by Administrative Agent on the ratings of a
proposed Securitization resulting from the occurrence (whether or not then
continuing) of a Default or Event of Default or the occurrence of a Material
Adverse Change. Administrative Agent shall promptly notify Borrower after it
has determined that a Borrower Non-Defeasance Condition, which has extended the
period during which Borrower is restricted from defeasing all or any part of
the Loan pursuant to Section 2.3.3 hereof, has occurred and no longer exists.
"BORROWER'S REMAINDER SUBACCOUNT" shall have the meaning set
forth in Section 10.2.2(a).
"BRISTOL" shall mean Bristol Hotel Company, a Delaware
corporation and the sole owner of the outstanding shares of capital stock of
BHOC.
"BRISTOL DEFAULT" shall occur if (i) Bristol or any direct or
indirect subsidiary of Bristol (including without limitation any Loan Party and
BHOC) shall fail to pay any principal of or premium or interest on any
indebtedness of such Person having a principal amount of $1,000,000 or more
(excluding Indebtedness evidenced by the Notes) when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise); (ii) any other event shall occur or condition shall
exist under any agreement or instrument relating to any such indebtedness, if
the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such indebtedness; (iii) or any such
indebtedness shall become or be declared to be due and payable, or required to
be prepaid (other
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<PAGE> 11
than by a regularly scheduled required prepayment), or Bristol or any direct or
indirect subsidiary of Bristol (including without limitation any Loan Party or
BHOC) shall be required to repurchase or offer to repurchase such indebtedness
(unless such Person is not in default under such indebtedness), prior to the
stated maturity thereof. Notwithstanding the foregoing a Bristol Default shall
not occur if Bristol or any direct or indirect subsidiary of Bristol (other
than a Loan Party) shall be in default in connection with any indebtedness
which is not recourse (except with respect to an environmental indemnity or a
guaranty of recourse carveouts) to Bristol or any direct or indirect subsidiary
of Bristol; provided such non-recourse indebtedness and any other non-recourse
indebtedness of Bristol and any direct or indirect subsidiary of Bristol in
connection with which such Person has been or is in default shall not (x) in
the aggregate have a principal amount outstanding in excess of $100,000,000 and
(y) be secured by a lien, in the aggregate, on more than two hotels or other
similarly significant assets of such Person. For purposes of the foregoing,
recourse debt shall be considered non-recourse debt if the borrower of such
debt is a special purpose entity which would not be reasonably expected to be
consolidated with any of its Affiliates and no other Person is liable with
respect to such indebtedness (except with respect to an environmental indemnity
or a guaranty of recourse carveouts.)
"BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or any other day on which national banks in New York, New York are not
open for business.
"CASH TRAP EVENT" shall mean each of (i) the occurrence of a
monetary Default, an Event of Default, or a Bristol Default or (ii) the
failure of Borrower or Parent to cause at least ninety percent (90%) of the sum
of (x) annual Mortgaged Property Gross Cash Flow of the Property and (y)
Security Deposits to be timely deposited into a Clearing Account A, as
evidenced by the audited financial statements delivered to Administrative Agent
pursuant to Section 5.1(j) hereof and in each case, notice to Borrower that
Administrative Agent is declaring a Cash Trap Event.
"CASH TRAP PERIOD" shall mean a date starting on the date of a
Cash Trap Event and ending on a date which is the later of the twelve (12)
month anniversary of the Cash Trap Event (or if later, the twelve month
anniversary of the occurrence of an event which would have caused a Cash Trap
Event to occur but for a prior event having already caused a Cash Trap Event)
and a date on which (i) no Default, Event of Default or Bristol Default is
continuing, (ii) Borrower shall have provided to Administrative Agent audited
financial statements (or in the case of a Cash Trap Event caused by a monetary
Default or an Event of Default or a Bristol Default, unaudited operating
statements) pursuant the Section 5.1(j) hereof evidencing that for the prior
twelve (12) month period at least ninety percent (90%) of the sum of Mortgaged
Property Gross Cash Flow of the Property and Security Deposits shall have been
timely deposited into a Clearing Account A and (iii) Borrower shall have
achieved, and provided evidence to Administrative Agent of the achievement, as
of the last day of the preceding calendar month, a Debt Service Coverage Ratio
for the Property for the preceding twelve (12) month period ending with such
calendar month of not less than 1.55 to 1.0
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"CASUALTY" shall have the meaning specified in Section
7.1.1(d).
"CASUALTY/CONDEMNATION PREPAYMENTS" shall have the meaning set
forth in Section 2.3.2.
"CASUALTY RELEASE DATE" shall mean the date on which a
Casualty Release Event Occurs.
"CASUALTY RELEASE EVENT" shall have the meaning set forth in
Section 7.1.2
"CHANGE IN CONTROL" shall mean (i) a transfer, hypothecation,
conveyance, alienation, mortgage, encumbrance or pledge by which an aggregate
of more than 49% of the equity interest of a Person (including by way of the
transfer, hypothecation, conveyance, alienation, mortgage, encumbrance or
pledge of any direct or indirect legal or beneficial interest in any
constituent partner, member or shareholder of such Person) shall be vested in
or pledged to any other Person who does not, as of the Closing Date, own more
than 49% of such Person or (ii) a transfer of the power to direct or cause the
direction of management and policies of such Person through the direct or
indirect transfer of voting securities or other ownership interests, by
contract or otherwise. A Change in Control shall not include the resignation,
removal or replacement of the chief executive officer, chief financial officer,
other senior management or any director (other than an Independent Director) of
such Person.
"CLEARING ACCOUNT A" shall have the meaning set forth in
Section 10.2.1.
"CLEARING ACCOUNT B" shall have the meaning set forth in
Section 10.2.1.
"CLEARING AGREEMENTS" shall have the meaning set forth in
Section 10.11, each individually a Clearing Agreement.
"CLEARING BANK" shall mean those commercial or savings banks
selected by Borrower and approved by Administrative Agent in its reasonable
discretion in which a Clearing Account A is maintained.
"CLOSING DATE" shall mean the date of the funding of the Loan.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
"COLLATERAL" means, collectively, all property, whether real,
personal or mixed, tangible or intangible, owned or to be owned or leased or to
be leased or otherwise held or to be held by a Loan Party or in which a Loan
Party has or shall acquire an interest, to the extent of
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<PAGE> 13
the Loan Party's interest therein, now or hereafter granted, assigned,
transferred, mortgaged or pledged to the Secured Parties, or in which a Lien is
granted to the Secured Parties, to secure all or any part of the Obligations,
whether pursuant to the Loan Documents or otherwise, including, without
limitation, the Assets, the Tenant Leases and Rents and rights under the
Property Management Agreements, and any and all proceeds of the foregoing, but
excluding the Excluded Assets.
"COLLATERAL SECURITY AGREEMENT" means the Security and Pledge
Agreement dated as of the date hereof, executed and delivered by the Loan
Parties, Borrower and the Administrative Agent as security for the Loan made
to Borrower pursuant to which the Loan Parties will pledge and grant a security
interest in the collateral described therein to Administrative Agent, as the
same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
"COLLECTION PERIOD" shall mean, with respect to any
Disbursement Date, the period of time commencing on and including the eleventh
(11th) day of the calendar month preceding the calendar month in which such
Disbursement Date occurs to and including the tenth (10th) day of the calendar
month in which such Disbursement Date occurs, provided that the first
Collection Period shall commence on the Closing Date.
"COMMITMENT" means the commitment of each Lender to make or
maintain the Loan pursuant to Section 2.1.1, and "Commitments" mean such
commitments of all Lenders in the aggregate.
"CONDEMNATION" shall have the meaning set forth in Section
7.1.3(a).
"CONDEMNATION PROCEEDS" shall mean any Award in respect of any
Condemnation.
"CONDEMNATION RELEASE DATE" shall mean the date on which a
Condemnation Release Event Occurs.
"CONDEMNATION RELEASE EVENT" shall have the meaning set forth
in Section 7.1.3.
"CONDEMNATION RESTORATION" shall have the meaning set forth in
Section 7.1.3(c).
"CONSENT AND SUBORDINATION OF PROPERTY MANAGER" shall mean the
Consent and Agreement of Manager and Subordination of Management Agreement
dated as of the date hereof (or with respect to a Substitution Added Asset,
dated as of the Substitution Date), executed by the Property Manager, as
manager, in favor of Administrative Agent.
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<PAGE> 14
"CREDIT CARD RECEIVABLES" shall mean any receivable payable to
or for the benefit of Borrower (or any other Loan Party) by a Credit Card
Payor.
"CREDIT CARD PAYOR" shall mean American Express, Discover,
Diners Club and all other credit card issuers (or merchant banks acting on
behalf of Borrower with respect to credit cards issuers) whose credit cards are
accepted for payment at the Property.
"CREDIT CARD PAYOR PAYMENT DIRECTION LETTER" shall have the
meaning set forth in Section 10.3(a) hereof.
"DEBT" shall mean the outstanding principal amount set forth
in, and evidenced by, the Notes together with all interest accrued and unpaid
thereon and all other sums (including the Yield Maintenance Premium) due to
Lenders in respect of the Loan under the Notes, this Agreement, each Mortgage
or any other Loan Document.
"DEBT SERVICE" shall mean, with respect to any particular
period of time, scheduled principal and interest payments due and payable under
the Notes.
"DEBT SERVICE COVERAGE RATIO" shall mean a ratio for the
applicable period in which: (a) the numerator is the Net Operating Income for
such period as set forth in the statements required hereunder (except that in
the case of any Asset encumbered by a Mortgage which secures less than the
maximum amount of the Loan, the Net Operating Income included in the numerator
on account of such Asset shall be no greater than the lesser of (x) the Net
Operating Income for such Asset as determined by Lender on the Closing Date (or
Substitution Date in the case of an Asset which was or is a Substitution Added
Asset) for the same period preceding the Closing Date (or Substitution Date in
the case of a Substitution Added Asset) and (y) only in the case of an Asset
which was or is a Substitution Added Asset, the Net Operating Income for the
corresponding Substitution Removed Asset as determined by Lender on the Closing
Date for the same period preceding the Closing Date), and (b) the denominator
is the Debt Service for such period.
"DEFAULT" shall mean the occurrence of any event hereunder or
under any other Loan Document which, but for the giving of notice or the
passage of time, or both, would be an Event of Default.
"DEFAULT RATE" shall mean, with respect to the Loan, a rate
per annum equal to 500 basis points above the Applicable Interest Rate;
provided, however, in no event shall such rate exceed the maximum rate
permitted by applicable law.
"DEFEASANCE DATE" shall have the meaning set forth in Section
2.3.3(a).
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<PAGE> 15
"DEFEASANCE DEPOSIT" shall mean an amount equal to the sum of
(a) the amount necessary to purchase U.S. Obligations whose cash flows are in
an amount sufficient to make the Scheduled Defeasance Payments, (b) any out-of-
pocket costs and expenses incurred or to be incurred in the purchase of U.S.
Obligations necessary to meet the Scheduled Defeasance Payments, and (c) any
revenue, documentary stamp or intangible taxes or any other tax or charge due
in connection with the transfer of the Notes, the creation of the Defeased
Notes and the Undefeased Notes, as the case may be, any transfer of the
Defeased Notes or otherwise required to accomplish the agreements of Sections
2.3 and 2.4 hereof.
"DEFEASANCE EVENT" shall have the meaning set forth in Section
2.3.3(a) hereof.
"DEFEASANCE SECURITY AGREEMENT" shall have the meaning set
forth in Section 2.3.3(a)(vi).
"DEFEASED NOTE" shall have the meaning set forth in Section
2.3.3(a) hereof.
"DEPOSIT ACCOUNT" shall mean the account established and
maintained pursuant to Section 10.2.2(a) of this Agreement and the Deposit
Agreement for collecting and retaining all the Rents and other revenue and
income from the Property.
"DEPOSIT AGREEMENT" shall have the meaning set forth in
Section 10.11.
"DEPOSIT BANK" shall mean the commercial or savings bank in
which the Deposit Account is maintained.
"DEVELOPMENT" means the erection or other construction or
installation of Improvements on real property that is then substantially
unimproved or from which all or substantially all of the existing Improvements
thereon have been removed or will be removed in connection with such erection,
construction or installation. Development does not include restorations and
renovations provided, such restorations or renovations are permitted by the
terms of this Agreement.
"DISBURSEMENT DATE" shall mean the eleventh (11th) day of each
calendar month, or if such eleventh (11th) day is not a Business Day, the next
succeeding Business Day.
"DISCLOSURE DOCUMENT" shall have the meaning set forth in
Section 9.2(a).
"DSCR DETERMINATION DATE" shall have the meaning set forth in
Section 10.12
"ELIGIBLE INVESTMENT" shall mean one or more of the following
obligations or securities payable on demand or having a scheduled maturity on
or before the Business Day preceding the day on which the amounts invested
pursuant hereto are required to be disbursed in
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accordance herewith and having at all times the required ratings, if any,
provided for in this definition:
(a) obligations of, or obligations fully guaranteed as to
payment of principal and interest by, the United States or any agency
or instrumentality thereof provided such obligations are backed by the
full faith and credit of the United States of America, including,
without limitation, obligations of: the U.S. Treasury (all direct or
fully guaranteed obligations), the Farmers Home Administration
(certificates of beneficial ownership), the General Services
Administration (participation certificates), the U.S. Maritime
Administration (guaranteed Title XI financing), the Small Business
Administration (guaranteed participation certificates and guaranteed
pool certificates), the U.S. Department of Housing and Urban
Development (local authority bonds) and the Washington Metropolitan
Area Transit Authority (guaranteed transit bonds); provided, however,
that the investments described in this clause (i) must have a
predetermined fixed dollar of principal due at maturity that cannot
vary or change, (ii) if rated by Standard & Poor's Ratings Services,
must not have an "r" highlighter affixed to their rating, (iii) must
have an interest rate tied to a single interest rate index plus a
fixed spread (if any) that moves proportionately with that index if
such investments have a variable rate of interest, and (iv) must not
be subject to liquidation prior to their maturity;
(b) Federal Housing Administration debentures;
(c) obligations of the following United States government
sponsored agencies: Federal Home Loan Mortgage Corp. (debt
obligations), the Farm Credit System (consolidated systemwide bonds
and notes), the Federal Home Loan Banks (consolidated debt
obligations), the Federal National Mortgage Association (debt
obligations), the Student Loan Marketing Association (debt
obligations), the Financing Corp. (debt obligations), and the
Resolution Funding Corp. (debt obligations); provided, however, that
the investments described in this clause (i) must have a predetermined
fixed dollar of principal due at maturity that cannot vary or change,
(ii) if rated by Standard & Poor's Ratings Services, must not have an
"r" highlighter affixed to their rating, (iii) must have an interest
rate tied to a single interest rate index plus a fixed spread (if any)
that moves proportionately with that index if such investments have a
variable rate of interest, and (iv) must not be subject to liquidation
prior to their maturity;
(d) federal funds, unsecured certificates of deposit,
time deposits, bankers' acceptances and repurchase agreements of any
bank, the short term obligations of which are rated in the highest
short term rating categories by at least two Rating Agencies (and if
any Securities are outstanding and are rated by Standard & Poor's
Ratings Services, one of such two Rating Agencies must be Standard &
Poor's Ratings Services); provided, however, that the investments
described in this clause (i) must have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (ii) if rated by
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<PAGE> 17
Standard & Poor's Ratings Services, must not have an "r" highlighter
affixed to their rating, (iii) must have an interest rate tied to a
single interest rate index plus a fixed spread (if any) that moves
proportionately with that index if such investments have a variable
rate of interest, and (iv) must not be subject to liquidation prior to
their maturity;
(e) fully Federal Deposit Insurance Corporation-insured
demand and time deposits in, or certificates of deposit of, or
bankers' acceptances issued by, any bank or trust company, savings and
loan association or savings bank; provided, however, that the
investments described in this clause (i) must have a predetermined
fixed dollar of principal due at maturity that cannot vary or change,
(ii) if rated by Standard & Poor's Ratings Services, must not have an
"r" highlighter affixed to their rating, (iii) must have an interest
rate tied to a single interest rate index plus a fixed spread (if any)
that moves proportionately with that index if such investments have a
variable rate of interest, and (iv) must not be subject to liquidation
prior to their maturity;
(f) debt obligations rated by at least two Rating
Agencies (and if any Securities are outstanding and are rated by
Standard & Poor's Ratings Services, one of such two Rating Agencies
must be Standard & Poor's Ratings Services) in their highest long-term
unsecured rating categories; provided, however, that the investments
described in this clause (i) must have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (ii) if rated by
Standard & Poor's Ratings Services, must not have an "r" highlighter
affixed to their rating, (iii) must have an interest rate tied to a
single interest rate index plus a fixed spread (if any) that moves
proportionately with that index if such investments have a variable
rate of interest, and (iv) must not be subject to liquidation prior to
their maturity;
(g) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on
demand or on a specified date not more than one year after the date of
issuance thereof) that is rated by at least two Rating Agencies (and
if any Securities are outstanding and are rated by Standard & Poor's
Ratings Services, one of such two Rating Agencies must be Standard &
Poor's Ratings Services) in their highest short-term unsecured debt
rating; provided, however, that the investments described in this
clause (i) must have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (ii) if rated by Standard &
Poor's Ratings Services, must not have an "r" highlighter affixed to
their rating, (iii) must have an interest rate tied to a single
interest rate index plus a fixed spread (if any) that moves
proportionately with that index if such investments have a variable
rate of interest, and (iv) must not be subject to liquidation prior to
their maturity;
(h) the Federated Prime Obligation Money Market Fund (the
"Fund") so long as the Fund is rated "AAA" by each Rating Agency (or,
if not rated by any Rating Agency other than Standard & Poor's Rating
Service, otherwise acceptable to such
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<PAGE> 18
Rating Agency or Rating Agencies, as applicable, as confirmed in
writing that such investment would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current ratings
assigned to the Securities issued in respect of, or secured by, such
pool of mortgage loans); and
(i) any other demand, money market or time deposit,
demand obligation or any other obligation, security or investment,
provided that each Rating Agency has confirmed in writing to
Administrative Agent, that such investment would not, in and of
itself, result in a downgrade, qualification or withdrawal of the then
current ratings assigned to the Securities issued in respect of, or
secured by such pool of mortgage loans;
provided, however, (i) that, in the judgment of Administrative Agent, such
obligation or security continues to qualify as a "cash flow investment"
pursuant to Code Section 860G(a)(6) earning a passive return in the nature of
interest and (ii) that no obligation or security shall be an Eligible
Investment if (x) the right to receive principal and interest payments derived
from the underlying investment provides a yield to maturity in excess of 120%
of the yield to maturity at par of such underlying investment or (y) such
investment has a maturity in excess of one year from the date of acquisition of
such investment or (z) such obligation or security evidences a right to receive
only interest payments.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as
defined in Section 3(3) of ERISA which (i) is currently maintained or
contributed to by any Loan Party or any of their respective ERISA Affiliates,
or (ii) was at any time within the preceding five years maintained or
contributed to by any Loan Party or any of their respective ERISA Affiliates to
the extent any of them could reasonably be expected to incur liability with
respect to such employee benefit plan.
"ENVIRONMENTAL CLAIM" means any accusation, allegation, notice
of violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any Governmental Authority or any other Person
for any damage, including, without limitation, personal injury (including
sickness, disease or death), tangible or intangible property damage,
contribution, indemnity, indirect or consequential damages, damage to the
environment, damage to natural resources, nuisance, pollution, contamination or
other adverse effects on the environment, or for fines, penalties or
restrictions, in each case relating to, resulting from or in connection with
any Hazardous Substance and relating to any Loan Party or any Asset.
"ENVIRONMENTAL INDEMNITY" shall mean the Environmental and
Hazardous Substance Indemnification Agreement dated as of the date hereof (or
with respect to a Substitution Added Asset, dated as of the Substitution Date),
executed by Borrower in connection with the Loan for the benefit of Lenders, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
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"EQUIPMENT" means, with respect to any Asset, all machinery,
apparatus, equipment, fittings, fixtures, furniture, furnishings and articles
of personal property (including any such article constituting a fixture) of
every kind and nature whatsoever owned or leased now or in the future by
Borrower or any other Loan Party, and either located upon the real property
related to such Asset, or any part thereof, or used in connection with the
present use, maintenance, operation or occupancy of the related Improvements as
a hotel or motel or any other future occupancy or use of such Improvements,
including, without limitation, all heating, lighting, laundry, incinerating,
loading, unloading, swimming pool, landscaping, garage and power equipment and
supplies, engines, pipes, pumps, tanks, motors, conduits, switchboards,
plumbing, lifting, cleaning, fire prevention, fire extinguishing,
refrigerating, ventilating, and communications apparatus, luggage or food
carts, dollies, air cooling and air conditioning apparatus, elevators,
escalators, shades, awnings, screens, storm doors and windows, stoves,
freezers, refrigerators, cabinets, dressers, cooking utensils, dishes,
silverware, kitchen appliances and restaurant equipment and supplies,
computers, reservation systems, software, cash registers, card keys, telephone
switchboards, partitions, ducts and compressors, carpets, rugs, bed frames,
springs, mattresses, sheets, pillow cases, pillows, blankets, bed spreads,
stationery, tables, desks, chairs, sofas, bureaus, dressers, benches, window
curtains, telephones, televisions, radios, lamps, mirrors, paintings, wall
hangings, decorations, clothes hangers, bathroom fixtures, shower curtains,
towels, medicine cabinets, and hotel cleaning equipment and supplies, and all
additions, substitutions and replacements thereof, wherever located, together
with all attachments, components, parts, equipment and accessories installed
thereon or affixed thereto and all the present and future "goods",
"equipment" and "fixtures" (as such terms are defined in the Uniform
Commercial Code) and other personal property of Borrower or such other Loan
Party, including, without limitation, any such personal property and fixtures
which are leased, and all repairs, attachments, betterments, renewals,
replacements, substitutions and accessions thereof and thereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA AFFILIATE" means, with respect to any Person, (i) any
corporation which is, or was at any time, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Code of which such
Person is a member; (ii) any trade or business (whether or not incorporated)
which is a member of a group of trades or businesses under common control
within the meaning of Section 414(c) of the Code of which such Person is a
member; and (iii) any member of an affiliated service group within the meaning
of Section 414(m) or (o) of the Code of which such Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is a member. Any former ERISA Affiliate of any Loan Party shall continue
to be considered an ERISA Affiliate of such Loan Party, within the meaning of
this definition with respect to the period during which such entity was an
ERISA Affiliate of such Loan Party and with respect to liabilities arising
after such period for which such Loan Party could be liable under the Code or
ERISA.
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"ERISA EVENT" means (i) a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation), (ii) the failure to meet the
minimum funding standard of Section 412 of the Code with respect to any Pension
Plan (whether or not waived in accordance with Section 412(d) of the Code) or
the failure to make by its due date a required installment under Section 412(m)
of the Code with respect to any Pension Plan or the failure to make any
required contribution to a Multiemployer Plan, in the case of any such failure,
by a material amount, (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA, (iv)
the withdrawal by any Loan Party, or any of their respective ERISA Affiliates
from any Pension Plan with two or more contributing sponsors or the termination
of any such Pension Plan resulting in liability pursuant to Section 4063 or
4064 of ERISA, (v) the institution by the PBGC of proceedings to terminate any
Pension Plan, or the occurrence of any event or condition which might
constitute grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan, (vi) the imposition of liability on
any Loan Party or any of their respective ERISA Affiliates pursuant to Section
4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of
ERISA, (vii) the withdrawal by any Loan Party or any of their respective ERISA
Affiliates in a complete or partial withdrawal (within the meaning of Sections
4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential
material liability therefor, or the receipt by any Loan Party or any of their
respective ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA,
(viii) the occurrence of an act or omission which could give rise to the
imposition on any Loan Party or any of their respective ERISA Affiliates of
material fines, penalties, taxes or related charges under Chapter 43 of the
Code or under Section 409 or Section 502(c)(2), (i) or (l), or Section 4071 of
ERISA in respect of any Employee Benefit Plan, (ix) the assertion of a material
claim (other than routine claims for benefits) against any Employee Benefit
Plan other than a Multiemployer Plan or the assets thereof, or against any Loan
Party or any of their respective ERISA Affiliates in connection with any such
Employee Benefit Plan, (x) receipt from the Internal Revenue Service of notice
of the failure of any Pension Plan (or any other Employee Benefit Plan intended
to be qualified under Section 401(a) of the Code) to qualify under Section
401(a) of the Code, or the failure of any trust forming part of any Pension
Plan to qualify for exemption from taxation under Section 501(a) of the Code or
(xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the
Code or pursuant to ERISA with respect to any Pension Plan.
"EVENT OF DEFAULT" shall have the meaning set forth in Section
8.1(a).
"EXCHANGE ACT" shall have the meaning set forth in Section
9.2(a).
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"EXCLUDED ASSETS" means the rights of the Borrower or any
other Loan Party under Property Management Agreements, liquor licenses,
Authorizations, service contracts, equipment leases, purchase agreements,
collective bargaining agreements and other agreements, but in each case only if
by their terms or by law they may not or cannot be pledged or assigned by
Borrower or such Loan Party to Administrative Agent or Lenders.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by Administrative Agent from three Federal funds
brokers of recognized standing selected by Administrative Agent.
"FF&E" means, with respect to any Asset, any furniture,
fixtures and equipment located thereon or therein and owned or leased by
Borrower, including, without limitation, the Equipment.
"FF&E FINANCINGS" shall mean purchase money financing (and
refinancing thereof not to exceed the outstanding principal balance thereof nor
to be secured by additional FF&E) of FF&E located on and used in connection
with any Asset including but not limited to a lease of FF&E which would be
accounted for as a capital lease on a balance sheet prepared in conformity with
GAAP.
"FISCAL YEAR" shall mean each twelve month period commencing
on January 1 and ending on December 31 during the term of the Loan.
"FRANCHISE AGREEMENTS" means each of the franchise agreements
listed on Schedule V annexed hereto, together with the most recent related core
modernization plan or other property improvement plan required by the
respective franchisor, as each such agreement or property improvement plan may
be amended, restated, supplemented or otherwise modified or replaced from time
to time in accordance with the terms of this Agreement.
"FRANCHISE FEES" shall mean all fees payable by any franchisee
pursuant to any Franchise Agreements (including without limitation, marketing
fees).
"FUNCTION SPACE" shall mean with respect to any Asset, any
conference rooms, ballrooms, banquet facilities or other similar accommodations
at such Asset.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as of the date of the applicable financial report.
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"GOVERNMENTAL AUTHORITY" shall mean any court, board, agency,
commission, office or authority of any nature whatsoever for any governmental
unit (federal, state, county, district, municipal, city or otherwise) whether
now or hereafter in existence.
"GROSS INCOME FROM OPERATIONS" shall mean all income, computed
on an accrual basis in accordance with GAAP, derived from the ownership and
operation of the Property (or of each Asset, as applicable) from whatever
source, including, but not limited to, all Rent, utility charges, escalations,
forfeited security deposits, service fees or charges, license fees, parking
fees, rent concessions or credits, and any business interruption and rent loss
insurance proceeds, but excluding (a) sales, use and occupancy or other taxes
on receipts required to be accounted for by Borrower to any government or
governmental agency, (b) refunds and uncollectible accounts, (c) sales of
furniture, fixtures and equipment, (d) proceeds of casualty insurance and
condemnation awards, (e) interest on credit accounts, (f) proceeds of any
financing, (g) proceeds of any sale, exchange or transfer of the Property or
any part thereof or interest therein, (h) capital contributions or loans to
Borrower, and (i) any other non-operating or extraordinary nonrecurring
revenue.
"GROUND LEASE" shall, at any time, mean each lease pursuant to
which the Borrower has acquired a Leasehold Estate.
"GROUND LEASE EARLY RELEASE" shall have the meaning set forth
in Section 5.1(bb).
"GROUND LEASE EARLY REPAYMENT DATE" shall have the meaning set
forth in Section 5.1(bb).
"GROUND LESSOR" shall mean the Landlord under any Ground
Lease.
"GROUND RENT" shall mean all rents (including, without
limitation, fixed minimum rent and percentage rent), and rent equivalents and
other consideration of whatever form or nature payable to or for the account of
or benefit of the Ground Lessor under any Ground Lease.
"GROUND RENT ESCROW FUND" shall have the meaning set forth in
Section 7.6.
"GROUND RENT SUBACCOUNT" shall have the meaning set forth in
Section 10.2.2(a).
"GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation (for purposes of this definition only "primary obligations")
of any other Person (for purposes of this definition only "primary obligor") in
any manner including, without limitation, any obligation or arrangement
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<PAGE> 23
of such Person (a) to purchase or repurchase any such primary obligation, (b)
to advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, or (d) to indemnify the owner of such primary obligation
against loss in respect thereof.
"HAZARDOUS SUBSTANCE" shall have the meaning ascribed thereto
in the Environmental Indemnity.
"HOLIDAY INNS FRANCHISING" shall mean Holiday Inns
Franchising, Inc., a Delaware corporation or any Affiliate thereof.
"HOUSTON GROUND LEASE" shall mean that certain lease dated
July 5, 1962 among P.A. Zuber, A.M. Zuber, David Zuber, Joe Robinowitz, Maurice
E. Robinowitz, Charles Lerner and Studio Realty, Inc., as such lease has been
amended and assigned from time to time.
"HOUSTON EARLY RELEASE" shall have the meaning set forth in
Section 5.1(bb).
"HOUSTON HOTEL" shall mean that certain Asset in which
Borrower owns a Leasehold Estate pursuant to the Houston Ground Lease.
"IMPROVEMENTS" shall have the meaning, with respect to each
Asset, as set forth in the Mortgage with respect to such Asset.
"INDEMNITEE" shall have the meaning set forth in Section
11.13(b).
"INDEMNIFIED MATTERS" shall have the meaning set forth in
Section 11.13(b).
"INDEPENDENT" shall mean, when used with respect to any
Person, a Person who (a) is in fact independent, (b) does not have any direct
financial interest in Borrower, or in any Affiliate of Borrower or any
Affiliate of any constituent partner, shareholder, member or beneficiary of
Borrower (including without limitation any Loan Party), and (c) is not
connected with Borrower or any Affiliate of Borrower or any Affiliate of any
constituent partner, shareholder, member or beneficiary of Borrower as an
officer, employee, promoter, underwriter, trustee, partner, member, director or
person performing similar functions (including without limitation any Loan
Party). Notwithstanding the foregoing, Curt Boisfontaine shall not be deemed
to be not Independent solely by virtue of the fact that he is acting as an
"independent director" of any of Borrowers' Affiliates. Whenever it is herein
provided that any Independent Person's opinion or certificate shall be
provided, such opinion or certificate shall
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<PAGE> 24
state that the Person executing the same has read this definition and is
Independent within the meaning thereof.
"INDEPENDENT DIRECTOR" shall have the meaning set forth in
Section 4.1(dd)(xvi).
"INITIAL DEBT SERVICE COVERAGE RATIO" shall mean 1.65 to 1.
"INITIAL INTEREST RATE" shall mean a rate per annum equal to
seven and four hundred fifty-eight thousandths percent (7.458%).
"INSURANCE PREMIUMS" shall have the meaning set forth in
Section 7.1.1(c) hereof.
"INSURANCE PROCEEDS" shall mean all proceeds received,
damages, claims and rights of action, and rights thereto under insurance
policies required to be maintained by Borrower or relating to any Asset or any
portion thereof.
"INTEREST ACCRUAL PERIOD" means, with respect to a
Disbursement Date, the period commencing on and including the 11th day of the
month preceding the month in which such Disbursement Date occurs (or, in the
case of the first Disbursement Date, the Closing Date) and ending on and
including the 10th day of the month in which such Disbursement Date occurs,
except that the first Interest Accrual Period shall be the period commencing on
and including the Closing Date to and including the tenth (10th) day of the
first month immediately following the Closing Date; provided, however, that no
Interest Accrual Period shall extend beyond the Maturity Date.
"INTELLECTUAL PROPERTY" means, as of any date of
determination, all patents, trademarks, tradenames, copyrights, technology,
know-how and processes used in or necessary for the conduct of the business of
the Borrower as conducted on such date of determination that are material to
the business, operations or condition (financial or otherwise) of Borrower or
any other Loan Party including any of the foregoing licensed to any Loan Party
by other Persons.
"IP LICENSE AGREEMENTS" means, collectively, the agreements
(other than the Franchise Agreements) pursuant to which any Loan Party has
rights to use any Intellectual Property owned by any other Person.
"LEASING COMMISSIONS" shall mean any leasing commission
incurred by Borrower in connection with any new Tenant Lease or modification,
renewal or extension of an existing Tenant Lease.
"LEASEHOLD ESTATE" shall, at any time, mean any leasehold
estate of Borrower in real property and improvements now or hereafter
encumbered by a Mortgage together with all
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right, title interest and privileges of Borrower in, to, under or otherwise by
nature of the lease creating such leasehold estate, as such lease may be
amended, restated, replaced, supplemented or modified from time to time.
"LEGAL REQUIREMENTS" shall mean all federal, state, county,
municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental Authorities
affecting any Asset or any part thereof or the construction, use, alteration or
operation thereof, or any part thereof, whether now or hereafter enacted and in
force, and all permits, licenses and authorizations and regulations relating
thereto, and all covenants, agreements, restrictions and encumbrances contained
in any instruments, either of record or known to Borrower, at any time in force
affecting any Asset or any part thereof, including, without limitation, any
which may (i) require repairs, modifications or alterations in or to such Asset
or any part thereof, or (ii) in any way limit the use and enjoyment thereof.
"LIABILITIES" shall have the meaning set forth in Section
9.2(b).
"LICENSES" shall have the meaning set forth in Section 4.1(v).
"LIEN" shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other encumbrance, charge
or transfer of, on or affecting any Asset or any portion thereof or any
interest therein, any Collateral or any portion thereof or any interest
therein, or Borrower or any other Loan Party, including, without limitation,
any conditional sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, the
filing of any financing statement, any option (including any purchase option,
call option or similar option), trust or other preferential arrangement having
the same economic effect of any of the foregoing, and mechanic's, materialmen's
and other similar liens and encumbrances.
"LIQUOR AGREEMENTS" means, collectively, the Liquor Operations
Servicing Agreements and the Liquor Leases listed on Schedule VI annexed
hereto, as any such agreement may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof and
hereof.
"LIQUOR COST EVIDENCE" shall have the meaning set forth in
Section 3.1(aa).
"LIQUOR LEASES" means each Tenant Lease entered into between a
Property Manager, as lessor, and the holder of a Liquor License in respect of
an Asset, in each case in connection with the sale of alcoholic beverages at
such Asset, substantially in the form approved by Administrative Agent on or
before the Closing Date or in such other form as may be reasonably acceptable
to Administrative Agent, as any such Tenant Lease may be amended,
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restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"LIQUOR LICENSES" means, collectively, the licenses set forth
on Schedule VI annexed hereto and each other license issued by the Department
of Alcoholic Beverage Control or similar state or local agency to Borrower or a
Subsidiary or in respect of any Asset, in each case in connection with the sale
of alcoholic beverages at such Asset.
"LIQUOR OPERATIONS SERVICING AGREEMENTS" means, collectively,
the sub-management agreements entered into between a Property Manager, as
sub-manager, and Borrower or a Subsidiary as a holder of a Liquor License,
substantially in the form approved by the Administrative Agent on or before
the Closing Date or in such other form as may be reasonably acceptable to
Administrative Agent, as any such sub-management agreement may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof.
"LOAN" shall mean the loan made by Lenders to Borrower in the
original aggregate principal amount set forth in, and evidenced by, the Notes
executed and delivered by Borrower and secured by the Mortgage and the other
Loan Documents executed and delivered by Borrower and/or other Loan Parties.
"LOAN PARTY" shall mean each of Borrower, each Subsidiary and
Parent.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the
Notes, each Mortgage, each Assignment of Leases, the Environmental Indemnity,
the Consent and Subordination of Property Manager, the Omnibus Management and
Liquor License Agreement, the Collateral Security Agreement, the Affiliate
Guaranty, the other Security Documents and any other document pertaining to the
Property or any of the Assets as well as all other documents executed and/or
delivered by Borrower or any other Loan Party in connection with the Loan.
"LOCK-BOX AGREEMENTS" shall have the meaning set forth in
Section 10.11.
"LOSS PROCEEDS" shall mean Insurance Proceeds or Condemnation
Proceeds.
"LOSS PROCEEDS SUBACCOUNT" shall have the meaning set forth in
Section 10.2.2(a).
"MANAGEMENT CO." means Bristol Hotel Management Corporation,
a Delaware corporation and a wholly owned subsidiary of BHOC.
"MANAGEMENT FEES" means, collectively, all hotel management
fees (however characterized, including base fees, trade name fees, incentive
fees, special incentive fees,
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<PAGE> 27
termination fees and all fees in respect of liquor license operations) and all
other fees or charges payable to the Property Manager for the management and
operation of an Asset, any other Collateral or any part thereof.
"MATERIAL ADVERSE CHANGE" shall mean a material adverse change
in or effect on (i) the assets, operations, or condition (financial or
otherwise) of the Borrower or the other Loan Parties, (ii) Borrower's ability
to pay the Debt in accordance with the terms hereof and otherwise comply with
the material terms of this Agreement, (iii) any Loan Party's ability to comply
with the material terms of any of the Loan Documents, (iv) any of the Assets or
the other material Collateral, or (v) the Secured Parties' Lien on any Asset or
the other material Collateral or the priority of such Lien.
"MATERIAL LEASE" means: (i) for any Tenant Lease entered into
prior to the Closing Date, each Tenant Lease determined by the Requisite
Lenders and Administrative Agent in their sole discretion to be material to
Borrower or the operation of Borrower's business; and (ii) for any Tenant Lease
entered into after the Closing Date, (w) any Tenant Lease which is not a lease
of retail or restaurant space or to a service provider (such as a lease to an
airline ticket agent or to an overnight courier) (x) any Tenant Lease necessary
for the operation of any Asset, (y) any Tenant Lease which individually
generates two percent (2%) or more, or together with previously existing Tenant
Leases generates more than five percent (5%) of the Mortgaged Property Gross
Cash Flow for such Asset or (z) any Tenant Lease which could reasonably be
expected to cause a Material Adverse Change.
"MATERIAL SECURITY DEPOSITS" shall mean a Security Deposit (x)
with respect to a Tenant Lease in an amount in excess of $5,000.00 and (y) with
respect to a Function Space in an amount in excess of $10,000.00.
"MATURITY DATE" shall mean the date on which the final payment
of principal of the Notes becomes due and payable as therein provided, whether
at the Stated Maturity, by declaration of acceleration, or otherwise.
"MAXIMUM MANAGEMENT FEE" shall mean an amount not greater than
the greater of (x) five percent (5%) per annum of Gross Income from Operations
for each Asset and (y) the fee generally charged by third party managers of
hotels substantially similar to such Asset (as reasonably determined by
Administrative Agent) in the same region as such Asset but in no event in
excess of seven percent (7%) per annum of Gross Income from Operations for each
Asset.
"MAXIMUM PERMITTED TRADE PAYABLES AND FF&E FINANCINGS" shall
mean (x) Permitted Trade Payables which are outstanding for more than sixty
(60) days and (y) FF&E Financings, in the aggregate for clause (x) and clause
(y) not to exceed $350,000 per Asset and $3,937,500 for the Property.
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"MINIMUM BALANCE" shall have the meaning set forth in Section
10.4.1.
"MONTHLY DEBT SERVICE PAYMENT AMOUNT" shall mean a constant
payment of $1,067,579.04.
"MONTHLY DEBT SERVICE SUBACCOUNT" shall have the meaning set
forth in Section 10.2.2(a).
"MORTGAGE" shall mean with respect to each of the Assets, that
certain first priority Mortgage, Assignment of Leases and Rents and Security
Agreement, or Deed of Trust, Assignment of Leases and Rents and Security
Agreement or Deed to Secure Debt, Assignment of Leases and Rents and Security
Agreement dated as of the date hereof (or with respect to a Substitution Added
Asset, dated as of the Substitution Date), executed and delivered by Borrower
as security for the Loan made to Borrower and encumbering such Asset, as the
same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.
"MORTGAGED PROPERTY" shall have the same meaning as Asset.
"MORTGAGED PROPERTY GROSS CASH FLOW" shall mean, for any
period, all Rents and other income or revenue received with respect to the
Property, on a cash basis, including, without limitation, Loss Proceeds.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan that is a
"multiemployer plan", as defined in Section 3(37) of ERISA.
"NACC" shall have the meaning set forth in Section 2.4.2.
"NET OPERATING INCOME" shall mean, for any period, the Gross
Income From Operations, LESS the sum of:
(i) Operating Expenses in an amount equal to actual
Operating Expenses payable by Borrower for the consecutive
full twelve (12) months (or such other applicable period)
immediately preceding the date of determination (except real
property taxes and Insurance Premiums, which shall be included
only to the extent of the greater of (1) the actual amounts
payable and (2) the amounts payable in future periods as a
result of any reassessment actually made (with respect to real
estate taxes) or changes to Insurance Premiums). Operating
Expenses shall (a) exclude Franchise Fees, extraordinary
expenses (as reasonably determined by Administrative Agent in
accordance with the criteria established by any Rating Agency
rating the Securities), Management Fees and capital
expenditures, (b) be adjusted (as reasonably determined by
Administrative Agent in accordance with the criteria
established by any Rating Agency rating the
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Securities) for any items that are non-recurring or not
supported by historical statements (as reasonably determined
by the Administrative Agent in accordance with the criteria
established by any Rating Agency rating the Securities) and
(c) be adjusted (as reasonably determined by Administrative
Agent in accordance with the criteria established by any
Rating Agency rating the Securities) if any Asset has been in
operation for less than the full twelve (12) months
immediately preceding the date of determination; plus
(ii) Franchise Fees in an amount equal to the
greater of (A) actual Franchise Fees for such period and (B)
an amount equal to the actual marketing fees to be paid under
Franchise Agreements for such period plus a per annum amount
equal to five percent (5%) of "revenues from room rentals" at
the Property (determined in accordance with the Uniform
System); plus
(iii) Management Fees in an amount equal to the
greater of (A) the per annum amount equal to 3.5% of the Gross
Income from Operations of the Property and (B) actual
management fees payable to the Property Manager for such
period; plus
(iv) a reserve for capital expenditures in an amount
equal to five percent (5%) of Gross Income from Operations;
plus
(v) such other deductions from and adjustments to
Gross Income from Operations and adjustments to Operations
Expenses consistent with the standards applied by Rating
Agencies including, without limitation, adjustments to actual
occupancy rates and expenses as the Rating Agency rating the
Securities (or if the Securitization has not occurred, a
Rating Agency selected by Administrative Agent) or
Administrative Agent, in its reasonable discretion, shall
require for other matters or factors that impact thereon.
"NEW ORLEANS GROUND LEASE" shall mean that certain lease dated
October 31, 1966 among Royal Banco, Inc., William J. Capo and Collin C. Diboll,
as such lease has been amended and assigned from time to time.
"NEW ORLEANS EARLY RELEASE" shall have the meaning set forth
in Section 5.1(bb).
"NEW ORLEANS HOTEL" shall mean that certain Asset in which
Borrower owns a Leasehold Estate pursuant to the New Orleans Ground Lease.
"NON-CONSOLIDATION OPINION" shall mean an opinion of counsel
to Borrower (reasonably satisfactory to Administrative Agent in form and
substance and from counsel
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reasonably satisfactory to Administrative Agent and containing assumptions,
limitations and qualifications customary for opinions of such type) to the
effect that a court of competent jurisdiction in a proceeding under the
Bankruptcy Code would not consolidate the assets and liabilities of (x)
Borrower and any special purpose, bankruptcy remote general partner or member
of Borrower with those of a disclosed Person or Affiliate thereof (other than
another Loan Party) which became a debtor under the Bankruptcy Code or (y)
Parent with those of a disclosed Person or Affiliate thereof (other than
another Loan Party) which became a debtor under the Bankruptcy Code and, if
applicable.
"NOMURA" shall have the meaning set forth in Section 9.2(b).
"NOMURA GROUP" shall have the meaning set forth in Section
9.2(b).
"NOTE" shall mean each Promissory Note dated as of the date
hereof, made by Borrower in favor of each Lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.
"OBLIGATIONS" shall mean any and all debt, liabilities and
obligations of Borrower to Lenders under the Loan Documents, including, without
limiting the generality of the foregoing, the Debt.
"OCCUPANCY/ROOM RATE STATISTICS" shall mean for any period, a
report, in a form and content reasonably acceptable to Administrative Agent,
setting forth on an Asset by Asset basis (x) average room rates for each Asset
during such period and (y) occupancy statistics for each Asset during such
period.
"OFFICERS' CERTIFICATE" shall mean a certificate delivered to
Administrative Agent by Borrower which is signed by an authorized senior
officer of Borrower.
"OMNIBUS MANAGEMENT AND LIQUOR LICENSE AGREEMENT" means the
Agreement regarding Liquor Leases, Servicing Agreements, Property Management
Agreements and Liquor Licenses dated as of the date hereof, executed and
delivered by Borrower and certain other Loan Parties as security for the Loan
made to Borrower, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.
"O&M PLAN" shall have the meaning set forth in Section
3.1(bb).
"OPERATING EXPENSES" shall mean the total of all expenditures
of whatever kind, computed on an accrual basis in accordance with GAAP for all
purposes other than in connection with a Requisition which shall be computed on
the cash basis, relating to the operation, maintenance and management of the
Property, but excluding any non-cash charge or non-operating items such as
depreciation, debt service, income taxes and capital expenditures and
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other expenses similar to those capitalized on or excluded from the Financial
Statements for the 12 months ending December 31, 1996 audited by Arthur
Anderson LLP which were delivered to Lenders in connection with the funding of
the Loan on the Closing Date.
"OPTIONAL PREPAYMENT DATE" shall mean November 11, 2007.
"OTHER CHARGES" shall mean all maintenance charges,
impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining any Asset, now or hereafter levied or assessed or
imposed against the Property or any part thereof and which may create a Lien
against any Asset or any part thereof.
"PARENT" shall mean Bristol Lodging Holding Company, a
Delaware corporation.
"PARTIAL RELEASE" shall mean, with respect to a particular
Asset, a discharge, release satisfaction or similar instrument necessary or
sufficient to release an Asset and the Collateral related to such Asset (other
than any substitute collateral pledged pursuant to Section 2.3.3 hereof) from
the Lien of the Mortgage encumbering such Asset and from the other Security
Documents encumbering such Collateral.
"PAYMENT DIRECTION LETTER" shall have the meaning set forth in
Section 10.3(a) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor thereto).
"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue
Code or Section 302 of ERISA.
"PERMITTED ENCUMBRANCES" shall mean, with respect to each
Asset, collectively: (a) the Liens created by or permitted under the Loan
Documents (including without limitation Liens securing FF&E Financings and
Permitted Trade Payables which in the aggregate do not exceed Maximum Permitted
Trade Payables and FF&E Financings), (b) all Liens, encumbrances and other
matters disclosed in the Title Insurance Policies relating to such Asset or any
part thereof, (c) Liens, if any, for Taxes imposed by any Governmental
Authority and Other Charges not yet delinquent, (d) statutory liens for labor
or materials securing sums not yet due and payable (or with respect to which
Borrower has removed any such lien within 60 days of such sum becoming due and
payable, by posting a bond or otherwise), (e) rights of tenants, as tenants
only, under Tenant Leases approved or deemed approved by Administrative Agent,
(f) judgments provided such judgments are being appealed by Borrower and a stay
of execution has been granted with respect thereto and Borrower has either
deposited 125% of the value of such judgments with Administrative Agent or
posted a bond reasonably satisfactory to Administrative
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Agent, (g) rights of guests to occupy rooms of any Asset but only if permitted
by Section 5.1(t) and (h) mechanics, materialmen and other similar liens and
encumbrances that are bonded and thereby deemed released of record in a manner
reasonably satisfactory to Administrative Agent.
"PERMITTED PLEDGE" shall mean a pledge of the stock of BHOC
which pledge shall secure the Subordinate Notes and be in form and substance
acceptable to the Requisite Lenders and the Administrative Agent in their sole
discretion.
"PERMITTED TRADE PAYABLES" shall mean unsecured trade payables
which are customarily and actually required to be satisfied within thirty (30)
days.
"PERMITTED TRANSFER" shall mean a one-time dividend of the
capital stock of Parent by BHAC to BHOC, which dividend shall have occurred
subsequent to the date hereof and prior to the making of the Loan hereunder.
"PERSON" shall mean any individual, corporation, partnership,
limited liability company, joint venture, estate, trust, unincorporated
association, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on
behalf of any of the foregoing.
"POLICIES" shall have the meaning specified in Section
7.1.1(c).
"POST OPTIONAL PREPAYMENT DATE REQUISITION" shall have the
meaning set forth in Section 10.8.2 hereof.
"PREMISES" shall have the meaning, with respect to each Asset,
as set forth in the Mortgage with respect to such Asset.
"PROPERTY" shall mean collectively, at any time, the real
properties, the hotel and other improvements thereon and FF&E and personal
property in connection therewith, then owned by Borrower or in which Borrower
owns a Leasehold Estate and now or hereafter encumbered by a Mortgage, together
with all rights pertaining to such properties and improvements, and Leasehold
Estate as each is more particularly described in the granting clauses of each
Mortgage and referred to therein as the "Mortgaged Property." The Assets
comprising the Property on the Closing Date (other than FF&E and personal
property) are listed on Schedule VII which Schedule may be revised from time to
time by Administrative Agent as existing Assets are released from the Lien of a
Mortgage and new Assets are encumbered by the Lien of a Mortgage in accordance
with Section 2.4 hereof.
"PROPERTY MANAGEMENT AGREEMENT" means, a property management
agreement which is reasonably acceptable to Administrative Agent, entered into
by and between Borrower and the Property Manager, pursuant to which the
Property Manager is to provide management
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and other services with respect to each Asset, as any such management agreement
may be amended, restated, supplemented or otherwise modified from time to time
with the consent of Administrative Agent.
"PROPERTY MANAGER" shall mean any Person that manages an Asset
pursuant to a Property Management Agreement which unless otherwise reasonably
approved by Administrative Agent shall be Management Co.
"PROPERTY MANAGER CONTROL NOTICE" shall have the meaning set
forth in Section 5.1(v).
"PRO RATA SHARE" or "pro-rata" means, with respect to each
Lender, the quotient obtained by dividing the Commitment of such Lender by the
Commitments of all Lenders; provided, however, that if the Commitments have
been terminated or have expired, it means the quotient obtained by dividing the
outstanding principal amount of the Loan of such Lender by the outstanding
principal amount of all Loans of all Lenders.
"PROPERTY REQUIRED REPAIRS" shall have the meaning set forth
in Section 7.2.1.
"PROVIDED INFORMATION" shall have the meaning set forth in
Section 9.1(a).
"RATING AGENCY" shall mean each of Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Moody's Investors Service,
Inc., Duff & Phelps Credit Rating Co. and Fitch Investors Service, Inc. or any
other nationally-recognized statistical rating agency which has been approved
by Administrative Agent.
"REGISTRATION STATEMENT" shall have the meaning set forth in
Section 9.2(b).
"RELEASE PRICE" for an Asset shall mean 125% (or in the case
of a Casualty Release Event, a Condemnation Release Event or a Ground Lease
Early Release, 100%) of the Allocated Loan Amount of such Asset, less insurance
proceeds and casualty awards applicable to such Asset which shall have been
applied in reduction of the principal amount of the Loan in accordance with
Section 2.3.2(a) hereof plus such additional sums necessary to satisfy the
conditions to release set forth in Section 2.4 hereof.
"REMAINING PROPERTY" shall mean the Property which is, at the
date of determination, subject to the lien of a Mortgage (including any
Substitution Added Asset in the case of a Substitution Event and excluding any
Assets in connection with which Borrower is requesting a Partial Release).
"REMAINING PROPERTY DSCR" shall mean the ratio of (i) Net
Operating Income of the Remaining Property for the twelve (12) full months
preceding the applicable Defeasance
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Date or Substitution Date, as the case may be (except that in the case of any
Asset encumbered by a Mortgage which secures less than the maximum amount of
the Loan, the Net Operating Income included in the numerator on account of such
Asset shall be no greater than the lesser of (x) the Net Operating Income for
such Asset as determined by Lender on the Closing Date (or Substitution Date in
the case of an Asset which was or is a Substitution Added Asset) for the same
period preceding the Closing Date (or Substitution Date in the case of a
Substitution Added Asset) and (y) only in the case of an Asset which was or is
a Substitution Added Asset, the Net Operating Income for the corresponding
Substitution Removed Asset as determined by Lender on the Closing Date for the
same period preceding the Closing Date) to (ii) Debt Service for the twelve
(12) full months next following the applicable Defeasance Date or Substitution
Date as the case may be (using the balance of the Loan after payment of the
Release Price for the Assets in connection with which Borrower is requesting a
Partial Release and all Assets previously Partially Released).
"REMIC TRUST" shall have the meaning set forth in Section
2.3.3(a).
"RENT" shall mean all rents (including, without limitation,
fixed minimum rent and percentage rent), rent equivalents, moneys payable as
damages or in lieu of rent or rent equivalents, royalties (including, without
limitation, all oil and gas or other mineral royalties and bonuses), income,
issues, profits, royalties, room receipts, rack charges, vending machine
receipts, food and beverage receipts, concession fees and charges, public
assembly room receipts, receivables, receipts, expense reimbursements and
recoveries from tenants, guests and customers, revenues, deposits (including,
without limitation, security, utility and other deposits), accounts, cash,
issues, profits, charges for services rendered, and other consideration of
whatever form or nature received by or paid to or for the account of or benefit
of Borrower or its agents or employees from any and all sources arising from or
attributable to the Property and proceeds, if any, from business interruption
or other loss of income insurance.
"RENT ROLL" shall have the meaning set forth in Section
5.1(t)(i).
"REPLACEMENT RESERVE FUND" shall have the meaning set forth in
Section 7.4.1.
"REPLACEMENT RESERVE SUBACCOUNT" shall have the meaning set
forth in Section 10.2.2(a).
"REPLACEMENTS" shall have the meaning set forth in Section
7.4.2(a).
"REQUIRED RATIO" shall have the meaning set forth in Section
10.12.
"REQUIRED RECORDS" shall mean the financial statements,
certificates, reports or information required to be delivered by Borrower
pursuant to Section 5.1(j).
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"REQUIRED REPAIR FUND" shall have the meaning set forth in
Section 7.2.2.
"REQUIRED REPAIR SUBACCOUNT" shall have the meaning set forth
in Section 10.2.2(a).
"REQUISITE LENDERS" means Lenders having or holding more than
51% of the sum of the Commitments of all Lenders, or if such Commitments have
terminated or expired, Lenders having or holding more than 51% of the aggregate
principal amount of the outstanding Loan.
"REQUISITION" shall have the meaning set forth in Section
10.8.1.
"RESTORATION" shall have the meaning set forth in Section
7.1.2(b).
"RESIDUAL AMOUNT" shall mean any residual interest in the
REMIC Trust.
"SCHEDULED DEFEASANCE PAYMENTS" shall have the meaning set
forth in Section 2.3.3(b).
"SECONDARY MARKET TRANSACTION" shall mean any transaction,
including a Securitization, in which a Lender (i) sells the Loan, its Note and
the other Loan Documents to one or more investors as a whole loan, (ii)
participates the Loan to one or more investors, (iii) deposits the Loan, the
Mortgages, the Note and the other Loan Documents with a trust, which trust may
sell certificates to investors evidencing an ownership interest in the trust
assets, or (iv) otherwise sells the Loan or interest therein to investors.
"SECURED PARTIES" shall mean Lenders and Administrative Agent.
"SECURITIES" shall have the meaning set forth in Section 9.1.
"SECURITIES ACT" shall have the meaning set forth in Section
9.2(a).
"SECURITIZATION" shall have the meaning set forth in Section
9.1.
"SECURITIZATION EXPENSES" shall have the meaning set forth in
Section 9.1.
"SECURITY DEPOSIT SUBACCOUNT" shall have the meaning set forth
in Section 10.2.2(a).
"SECURITY DEPOSITS" shall mean all security (whether cash,
letter of credit or otherwise) given to Borrower or any agent or Person acting
on behalf of Borrower in connection with (x) the Tenant Leases or (y) Function
Space.
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"SECURITY DOCUMENTS" shall mean, collectively, the Mortgages,
the Assignments of Leases, the Collateral Security Agreement, the Assumption
Agreements, the Lock-Box Agreement, the Omnibus Management and Liquor License
Agreement, and all deeds of trust, deeds to secure debt, mortgages, security
agreements, pledge agreements, assignments and all other instruments or
documents (including UCC-1 financing statements, fixture filings, amendments of
financing statements or similar documents required or advisable in order to
perfect or maintain the Liens created by the Security Documents) delivered by
any Person pursuant to this Agreement or any of the other Loan Documents, in
order to grant to the Secured Parties Liens in real, personal or mixed property
of such Person, and to maintain such Liens or as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"SENIOR NOTE CONSENT" shall mean that certain Indenture
Supplement No. 3, Consent and Amendment No.1 to Pledge Agreement dated on or
about the date hereof and executed by Bristol, BHAC, BHOC, and The Bank of New
York, as trustee.
"SERVICER" shall have the meaning set forth in Section 10.1.
"SERVICING FEES" shall have the meaning set forth in Section
10.1.
"SEVERED LOAN DOCUMENTS" shall have the meaning set forth in
Section 8.2(c).
"SPE MEMBER" shall have the meaning set forth in Section
4.1(dd)(xv).
"STATE" shall mean the State of New York.
"STATED MATURITY" shall mean November 11, 2022.
"SUBACCOUNTS" shall have the meaning set forth in Section
10.2.2(a).
"SUBORDINATE NOTE DOCUMENTS" shall mean those certain
documents executed in connection with the Subordinate Notes, each such document
being in a form and substance as approved by the Administrative Agent on or
prior to the Closing Date, in each case as such documents shall be amended,
restated, supplemented or otherwise modified from time to time pursuant to the
terms of this Agreement.
"SUBORDINATE NOTES" shall mean those notes issued by Bristol
pursuant to that certain Indenture, dated as of December 18, 1995, as amended,
among Bristol BHAC, BHOC and The Bank of New York, as trustee, in each case as
such documents shall be amended, restated, supplemented or otherwise modified
from time to time pursuant to the terms of this Agreement.
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"SUBSIDIARY" shall mean those entities, wholly-owned by
Parent, which are named on Schedule XIII.
"SUBSTITUTION ADDED ASSET" shall have the meaning set forth in
Section 2.4.4.
"SUBSTITUTION DATE" the date on which any Substitution Event
occurs.
"SUBSTITUTION DILIGENCE PERIOD" shall mean the sixty (60) days
prior to any Substitution Date.
"SUBSTITUTION EVENT" shall have the meaning set forth in
Section 2.4.4.
"SUBSTITUTION NOTICE" shall have the meaning set forth in
Section 2.4.4.
"SUBSTITUTION REMOVED ASSET" shall have the meaning set forth
in Section 2.4.4.
"SUCCESSOR BORROWER" shall have the meaning set forth in
Section 2.4.2.
"SUPPLEMENTAL COLLATERAL AGENT" shall have the meaning set
forth in Section 12.2.1.
"SURVEY" shall mean a survey of each Asset prepared by a
surveyor licensed in the state where such Asset is located and satisfactory to
Administrative Agent and the company or companies issuing the Title Insurance
Policy applicable to such Asset, and containing a certification of such
surveyor satisfactory to Administrative Agent.
"TAX AND INSURANCE ESCROW FUND" shall have the meaning set
forth in Section 7.3.
"TAX AND INSURANCE ESCROW SUBACCOUNT" shall have the meaning
set forth in Section 10.2.2(a).
"TAXES" shall mean all real estate and personal property
taxes, assessments, water rates or sewer rents now or hereafter levied or
assessed or imposed against an Asset or any part thereof, including, but not
limited to, (a) any ad valorem real and tangible personal property taxes levied
against an Asset and (b) any intangible personal property tax levied or imposed
on any Lender with respect to its ownership in the Loan.
"TENANTS" shall have the meaning set forth in Section 10.3(a).
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"TENANT LEASE" shall mean any lease (or, to the extent of the
interest therein of Borrower, any sublease or sub-sublease), letting, license,
concession or other agreement (whether written or oral and whether now or
hereafter in effect) pursuant to which any person is granted a possessory
interest (other than (x) as a guest who personally occupies a room in any Asset
which is a hotel for less than 30 days) or (y) Function Space for a period of
less than 7 days) in, or right to use or occupy all or any portion of, any
space in any Asset, and every modification, amendment or other agreement
relating to such lease, sublease, sub-sublease or other agreement entered into
in connection with such lease, sublease, sub-sublease or other agreement and
every guarantee of the performance and observance of the covenants, conditions
and agreements to be performed and observed by the other party thereto.
"TERM" shall have the meaning set forth in Section 7.1.1(a).
"TITLE INSURANCE POLICY" shall mean the ALTA (or in the case
of any Asset located in Texas, the Texas equivalent) mortgagee title insurance
policy in the form (acceptable to Administrative Agent) issued with respect to
each Asset and insuring the lien of the Mortgage encumbering each such Asset.
"TOTAL RELEASE" shall mean a discharge, release, satisfaction
or similar instrument necessary and sufficient to release all of the Property
and the other Collateral (other than the substitute collateral pledged pursuant
to Section 2.3.3 hereof) from the Liens of all of the Mortgages encumbering the
Property and of all of the other Security Documents.
"TRANSFER" shall have the meaning set forth in Section
6.1(j)(ii).
"TRANSFEREE" shall have the meaning set forth in Section
6.1(j)(vii)(B).
"TREASURY RATE" shall mean, at the time of determination, the
sum of (x) the rate listed in the "Week Ending" column for securities having a
maturity most nearly approximating the Stated Maturity in the most current
Federal Reserve Statistical Release H.15-Selected Interest Rates (the "FEDERAL
RELEASE") under the heading "U.S. government securities", and the sub-heading
"Treasury constant maturities" plus (y) seven-eights of a percent (.875%). In
the event the Federal Release is no longer published, Administrative Agent
shall select a comparable publication to determine the Treasury Rate.
"UCC" or "UNIFORM COMMERCIAL CODE" shall mean, with respect to
any Asset, the Uniform Commercial Code as in effect in the applicable state or
commonwealth in which such Asset is located.
"UNDEFEASED NOTE" shall have the meaning set forth in Section
2.3.3(a) hereof.
"UNDERWRITER GROUP" shall have the meaning set forth in
Section 9.2(b).
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"UNIFORM SYSTEM" shall mean the Uniform System of Accounts for
Hotels, 8th Revised Edition, 1986, as published by the Hotel Association of New
York City, as the same may be further revised from time to time.
"UNUSED REQUISITION AMOUNT" shall have the meaning set forth
in Section 10.8.2.
"U.S. OBLIGATIONS" shall mean direct non-callable United
States of America government securities as defined in Section 2(a)(16) of the
Investment Company Act of 1940 (15 U.S.C. 80a-1).
"YIELD MAINTENANCE PREMIUM" shall mean the amount (if any)
which, when added to the remaining unpaid principal amount of the Note or the
principal balance of the Defeased Note, as applicable, will be sufficient to
purchase U.S. Obligations providing the required Scheduled Defeasance Payments.
SECTION 1.2 PRINCIPLES OF CONSTRUCTION.
All references to sections, schedules and exhibits are to
sections, schedules and exhibits in or to this Agreement unless otherwise
specified. Unless otherwise specified, the words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified, all meanings attributed to defined
terms herein shall be equally applicable to both the singular and plural forms
of the terms so defined. The terms "Lender" and "Administrative Agent" include
their respective successors and assigns who become a party hereto pursuant to
the terms of this Agreement.
II. GENERAL TERMS
SECTION 2.1 LOAN COMMITMENT; DISBURSEMENT TO BORROWER.
2.1.1 THE LOAN. Subject to and upon the terms and conditions
set forth herein, each Lender hereby severally agrees to make its pro rata
portion of the Loan to Borrower on the Closing Date in the original principal
amount for each Lender set forth opposite its name on Schedule XVIII. The Loan
shall mature on the Maturity Date.
2.1.2 DISBURSEMENT TO BORROWER. Borrower may request and
receive only one borrowing hereunder in respect of the Loan. Any amount
borrowed and repaid hereunder in respect of the Loan may not be reborrowed.
Borrower shall, on the Closing Date, receive its Loan, subject to the direction
given by Borrower as to the application of the Loan proceeds to the items set
forth in Section 2.2.
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2.1.3 THE NOTE. Each Lender's pro-rata portion of the Loan
shall be evidenced by a Note of Borrower in favor of such Lender, in the
original principal amount of such Lender's interest in the Loan. The Loan
shall bear interest as provided in the Notes and in Section 2.6 hereof and
shall be subject to repayment as provided in the Notes and in Section 2.3
hereof. The holder of each Note shall be entitled to the benefits of this
Agreement and the Loan shall be secured by the Mortgage, the Assignment of
Leases and the other Loan Documents.
SECTION 2.2 USE OF PROCEEDS. Borrower shall use, in the
following order of priority, the proceeds of the Loan disbursed to it pursuant
to Section 2.1 to (a) repay and discharge any existing loans relating to the
Property (other than Permitted Trade Payables and FF&E Financing which do not
in the aggregate exceed the Maximum Permitted Trade Payables and FF&E
Financings, to the extent Borrower elects in its sole discretion not to repay
such indebtedness from Loan proceeds), (b) pay all past-due Basic Carrying
Costs, if any, in respect of the Property, (c) fund the Tax and Insurance
Escrow Fund, the Replacement Reserve Fund, the Ground Rent Escrow Fund and the
Required Repair Fund to the extent required to be funded on the Closing Date
pursuant to the terms of this Agreement, (d) pay reasonable out-of- pocket
costs and expenses incurred in connection with the closing of the Loan, as
approved by Administrative Agent and (e) any other corporate purpose (including
payment of a dividend to Parent).
SECTION 2.3 LOAN PREPAYMENT AND DEFEASANCE.
2.3.1 REPAYMENT AND PREPAYMENT. Borrower shall repay any
outstanding principal indebtedness of the Loan in full on the Maturity Date of
the Loan, together with interest thereon to (but excluding) the date of
repayment. Other than as set forth in Sections 2.3.2, 7.1.2(c) and 7.1.3(d)
below, Borrower shall have no right to prepay all or any portion of the Loan
prior to the Optional Prepayment Date. On the Optional Prepayment Date or on
any scheduled payment date thereafter, Borrower may, at its option and upon at
least thirty (30) days, but not more than ninety (90) days prior written notice
from Borrower to Administrative Agent (which notice shall be irrevocable except
as hereinafter provided in this Section 2.3.1), who shall promptly notify the
Lenders thereof, prepay in whole or in part the Debt without payment of the
Yield Maintenance Premium or any other premium or penalty, provided however,
prior to the date which is twenty (20) days before the date for prepayment
specified by Borrower in such notice, Borrower shall be permitted to revoke
such notice and if so revoked such notice shall not accelerate the Maturity
Date. If prior to the Optional Prepayment Date and following the occurrence of
any Event of Default, Borrower shall tender payment of an amount sufficient to
satisfy the Debt, such tender by Borrower shall be deemed to be voluntary and
Borrower shall pay, in addition to the Debt, the Yield Maintenance Premium, if
any, that would be required under a Defeasance Event. Each voluntary
prepayment after the Optional Prepayment Date shall be made on a scheduled
payment date and include all accrued and unpaid interest up to but not
including such scheduled payment date or, if not paid on a
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scheduled payment date, include interest that would have accrued on such
prepayment through the next regularly scheduled payment date.
2.3.2 CASUALTY/CONDEMNATION PREPAYMENTS. The Loan is subject
to mandatory and voluntary prepayment in certain instances of Casualty and
Condemnation (each, a "CASUALTY/CONDEMNATION PREPAYMENT"), in the manner and to
the extent set forth in Section 7.1.2 and Section 7.1.3 hereof. Each
Casualty/Condemnation Prepayment shall be made on a scheduled payment date and
include all accrued and unpaid interest up to but not including such scheduled
payment date or, if not paid on a scheduled payment date, include interest that
would have accrued on such prepayment through the next regularly scheduled
payment date.
2.3.3 VOLUNTARY DEFEASANCE OF THE LOAN. (a) At any time
prior to the Optional Prepayment Date and after the date which is the earlier
of (x) two (2) years from the "startup day" (within the meaning of Section
860G(a)(9) of the Code) of a "real estate mortgage investment conduit" (within
the meaning of Section 860D of the Code) which holds the Notes (the "REMIC
TRUST"), if applicable, or (y) the three year anniversary of the Closing Date
(as such three year anniversary may be extended by Administrative Agent as a
result of a Borrower Non-Defeasance Condition to a date that is five (5) days
after Administrative Agent has reasonably determined that no Borrower
Non-Defeasance Condition exists), Borrower may voluntarily defease all or any
portion of the Loan by pledging substitute collateral to the Secured Parties
that consists solely of U.S. Obligations that produce payments which replicate
the payment obligations of Borrower under the Note or that portion of the Note
which the Borrower wishes to defease (hereinafter, a "DEFEASANCE EVENT"). Each
Defeasance Event by Borrower shall be subject to the satisfaction of the
following conditions precedent:
(i) Borrower shall provide not less than thirty
(30) days prior written notice to Administrative Agent specifying a
regularly scheduled payment date (the "DEFEASANCE DATE") on which the
Defeasance Event is to occur; such Notice shall indicate the principal
amount of the Notes to be defeased, shall list the Assets, if any,
which Borrower wants the Secured Parties to release from the Lien of a
Mortgage pursuant to Section 2.4 hereof;
(ii) Borrower shall pay to each Lender all accrued
and unpaid interest on the principal balance of the Note held by such
Lender to but not including the Defeasance Date. If for any reason
the Defeasance Date is not a regularly scheduled payment date,
Borrower shall also pay interest that would have accrued on the Notes
through the next regularly scheduled payment date;
(iii) Borrower shall pay to each Lender all other
sums, not including scheduled interest or principal payments, due
under the Notes, this Agreement, the Mortgage and the other Loan
Documents;
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(iv) Borrower shall pay to each Lender the
required Defeasance Deposit for the Defeasance Event;
(v) In the event only a portion of the Loan is
the subject of a Defeasance Event, Borrower shall prepare all
necessary documents to amend and restate the Notes and issue two
substitute notes for each Lender, one of such substitute notes having
a principal balance equal to the defeased portion of the original Note
held by such Lender (the "DEFEASED NOTE") and the other of such
substitute notes having a principal balance equal to the undefeased
portion of the Note held by such Lender (the "UNDEFEASED NOTE"). The
Defeased Note and Undefeased Note shall have identical terms as the
original Notes except for the principal balance.
(vi) Borrower shall execute and deliver a security
agreement, in form and substance satisfactory to Administrative Agent
creating a first priority lien on the Defeasance Deposit and the U.S.
Obligations purchased with the Defeasance Deposit in accordance with
the provisions of this Section 2.3.3 (the "DEFEASANCE SECURITY
AGREEMENT");
(vii) Borrower shall deliver an opinion of counsel
for Borrower in form satisfactory to the Requisite Lenders and
Administrative Agent in their sole discretion stating, among other
things, that (i) in the event of a Total Release under Section 2.4.1,
Borrower has legally and validly transferred and assigned the U.S.
Obligations and all obligations, rights and duties under and to the
Notes or the Defeased Notes, as applicable to the Successor Borrower,
(ii) the Secured Parties have a perfected first priority security
interest in the Defeasance Deposit and the U.S. Obligations delivered
by Borrower or Successor Borrower, as applicable, and (iii) if the
Loan is included in any REMIC formed pursuant to a Securitization,
after the Defeasance Event the Loan will continue to be a "qualified
mortgage" within the meaning of Section 860G of the Code and the REMIC
will not fail to maintain its status as a "real estate mortgage
investment conduit" within the meaning of Section 860D of the Code as
a result of such Defeasance Event;
(viii) If the Loan has been included in a
Securitization, evidence in writing from the applicable Rating
Agencies shall have been delivered to the effect that such release
will not result in a downgrade, withdrawal or qualification of the
respective ratings in effect immediately prior to such Defeasance
Event for the Securities issued in connection with the Securitization
which are then outstanding. If required by the applicable Rating
Agencies, Borrower shall also deliver or cause to be delivered a
Non-Consolidation Opinion with respect to the Successor Borrower in
form and substance reasonably satisfactory to Administrative Agent,
and the applicable Rating Agencies;
(ix) Borrower shall deliver an Officer's
Certificate certifying that the requirements set forth in this Section
2.3.3(a) have been satisfied;
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(x) Borrower shall deliver such other
certificates, documents or instruments as Administrative Agent and
Lenders may reasonably request;
(xi) Borrower shall pay all reasonable
out-of-pocket costs and expenses of Administrative Agent and Lenders
incurred in connection with the Defeasance Event, including any costs
and expenses associated with a release of one or more Liens as
provided in Section 2.4 hereof as well as reasonable attorneys' fees
and expenses; and
(xii) No Event of Default may exist on the
Defeasance Date which is not cured by the occurrence of such
Defeasance Event.
(b) In connection with each Defeasance Event, Borrower
hereby appoints Administrative Agent as its agent and attorney-in-fact for the
purpose of using the Defeasance Deposit to purchase U.S. Obligations which
provide payments on or prior to, but as close as possible to, all successive
scheduled payment dates after the Defeasance Date upon which interest and
principal payments are required under the Notes (assuming that Borrower pays
the Notes in full on the Optional Prepayment Date), in the case of a Defeasance
Event for the entire outstanding principal balance of the Loan, or the Defeased
Notes (assuming that the Borrower pays the Defeased Note in full on the
Optional Prepayment Date), in the case of a Defeasance Event for only a portion
of the outstanding principal balance of the Loan, as the case may be (including
the amounts due on the Optional Prepayment Date, assuming that the Borrower
pays the Defeased Notes in full on the Optional Prepayment Date, of either the
Note or the Defeased Notes, as the case may be), and in amounts equal to the
regularly scheduled interest and principal payments and servicing fee due on
such dates under the Notes or the Defeased Notes, as the case may be, including
the principal payment due on the Optional Prepayment Date (assuming that the
Borrower pays the Defeased Notes in full on the Optional Prepayment Date) under
the Notes or the Defeased Notes, as the case may be (the "SCHEDULED DEFEASANCE
PAYMENTS"). Borrower, pursuant to the Defeasance Security Agreement or other
appropriate document, shall authorize and direct that the payments received
from the U.S. Obligations shall be made directly to the Deposit Account (unless
otherwise directed by Administrative Agent) and applied to satisfy the
obligations of Borrower under the Notes or the Defeased Notes, as the case may
be. Any portion of the Defeasance Deposit in excess of the amount necessary to
purchase the U.S. Obligations required by this Section 2.3 and satisfy
Borrower's obligation under this Section 2.3 and Section 2.4 shall be remitted
to Borrower.
SECTION 2.4 RELEASE OF PROPERTY/SUBSTITUTION OF PROPERTY.
Except as set forth in this Section 2.4, no repayment,
prepayment or defeasance of all or any portion of the Notes shall cause, give
rise to a right to require, or otherwise result in, the release of the Lien of
any of Mortgage on any Asset or of any other Security Document on any other
Collateral.
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2.4.1 RELEASE OF ENTIRE PROPERTY. (a) If Borrower has
elected to defease the entire Notes and the requirements of Section 2.3.3 have
been satisfied, Administrative Agent shall provide Borrower with a Total
Release of the Lien of the Mortgages (and related Security Documents) with
respect to the Property and the other Collateral, whereupon the U.S.
Obligations pledged pursuant to the Defeasance Security Agreement shall be the
sole source of Collateral securing the Notes.
(b) In connection with the Total Release, Borrower shall
submit to Administrative Agent, not less than fourteen (14) days prior to the
Defeasance Date, a Total Release for the Property and the other Collateral for
execution by Administrative Agent. Such Total Release shall be in a form
appropriate in each of the jurisdictions in which the Property is located and
satisfactory to the Requisite Lenders and Administrative Agent in their sole
discretion. In addition, Borrower shall provide all other documentation
Administrative Agent reasonably requires to be delivered by Borrower in
connection with such Total Release, together with an Officer's Certificate
certifying that such documentation (i) is in compliance with all Legal
Requirements, and (ii) will effect such Total Release in accordance with the
terms of this Agreement.
(c) Borrower shall pay all reasonable out-of-pocket costs
and expenses incurred by Administrative Agent in connection with any Total
Release (including reasonable attorney's fees and costs).
(d) Any Total Release pursuant to this Section may only
occur on a day that a regularly scheduled payment of principal and interest is
due under the Notes.
2.4.2 SUCCESSOR BORROWER. In connection with any release of
a Lien under Section 2.4.1, Administrative Agent shall establish or designate a
successor single purpose bankruptcy remote entity (the "SUCCESSOR BORROWER")
and Borrower shall transfer and assign all obligations, rights and duties under
and to the Notes together with the pledged U.S. Obligations to such Successor
Borrower. The obligation of Administrative Agent to establish or designate a
Successor Borrower shall be retained by Administrative Agent notwithstanding
the sale or transfer of this Agreement unless such obligation is specifically
assumed by the transferee. Such Successor Borrower shall assume the
obligations under the Notes and the Defeasance Security Agreement and Borrower
shall be relieved of its obligations under such documents and all other Loan
Documents (except to the extent specifically set forth therein) from and after
the date of the assumption by the Successor Borrower. Borrower shall pay
$1,000 to any such Successor Borrower as consideration for assuming the
obligations under the Notes and the Defeasance Security Agreement.
Notwithstanding anything in this Agreement to the contrary, no other assumption
fee shall be payable upon a transfer of the Notes in accordance with this
Section 2.4.2, but Borrower shall pay all reasonable out-of-pocket costs, fees
and expenses, including, without limitation, attorneys' fees and expenses,
incurred by Administrative Agent in connection therewith.
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2.4.3 RELEASE OF AN ASSET. (a) If Borrower has elected to
defease a portion of the Notes and the requirements of Section 2.3.3 have been
satisfied, or if Borrower has elected to replace one or more Assets with
substitute hotel properties and the requirements of Section 2.4.4 shall have
been satisfied, or Borrower has elected to repay a portion of the Notes
pursuant to Section 7.1.2(c) or 7.1.3(d) hereof and the requirements of such
sections have been satisfied, Administrative Agent shall provide Borrower with
a Partial Release of the Lien of the Mortgage (and related Security Documents)
with respect to one or more Assets (or in the case of Section 7.1.2(c) or
7.1.3(d) the Asset which is the subject of the Casualty or Condemnation)
provided Borrower is selling, making a dividend in kind (provided a Person
other than a Loan Party is the ultimate and immediate recipient of such Asset)
or otherwise disposing of such Assets and Borrower shall have satisfied or
cause to have satisfied the following conditions:
(i) there exists no Default (unless such
Default will be cured by the Defeasance Event, Substitution Event,
Casualty Release Event or Condemnation Release Event, as applicable)
or Event of Default;
(ii) the Remaining Property DSCR is not less
the Initial Debt Service Coverage Ratio;
(iii) Intentionally Deleted;
(iv) in the case of a Defeasance Event, a
Casualty Release Event or Condemnation Release Event with respect to a
portion of the Notes, the portion of the Notes which Borrower defeases
pursuant to Section 2.3.3 or repays pursuant to Section 7.1.2(c) or
7.1.3(d), in connection with such Partial Release is equal to or
greater than the aggregate Release Price for the Assets which Borrower
is requesting to be released;
(v) Borrower shall have paid all reasonable
out-of-pocket costs and expenses of Administrative Agent and Lenders
(including reasonable attorneys fees and expenses) arising in
connection with any partial releases, including, but not limited to,
reasonable legal fees of counsel, all title insurance premiums arising
as a result of endorsements reasonably required by Administrative
Agent in connection with such partial release, and all other costs
arising in connection with the execution and delivery of the Partial
Release;
(vi) Borrower shall have delivered to
Administrative Agent one or more endorsements, if available in the
applicable jurisdiction, to the Title Policies for each Asset, other
than the Asset in connection with which such Partial Release is being
provided, insuring that after giving effect to such Partial Release,
the liens created by the remaining Mortgages and insured by the
applicable Title Policies remain in full force and effect;
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(vii) Borrower shall have provided to
Administrative Agent and Lenders such other documents and evidence as
Administrative Agent or such Lenders, as the case may be shall
reasonably require in order to establish compliance with the
provisions of this Section 2.4.3;
(viii) together with the sale, dividend in kind
or other disposition of the Asset in connection with which Borrower is
requesting a Partial Release, Borrower or the applicable Subsidiary is
also selling, dividend in kind (provided a Person other than a Loan
Party is the ultimate and immediate recipient of such Asset) or
otherwise disposing of the Collateral used in connection with such
Asset;
(ix) the sale, dividend in kind or other
disposition of such Asset and the related Collateral occurs on the
Defeasance Date, Substitution Date or Casualty Release Date or
Condemnation Release Date, as applicable; and
(x) Administrative Agent shall have received a
reaffirmation of the Affiliate Guaranty, executed by Parent and each
Subsidiary, in a form and substance acceptable to Administrative
Agent.
(b) In connection with the Partial Release, Borrower
shall submit to Administrative Agent, not less than fourteen (14) days prior to
the Defeasance Date, the Substitution Date, the Casualty Release Date or the
Condemnation Release Date, as applicable, a Partial Release for the Asset and
the related Collateral for execution by Administrative Agent. Such Partial
Release shall be in a form appropriate in the jurisdiction in which each such
Asset is located and satisfactory to the Requisite Lenders and Administrative
Agent in their sole discretion. In addition, Borrower (and any other Loan
Party requested by the Administrative Agent to do so) shall provide all other
documentation Administrative Agent reasonably requires to be delivered by
Borrower (or such Loan Party) in connection with such Partial Release, together
with an Officer's Certificate certifying as to the matters set forth in
Sections 2.4.3(i), (ii) and (iii) in reasonable detail and certifying that such
documentation (i) is in compliance with all Legal Requirements, and (ii) will
effect such Partial Release in accordance with the terms of this Agreement.
(c) Any Partial Release pursuant to this Section may only
occur on a day that a regularly scheduled payment of principal and interest is
due under the Notes.
(d) Upon a Partial Release of any Asset, or other item of
Collateral pursuant to this Section 2.4.3, such Asset shall cease to be an
Asset, a part of the Property and an item of Collateral for purposes of this
Agreement (other than for purposes of any indemnity applicable to such Asset).
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SECTION 2.4.4 SUBSTITUTION OF AN ASSET. At the sole
discretion of Administrative Agent and the Requisite Lenders and provided there
exists no Default (unless such Default will be cured by the Substitution Event)
or Event of Default at any time after the Closing Date and prior to the
Optional Prepayment Date, Borrower may request Administrative Agent to agree
(which consent Administrative Agent may withhold in its sole and absolute
discretion) to replace one or more Assets and related Collateral (the
"Substitution Removed Assets") with substitute hotel properties and related
property ("Substitution Added Assets") provided each such substitution (a
"Substitution Event") shall be subject to the satisfaction of such conditions
as Administrative Agent shall require in its sole and absolute discretion
including without limitation the conditions precedent set forth in Sections
2.4.1 and 3.2 hereof and no less than sixty (60) days prior to the Substitution
Date, Borrower shall have delivered to Administrative Agent a notice of its
desire to substitute one or more Substitution Added Assets for one or more
Substitution Removed Assets (the "Substitution Notice") in form acceptable to
Administrative Agent specifying (i) a regularly scheduled payment date on which
the Substitution Event is to occur, (ii) the one or more proposed Substitution
Removed Assets which Borrower is requesting Administrative Agent, on behalf of
Lenders, to release from the Lien of one or more Mortgages and (iii) the one or
more proposed Substitution Added Assets Borrower is requesting to be added to
the Property and to be encumbered by one or more Mortgages and other Security
Documents. Notwithstanding anything to the contrary contained in this
Agreement (including but not limited to Section 3.2 hereof), a Substitution
Event shall not occur without the prior consent of Administrative Agent (and
then only with the consent of the Requisite Lenders) which consent may be
withheld by Administrative Agent in its sole and absolute discretion.
SECTION 2.5 ASSUMPTION OF LOAN.
Borrower acknowledges that each Lender, in agreeing to make
its pro-rata portion of the Loan available, has examined and relied on the
creditworthiness and experience of Borrower in owning and operating properties
such as the Property, and that each Lender will continue to rely on Borrower's
ownership and operation (subject to the Property Management Agreement) of the
Property as a means of maintaining the value of the Property as security for
repayment of the Debt. Borrower acknowledges that each Lender has a valid
interest in maintaining the value of the Property so as to ensure that, should
Borrower default in the repayment of the Debt, such Lender can recover the Debt
by a sale of the Property by Administrative Agent, as agent for Lenders.
Accordingly, except as otherwise expressly permitted in Section 6.1(j) of this
Agreement, Borrower shall not, without the prior written consent of each
Lender, transfer the Property, any Asset or any part thereof, or permit the
Property, any Asset or any part thereof to be transferred.
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SECTION 2.6 INTEREST AND PRINCIPAL.
2.6.1 GENERALLY. Borrower shall repay the principal balance
of the Loan, with interest thereon to be computed for the applicable Interest
Accrual Period on the unpaid principal balance from time to time outstanding at
the Applicable Interest Rate, as follows: (i) one installment of interest only
on October 28, 1997, for the period commencing on (and including) October 28,
1997 and ending on (and including) November 10, 1997 and (ii) in installments
equal to the Monthly Debt Service Payment Amount on December 11, 1997 and on
the eleventh day of each calendar month thereafter (or if such eleventh day is
not a Business Day, the next day which is a Business Day). From and after the
Optional Prepayment Date, interest accrued monthly at the Adjusted Interest
Rate and not paid pursuant to the immediately preceding sentence shall be
deferred monthly and added to the unpaid principal amount of the Loan and shall
earn interest at the Adjusted Interest Rate to the extent permitted under
applicable law (such accrued interest, with interest thereon, the "ACCRUED
INTEREST"). Accrued Interest shall be paid after payment of the principal
balance of the Notes in full pursuant to Section 10.9.2 hereof. The balance of
the principal sum together with all accrued and unpaid interest thereon
(including unpaid Accrued Interest) shall be paid on the Maturity Date, all in
accordance with the terms and provisions set forth in the Notes. Funds
collected in the Deposit Account pursuant to this Agreement shall be disbursed
(including, without limitation, disbursements for the Monthly Debt Service
Payment Amount and Accrued Interest) in accordance with Section 10.9 hereof.
2.6.2 DEFAULT RATE. Borrower agrees that upon the occurrence
of an Event of Default: (a) Lenders shall be entitled to receive and Borrower
shall pay to Administrative Agent, for the account of Lenders' interest on the
entire unpaid principal sum of the Loan and any other amounts (including
interest to the extent permitted by applicable law and post-petition interest
in any proceeding under the Bankruptcy Code or other applicable bankruptcy or
insolvency laws) due at the Default Rate, and (b) on the eleventh day of each
month (or if such eleventh day is not a Business Day, the next day which is a
Business Day) during which such Event of Default shall continue, Administrative
Agent shall cause the Deposit Bank to distribute to Lenders, pro-rata, the
amounts then held as collected funds in the Deposit Account and the Subaccounts
(other than Security Deposits to the extent any Tenant may have any right to
the return of such Security Deposit), such amounts to be applied by
Administrative Agent as set forth in Section 10.9.3 hereof. Interest at the
Default Rate, to the extent not paid, shall be added to the Debt and shall be
secured by the Mortgage. This Section, however, shall not be construed as an
agreement or privilege to extend the date of payment of the Debt, nor as a
waiver of any other right or remedy accruing to Administrative Agent and
Lenders by reason of the occurrence of any Event of Default. The acceptance of
any payment of Mortgaged Property Gross Cash Flow shall not be deemed to cure
or constitute a waiver of any Event of Default. Administrative Agent, at the
direction of the Requisite Lenders, retains its rights under the Loan Documents
to accelerate and to continue to demand payment of the Debt upon the happening
of any Event of Default, despite any payment of Mortgaged Property Gross Cash
Flow.
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SECTION 2.7 PAYMENTS AND COMPUTATIONS.
2.7.1 MAKING OF PAYMENTS. Each payment by Borrower hereunder
or under the Notes shall be made in funds settled through the New York Clearing
House Interbank Payments System or other funds immediately available to
Administrative Agent by 11:00 a.m., New York City time, on the date such
payment is due, to Administrative Agent by deposit to the Deposit Account.
Whenever any payment hereunder or under the Notes shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the first
Business Day thereafter.
2.7.2 COMPUTATIONS. Interest payable hereunder or under the
Notes by Borrower shall be computed on the basis of the actual number of days
elapsed in each year over a 360-day year.
2.7.3 LATE PAYMENT CHARGE. If any principal, interest or any
other sums due under the Loan Documents is not paid by Borrower on or before
the date which is five (5) days after the date on which it is due, Borrower
shall pay to Administrative Agent upon demand an amount, for distribution to
the Lenders pro-rata, equal to the lesser of three percent (3%) of such unpaid
sum or the maximum amount permitted by applicable law in order to defray the
expense incurred by Administrative Agent in handling and processing such
delinquent payment and to compensate Administrative Agent and each Lender for
the loss of the use of such delinquent payment. Any such amount shall be in
addition to any other amounts required under the Loan Documents (including,
without limitation, Section 2.6.2 hereof) and shall be secured by the Mortgage
and the other Loan Documents.
2.7.4 PAYMENTS RECEIVED IN THE DEPOSIT ACCOUNT.
Notwithstanding anything to the contrary contained in this Agreement or the
other Loan Documents, and provided no Event of Default has occurred and is
continuing, Borrower's obligations with respect to the monthly payment of
principal and interest and amounts due for the Tax and Insurance Escrow Fund,
the Replacement Reserve Fund and any other payment reserves established
pursuant to this Agreement or any other Loan Documents shall be deemed
satisfied to the extent sufficient amounts are deposited in the Deposit Account
to satisfy such obligations on the Business Day prior to the date each such
payment is required.
2.7.5 APPORTIONMENT OF PAYMENTS. Aggregate principal and
interest payments, Yield Maintenance Premiums and late payment charges with
respect to the Loan shall be apportioned proportionately to Lenders' respective
Pro Rata Shares. Subject to Section 2.7.6, Administrative Agent shall promptly
distribute to each Lender, at its primary address set in Section 11.6 hereof or
at such other address as such Lender may request, its Pro Rata Share of all
such payments received by Administrative Agent when received by the Agent.
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2.7.6 DISTRIBUTION TO LENDERS. Any payment received by
Administrative Agent for distribution to Lenders that is received by 2:00 P.M.
(New York time) on any day shall be paid to Lenders by the end of such day and,
if such amounts are not paid to Lenders on such date, shall bear interest,
payable on demand by Administrative Agent, until paid to Lenders at the Federal
Funds Rate.
III. CONDITIONS PRECEDENT
SECTION 3.1 CONDITIONS PRECEDENT TO CLOSING.
The obligation of each Lender to make its pro-rata portion of
the Loan available hereunder is subject to the fulfillment by Borrower and each
Loan Party or waiver by Administrative Agent and Lenders of the following
conditions precedent no later than the Closing Date:
(a) Representations and Warranties; Compliance with
Conditions. The representations and warranties of Borrower and Parent
contained in this Agreement and of Borrower and Parent and each other Loan
Party in the other Loan Documents shall be true and correct in all material
respects on and as of the Closing Date with the same effect as if made on and
as of such date, no Material Adverse Change has occurred and no Default or
Event of Default shall have occurred and be continuing or would result from the
consummation of the borrowing contemplated by the Loan; and Borrower and each
Loan Party shall be in compliance in all material respects with all terms and
conditions set forth in this Agreement and in each other Loan Document on its
part to be observed or performed.
(b) Loan Agreement and Notes. Each Lender shall have
received a copy of this Agreement and its Note, in each case, duly executed and
delivered on behalf of Borrower.
(c) Delivery of Loan Documents; Title Insurance; Reports.
(i) Mortgage, Assignment of Leases, Assignments
of Agreements, UCC, Etc. Administrative Agent shall have received
from Borrower fully executed and acknowledged counterparts of the
Mortgage, the Assignment of Leases relating to each of the Assets and
evidence (reasonably satisfactory to Administrative Agent) that
counterparts of such Mortgages and such Assignments of Leases have
been delivered to the title company for recording, in the reasonable
judgment of Administrative Agent, so as to effectively create upon
such recording valid and enforceable Liens upon each of the Assets, of
the requisite priority, in favor of the Secured Parties, subject only
to the Permitted Encumbrances. Administrative Agent shall have also
received from Borrower (and each Loan Party, if applicable) fully
executed counterparts of the Environmental Indemnity, the Consent and
Subordination of Property Manager, and the Clearing Agreement
(together with a Payment Direction Letter or a Credit Card Payor
Payment
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Direction Letter, as applicable, addressed to each tenant and Credit
Card Payor, respectively, postage prepaid, return receipt requested)
with respect to each Asset, the Deposit Agreement, the Omnibus
Management and Liquor License Agreement, the Affiliate Guaranty and
the Collateral Security Agreement. Administrative Agent shall have
also received from Borrower and each Loan Party (i) such financing
statements under the Uniform Commercial Code (or any similar or
equivalent legislation) as Administrative Agent shall require with
respect to the Assets and the other Collateral, executed by Borrower
and all other appropriate Persons and such financing statements shall
have been filed of record in the appropriate filing offices in each of
the appropriate jurisdictions or delivered to the title insurance
company issuing the Title Insurance Policy in connection with the
Assets for filing, in the reasonable judgment of Administrative Agent,
so as to effectively create upon such filing a valid and enforceable
Lien on the Assets of the requisite priority in favor of the Secured
Parties, subject only to the Permitted Encumbrances for such Asset and
(ii) a list of the principal places of business, tax identification
numbers, and doing business names for Borrower and each other Loan
Party, the partners, members or shareholders of Borrower or such Loan
Party, as applicable and the Property Manager, each as set forth on
Schedule XIX, and all other information as Administrative Agent
reasonably may require to properly file such UCC financing statement,
all certified by a managing member, general partner or authorized
officer of Borrower.
(ii) Title Insurance. Administrative Agent shall
have received the Title Insurance Policy with respect to each Asset
issued by a title company acceptable to Administrative Agent and dated
as of the Closing Date, with co-insurance and/or reinsurance and
direct access agreements acceptable to Administrative Agent. Such
Title Insurance Policy shall (A) provide coverage in amounts
satisfactory to Administrative Agent, (B) insure the Lenders that each
Mortgage creates a valid first lien on each Asset free and clear of
all exceptions from coverage other than Permitted Encumbrances and
standard exceptions and exclusions from coverage (as modified by the
terms of any endorsements), (C) contain such endorsements and
affirmative coverages as Administrative Agent may reasonably request
and are available in the state where each Asset is located, (D) show
good and marketable indefeasible title to each Leasehold Estate, if
any, and fee simple title to each other Asset vested in Borrower and
(E) name Administrative Agent, as agent of Lenders, as the insured.
Each Title Insurance Policy shall be assignable. Administrative Agent
also shall have received evidence that all premiums in respect of the
Title Insurance Policy have been paid. Borrower shall have paid to the
title company issuing the Title Insurance Policies or to the
appropriate Governmental Authority all recording and stamp taxes
(including mortgage recording, intangible and similar taxes) and fees
payable in connection with recording each Mortgage, each Assignment of
Leases and each financing statement in the appropriate state, county,
parish or municipal offices. Administrative Agent shall have received
satisfactory UCC financing statement, tax lien, judgment, bankruptcy
litigation and other
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lien searches and reports conducted by a search firm acceptable to
Administrative Agent with respect to the Assets from the Borrower and
all other relevant Persons, such searches to be conducted in each of
the locations as shall be required by Administrative Agent.
(iii) Survey. Administrative Agent shall have
received a current title survey for each of the Assets certified to
the title company and Administrative Agent, as agent for Lenders, and
their successors and assigns in form and content satisfactory to
Administrative Agent and prepared by a professional and properly
licensed land surveyor satisfactory to Administrative Agent in
accordance with the 1992 Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys. The survey should meet the
classification of an "Urban Survey" and the following additional items
from the list of "Optional Survey Responsibilities and Specifications"
(Table A) should be added to the survey: 2, 3, 4, 6, 7, 8, 9, 10, 11
and 13. Such surveys shall reflect the same legal description
contained in the Title Insurance Policy referred to in clause (ii)
above relating to each of the Assets and shall include, among other
things, a metes and bounds description of the real property comprising
part of each such Asset reasonably satisfactory to Administrative
Agent. The surveyor's seal shall be affixed to the survey and the
surveyor shall provide a certification for the survey in form and
substance acceptable to Administrative Agent. The surveyor's
certification shall include a statement as to whether the applicable
Asset is in an area identified by the Federal Emergency Management
Agency as an area having special flood hazards.
(iv) Insurance. Administrative Agent shall have
received valid certificates of insurance for the Policies required
hereunder, and evidence of the payment of all premiums then due and
payable and evidence that the current Policies will be renewed on the
same terms and conditions (or other terms and conditions acceptable to
Administrative Agent), all of which terms and conditions shall be
satisfactory to Administrative Agent. To the extent permitted by law,
Borrower and Parent, for itself and on behalf of each other Loan
Party, hereby irrevocably waives, releases and discharges any and all
rights of action, demands and other claims of any kind or nature
against Administrative Agent arising from any failure of
Administrative Agent and Lenders to comply with the National Flood
Insurance Act of 1968 (42 U.S.C. Sections 4001, et seq.), the Flood
Disaster Protection Act of 1973 or the National Flood Insurance Reform
Act of 1994, including any failure of Administrative Agent to provide
the Borrower with written notification within ten days prior to the
Closing Date of whether any Asset is in a special flood hazard area or
whether federal disaster relief assistance will be available in the
event of flood damage to any Asset.
(v) Zoning. Administrative Agent shall have
received a certificate of occupancy (or the equivalent) from the
applicable city or county agency allowing for occupancy and operation
of each of the Assets reflecting the use of such Assets on the
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Closing Date as hotels and, at Administrative Agent's option, (A)
letters or other evidence with respect to each Asset from the
appropriate Governmental Authorities (or other Persons) concerning
applicable zoning, subdivision, building, environmental and other laws
applicable to the Assets, (B) an ALTA 3.1 zoning endorsement for the
Title Insurance Policy, or (C) a zoning opinion letter, in substance
reasonably satisfactory to Administrative Agent. Administrative Agent
shall have also received evidence satisfactory to it that each Asset
is independent of any other real property for taxing purposes.
(vi) Encumbrances. Borrower shall have taken or
caused to be taken such actions in such a manner so that the Secured
Parties have a valid and perfected Lien of first priority as of the
Closing Date with respect to the Mortgages (and Assignment of Leases)
encumbering each Asset, subject only to applicable Permitted
Encumbrances, and Administrative Agent shall have received
satisfactory evidence thereof.
(d) Related Documents. Each additional document not
specifically referenced herein, but relating to the transactions contemplated
herein, shall have been duly authorized, executed and delivered by all parties
thereto and Administrative Agent shall have received and approved originals
thereof.
(e) Delivery of Organizational Documents/Consents. On or
before the Closing Date, Borrower and Parent shall have delivered or caused to
be delivered to Administrative Agent, in sufficient copies for each Lender,
certified copies of all organizational documentation related to Borrower, each
other Loan Party and each general partner or member of Borrower and each other
Loan Party as Administrative Agent may request in its sole discretion,
including, without limitation, good standing certificates, qualifications to do
business in the appropriate jurisdictions, resolutions authorizing the entering
into of the Loan, the execution and delivery of the Loan Documents, and
incumbency certificates as may be requested by Administrative Agent.
Administrative Agent shall have received copies of all consents, licenses and
approvals, if any, required in connection with the execution, delivery and
performance by the Borrower or any other Loan Party and the validity and
enforceability of the Loan Documents, and such consents, licenses and approvals
shall be in full force and effect.
(f) Opinions of Borrower's Counsel. Administrative Agent
shall have received opinions of Borrower's counsel, and the other Loan Parties'
counsel (including with respect to clause (ii) below from counsel in each state
where each Asset is located), (i) with respect to non-consolidation and (ii)
with respect to due execution, authority, enforceability (including usury) of
the Loan Documents and such other matters as Administrative Agent may require,
all such opinions to be in form, scope and substance satisfactory to
Administrative Agent and its counsel in their reasonable discretion.
(g) Intentionally Deleted.
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(h) Basic Carrying Costs. Borrower shall have paid all
Basic Carrying Costs relating to each of the Assets which are in arrears,
including, without limitation, (i) due but unpaid insurance premiums relating
to such Assets, (ii) currently due Taxes (including any in arrears) relating to
such Assets, (iii) currently due Other Charges relating to such Assets, (iv)
currently due Ground Rents with respect to such Assets and (v) currently due
Franchise Fees with respect to such Assets, which amounts may be funded with
proceeds of the Loan if such proceeds are sufficient therefor.
(i) Completion of Proceedings. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated by this Agreement and the other Loan Documents and all documents
incidental thereto shall be satisfactory in form and substance to
Administrative Agent, and Administrative Agent shall have received all such
counterpart originals or certified copies of such documents as Administrative
Agent may reasonably request.
(j) Estoppel and Subordinations. Administrative Agent
shall have received an executed tenant estoppel letter and subordination
agreement, which shall be in form and substance satisfactory to Administrative
Agent in its sole but reasonable discretion, from each tenant under each Tenant
Lease listed on Schedule XIV at each Asset and such other estoppel letters as
Administrative Agent shall require in connection with each such Asset
(including from parties to reciprocal easement agreements, from Ground Lessors
and in connection with other documents affecting each such Asset).
(k) Payments. All payments, deposits or escrows required
to be made or established by Borrower under this Agreement, the Notes and the
other Loan Documents on or before the Closing Date shall have been paid
(including without limitation the transfer of all security deposits to the
Security Deposit Subaccount). Administrative Agent, shall have received (i) a
settlement statement setting forth the disbursement of the Loan in form and
content satisfactory to Administrative Agent and (ii) Schedule XXV which sets
forth all amounts payable with respect to the Property on account of tax and
insurance bills for the two calendar years prior to the applicable Closing Date
which Schedule XXV shall be true and correct.
(l) Third Party Reports. Administrative Agent shall have
received a current seismic report (prepared by a specialist acceptable to
Administrative Agent for all Assets, reasonably requested by Administrative
Agent which are located in areas where there is a risk of the occurrence of an
earthquake), an MAI appraisal report (prepared in compliance with all Legal
Requirements, including Title XI of the Financing Institutions Reform, Recovery
and Enforcement Act of 1989, 12 U.S.C. Sections 331, et seq., as amended, and
any successor statute thereto and the regulations promulgated thereunder
("FIRREA")), structural engineering report (identifying, among other things,
(a) deferred maintenance for any Assets and the cost thereof and (b) a 10 year
schedule of anticipated capital expenditures and the per annum cost thereof)
and environmental property condition report (Phase I environmental reports for
each Asset and Phase II reports and other environmental investigation in all
cases where environmental
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consultants recommend such Phase II reports and/or further investigation or as
Administrative Agent otherwise determines are required); in respect of each of
the Assets, each addressed to Administrative Agent and Lenders and in form and
substance satisfactory to Administrative Agent and performed by an appraiser,
engineer or other professional satisfactory to Administrative Agent.
(m) Financial Statements. Administrative Agent shall
have received unaudited historical operating statements for each Asset for the
Fiscal Year ended December 31, 1996 and for the consecutive full twelve (12)
months immediately preceding the Closing Date Administrative Agent and Borrower
shall agree on procedures to be performed by Arthur Anderson LLP and reported
upon on an Asset by Asset basis on or before December 15, 1997.
(n) Payoff Letters; Assignments. Administrative Agent
shall have received a true and correct copy of the payoff letters for all of
the existing debt encumbering each Asset. In addition, for all of the existing
debt encumbering each Asset which is to be assigned to Lenders, Administrative
Agent shall have received the original promissory notes endorsed to the order
of Administrative Agent, as agent for Lenders, the original mortgages together
with an original assignment thereof to Administrative Agent in form and
substance acceptable to Administrative Agent and representations from the
lender holding such existing debt as to the outstanding principal balance
thereof, no defaults existing thereunder and such other matters as
Administrative Agent may reasonably require.
(o) Rent Roll. Administrative Agent shall have received
a Rent Roll dated as of October 15, 1997, together with occupancy statistics
for the 12 month periods ending December 31, 1996, and the twelve months ending
August 31, 1997, each in form and content acceptable to Administrative Agent
for each Asset and certified by Borrower as being true, correct, complete and
accurate.
(p) Leases, Contracts and Permits. Administrative Agent
shall have received copies of (or been provided the opportunity to review) all
leases (including equipment leases), permits, licenses, appraisals,
authorizations and contracts related to each of the Assets.
(q) Structuring Fee. Administrative Agent shall have
received an amount equal to three-eighths of one percent (.375%) of the Loan.
(r) Utilities. Administrative Agent shall have received
evidence that all utility services and parking required for each of the Assets
are available (which evidence may consist of the survey set forth in clause
(c)(iii) above for each of such Assets reflecting the utility and parking), and
evidence that each of such Assets is subject to tax assessment which is
separate from any other real property or improvements.
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(s) Ground Lease Matters. No Asset shall be a Leasehold
Estate unless agreed to by Administrative Agent and Lenders in their sole
discretion; in which event (except with respect to the New Orleans Hotel and
the Houston Hotel but only for the period from the Closing Date to the Ground
Lease Early Repayment Date) (i) Administrative Agent shall have received from
Borrower (i) such estoppel certificates, subordination agreements and other
agreements in form and substance satisfactory to Administrative Agent (ii) the
Ground Lease shall expire no earlier than ten (10) years after the Stated
Maturity and shall otherwise be on terms acceptable to the Requisite Lenders
and Administrative Agent in their sole discretion, including the financeability
of such Ground Lease, (iii) Borrower shall have delivered to Administrative
Agent (in sufficient copies for each Lender) executed or conformed, certified
copies of each of the Ground Leases and all amendments and written waivers
thereto entered into on or prior to the Closing Date and (iv) the Ground Lease
shall not be subordinate to any lien and shall be the first lien against the
fee simple estate in the real property and improvements; which fee simple
estate shall not be encumbered by a mortgage unless agreed to by Administrative
Agent and the Requisite Lenders in their sole discretion.
(t) Property Management Agreements. Borrower shall have
delivered to Administrative Agent (in sufficient copies for each Lender)
executed or conformed, certified copies of each of the Property Management
Agreements and all amendments and written waivers thereto entered into on or
before the Closing Date, as listed on Schedule VI annexed hereto, which
Property Management Agreements shall be satisfactory in form and substance to
the Requisite Lenders and Administrative Agent in their sole discretion; such
Property Management Agreements, as so amended or waived, shall be in full
force and effect and no material term or condition thereof shall have been
further amended, modified or waived in any material respect after the execution
thereof (other than the waiver of any Management Fee previously due and
payable).
(u) Liquor Agreements. Borrower shall have delivered to
Administrative Agent (in sufficient copies for each Lender) executed or
conformed, certified copies of each of the Liquor Agreements and all amendments
and written waivers thereto entered into on or before the Closing Date, as
listed on Schedule VI annexed hereto, which Liquor Agreements shall be
satisfactory in form and substance to the Requisite Lenders and Administrative
Agent in their sole discretion; such Liquor Agreements, as so amended or
waived, shall be in full force and effect and no material term or condition
thereof shall have been further amended, modified or waived after the execution
thereof; and no Person shall have failed in any material respect to perform any
material obligation or covenant or satisfy any material condition required by
such Liquor Agreements to be performed or complied with on or before the
Closing Date.
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(v) Franchise Agreements; Franchisor Comfort Letters.
Borrower shall have delivered to Administrative Agent (in sufficient copies for
each Lender) executed or conformed, certified copies of each of the Franchise
Agreements and all amendments and written waivers thereto entered into on or
before the Closing Date, as listed on Schedule V annexed hereto, which
Franchise Agreements shall be reasonably satisfactory in form and substance to
Administrative Agent in all material respects; such Franchise Agreements, as so
amended or waived, shall be in full force and effect and no material term or
condition thereof shall have been further amended, modified or waived after the
execution thereof; and no Person shall have failed in any material respect to
perform any material obligation or covenant or satisfy any material condition
required by such Franchise Agreements to be performed or complied with on or
before the Closing Date, including, without limitation (but only if the same
constitutes a material obligation, covenant or condition), obligations under
property improvement plans and quality control plans required by the respective
franchisors to be performed within specified periods. Borrower shall have
delivered to Administrative Agent original counterparts of a franchisor's
comfort letter with respect to each Franchise Agreement in respect of each
Asset acceptable in form and substance to Administrative Agent, and duly
executed by each franchisor under such Franchise Agreement.
(w) Senior Note Consent. Borrower shall have delivered
to Administrative Agent an executed or conformed, certified copy of the Senior
Note Consent and such documents, as so amended, shall be in full force and
effect and no term or condition thereof shall have been further amended,
modified or waived after the execution thereof; and no Person shall have failed
in any material respect to perform any material obligation or covenant or
satisfy any material obligation or covenant or satisfy any material condition
required thereunder to be performed or complied with on or before the Closing
Date.
(x) IP License Agreements. Borrower shall have delivered
to Administrative Agent (in sufficient copies for each Lender) executed or
conformed, certified copies of every IP License Agreement and all amendments
and written waivers thereto entered into on or before the Closing Date, as
listed on Schedule XI annexed hereto, which IP License Agreements shall be
reasonably satisfactory in form and substance to Administrative Agent in all
material respects; such IP License Agreements, as so amended or waived, shall
be in full force and effect and no material term or condition thereof shall
have been further amended, modified or waived after the execution thereof; and
no Person shall have failed in any material respect to perform any material
obligation or covenant or satisfy any material condition required by such IP
License Agreements to be performed or complied with on or before the Closing
Date; the Loan Parties shall have delivered evidence reasonably satisfactory in
form and substance to Administrative Agent that there is no material
Intellectual Property.
(y) Room Rates. Administrative Agent shall have received
Occupancy/Room Rate Statistics for each Asset for the twelve (12) ending
December 31, 1996 and the twelve months ending August 31, 1997.
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(z) Stock Pledges. The Loan Parties shall have
delivered to Administrative Agent pursuant to the Collateral Security Agreement
the stock certificates (which certificates shall be accompanied by irrevocable
undated stock powers duly endorsed in blank and irrevocable proxies, all
satisfactory in form and substance to Administrative Agent), certificated
partnership interests, certificated limited liability company membership
interests, promissory notes and other instruments, (in each case duly endorsed
to the order of Administrative Agent, as Agent for Lenders, as secured party),
representing the capital stock, partnership interests, limited liability
company membership interests, promissory notes and other instruments to be
pledged on the Closing Date pursuant to the Collateral Security Agreement.
(aa) Liquor Cost Evidence. Borrowers have delivered
to Administrative Agent, in a form and substance satisfactory to Administrative
Agent, evidence that expenses incurred by each Subsidiary in connection with
each Liquor Agreement generally equal or exceed 50% of the revenue collected by
such Subsidiary in connection with each such Liquor Agreement ("LIQUOR COST
EVIDENCE").
(bb) O&M Plan. Borrower shall have implemented an
operations and maintenance plan ("O&M PLAN") which shall be reasonably
satisfactory to Administrative Agent, for asbestos-bearing materials ("ABM")
that is consistent with the recommendations in the Environmental Protection
Agency's "Managing Asbestos in Place, A Building Owner's Guide to Operations
and Maintenance Programs for Asbestos-Containing Materials" (or any successor
to such guide) and which shall include, without limitation, a plan for
complying with all applicable laws with respect to ABM and (to the extent
required by such guide) the following program elements: (i) notification (a
program to tell workers, tenants and building occupants where ABM is located,
and how and why to avoid disturbing the ABMs); (ii) surveillance (regular ABM
surveillance to note, assess, and document changes in the ABM's condition);
(iii) controls (work control/permit system to control activities which might
disturb ABMs); (iv) work practices (operations and maintenance work practices
to avoid or minimize fiber release during activities affecting ABM); (v)
recordkeeping (to document operations and maintenance activities); (vi) worker
protection (medical and respiratory protection programs, as applicable); and
(vii) training (asbestos program manager and custodial and maintenance staff
training). A copy of each such O&M Plan shall have been delivered to
Administrative Agent.
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SECTION 3.2 CONDITIONS PRECEDENT TO ANY SUBSTITUTION EVENT.
The obligation of Administrative Agent to provide Borrower a
Partial Release for any proposed Substitution Removed Asset pursuant to Section
2.4.1 hereof is subject to fulfillment by Borrower or waiver by Lenders of the
following conditions precedent no later than the date required therefore as
hereinafter provided:
(a) Information Deliveries. Borrower shall have
delivered to Administrative Agent, pursuant to Section 2.4.4 hereof, the
following in form and substance satisfactory to the Requisite Lenders and
Administrative Agent in their sole discretion:
(i) Section 3.1 Deliveries. All of the
deliveries required to be delivered by Borrower pursuant to Sections
3.1(c)(iii), (c)(iv), (c)(v); (e), (f), (j), (l), (m), (o), (p), (r)
and (s) on or prior to the Closing Date shall be delivered to
Administrative Agent with respect to the Substitution Added Asset;
(ii) Title. A preliminary title report consistent
with the provisions of Section 3.1(c)(ii) hereof for the Substitution
Added Asset; and
(iii) Other Documents. Such other certificates and
documentation relating to the Substitution Event as may have been
reasonably requested by Administrative Agent (including, without
limitation, all corporate and other proceedings), all other documents
(including, without limitation, all documents referred to herein and
not appearing as exhibits hereto) and all legal matters in connection
with the Substitution Event shall be reasonably satisfactory in form
and substance to Administrative Agent.
(iv) Budgets. Borrower shall have delivered, and
Administrative Agent shall have approved, the Approved Annual
Operating Budget (relating to each Substitution Added Asset) for the
remainder of the current Fiscal Year, amended in form and substance
satisfactory to the Requisite Lenders and Administrative Agent in
their sole discretion (which shall include a budget for Replacements
and Leasing Commissions) to reflect the Substitution Event.
(b) Value. Borrower shall have provided to
Administrative Agent such evidence as Administrative Agent shall require and
Administrative Agent shall have determined in its sole and absolute discretion
that (i) the market value of the Substitution Added Assets as determined
pursuant to the appraisals delivered pursuant to Section 3.2(a)(i) hereof
exceeds the market value of the Substitution Removed Assets as determined
pursuant to Section 2.4.3(iii), and (ii) the Net Operating Income which will be
generated from the Substitution Added Assets shall equal or exceed the Net
Operating Income for the Substitution Removed Assets.
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(c) Representations and Warranties; Compliance with
Conditions. The representations and warranties of all Loan Parties contained
in this Agreement and the other Loan Documents shall be true and correct in all
material respects on and as of the Substitution Date after giving effect to the
Substitution Event with the same effect as if made on and as of the
Substitution Date, no Material Adverse Change shall have occurred, and no
Default or Event of Default shall have occurred and be continuing (x) on the
Substitution Date which will not be cured by the Substitution Event or (y)
after giving effect to the Substitution Event.
(d) Document Deliveries. On or prior to the Substitution
Date, all of the conditions set forth in Section 3.1 with respect to the Loan
shall have been fulfilled and the Borrower shall, at its sole cost and expense,
deliver to Administrative Agent the following, in form and content acceptable
to the Requisite Lenders and Administrative Agent, in their sole discretion,
with respect to the Substitution Added Asset:
(i) Section 3.1 Deliveries. All of the
deliveries, payments and actions required to be delivered, paid or
performed by Borrower or any other Loan Party pursuant to Sections
3.1(c)(i), (c)(vi), (d), (f), (h), (i), (k), (n), (t), (u), (v), (x),
(y) and (z) on or prior to the Closing Date shall be delivered, paid
or performed with respect to the Substitution Added Asset on or prior
to the Substitution Date;
(ii) Substitution Certificate. A certificate
executed and delivered by an authorized officer, director, general
partner or managing member of Borrower, as applicable certifying, as
of the Substitution Date, (v) as to the matters set forth in Section
3.2(b) and (c), (w) as to the principal amount outstanding under the
Notes, (x) as to the allocation of the Allocated Loan Amounts for the
Substitution Removed Assets among the Substitution Added Assets, as
determined by the Requisite Lenders and Administrative Agent in their
sole discretion and (y) as to the amount of the initial deposits or
monthly deposits, as determined by Administrative Agent, if required
to be made in connection with such Substitution Event pursuant to
Article 7 hereof;
(iii) Title Policy. A Title Policy and the other
deliveries consistent with Section 3.1(c)(ii) for the Substitution
Added Assets.
(iv) Recording Charges. Evidence of payment of
all mortgage, mortgage recording, stamp, intangible and other similar
taxes, recording charges and filing fees, if any, incurred in
connection with each Mortgage, Assignment of Leases and other Loan
Document executed and delivered in connection with the Substitution
Event;
(v) Expenses. Payment of all reasonable
out-of-pocket expenses of the transactions to be consummated on the
Substitution Date, including without limitation, all reasonable
attorneys' fees, appraisal fees, accounting fee, consultant fees, and
other expenses of Administrative Agent and any Lender;
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(vi) Updates to Schedules. To the extent required
by Administrative Agent, updates to all schedules and exhibits to this
Agreement;
(vii) Acquisition Documents. If Borrower is
purchasing the Substitution Added Asset from a third party, copies of
all documents with respect to such purchase (including but not limited
to copies of purchase contracts, deeds and title policies).
(e) Site Inspection. Administrative Agent on behalf of
Lenders, shall have performed, or caused to be performed on its behalf, an
on-site due diligence review of the Substitution Added Asset and the results
thereof shall have been satisfactory to the Requisite Lenders and
Administrative Agent in their sole discretion;
(f) No Injunction. On the Substitution Date, no law or
regulation shall have been adopted, no order, judgment or decree of any
Governmental Authority shall have been issued and no litigation shall be
pending or threatened, which in the good faith judgment of Administrative Agent
would enjoin, prohibit or restrain, or impose or result in the imposition of
any material adverse condition upon, the making or repayment of the Loan or the
consummation of the transactions contemplated by this Agreement or the other
Loan Document.
(g) Form of Loan Documents and Related Matters. The
certificates, agreements, legal opinions and other documents and papers
referred to in this Section 3.2 shall be delivered to Administrative Agent, and
shall be reasonably satisfactory in form and substance to Administrative Agent
and the Lenders (unless the form thereof is prescribed herein and except that
the Mortgages, Assignment of Leases, Environmental Indemnities, Clearing
Account Agreement and Consent and Subordination of Property Manager, shall be
consistent with the form of such document, delivered in connection with the
Closing except as may be required by Administrative Agent or its counsel to
take into account the particular Substitution Added Asset which is being
encumbered or circumstances in connection therewith (such as conforming the
documents to the requirements of local law and of Administrative Agent and
Lenders in the state where the Substitution Added Asset is located)).
IV. REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS OF BORROWER AND PARENT.
To induce Lenders and the Administrative Agent to enter into
this Agreement, Borrower and Parent represent and warrant as of the Closing
Date that:
(a) Organization. Borrower and each other Loan Party has
been duly organized and is validly existing and in good standing with requisite
power and authority to own its properties and to transact the businesses in
which it is now engaged. Borrower and each other Loan Party is duly qualified
to do business and is in good standing in each jurisdiction
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where it is required to be so qualified in connection with its properties,
businesses and operations, except where such failure could not reasonably be
expected to cause, either individually or in the aggregate, a Material Adverse
Change. Borrower and each other Loan Party possesses all rights, licenses,
permits and authorizations, governmental or otherwise, necessary to entitle it
to own its properties and to transact the businesses in which it is now engaged
(except where such failure could not reasonably be expected to cause, either
individually or in the aggregate, a Material Adverse Change), and the sole
business of Borrower and each other Loan Party is the ownership, management and
operation of the Property and the other Collateral, respectively. All issued
and outstanding common stock of Borrower and each Loan Party which is a
corporation is duly and validly issued, fully paid and nonassessable.
(b) Proceedings. Borrower and each other Loan Party has
taken all necessary action to authorize the execution, delivery and performance
of this Agreement and the other Loan Documents. This Agreement and such other
Loan Documents have been duly executed and delivered by or on behalf of
Borrower and each other Loan Party and constitute legal, valid and binding
obligations of Borrower and such Loan Parties to which it is a party
enforceable against Borrower and each other Loan Party in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization
and similar laws affecting rights of creditors generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
(c) No Conflicts. The execution, delivery and
performance of this Agreement and the other Loan Documents by Borrower and each
other Loan Party which is a party thereto will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance (other
than pursuant to the Loan Documents) upon any of the property or assets of
Borrower or any other Loan Party pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement, partnership agreement, operating
agreement, certificate of incorporation, by-laws or other agreement or
instrument to which Borrower or any other Loan Party is a party or by which any
of Borrower's or any other Loan Party's property or assets is subject, nor will
such action result in any violation of the provisions of any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over Borrower or any other Loan Party or any of Borrower's or any
other Loan Party's properties or assets, and any consent, approval,
authorization, order, registration or qualification of or with any court or any
such regulatory authority or other governmental agency or body required for the
execution, delivery and performance by Borrower or any other Loan Party of this
Agreement or any other Loan Documents to which it is a party has been obtained
and is in full force and effect, except where failure to so comply will not
then have caused and could not reasonably be expected to cause, either
individually or in the aggregate, a Material Adverse Change.
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(d) Litigation. There are no actions, suits or
proceedings at law or in equity by or before any Governmental Authority or
other agency now pending or threatened against or affecting Borrower, any other
Loan Party or the Property or the other Collateral, which actions, suits or
proceedings, if determined against Borrower, any other Loan Party or the
Property or the other Collateral, could reasonably be expected to cause, either
individually or in the aggregate, a Material Adverse Change.
(e) Agreements. Neither Borrower nor any other Loan
Party nor any subsidiary of Bristol is a party to any agreement or instrument
or subject to any restriction which could reasonably be expected to cause a
Material Adverse Change. Neither Borrower nor any other Loan Party is in
default (and no condition exists that, with the giving of notice or the passage
of time or both, would constitute a default) in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party or by which Borrower, such Loan
Party or any Asset or other Collateral is bound which defaults, in the
aggregate, will not then have caused and could not reasonably be expected to
cause, either individually or in the aggregate, a Material Adverse Change.
Other than the Loan Documents, the Acquisition Documents and the Subordinate
Note Documents, no agreement, instrument or other restriction exists which
limits the ability or right of any Loan Party to (w) amend, restate or satisfy
the terms and conditions of this Agreement or the other Loan Documents, (x)
refinance, prepay or repay the Debt, (y) acquire, loan or dispose of any
property or other asset, or any interest therein, or acquire or enter into, or
provide any services under any Property Management Agreement or other
management agreement or (z) otherwise conduct such Loan Party's business.
(f) Title. Borrower has good, marketable and insurable
title to the Leasehold Estates comprising the Property, good marketable and
insurable title in fee simple to all of the other real property and
improvements comprising the Property and good title to the balance of the
Collateral, free and clear of all Liens whatsoever except the Permitted
Encumbrances. Each Mortgage, when properly recorded in the appropriate records
and each of the other Security Documents, together with any Uniform Commercial
Code financing statements required to be filed in connection therewith, will
create (i) a valid, perfected, legally enforceable first priority lien on the
appropriate Asset and on the other Collateral, subject only to the Permitted
Encumbrances and (ii) perfected security interests in and to, and perfected
collateral assignments of, all personalty (including the Tenant Leases) and the
other Collateral, all in accordance with the terms thereof, in each case
subject only to any applicable Permitted Encumbrances. The Permitted
Encumbrances do not materially and adversely affect the value of any Asset, the
use of such Asset for the use being made thereof as of the date of this
Agreement, the operation of such Asset or Borrower's ability to repay the Loan
in full. There are no claims for payment for work, labor or materials
affecting any Asset which are or may become a Lien prior to, or of equal
priority with, the Liens created by the Loan Documents other than the Permitted
Encumbrances.
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(g) No Bankruptcy Filing. Neither Borrower nor any Loan
Party is contemplating either the filing of a petition by it under any state or
federal bankruptcy or insolvency laws or the liquidation of all or a major
portion of its assets or property, and neither Borrower nor Parent has
knowledge of any Person contemplating the filing of any such petition against
Borrower or any Loan Party.
(h) Full and Accurate Disclosure. No statement of fact
made by Borrower or any Loan Party in this Agreement or in any of the other
Loan Documents, nor any written materials relating to the business, operations
or condition (financial or otherwise) of Borrower, any Loan Party, the Property
or any other Collateral that were supplied to Lenders in connection with the
transactions contemplated by the Loan Documents (other than financial
projections in respect of which no representation is made) contains or will
contain (or, in the case of such written material, at the time supplied
contained) any untrue statement of a material fact or omits or will omit (or
omitted, as the case may be) to state any material fact necessary to make the
statements contained herein or therein not misleading. There is no material
fact presently known to Borrower or Parent which has not been disclosed to
Administrative Agent and Lenders in writing in connection with such due
diligence investigation which adversely affects, nor as far as Borrower or
Parent can foresee, might cause a Material Adverse Change.
(i) No Plan Assets. Neither Borrower nor any other Loan
Party is an "employee benefit plan" (as defined in Section 3(3) of ERISA),
subject to Title I of ERISA, and none of the assets of Borrower or any other
Loan Party constitutes or will constitute "plan assets" of one or more such
plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition, (i)
neither Borrower nor any other Loan Party is a "governmental plan" within the
meaning of Section 3(32) of ERISA and (ii) transactions by or with Borrower or
any other Loan Party are not subject to state statutes regulating investments
of, and fiduciary obligations with respect to, governmental plans.
(j) Compliance. Borrower, each other Loan Party, the
Property, the other Collateral and the use thereof comply with all applicable
Legal Requirements, including, without limitation, building and zoning
ordinances and codes and subdivision laws and regulations, except where failure
to so comply will not then have caused and could not reasonably be expected to
cause, either individually or in the aggregate, a Material Adverse Change.
Neither Borrower nor any Loan Party is in default or violation of any order,
writ, injunction, decree or demand of any Governmental Authority, except where
failure to so comply will not then have caused and could not reasonably be
expected to cause, either individually or in the aggregate, a Material Adverse
Change. There has not been and shall never be committed by Borrower any other
Loan Party or any other person in occupancy of or involved with the operation
or use of any Asset or any other Collateral any act or omission affording the
federal government or any state or local government the right of forfeiture as
against any Asset, any other Collateral or any part thereof or any monies paid
in performance of Borrower's obligations under any of the Loan
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Documents. Borrower and Parent hereby covenant and agree not to commit, permit
or suffer to exist any act or omission affording such right of forfeiture.
(k) Financial Information.
(i) To Borrower's and Parent's best knowledge,
all financial data, including, without limitation, the statements of
cash flow and income and operating expense, that have been delivered
to Administrative Agent and Lenders in respect of the Property,
including those required under Section 3.1 hereof (A) are true,
complete and correct in all material respects, (B) accurately
represent the financial condition of the Property as of the date of
such reports, and (C) have been prepared in accordance with GAAP
consistently applied throughout the periods covered, except as
disclosed therein. Neither Borrower nor any other Loan Party has any
material contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments that are known to Borrower and
reasonably likely to cause a Material Adverse Change except as
referred to or reflected in said financial statements. Since the date
of such financial statements, there has been no Material Adverse
Change in the financial condition, operations or business of Borrower
or any other Loan Party from that set forth in said financial
statements.
(ii) All federal, state and local income tax
returns have been filed by Borrower and the other Loan Parties and
there are no income taxes due and owing by Borrower or the other Loan
Parties.
(l) Condemnation/Casualty. No Condemnation or other
proceeding has been commenced or, to Borrower's best knowledge, is contemplated
with respect to all or any portion of any Asset or for the relocation of
roadways providing access to any Asset. Except as set forth on Schedule XXIV
no Casualty (which has not already been repaired) has occurred at any Asset
except for Casualties which would cost less than $100,000 to repair.
(m) Federal Reserve Regulations. No part of the proceeds
of the Loan will be used for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or for any other purpose which would be inconsistent
with such Regulation U or any other Regulations of such Board of Governors, or
for any purposes prohibited by Legal Requirements or by the terms and
conditions of this Agreement or the other Loan Documents.
(n) Utilities and Public Access. Each of the Assets has
rights of access to public ways and is served by water, sewer, sanitary sewer
and storm drain facilities adequate to service each of the Assets for its
intended use. All public utilities necessary or convenient to the full use and
enjoyment of each of the Assets are located either in the public rights-of-way
abutting such Asset (which are connected so as to serve each of the Assets
without passing over
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other property) or in recorded easements serving each of the Assets and such
easements are set forth in the Title Insurance Policy for such Asset. All
roads necessary for the use of the Property for its current purpose have been
completed and dedicated to public use and accepted by all Governmental
Authorities.
(o) Not a Foreign Person. Neither Borrower nor any other
Loan Parties is a "foreign person" within the meaning of Section 1445(f)(3) of
the Code.
(p) Separate Lot. Each of the Assets is comprised of one
(1) or more parcels which constitute a separate tax lot and does not constitute
a portion of any other tax lot not a part of such Asset.
(q) Assessments. Except as set forth on Schedule XX,
there are no pending or proposed special or other assessments for public
improvements or otherwise affecting any of the Assets, nor are there any
contemplated improvements to any of the Assets that may result in such special
or other assessments, and Borrower has no knowledge of any other facts or
circumstances (other than facts or circumstances which generally affect
properties located in the area where any Asset is located, such as a general
increase in Taxes for properties in such area) which would cause the Taxes for
Fiscal Year 1997 to be significantly higher than the Taxes assessed and imposed
for Fiscal Year 1996 except as set forth on Schedule XX.
(r) Enforceability. The Loan Documents are not subject
to any right of rescission, set-off, counterclaim or defense by Borrower or any
other Loan Party, including the defense of usury, nor would the operation of
any of the terms of the Loan Documents, or the exercise of any right
thereunder, render the Loan Documents unenforceable except to the extent such
unenforceability may be the result of bankruptcy, insolvency, reorganization or
similar laws affecting rights of creditors generally or general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity
or at law), and neither Borrower nor any other Loan Party has asserted any
right of rescission, set-off, counterclaim or defense with respect thereto.
(s) No Prior Assignment. There are no prior assignments
of (i) the Tenant Leases, (ii) any portion of the Rents due and payable or to
become due and payable or (iii) any other Collateral (except the assignments of
Collateral, set forth on Schedule XXI, which secure Permitted Trade Payables
and FF&E Financings which in the aggregate do not exceed the Maximum Permitted
Trade Payables and FF&E Financings and other Permitted Encumbrances), which
will be outstanding following the Closing Date.
(t) Insurance. Borrower has obtained and has delivered
to Administrative Agent certified copies of all Policies reflecting the
insurance coverages, amounts and other requirements set forth in this Agreement
and there have been no acts or omissions that would impair the coverage of any
such Policies or the benefits of the mortgagee endorsement and all
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such insurance policies are in full force and effect and all premiums with
respect to each such insurance policy have been paid in accordance with the
requirements of Section 7.1 hereof.
(u) Use of Property. Each of the Assets is used
exclusively for hotel purposes and other appurtenant and related uses
(including retail stores and restaurants).
(v) Certificate of Occupancy; Licenses. All
certifications, permits, licenses and approvals, including, without limitation,
certificates of completion and occupancy permits required for the legal use,
occupancy and operation of each of the Assets as a hotel (collectively, the
"LICENSES"), have been obtained and are in full force and effect, except where
any failure to do so, in the aggregate, will not result in a Material Adverse
Change. Borrower shall and Parent shall cause each Loan Party to keep and
maintain all Licenses necessary for the operation of each of the Assets as a
hotel. The use being made of each of the Assets is in conformity with the
certificates of occupancy issued for the Property, except where failure to so
comply will not then have caused and could not reasonably be expected to cause,
either individually or in the aggregate, a Material Adverse Change.
(w) Flood Zone. Except as set forth on Schedule XXII,
none of the Improvements on each of the Assets are located in an area as
identified by the Federal Emergency Management Agency as an area having special
flood hazards. Flood insurance policies (meeting the requirements of Section
7) are in effect for all Assets listed on Schedule XXII. None of the
Improvements on any Asset are constructed on land designated by any
Governmental Authority as wetlands.
(x) Physical Condition. Except as shown on the reports
delivered pursuant to Section 3.1(l), each of the Assets and material
components thereof, including, without limitation, all buildings, improvements,
parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems,
HVAC systems, fire protection systems, electrical systems, equipment,
elevators, exterior sidings and doors, landscaping, irrigation systems and all
structural components, is in good condition, order and repair in all material
respects, ordinary wear and tear excepted. There exists no structural or other
material defects or damages in any Asset, whether latent or otherwise, and
neither Borrower nor any other Loan Party has received notice from any
insurance company or bonding company of any defects or inadequacies in any
Asset, or any part thereof, which would adversely affect the insurability of
the same or cause the imposition of extraordinary premiums or charges thereon
or of any termination or threatened termination of any policy of insurance or
bond.
(y) Boundaries. All of the improvements which were
included in determining the appraised value of each Asset lie wholly within the
boundaries and building restriction lines of such Asset (other than immaterial
encroachments upon any building line, setback line, sideyard line or recorded
or visible easements, which in each case are described in the Title Insurance
Policy and survey for such Asset and provided (x) the same do not restrict the
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maintenance and current use of the improvements included in the Asset and (y)
within thirty (30) days of the request of the Administrative Agent, Borrower
will request and use reasonable efforts (including but not limited to the
payment of fees and escrows) to cause the title company issuing the Title
Insurance Policy with respect to such Asset to provide affirmative insurance
acceptable to Administrative Agent with respect thereto), and no improvements
on adjoining properties encroach upon such Asset, and no easements or other
encumbrances upon such Asset encroach upon any of the improvements, so as to
affect the value or marketability of such Asset except those which are insured
against by title insurance or which are not likely to result in a Material
Adverse Change.
(z) Leases. No Asset is subject to any Tenant Leases
other than the Tenant Leases described in the Rent Roll delivered to
Administrative Agent in connection with this Agreement and set forth as
Schedule III attached hereto. Other than hotel guests in the ordinary course
of business, no person has any possessory interest in any Asset or right to
occupy the same except under and pursuant to the provisions of the Tenant
Leases. The current Material Leases are in full force and effect and there are
no defaults thereunder by either party and there are no conditions that, with
the passage of time or the giving of notice, or both, would constitute defaults
thereunder.
(aa) Survey. The Survey for each Asset delivered to
Administrative Agent in connection with this Agreement has been prepared in
accordance with the provisions of Section 3.1(c)(iii) hereof, and does not fail
to reflect any matter affecting such Asset or the title thereto which would
likely result in a Material Adverse Change.
(bb) Loan to Value. The Loan as of the Closing Date is
equal to no more than 75% of the fair market value of the Property based on the
appraisals, delivered in connection with the origination of the Loan.
(cc) Filing and Recording Taxes. All transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements currently
in effect in connection with the transfer of the Property to Borrower have been
paid. All mortgage, mortgage recording, stamp, intangible or other similar
taxes required to be paid by any Person under applicable Legal Requirements
currently in effect in connection with the execution, delivery, recordation,
filing, registration, perfection or enforcement of any of the Loan Documents,
including, without limitation, each Mortgage, have been paid, and, under
current Legal Requirements, each Mortgage is enforceable in accordance with its
terms by the Secured Parties (or any subsequent holder thereof).
(dd) Single-Purpose. Borrower and Parent hereby
represents and warrants to, and covenants with, Administrative Agent and
Lenders that as of the Closing Date and until such time as the Debt shall be
paid in full:
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(i) Borrower does not own and will not own any
asset or property other than (A) the Property, (B) incidental personal
property necessary for the ownership or operation of the Property and
(C) the other Collateral.
(ii) Borrower will not engage in any business
other than the ownership, management and operation of the Property and
the Collateral in connection with the Property and Borrower will
conduct and operate its business as presently conducted and operated.
(iii) Borrower will not enter into any contract or
agreement with any Affiliate of Borrower (other than a Loan Party),
any constituent party of Borrower or any Affiliate of any constituent
party, except upon terms and conditions that are intrinsically fair
and substantially similar to those that would be available on an
arms-length basis with third parties other than any such party.
(iv) Borrower has not incurred and will not incur
any indebtedness (including without limitation Guaranteed
Indebtedness), secured or unsecured, direct or indirect, absolute or
contingent (including guaranteeing any obligation), other than the
Debt and the FF&E Financings. No indebtedness other than the Debt may
be secured (subordinate or pari passu) by the Property except that
FF&E Financings permitted hereunder may be secured by the furniture,
fixtures and equipment purchased in connection with such financings.
(v) Borrower has not made and will not make any
loans or advances to any third party (including any Affiliate or
constituent party), and shall not acquire obligations or securities of
its Affiliates.
(vi) Borrower is and will remain solvent and
Borrower will pay its debts and liabilities (including, as applicable,
shared personnel and overhead expenses) from its assets as the same
shall become due.
(vii) Borrower has done or caused to be done and
will do all things necessary to observe organizational formalities and
preserve its existence, and Borrower will not, nor will Borrower
permit any constituent party of Borrower to, amend, modify or
otherwise change the partnership agreement, partnership certificate,
articles of incorporation, bylaws, articles of organization, operating
agreement, trust or other organizational documents of Borrower or such
constituent party without the prior written consent of Administrative
Agent.
(viii) Borrower will maintain all of its books,
records, financial statements and bank accounts separate from those of
its Affiliates and any constituent
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party. Borrower shall maintain its books, records, resolutions and
agreements as official records.
(ix) Borrower will be, and at all times will hold
itself out to the public as, a legal entity separate and distinct from
any other entity (including any Affiliate of Borrower or any
constituent party of Borrower), shall conduct business in its own
name, shall correct any known misunderstanding regarding its status as
a separate entity, shall not identify itself or any of its Affiliates
as a division or part of the others and shall maintain and utilize a
separate telephone number and separate stationery, invoices and
checks.
(x) Borrower will maintain adequate capital for
the normal obligations reasonably foreseeable in a business of its
size and character and in light of its contemplated business
operations.
(xi) Neither Borrower nor any constituent party of
Borrower will seek or effect the liquidation, dissolution, winding up,
consolidation or merger, in whole or in part, of Borrower.
(xii) Borrower will neither commingle the funds and
other assets of Borrower with those of any Affiliate or constituent
party of Borrower or any other Person nor control the decisions with
respect to the daily affairs of any other Person.
(xiii) Borrower has and will maintain its assets in
such a manner that it will not be costly or difficult to segregate,
ascertain or identify its individual assets from those of any
Affiliate or constituent party of Borrower or any other Person.
(xiv) Borrower does not and will not hold itself
out to be responsible for the debts or obligations of any other Person
(other than any Loan Party).
(xv) If Borrower is a limited liability company or
a limited partnership, at least one member of Borrower and any member
owning a 49% or greater membership interest in Borrower (collectively
the "SPE MEMBER") and each general partner of Borrower, as applicable,
shall be a corporation whose sole asset is its interest in Borrower;
and each general partner, the SPE Member of Borrower, or each
shareholder of Borrower which owns a 49% or greater interest in
Borrower, as applicable, will at all times comply, and will cause
Borrower to comply, with each of the representations, warranties and
covenants contained in this Section 4.1(dd) as if such representation,
warranty or covenant was made directly by such general partner or SPE
Member or shareholder. Only the SPE Member may be designated as a
manager under the law where the Borrower is organized.
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(xvi) Borrower shall at all times cause there to be
at least one duly appointed member of the board of directors (an
"INDEPENDENT DIRECTOR") of Borrower or of each general partner of
Borrower if Borrower is a limited partnership or of the SPE Member of
Borrower if Borrower is a limited liability company reasonably
satisfactory to Administrative Agent who shall not have been at the
time of such individual's initial appointment, and may not have been at
any time during the preceding five years, and shall not be at any time
while serving as a director of Borrower or the general partner (or
Member) either (A) a shareholder of, or an officer, director, partner
or employee of, Borrower or any of its shareholders, partners, members,
subsidiaries or Affiliates, (B) a customer of, or supplier to, Borrower
or any of its shareholders, partners, members, subsidiaries or
Affiliates, (C) a person or other entity controlling or under common
control with any such shareholder, officer, director, partner, member,
employee, supplier or customer, or (D) a member of the immediate family
of any such shareholder, officer, director, partner, member, employee,
supplier or customer. Notwithstanding the foregoing, Curt Boisfontaine
shall not be disapproved as an Independent Director solely by virtue of
the fact that he is acting as an "independent director" of any of
Borrowers' Affiliates. As used herein, the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policy of a person or entity, whether
through ownership of voting securities, by contract or otherwise.
(xvii) Borrower shall not cause or permit the board
of directors of Borrower or the general partner of Borrower if
Borrower is a limited partnership or of the SPE Member of Borrower if
Borrower is a limited liability company to take any action which,
under the terms of any certificate of incorporation, bylaws or any
voting trust agreement with respect to any common stock, requires a
vote of the board of directors of Borrower, the general partner of
Borrower or the SPE Member of Borrower unless at the time of such
action there shall be at least one member of the board of directors
who is an Independent Director.
(ee) Existing Debt. The total aggregate outstanding
principal amount of the existing debt and FF&E Financings, other than the Debt,
encumbering each of the Assets is as set forth on Schedule XV.
(ff) Taxes. The total Taxes (including special or other
assessments) payable with respect to each Asset for the calendar year 1996 is
as set forth in Schedule XVI, and neither Borrower nor any other Loan Party
knows of any reason, other than the renovations and improvements described on
Schedule XVI and general increases in Taxes for properties in the area where
any Asset is located, why the Taxes payable for the calendar year 1997 would be
higher.
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(gg) Rent Roll and Occupancy/Room Rate Statistics. The
Rent Roll required to be delivered to Administrative Agent pursuant to Section
3.1(o) accurately states the amounts payable under the Tenant Leases and,
except as disclosed to Administrative Agent, all such tenants are occupying the
space and are open for business. Borrower is not aware of any pending closings
or Tenant Lease cancellations or nonrenewals. To the best of Borrower's
knowledge, no tenant has any existing set-off rights against rent currently
owed. The Occupancy/Room Rate statistics delivered to Administrative Agent
pursuant to Section 3.1(y) accurately state the average room rates and
occupancy for the period covered.
(hh) Property Management Agreements. Each of the Property
Management Agreements and all amendments thereto that have been or will be
entered into on or before the Closing Date are listed on Schedule VI annexed
hereto. The Property Management Agreements, as so amended, are in full force
and effect and no term or condition thereof has been further amended, modified
or waived after the execution thereof, except in each case in accordance with
this Agreement; and no Person will have failed in any respect to perform any
obligation or covenant or satisfy any condition required by the Property
Management Agreements to be performed or complied with, except where failure to
so comply will not then have caused and could not reasonably be expected to
cause, either individually or in the aggregate, a Material Adverse Change.
(ii) Liquor Agreements. The Liquor Agreements with
respect to each Asset, in each case with all amendments thereto that have been
or will be entered into on or before the Closing Date, are listed on Schedule
VI annexed hereto. The Liquor Agreements, as amended, are in full force and
effect and no term or condition thereof has been further amended, modified or
waived after the execution thereof, except in each case in accordance with this
Agreement; and no Person will have failed in any respect to perform any
obligation or covenant or satisfy any condition required by the Liquor
Agreements to be performed or complied with, except where failure to so comply
will not then have caused and could not reasonably be expected to cause, either
individually or in the aggregate, a Material Adverse Change. Each Liquor
Agreement provides that at least 45% of the revenue collected by each
Subsidiary which is a party to such Liquor Agreement is required to be paid to
Borrower and no more than 5% of the revenue collected by such Subsidiary with
respect to such Liquor Agreement is required to be paid to the Property
Manager. The Cost Evidence delivered to Administrative Agent accurately sets
forth the expenses incurred by each Subsidiary in connection with each Liquor
Agreement. Each Liquor Agreement with respect to each Asset is subordinate
(and will continue to be subordinate) to the Lien of the Mortgage encumbering
each such Asset.
(jj) Franchise Agreements. The Franchise Agreement with
respect to each Asset, if applicable, and all amendments thereto that have been
or will be entered into on or before the Closing Date, are listed on Schedule V
annexed hereto. The Franchise Agreements, as so amended, are in full force and
effect and no term or condition thereof has been further amended, modified or
waived after the execution thereof, except in each case in accordance with
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this Agreement; and no Person will have failed in any respect to perform any
obligation or covenant or satisfy any condition required by the Franchise
Agreements to be performed or complied with, except where failure to so comply
will not then have caused and could not reasonably be expected to cause, either
individually or in the aggregate, a Material Adverse Change. Borrower has
satisfied the requirements of all core modernization plans or other property
improvement plan required by the terms of any Franchise Agreement.
(kk) Liquor Licenses. Each Liquor License issued in
connection with each Asset is set forth on Schedule VI annexed hereto, each
such Liquor License (i) is validly issued and in full force and effect or (ii)
as set forth on Schedule VI, has been applied for in accordance with the
procedures set forth on Schedule VI and the applicant has the legal right to
sell alcoholic beverages at the applicable Asset pending the issuance of the
Liquor License therefore (and Borrower has no reason to believe that such
license will not be timely issued), and the holder of each such Liquor License
or applicant, as the case may be is a party to the Omnibus Management and
Liquor License Agreement. The Borrower or its Subsidiaries has the legal right
to utilize each Liquor License required in connection with the operation of any
restaurant, bar or other alcoholic beverage service located at the applicable
Asset, except where the failure to have such right has not caused and could not
reasonably be expected to cause, either individually or in the aggregate, a
Material Adverse Change. All cash and other revenues and receipts from the
operation of any owner of a Liquor License of an alcoholic beverage service at
any Asset are collected either by the licensee thereof or the Borrower and are
then deposited directly into the Clearing Account A established for such Asset.
(ll) IP License Agreements.
(i) Each IP License Agreement, if any, and all
amendments thereto that have been or will be entered into on or before
the Closing Date are listed on Schedule XI annexed hereto. Such IP
License Agreements, as so amended, are in full force and effect and no
term or condition thereof has been further amended, modified or waived
after the execution thereof, except in each case in accordance with
this Agreement; and no Person will have failed in any respect to
perform any obligation or covenant or satisfy any condition required
by such IP License Agreements to be performed or complied with, except
where failure to so comply will not then have caused and could not
reasonably be expected to cause, either individually or in the
aggregate, a Material Adverse Change.
(ii) The Borrower and its Subsidiaries owns, or are
licensed to use or otherwise have the lawful right to use, the
material Intellectual Property. Except as set forth on Schedule XII
annexed hereto, all such material Intellectual Property (other than in
respect of rights under Franchise Agreements) is fully protected and
duly and properly registered, filed or issued in the appropriate
office and jurisdictions for such registrations, filing or issuances,
except where the lack of the lawful right to use such Intellectual
Property could not reasonably be expected, individually or in the
aggregate,
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to result in a Material Adverse Change, and in each case the Person
holding rights therein, are identified in Schedule XIIannexed hereto.
(iii) No claim has been asserted with respect to the
use of any such Intellectual Property by the Borrower or any other
Loan Party by any other Person challenging or questioning the validity
or effectiveness of any such Intellectual Property, and neither
Borrower nor any other Loan Party knows of any valid basis for any
such claim which, in either case, has caused or could reasonably be
expected to cause, either individually or in the aggregate, a Material
Adverse Change; and the use of such Intellectual Property by Borrower
does not infringe on the rights of any Person, subject to such claims
and infringements as do not, in the aggregate, give rise to any
liability on the part of Borrower or any other Loan Party that has
caused or could reasonably be expected to cause, either individually
or in the aggregate, a Material Adverse Change. The consummation of
the transactions contemplated by this Agreement will not in any manner
or to any extent impair the ownership of (or the license to use, as
the case may be) any of such Intellectual Property by Borrower.
(mm) Ground Leases. Each of the representations and
warranties set forth in Section 32 of the Mortgages which encumber Ground
Leases are herein incorporated by reference.
(nn) Subsidiaries. All of the capital stock or
partnership, limited liability company, joint venture, or other ownership
interests (however designated) of each Subsidiary (including all warrants, and
options to purchase) are directly or indirectly owned by Parent.
(oo) Borrower. All of the capital stock of Borrower is
owned by Parent and there are no warrants or options to purchase Borrower or
any stock of Borrower.
(pp) Parent. All of the capital stock of Parent is owned
by BHOC and there are no warrants or options to purchase Parent or any stock of
Parent.
SECTION 4.2 SURVIVAL OF REPRESENTATIONS.
Borrower and Parent agree that all of the representations and
warranties of Borrower (and the Loan Parties) set forth in Section 4.1 and
elsewhere in this Agreement and in the other Loan Documents shall survive for
so long as any amount remains owing to any Lender under this Agreement or any
of the other Loan Documents by Borrower. All representations, warranties,
covenants and agreements made in this Agreement or in the other Loan Documents
by Borrower, Parent or any other Loan Party shall be deemed to have been relied
upon by Administrative Agent and each Lender notwithstanding any investigation
heretofore or hereafter made by Administrative Agent or such Lender.
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V. AFFIRMATIVE COVENANTS
SECTION 5.1 BORROWER COVENANTS.
From the Closing Date and until payment and performance in
full of all obligations of Borrower under the Loan Documents or the earlier
Total Release of all the Liens of every Mortgage in accordance with the terms
of this Agreement and the other Loan Documents, Borrower hereby covenants and
agrees that unless the Requisite Lenders otherwise consent in writing:
(a) Existence; Compliance with Legal Requirements;
Insurance. Borrower and Parent shall do or cause to be done all things
necessary to preserve, renew and keep in full force and effect Borrower's and
the Loan Parties' existence, rights, licenses, Authorizations, permits and
franchises and Borrower shall comply and Parent shall cause each Loan Party to
comply with all Legal Requirements applicable to them, to every Asset and to
all other Collateral, except where failure to so comply will not then have
caused and could not reasonably be expected to cause, either individually or in
the aggregate, a Material Adverse Change. Borrower shall and Parent shall
cause all Loan Parties to at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of their property
used or useful in the conduct of their business and Borrower shall keep the
Property in good working order and repair (ordinary wear and tear excepted) and
from time to time make, or cause to be made, all reasonably necessary repairs,
renewals, replacements, betterments and improvements thereto, all as more fully
provided in each Mortgage or in this Agreement. Borrower shall keep the
Property insured at all times by financially sound and reputable insurers, to
such extent and against such risks, and maintain liability and such other
insurance, as is more fully provided in this Agreement.
(b) Taxes and Other Charges. Borrower shall pay all
Taxes and Other Charges now or hereafter levied or assessed or imposed against
the Property or any part thereof prior to the date the same become delinquent;
provided, however, Borrower's obligation to directly pay Taxes shall be
suspended for so long as Borrower complies with the terms and provisions of
Section 7.3 hereof. Borrower will deliver to Administrative Agent receipts for
payment or other evidence satisfactory to Administrative Agent that the Taxes
and Other Charges have been so paid or are not then delinquent no later than
thirty (30) days prior to the date on which the Taxes and/or Other Charges
would otherwise be delinquent if not paid (provided, however, that Borrower is
not required to furnish such receipts for payment of Taxes in the event that
such Taxes have been paid by Administrative Agent pursuant to Section 7.3
hereof). Borrower shall not suffer and shall promptly cause to be paid and
discharged any lien or charge whatsoever which may be or become a lien or
charge against any Asset, and shall promptly pay for all utility services
provided to each Asset. After prior written notice to Administrative Agent,
Borrower, at its own expense, may contest by appropriate legal proceeding,
promptly initiated and conducted in good faith and with due diligence, the
amount or validity or application in whole or in part of any Taxes or Other
Charges, provided that (i) no
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Event of Default has occurred and remains uncured, (ii) Borrower is permitted
to do so under the provisions of any mortgage or deed of trust superior in lien
to any Mortgage, (iii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to which
Borrower is subject and shall not constitute a default thereunder, and such
proceeding shall be conducted in accordance with all applicable statutes, laws
and ordinances, (iv) neither any Asset nor any part thereof or interest therein
will be in danger of being sold, forfeited, terminated, cancelled or lost, and
(v) Borrower shall promptly upon final determination thereof pay the amount of
any such Taxes or Other Charges, together with all costs, interest and
penalties which may be payable in connection therewith. In addition, if the
Taxes or Other Charges are not paid in full when Borrower commences such
contest, then the following shall apply: (A) such proceeding shall suspend the
collection of Taxes or Other Charges from such Asset, and (B) Borrower shall
furnish such security as may be required in the proceeding, or as may be
reasonably requested by Administrative Agent, to insure the payment of any such
Taxes or Other Charges, together with all interest and penalties thereon.
Administrative Agent may pay over any such cash deposit or part thereof held by
Administrative Agent to the claimant entitled thereto at any time when, in the
judgment of Administrative Agent, the entitlement of such claimant is
established.
(c) Litigation. Borrower and Parent shall give prompt
written notice to Administrative Agent of (i) any litigation or governmental
proceedings pending or threatened against Borrower or any other Loan Party
which might reasonably be expected to cause, either individually or in the
aggregate, a Material Adverse Change and (ii) any material development in any
litigation or proceeding that, in any case either (x) seeks to enjoin or
otherwise prevent the consummation of, or to recover any damages or obtain
relief as a result of, the transactions contemplated hereby or (y) threatens
the validity or priority of the Liens granted pursuant to the Loan Documents.
(d) Access to Premises. Borrower shall permit agents,
representatives and employees of Administrative Agent to inspect each Asset or
any part thereof at reasonable hours upon reasonable advance notice.
(e) Notice of Default. Borrower and Parent shall
promptly advise Administrative Agent of any Material Adverse Change of which
Borrower or Parent has knowledge.
(f) Cooperate in Legal Proceedings. Borrower shall and
Parent shall cause all Loan Parties to cooperate fully with Administrative
Agent with respect to any proceedings before any court, board or other
Governmental Authority which may in any way affect the rights of Administrative
Agent hereunder or any rights obtained by Administrative Agent under any of the
other Loan Documents and, in connection therewith, permit Administrative Agent,
at its election, to participate in any such proceedings.
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(g) Perform Loan Documents. Borrower shall, and Parent
shall cause all Loan Parties to, observe, perform and satisfy all the terms,
provisions, covenants and conditions of, and shall pay when due all costs, fees
and expenses to the extent required under, the Loan Documents executed and
delivered by, or applicable to, Borrower or any other Loan Party.
(h) Insurance Benefits. Borrower shall cooperate with
Administrative Agent in obtaining for the Secured Parties the benefits of any
Insurance Proceeds lawfully or equitably payable in connection with any Asset,
and Administrative Agent shall be reimbursed for any reasonable out-of-pocket
expenses incurred in connection therewith (including, without limitation,
attorneys' fees and disbursements, and the payment by Borrower of the expense
of an appraisal on behalf of Administrative Agent in case of a fire or other
casualty affecting such Asset or any part thereof) out of such Insurance
Proceeds.
(i) Further Assurances; Supplemental Mortgage Affidavits.
Borrower shall and Parent shall cause each Loan Party to, as applicable, at
Borrower's or such Loan Party's sole cost and expense:
(i) furnish to Administrative Agent (with
sufficient copies for each of the Lenders) all instruments, documents,
boundary surveys, footing or foundation surveys, certificates, plans
and specifications, title and other insurance reports and agreements,
and each and every other document, certificate, agreement and
instrument required to be furnished by Borrower (or any other Loan
Party) pursuant to the terms of the Loan Documents or reasonably
requested by Administrative Agent in connection therewith;
(ii) furnish to Administrative Agent, with
reasonable promptness, (a) information and other data revised to
correct any material erroneous information and other data previously
delivered by any Loan Party to Administrative Agent pursuant to this
Section 5.1 or included in any statement, report or certificate
previously delivered by such Loan Party to Administrative Agent
pursuant to this Section 5.1, together with such statement, report or
certificate that shall have been revised to reflect such revised
information and data, and (b) such other information and data with
respect to the Loan Parties, the Assets, the Property, the Ground
Leases and Tenant Leases, the Property Management Agreements, the
other Collateral and the other assets and liabilities of the Loan
Parties, all in form consistent with any applicable requirements of
this Agreement and reasonably satisfactory to Administrative Agent, as
from time to time may be reasonably requested by Administrative Agent;
(iii) execute and deliver to Administrative
Agent such documents, instruments, certificates, assignments and other
writings, and do such other acts necessary or desirable, to evidence,
preserve and/or protect the collateral at any time
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securing or intended to secure the obligations of Borrower under the
Loan Documents, as Administrative Agent may reasonably require; and
(iv) do and execute all and such further lawful
and reasonable acts, conveyances and assurances for the better and
more effective carrying out of the intents and purposes of this
Agreement and the other Loan Documents, as Administrative Agent shall
reasonably require from time to time.
(j) Financial Reporting.
(i) Borrower will keep and maintain or will cause
to be kept and maintained on a Fiscal Year basis, in accordance with
GAAP (or such other accounting basis reasonably acceptable to
Administrative Agent), proper and accurate books, records and accounts
reflecting all of the financial affairs of Borrower and all items of
income and expense in connection with the operation of the Property
(on an Asset by Asset basis). Administrative Agent shall have the
right from time to time at all times during normal business hours upon
reasonable notice to examine such books, records and accounts at the
office of Borrower or other Person maintaining such books, records and
accounts and to make such copies or extracts thereof as Administrative
Agent shall desire, and Borrower will authorize its independent
accountants to disclose to Administrative Agent or any Lender any and
all financial statements and other information of any kind as
Administrative Agent or any Lender may reasonably request. After the
occurrence of an Event of Default, Borrower shall pay any reasonable
out-of-pocket costs and expenses incurred by Administrative Agent to
examine Borrower's accounting records with respect to the Property, as
Administrative Agent shall determine to be necessary or appropriate in
the protection of Lenders' interests.
(ii) Borrower will furnish to Administrative
Agent annually, within forty-five (45) days following the end of each
Fiscal Year (beginning with Borrowers' 1998 Fiscal Year), a complete
copy of Borrower's annual unaudited operating statements setting forth
the income and expenses for each Asset for such Fiscal Year including
without limitation Net Operating Income, Gross Income from Operations,
Operating Expenses and Mortgaged Property Gross Cash Flow. Borrower
will furnish to Lenders annually, within ninety (90) days following
the end of each Fiscal Year (beginning with Borrower's 1998 Fiscal
Year), a complete copy of Borrower's financial statements audited by
one of the Big Six Accounting Firms (or by an independent certified
public accountant acceptable to the Requisite Lenders and the
Administrative Agent in their sole discretion) in accordance with
GAAP, covering the Property for such Fiscal Year and containing
consolidated statements of profit and loss and cash flow for Borrower
and a consolidated balance sheet for Borrower together with an
"unqualified opinion" of such certified public accountant. The profit
and loss statements (included in the annual audited financial
statements will be accompanied by a procedures report reasonably
acceptable to
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Administrative Agent demonstrating how the Asset by Asset annual
unaudited operating statements correlate to the audited profit and
loss statements) and otherwise in a format reasonably acceptable to
Administrative Agent. Borrower's audited annual financial statements
shall be accompanied by a Rent Roll for each Asset in form and content
reasonably acceptable to Administrative Agent and a certificate
executed by the chief financial officer, treasurer or controller of
Borrower or the general partner or manager of Borrower, as applicable,
stating that to such officer's best knowledge such annual financial
statement presents fairly the financial condition of each Asset and
has been prepared in accordance with GAAP and that the financial
statement, and all information delivered in connection therewith are
true, accurate and complete. Together with Borrower's annual
financial statements, Borrower shall furnish to Administrative Agent
(i) an Officer's Certificate certifying as of the date thereof whether
there exists an event or circumstance which constitutes a Default or
an Event of Default under the Loan Documents executed and delivered
by, or applicable to, Borrower, and if any Default or Event of Default
exists, the nature thereof, the period of time it has existed and the
action then being taken to remedy the same and (ii) a written
statement by the accounting firm which prepared Borrower's financial
statements, stating (x) in substance that their audit examination has
included a review of the terms of this Agreement and the other Loan
Documents as they relate to accounting matters, and (y) whether, in
connection with their audit examination, any condition or event that
constitutes a Default or Event of Default has come to their attention
and, if such a condition or event has come to their attention,
specifying the nature and period of existence thereof; provided,
however, that such accountants shall not be liable by reason of any
failure to obtain knowledge of any such Default or Event of Default
that would not be disclosed in the course of their audit examination;
and (iii) (unless restricted by applicable professional standards),
copies of all reports submitted to any Loan Party by the accounting
firm which prepared Borrower's financial statements, including any
comment letter submitted by such accountants to management in
connection with their annual audit. If, as a result of any change in
accounting principles and policies the consolidated financial
statements of the Loan Parties delivered pursuant to this section
differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to this section had
no such change in accounting principles and policies been made,
Borrower shall furnish to Administrative Agent together with (x) the
first delivery of financial statements pursuant to this section
following such change, consolidated financial statements of the Loan
Parties for the current calendar year to the effective date of such
change and the two full calendar years immediately preceding the
calendar year in which such change is made, in each case prepared on a
pro forma basis as if such change had been in effect during such
periods, and (y) each delivery of financial statements pursuant to
this section following such change, a written statement of the chief
financial officer, treasurer or controller of Borrower setting forth
the differences which would have resulted in the financial statements,
if the financial statements had been prepared without giving effect to
such change.
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(iii) Borrower will furnish, or cause to
be furnished, to Administrative Agent on or before (x) twenty (20)
days after the end of each calendar month, and (y) forty five (45)
days (or until a successful Securitization twenty (20) days) after
each calendar quarter, the following items on an Asset by Asset basis
accompanied by a certificate of the chief financial officer of
Borrower or the general partner or manager of Borrower, as applicable,
stating that to such officer's best knowledge such items are true,
correct, accurate and complete and fairly present the financial
condition and results of the operations of Borrower and each Asset
(subject to normal year-end adjustments) as applicable: (A)
Occupancy/Room Rate Statistics for the preceding month or quarter; (B)
monthly or quarterly and year to date operating statements prepared
for each calendar month or quarter, noting Net Operating Income, Gross
Income from Operations, Operating Expenses and other information
necessary and sufficient under GAAP to fairly represent the financial
position and results of operation of each Asset during such calendar
month or quarter, all in form reasonably satisfactory to
Administrative Agent; (C) a calculation reflecting the annual Debt
Service Coverage Ratio for each Asset individually (based upon the
Debt Service which would be payable if the Note was in the principal
amount of the Allocated Loan Amount for such Asset) and for the
Property collectively for the immediately preceding twelve (12) month
period as of the last day of each such month or quarter; (D) the
actual capital expenditure at each Asset with respect to each calendar
month or quarter. In addition, the above-referenced certificate shall
also be accompanied by an Officer's Certificate stating that the
representations and warranties of Borrower set forth in Section
4.1(dd)(iv) are true and correct as of the date of such certificate
and that there is no material amount of trade payables (including but
not limited to Permitted Trade Payables) outstanding for more than
thirty (30) days; and (E) at the end of each fiscal quarter only, a
list of all Material Security Deposits and to the extent all such
Material Security Deposits were not deposited into the Security
Deposit Subaccount during such quarter, evidence that Borrower has
deposited into the Security Deposit Subaccount an amount equal to all
such Material Security Deposits not previously deposited into such
account.
(iv) Borrower shall furnish to Administrative
Agent, within ten (10) Business Days after request (or as soon
thereafter as may be reasonably possible), such further detailed
information with respect to the operation of any Asset and the
financial affairs of Borrower as may be reasonably requested by
Administrative Agent or any Lender (through the Administrative Agent),
which shall include:
(A) evidence reasonably satisfactory to
Administrative Agent that all premiums (including all
installments payments) then due and payable with respect to
the insurance required to be maintained pursuant to Section 7
have been paid in accordance with the requirements of Section
7.1.1(a); provided that evidence previously delivered pursuant
to this clause (A) with respect to the prior payment of any
installment payments need not be redelivered;
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(B) (I) promptly upon becoming aware of
the occurrence of or forthcoming occurrence of any ERISA
Event, a written notice specifying the nature thereof, what
action any Loan Party or any of their respective ERISA
Affiliates has taken, is taking or proposes to take with
respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto; (II) with reasonable
promptness, copies of all notices received by any Loan Party
or any of its ERISA Affiliates from a Multiemployer Plan
sponsor concerning an ERISA Event; and (III) with reasonable
promptness following Administrative Agent's reasonable
request, (x) copies of any Schedule B (Actuarial Information)
filed by any Loan Party or any of its ERISA Affiliates with
the Internal Revenue Service with respect to any Pension Plan
and (y) copies of such other documents or governmental reports
or filings relating to any Employee Benefit Plan as
Administrative Agent shall reasonably request;
(C) as soon as practicable following
receipt thereof, copies of all environmental audits and
reports, whether prepared by personnel of any Loan Party or by
independent consultants, with respect to material
environmental matters at any Asset or which relate to an
Environmental Claim which could reasonably be expected to
cause, either individually or in the aggregate, a Material
Adverse Change; and
(D) promptly upon request, copies of (a)
all financial statements, reports, notices and proxy
statements sent or made available generally by Bristol to its
security holders, (b) all regular and periodic reports and all
registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by Bristol or any
subsidiary of Bristol with the New York Stock Exchange, Inc.,
any other securities exchange or with the Securities and
Exchange Commission and all material filings with any
Governmental Authority or private regulatory authority, and
(c) all press releases made available generally by Bristol or
any of its subsidiaries to the public or to the security
holders of Bristol.
(k) Business and Operations. Borrower shall and Parent
shall cause each Loan Party to continue to engage in the businesses presently
conducted by it as, and to the extent the same, is necessary for the ownership,
maintenance, management and operation of the Property. Borrower will and
Parent will cause each Loan Party to qualify to do business and to remain in
good standing under the laws of each jurisdiction as and to the extent the same
is required for the ownership, maintenance, management and operation of the
Property or the other Collateral, except where failure to so qualify will not
then have caused and could not reasonably be expected to cause, either
individually or in the aggregate, a Material Adverse Change.
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(l) Title to the Property. Borrower will warrant and
defend (i) the title to each Asset and every part thereof, subject only to
Liens permitted hereunder (including Permitted Encumbrances), and (ii) the
validity and priority of the Liens of the Mortgage and the Assignment of Leases
on such Asset, subject only to Liens permitted hereunder (including Permitted
Encumbrances), in each case against the claims of all Persons whomsoever.
Borrower shall reimburse Administrative Agent and Lenders for any losses,
damages or reasonable out-of-pocket costs or expenses (including reasonable
attorneys' fees and court costs) incurred by Administrative Agent and Lenders
if an interest in any Asset, other than as permitted hereunder, is claimed by
another Person. If in the reasonable judgment of Administrative Agent,
Borrower is not adequately defending title to the Assets or the validity of the
Liens of the Loan Documents then Administrative Agent may, upon at least five
days' prior notice to Borrower, (i) appear in and defend any action or
proceeding, in the name and on behalf of Administrative Agent, the Lenders or
any Loan Party in which the Administrative Agent or any Lender is named or
which the Administrative Agent in its reasonable discretion determines is
reasonably likely to materially adversely affect any Asset, any Property
Management Agreement or other Collateral, any Mortgage, the Lien thereof or any
other Loan Document and (ii) institute any action or proceeding which
Administrative Agent reasonably determines should be instituted to protect the
interest or rights of Administrative Agent and the Lenders in any Asset or
other Collateral or under this Agreement or any other Loan Document. Borrower
and Parent agree that all reasonable out of pocket costs and expenses expended
or otherwise incurred pursuant to this subsection (including reasonable
attorneys' fees and disbursements) by Administrative Agent shall be paid,
without duplication, by the Borrower or reimbursed to Administrative Agent, as
the case may be, promptly after demand.
(m) Costs of Enforcement. In the event (i) that any
Mortgage or other Security Document is foreclosed in whole or in part or that
any Mortgage or other Security Document is put into the hands of an attorney
for collection, suit, action or foreclosure, (ii) of the foreclosure of any
mortgage prior to or subsequent to any Mortgage in which proceeding any Lender
is made a party, or (iii) of the bankruptcy, insolvency, reorganization,
rehabilitation, liquidation or other similar proceeding in respect of Borrower
or any other Loan Party or an assignment by Borrower or any other Loan Party
for the benefit of its creditors, then Borrower, its successors or assigns,
shall be chargeable with and agree to pay all costs of collection and defense,
including, without limitation, attorneys' fees, in connection therewith and in
connection with any appellate proceeding or post-judgment action involved
therein, which shall be due and payable together with all required service or
use taxes on demand.
(n) Estoppel Statements.
(i) Within ten (10) Business Days after request
by Administrative Agent, Borrower shall furnish Administrative Agent
with a statement, duly acknowledged and certified, setting forth (A)
the amount of the original principal amount of the Notes, (B) the
unpaid principal amount of the Notes, (C) the Applicable Interest
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Rate of the Notes, (D) the date installments of interest and principal
were last paid, (E) any offsets or defenses to the payment of the
Debt, if any, and (F) that the Notes, this Agreement, each Mortgage
and the other Loan Documents are valid, legal and binding obligations
and have not been modified or, if modified, giving particulars of such
modification.
(ii) Borrower shall use reasonable efforts to
deliver to Administrative Agent upon request, tenant estoppel
certificates from each Tenant under a Material Lease at any Asset in
form and substance reasonably satisfactory to Administrative Agent.
(o) Loan Proceeds. Borrower shall use the proceeds of
the Loan received by it on the Closing Date only for the purposes set forth in
Section 2.2 hereof.
(p) Performance by Borrower. Borrower shall, and Parent
shall cause each Loan Party to, in a timely manner observe, perform and fulfill
each and every covenant, term and provision of each Loan Document executed and
delivered by, or applicable to, Borrower or such Loan Party, and shall not
enter into or otherwise suffer or permit any amendment, waiver, supplement,
termination or other modification of any Loan Document executed and delivered
by, or applicable to, Borrower or such Loan Party without the prior written
consent of Administrative Agent.
(q) Annual Operating Budget. Borrower shall prepare and
deliver to Administrative Agent (with sufficient copies for each of the
Lenders), on or before the beginning of each Fiscal Year of Borrower, an annual
operating budget for each Asset including all planned capital expenditures for
each Asset for such ensuing Fiscal Year (the "ANNUAL OPERATING BUDGET"). The
Annual Operating Budget shall be prepared and submitted in a form reasonably
acceptable to Administrative Agent and shall set forth in reasonable detail
budgeted monthly Gross Income from Operations and monthly capital and other
expenses for the Property. Each Annual Operating Budget shall contain, among
other things, limitations on management fees and third party service fees, as
required hereunder, and, on and after the Optional Prepayment Date, in no event
shall management fees be permitted to be paid to an Affiliate of Borrower
except as if the Property Manager Agreement is renewed in accordance with
Section 5.1(v). Administrative Agent shall have the right to approve each
proposed Annual Operating Budget, which approval for the period prior to the
Optional Prepayment Date and as long as no Event of Default is continuing (i)
shall not be unreasonably withheld and (ii) shall be deemed given in the event
Administrative Agent fails to respond to Borrower's written request to approve
a proposed Annual Operating Budget within thirty (30) days after receipt by
Administrative Agent of such request accompanied by the proposed Annual
Operating Budget and all information required in order to adequately review the
same, and Borrower sends an additional written request for approval and
Administrative Agent fails to respond to Borrower's second request within ten
(10) days thereof. In the event that Administrative Agent's approval is
required and Administrative Agent objects to the proposed Annual Operating
Budget submitted by Borrower, Administrative
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Agent shall advise Borrower of such objections within fifteen (15) Business
Days after receipt thereof (and deliver to Borrower a reasonably detailed
description of such objection) and Borrower shall promptly revise such Annual
Operating Budget and resubmit the same to Administrative Agent. Administrative
Agent shall advise Borrower of any objections to such revised Annual Operating
Budget within fourteen (14) days after receipt thereof (and deliver to Borrower
a reasonably detailed description of such objection) and Borrower shall
promptly revise the same in accordance with the process described in this
sentence until Administrative Agent approves an Annual Operating Budget.
Notwithstanding anything to the contrary contained in this clause (q), any
Annual Operating Budget submitted prior to the Optional Prepayment Date at any
time other than during a Cash Trap Period shall not require the approval of
Administrative Agent, provided, however, that if Administrative Agent has not
approved the Annual Operating Budget in effect at the time a Cash Trap Event
occurs, Administrative Agent shall have the right to approve such Annual
Operating Budget. Each such Annual Operating Budget approved or not requiring
approval by Administrative Agent in accordance with terms hereof shall
hereinafter be referred to as an "APPROVED ANNUAL OPERATING BUDGET." Until
such time that Administrative Agent approves a proposed Annual Operating
Budget, the most recently Approved Annual Operating Budget shall apply;
provided that such Approved Annual Operating Budget shall be adjusted to
reflect actual increases in real estate taxes, insurance premiums and utilities
expenses.
(r) Confirmation of Representations. In addition to and
not in limitation of the covenants and agreements of Borrower and Parent
contained in this Agreement, Borrower shall and Parent shall cause each Loan
Party to deliver, in connection with any Secondary Market Transaction: (i) one
or more Officer's Certificates certifying as to the accuracy of all
representations and warranties made by Borrower or any other Loan Party in the
Loan Documents as of the date of the closing of such Secondary Market
Transaction in all relevant jurisdictions, and (ii) certificates of the
relevant Governmental Authorities in all relevant jurisdictions indicating the
good standing and qualification of Borrower, each other Loan Party and their
general partner or SPE Member as of the date of the Secondary Market
Transaction.
(s) No Joint Assessment. Borrower shall not suffer,
permit or initiate the joint assessment of any Asset (i) with any other real
property constituting a tax lot separate from such Asset, and (ii) with any
portion of such Asset which may be deemed to constitute personal property, or
any other procedure whereby the lien of any taxes which may be levied against
such personal property shall be assessed or levied or charged to such Asset.
(t) Leasing Matters.
(i) Without the prior written approval of
Administrative Agent and the Requisite Lenders, which approval shall
not be unreasonably withheld, conditioned or delayed, the Borrower
shall not (i) enter into, or amend, restate, supplement or otherwise
modify, any Lease, (ii) enter into any advanced booking of more than
51% of the rooms
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at any Asset for a period in excess of 30 days, provided, however,
Borrower shall have the right without obtaining the prior approval of
Administrative Agent, to enter into, amend, restate, supplement or
otherwise modify a Lease which is not a Material Lease provided or
such Tenant Lease (after giving effect to such modification,
amendment, restatement or supplement, if appropriate) complies with
the requirements set forth on Schedule XXIII. If any Tenant Lease
necessary to the operation of any Asset as a hotel is terminated,
Borrower shall either replace such Tenant Lease with a suitable
comparable Tenant Lease within a reasonable period of time following
such termination or shall itself provide the services intended to be
obtained under such Tenant Lease. All Tenant Leases and advanced
bookings, entered into after the date hereof, shall be subordinate to
the Mortgage and shall provide that the tenant under such Tenant Lease
or advance booking, as the case may be, agrees to (x) attorn to each
Lender and (y) provide Administrative Agent with an estoppel
certificate in form and substance satisfactory to Administrative
Agent, provided, however, if Administrative Agent shall have approved
a Tenant Lease and the Tenant shall have executed Administrative
Agent's form of subordination, non- disturbance and attornment
agreement and delivered same to Administrative Agent, Administrative
Agent agrees to execute and deliver the same with respect to such
Lease. All renewals of Tenant Leases and all proposed Tenant Leases
(other than the Liquor Leases) shall (AA) be on terms and conditions
which a senior executive, with at least ten (10) years experience in
the management of Assets substantially similar to the Assets in the
region where the Assets are located and that manages or has managed at
least 3 such Assets, would consider to be commercially reasonable,
constitute good and prudent business practice and be at prevailing
market rents and other terms and conditions, (BB) be arms-length
transactions, and (CC) not contain any terms which would adversely
affect the Administrative Agent and Lenders respective rights under
the Loan Documents. None of the Tenant Leases shall contain any
option to purchase, any right of first refusal to lease or purchase,
any non- disturbance or similar recognition agreement or any other
similar provisions which adversely affect the Property or which might
adversely affect the rights of any holder of the Loan, without the
prior written consent of Administrative Agent which consent shall not
be unreasonably withheld or delayed. Each Tenant shall conduct
business only in that portion of the Asset covered by its Tenant
Lease. Borrower shall furnish Administrative Agent with executed
copies of all Tenant Leases executed after the date hereof (regardless
of whether or not Administrative Agent's approval is required with
respect to any such Tenant Lease) and shall also deliver to
Administrative Agent, within 45 days of the end of each Fiscal Year, a
rent roll for each Asset certified to Administrative Agent as being
true and correct by Borrower and containing the name of each Tenant,
the term of each Tenant's Lease, the space occupied by each tenant,
the rentals or fees payable thereunder, the expiration date of each
Tenant Lease, occupancy statistics and such other information with
respect to the Tenant Leases as Administrative Agent shall reasonably
require (the "RENT ROLL"). To the extent Administrative Agent's
approval of any Tenant Lease or Material Lease, any tenant or an
alteration or
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modification of a Material Lease or Tenant Lease is required under
this Section 5.1(t), in the event Administrative Agent fails to
respond to Borrower's written request for such approval within thirty
(30) days after Administrative Agent has received from Borrower such
written request and all information reasonably required in order to
adequately review such request, Borrower may send an additional
written request for approval and if Administrative Agent fails to
respond to Borrower's second request within fourteen (14) days
thereof, Administrative Agent shall be deemed to have approved such
Lease or such tenant, as the case may be.
(ii) Borrower: (A) shall duly and punctually
observe and perform all the obligations imposed upon the landlord
under each of the Tenant Leases and shall not do or permit to be done
anything to impair the value of the Tenant Leases as security for the
Debt; (B) shall promptly send copies to Administrative Agent (with
sufficient copies for each Lender) of all notices of default which
Borrower shall send or receive under any of the Material Leases; (C)
shall enforce all the terms, covenants and conditions contained in
each of the Tenant Leases on the part of the tenant thereunder to be
observed or performed; (D) exclusive of Security Deposits, shall not
collect any of the Rents more than one (1) month in advance; (E) shall
not execute any other assignment of, or further mortgage or encumber,
the landlord's interest in the Tenant Leases or the Rents; (F) shall
use reasonable efforts to deliver to Administrative Agent, upon
request, Tenant estoppel certificates from each Tenant under a
Material Lease at the Property addressed to such party or parties as
directed by Administrative Agent and in form and substance reasonably
satisfactory to Administrative Agent; and (G) shall execute and
deliver at the request of Administrative Agent all such further
assurances, confirmations and assignments in connection with the
Tenant Leases as Administrative Agent shall from time to time
reasonably require. Borrower: (AA) shall not convey or transfer or
suffer or permit a conveyance or transfer of any Asset or of any
interest therein so as to effect a merger of the estates and rights
of, or a termination or diminution of the obligations of, Tenants
under the Tenant Leases; (BB) shall not consent to any assignment of
or subletting under the Material Leases not in accordance with their
terms, without the prior written consent of Administrative not to be
unreasonably withheld or delayed; (CC) shall not permit any Tenant
Lease to become subordinate to any lien other than the lien of the
Mortgage without the prior written consent of Administrative Agent.
Lenders (through Administrative Agent) shall have the right, at
Borrower's expense, but shall not be obligated, to cure any default by
Borrower under any of the Material Leases which, (x) if such default
remains uncured, would give the Tenant the right to terminate such
Material Lease or exercise a right of offset against Rents and (y)
Borrower has not cured itself within five (5) days after having
received notice thereof. Such curing by Lenders of a default by
Borrower under any of the Tenant Leases shall not release Borrower in
any way from liability to Lenders for Borrower's failure to discharge
its duty to so cure that default itself. Any and all sums expended by
Lenders with respect to any such cure, together with interest thereon
at the Default Rate from the date paid by Administrative
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Agent on behalf of Lenders until repaid by Borrower, shall immediately
be due and payable to Administrative Agent by Borrower on demand and
shall be secured by the Mortgage and by all of the other Loan
Documents securing all or any part of the Debt.
(u) Principal Place of Business. Borrower and Parent
shall not change their principal place of business as set forth on the first
page of this Agreement without first giving Administrative Agent thirty (30)
days prior written notice. Parent shall not permit any Subsidiary to change
its principal place of business without first giving Administrative Agent
thirty (30) days prior written notice.
(v) Property Manager. Borrower shall cause the Property
to be managed in a manner that is consistent with the Approved Property Manager
Standard. Borrower covenants and agrees with Administrative Agent that (i)
each Asset will be managed at all times by the Property Manager pursuant to a
Property Management Agreement which shall provide for a Management Fee of no
more than the Maximum Management Fee, that the payment of such Management Fee
shall be subordinate to the Lien of the Mortgage, that the Property Manager
shall not be permitted to receive any Management Fee or other payments at any
time that a monetary Default or an Event of Default is continuing (or after
giving effect to such payment would occur), that the payment of such Management
Fee shall be subordinate to all of the obligations of Borrower in connection
with the Property, including, without limitation, Debt Service, (ii) the
Management Fee shall be paid from the Mortgaged Property Gross Cash Flow, (iii)
after Borrower has knowledge of a Change in Control (other than a
hypothecation, mortgage, pledge or encumbrance of the capital stock of the
Property Manager) of the Property Manager, Borrower will promptly give
Administrative Agent written notice thereof (a "PROPERTY MANAGER CONTROL
NOTICE"), and (iv) the Property Management Agreement may be terminated by
Administrative Agent at any time for the Property Manager's gross negligence,
willful misconduct or fraud or at any time following either (A) the occurrence
and during the continuance of a monetary Event of Default, (B) the receipt of a
Property Manager Control Notice (or if Administrative Agent otherwise becomes
aware of a Change in Control (other than a hypothecation, mortgage, pledge or
encumbrance of the capital stock of the Property Manager) of the Property
Manager) if the Property Manager no longer meets the Approved Property Manager
Standard or is not otherwise approved by Lenders and Administrative Agent in
their sole discretion, (C) if any event shall have occurred which would allow
the Borrower to terminate the Property Management Agreement or (D) if any
portion of the Debt remains unpaid on the Optional Prepayment Date and Borrower
fails to renew the Property Management Agreement (with the consent of
Administrative Agent, not to be unreasonably withheld) under terms that are not
more favorable to the Property Manager than the Property Management Agreement
approved on the Closing Date in connection with the funding of this Loan, and
upon such termination, Borrower shall replace the terminated Property Manager
with a property manager selected by Borrower and approved by the Requisite
Lenders, Administrative Agent and the Rating Agencies rating the Securities in
their respective sole discretion or selected by the Requisite Lenders and
Administrative Agent in their sole discretion on terms and conditions
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satisfactory to Administrative Agent and Lenders, except that the Management
Fee payable to the replacement property manager shall be at market rates not to
exceed the Maximum Management Fee. Borrower further covenants and agrees that
Borrower shall require the Property Manager to maintain, at all times that all
or any portion of the Debt remains outstanding, worker's compensation insurance
(as and to the extent required by this Agreement) in compliance with Legal
Requirements. If, pursuant to this clause (v) or otherwise in this Agreement,
a substitute property manager is appointed, then such substitute property
manager shall be Independent (unless such Property Manager is the entity listed
in the definition of Property Manager), shall be approved by Administrative
Agent and shall execute and deliver to Administrative Agent a Consent and
Subordination of Property Manager.
(w) Control of Borrower/Subsidiaries. Except in the
event of a Transfer permitted under Section 6.1(j)(vi) or (vii), the sole
shareholder of Borrower will continue to be Parent. The sole shareholder of
each Subsidiary will continue to be Parent. The sole shareholder of Parent
will continue to be BHOC, except as provided in Section 6.1(j) hereof.
(x) Appraisals. Upon the written request of
Administrative Agent with respect to each Asset, Borrower shall promptly
thereafter at Lenders' sole expense (or at Borrower's sole expense if (x) an
Event of Default shall have occurred and be continuing or (y) Borrower is
required to deliver an appraisal pursuant to Section 2.4) (i) cooperate with
Administrative Agent so that Administrative Agent may obtain, or, at the
request of Administrative Agent, cause the preparation and delivery to
Administrative Agent of, an appraisal (satisfying the conditions for delivery
of an appraisal in connection with the funding of the Loan on the Closing Date)
dated not more than 60 days prior to the date of such delivery; and (ii)
deliver to Administrative Agent (with sufficient copies for each Lender),
promptly after the receipt thereof, a copy of each appraisal, if any, obtained
by Borrower or such Subsidiary.
(y) O&M Requirements. Borrower shall comply with all the
terms and conditions contained in each O&M Plan. If any Assets at any time are
known to contain (or for which there is a reasonable basis to believe that such
Assets may contain) ABM, Borrower shall promptly implement an O&M Plan.
(z) Ground Leases. Borrower promptly shall pay all
Ground Rent and all other sums and charges mentioned in, and payable under, any
Ground Lease; Borrower promptly shall perform and observe all of the terms,
covenants and conditions required to be performed and observed by the lessee
under all Ground Leases, the breach of which could permit any party to any
Ground Lease to validly terminate such Ground Lease (including, but without
limiting the generality of the foregoing, any payment obligations), shall do
all things necessary to preserve and to keep unimpaired its rights under every
Ground Lease, shall not waive, excuse or discharge any of the obligations of
the landlord under any Ground Lease without Administrative Agent's prior
written consent in each instance (not to be unreasonably withheld)
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and shall diligently and continuously enforce the obligations of such landlord
to the extent commercially reasonable;
(aa) intentionally deleted.
(bb) New Orleans Hotel and Houston Hotel. Borrower shall (i)
cause each of the New Orleans Ground Lease and the Houston Ground Lease to be a
financeable ground lease, as determined by the Requisite Lenders and the
Administrative Agent in their sole and absolute discretion and (ii) deliver to
Administrative Agent, with respect to both the New Orleans Hotel and the
Houston Hotel, all estoppel certificates, lease amendments, subordination
agreements and other agreements requested by Administrative Agent in the sole
and absolute discretion of the Requisite Lenders and Administrative Agent, in
each case on or prior to the earlier of December 31, 1997 and the date which is
thirty (30) days after Administrative Agent shall have given Borrower notice
that a securitization is expected to occur prior to December 31, 1997 (the
"GROUND LEASE EARLY REPAYMENT DATE"). It shall be an Event of Default
hereunder if prior to the Ground Lease Early Repayment Date Borrower has not
either: (i) satisfied clauses (i) and (ii) of the preceding sentence with
respect to both the New Orleans Hotel and the Houston Hotel; or (ii) if
Borrower failed to comply with clause (i) with respect to the (x) New Orleans
Hotel, repaid the Loan, in an amount equal to the Allocated Loan Amount for the
New Orleans Hotel, and obtained a Partial Release for the New Orleans Hotel (a
"NEW ORLEANS EARLY RELEASE"), in accordance with Section 2.4.3 other than
Section 2.4.3(ii) (except that instead of defeasing a portion of the Notes
equal to the Release Price of the New Orleans Hotel, Borrower shall be required
to prepay the Notes in an amount equal to the Allocated Loan Amount for the New
Orleans Hotel) and/or (y) Houston Hotel, repaid the Loan, in an amount equal to
the Allocated Loan Amount for the Houston Hotel, and obtained a Partial Release
for the Houston Hotel (a "HOUSTON EARLY RELEASE"; a New Orleans Early Release
and a Houston Early Release, collectively a "GROUND LEASE EARLY RELEASE"), in
accordance with Section 2.4.3 other than Section 2.4.3(ii) (except that instead
of defeasing a portion of the Notes equal to the Release Price of the Houston
Hotel, Borrower shall be required to prepay the Notes in an amount equal to the
Allocated Loan Amount for the Houston Hotel).
(cc) Agreements. For as long as the Obligations are
outstanding, other than the Loan Documents, the Acquisition Documents and the
Subordinate Note Documents no Loan Party will be a party to any agreement,
instrument or other restriction which limits the ability or right of any Loan
Party to (w) amend, restate or satisfy the terms and conditions of this
Agreement or the other Loan Documents, (x) refinance, prepay or repay the Debt,
(y) acquire, loan or dispose of any property or other asset, or any interest
therein, or acquire or enter into, or provide any services under any Property
Management Agreement or other management agreement or (z) otherwise conduct
such Loan Party's business, except in the case where the consequences, direct
or indirect, of any violation thereof could not reasonably be expected to,
either individually or in the aggregate, cause a Material Adverse Change.
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VI. NEGATIVE COVENANTS
SECTION 6.1 BORROWER'S NEGATIVE COVENANTS.
From the Closing Date until payment and performance in full of
all obligations of Borrower under the Loan Documents or the earlier release of
the Lien of every Mortgage in accordance with the terms of this Agreement and
the other Loan Documents, Borrower and Parent covenant and agree with
Administrative Agent that they will not do and they will not permit any Loan
Party to do, directly or indirectly, any of the following unless the Requisite
Lenders otherwise consent in writing:
(a) Operation of Property. Borrower shall not: (i)
terminate any Property Management Agreement relating to the Property or
otherwise replace any Property Manager of any Asset or enter into any other
management agreements with respect to any Asset; provided, however, that
Borrower may terminate or cancel any Property Management Agreement in
accordance with the terms thereof so long as, prior to such termination or
cancellation, Borrower has selected a replacement property manager and such
replacement property manager is a direct or indirect wholly-owned subsidiary of
Bristol and satisfies the Approved Property Manager Standard or has been
approved by Administrative Agent in its reasonable discretion; (ii) engage in
any business other than (a) the ownership, renovation, restoration, management
and operation of the Assets as hotels located in the United States of America
excluding, without limitation, the Development of real property, and (b) any
business that is ancillary, in purpose and extent, to any business referred to
in the preceding clauses (a) (including, without limitation, operating and
leasing retail stores on the Assets owned or leased by the Borrower); and (iii)
enter into any Material Lease or other agreement, or take any other action, if
such Material Lease or such other action which would materially change the
business conducted at any Property or which could reasonably be expected to
cause, either individually or in the aggregate, a Material Adverse Change or
would convert or reposition any Asset into any use other than a full service
hotel without the prior written consent of the Administrative Agent and the
Requisite Lenders, such consent not to be unreasonably withheld. Borrower
shall not and Parent shall not permit any Loan Party to initiate or consent to
any change in any laws, requirements of Governmental Authorities or obligations
created by private contracts and Tenant Leases which now or hereafter could
reasonably be expected to cause, either individually or in the aggregate a
Material Adverse Change without the prior written consent of the Requisite
Lenders.
(b) Liens. Borrower shall not, create, incur, assume or
suffer to exist any Lien on any portion of the Property or permit any such
action to be taken, except: (i) Permitted Encumbrances; and (ii) Liens for
Taxes or Other Charges not yet due; provided, however, Borrower, upon prior
notice to Administrative Agent, shall have the right to contest in good faith
and at no cost or expense to the Secured Parties any such Lien so long as it
does so diligently, by appropriate proceedings and without prejudice to the
Secured Parties rights under the Loan Documents and provided that, (i) in
Administrative Agents's sole judgment, neither any Asset
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nor any interest therein would be in any danger of sale, loss or forfeiture as
a result of such proceeding or contest, (ii) no such contest or proceeding
shall subject Administrative Agent to any civil or criminal penalty or
prosecution, (iii) Borrower shall keep Administrative Agent advised as to the
status of any such contest or proceeding on a regular basis, and (iv) no such
contest or proceeding shall (A) subject the Property or any part thereof to a
Lien for which the enforcement thereof is not suspended, or (B) otherwise
affect the priority of the lien of the Mortgage.
(c) Dissolution. Borrower shall not, nor shall Parent
permit any Loan Party to dissolve, terminate, liquidate, merge with,
consolidate into or acquire another Person.
(d) Change In Business. Borrower shall not enter into
any line of business other than the ownership renovation, restoration,
management and operation of the Property, or make any material change in the
scope or nature of its business objectives, purposes or operations, or
undertake or participate in activities other than the continuance of its
present business. Parent shall not and Parent shall not permit any other Loan
Party to enter into any line of business other than (x) the ownership of
Borrower and of the Subsidiaries and (y) the ownership, renovation,
restoration, management and operation of the Collateral, respectively, or make
any material change in the scope or nature of its business objectives, purposes
or operations, or undertake or participate in activities other than the
continuance of its present business. Notwithstanding anything to the contrary
contained in this Section 6.1(d), Borrower may, without Administrative Agent's
or Lenders' consent, convert any Asset to a "Holiday Inn", "Holiday Inn
Select", "Crowne Plaza" or other flag licensed by Holiday Inns Franchising.
(e) Debt Cancellation. Borrower shall not and Parent
shall not permit any Loan Party to cancel or otherwise forgive or release any
claim or debt (other than termination of Tenant Leases in accordance herewith)
owed to Borrower or such Loan Party by any Person, except for adequate
consideration and in the ordinary course of Borrower's or such Loan Party's
business.
(f) Affiliate Transactions. Borrower shall not and
Parent shall not permit any Loan Party to enter into, or be a party to, any
transaction with an Affiliate of Borrower, Parent or such other Loan Party or
any of the partners or members of Borrower, Parent or such other Loan Party
except in the ordinary course of business and on terms which are fully
disclosed to and approved by Administrative Agent in advance and (other than
the Property Management Agreements, Liquor Leases and Liquor Operation
Servicing Agreements approved by Lenders on or prior to the Closing Date or a
Substitution Date, as applicable) are no less favorable to Borrower or such
Affiliate than would be obtained in a comparable arm's-length transaction with
an unrelated third party.
(g) Zoning. Borrower shall not initiate or consent to
any zoning reclassification of any portion of any Asset or seek any variance
under any existing zoning
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ordinance or use or permit the use of any portion of any Asset in any manner
that could result in such use becoming a non-conforming use under any zoning
ordinance or any other applicable land use law, rule or regulation, without the
prior written consent of the Requisite Lenders.
(h) Assets. Borrower shall not purchase or own any
properties other than the Property. Parent shall not (x) permit any Subsidiary
to purchase or own any properties other than the Collateral or (y) purchase or
own any assets other than the stock of Borrower or any Subsidiary.
(i) Debt. Other than the Debt, Borrower shall not
create, incur, guaranty or assume any debt (including without limitation
Guaranteed Indebtedness) other than (i) Permitted Trade Payables or (ii) FF&E
Financings, in an aggregate amount not to exceed the Maximum Permitted Trade
Payables/FF&E Financings. Borrower shall not allow any trade payables
(including but not limited to Permitted Trade Payables) to be outstanding for
more than sixty (60) days. Borrower shall make all payments due pursuant to
any FF&E Financings when same are due and payable. Parent shall not permit any
Loan Party to create, incur or assume any debt, except as set forth in this
Section 6.1(i). BHOC and Bristol shall not modify the terms of the Acquisition
Facility in any way which limits the ability or right of any Loan Party to (w)
amend, restate or satisfy the terms and conditions of this Agreement or the
other Loan Documents, (x) refinance, prepay or repay the Debt, (y) acquire,
loan or dispose of any property or other asset, or any interest therein, or
acquire or enter into, or provide any services under any Property Management
Agreement or other management agreement or (z) otherwise conduct such Loan
Party's business, except in the case where the consequences, direct or
indirect, of any violation of this covenant could not reasonably be expected
to, either individually or in the aggregate, cause a Material Adverse Change.
Notwithstanding the foregoing, without the consent of the Administrative Agent
and the Requisite Lenders, which consent may be withheld in their sole
discretion, the Permitted Pledge may not be amended, restated, supplemented or
otherwise modified. Borrowers shall and shall cause all other Loan Parties to
make all payments due pursuant to any FF&E Financings when same are due and
payable.
(j) Transfer or Encumbrance of the Property.
(i) Borrower acknowledges that each Lender, in
agreeing to make the Loan, has examined and relied on the
creditworthiness and experience of Borrower in owning and operating
properties such as the Property, and that such Lender will continue to
rely on Borrower's ownership and operation of the Property as a means
of maintaining the value of the Property as security for repayment of
the Debt. Borrower acknowledges that each Lender has a valid interest
in maintaining the value of the Property so as to ensure that, should
Borrower default in the repayment of the Debt, each Lender can recover
all or a portion of the Debt by a sale of the Property. Accordingly,
subject to the terms of Sections 6.1(i) and 6.1(j)(vi) and (vii)
hereof, Borrower shall not and Parent shall not permit any Loan Party
to, without the prior written consent of each Lender and
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Administrative Agent, Transfer the Property, any other Collateral or
any part thereof or any interest therein, or permit the Property, or
any part thereof or any interest therein, to be Transferred other than
pursuant to the Permitted Pledge, the Permitted Transfer or a
Permitted Encumbrance.
(ii) As used herein, a "TRANSFER" shall mean any
sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Property or the other Collateral or any part thereof
or interest therein including: (A) an installment sales agreement
wherein any Loan Party agrees to sell any Asset, any other Collateral
or any part thereof or any interest therein for a price to be paid in
installments; (B) an agreement by Borrower leasing all or a
substantial part of any Asset for other than actual occupancy by a
space tenant thereunder, or a sale, assignment or other transfer of,
or the grant of a security interest in, Borrower's right, title and
interest in and to any Tenant Leases or any Rents; (C) if any Loan
Party or any general partner or member of any Loan Party is a
corporation, the voluntary or involuntary sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of such
corporation's stock (or the stock of any corporation directly or
indirectly controlling such corporation by operation of law or
otherwise) or the creation or issuance of new stock to a party or
parties who are not now stockholders or any Change in Control of such
corporation; (D) if any Loan Party or any general partner or member of
any Loan Party is a limited or general partnership, joint venture or
limited liability company, the change, removal, resignation or
addition of a partner, joint venturer or member or the sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of
the partnership interest of any partner or the sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the interest
of any joint venturer or member; (E) if any Loan Party is a limited or
general partnership, joint venture, limited liability company, trust,
nominee trust, tenancy in common or other unincorporated form of
business association or form of ownership interest, the voluntary or
involuntary sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of any interest of Person having a direct legal or
beneficial ownership interest in any Loan Party, including any legal
or beneficial interest in any constituent partner or member of any
Loan Party; (F) any instrument subjecting any Asset to a condominium
regime or transferring ownership to a cooperative corporation; and (G)
the dissolution or termination of any Loan Party or any general
partner or member of any Loan Party or the merger or consolidation of
any Loan Party or any general partner or member of any Loan Party with
any other Person.
(iii) Administrative Agent shall not be required to
demonstrate any actual impairment of the Secured Parties' security or
any increased risk of default hereunder in order to declare the Debt
immediately due and payable upon any Loan Party's Transfer of any
Asset or other Collateral Lenders' consent (if such consent is
required under this Section 6.1(j)). This provision shall apply to
every Transfer of any
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Asset or other Collateral regardless of whether voluntary or not, or
whether or not Lenders' have consented to any previous Transfer of any
Asset or other Collateral.
(iv) Lenders consent to one Transfer of any Asset
or other Collateral shall not be deemed to be a waiver of Lenders'
right to require such consent to any future occurrence of the same.
Any Transfer of any Asset or other Collateral made in contravention of
this Section shall be null and void and of no force and effect.
(v) Borrower agrees to bear and shall pay or
reimburse Administrative Agent and Lenders on demand for all
reasonable out-of-pocket costs and expenses (including, without
limitation, title search costs, title insurance endorsement premiums
and reasonable attorneys' fees and disbursements) incurred by
Administrative Agent and Lenders in connection with the review,
approval and documentation of any Transfer of any Asset.
(vi) Notwithstanding anything to the contrary
contained in this Section 6.1(j), the following transfers shall be
permitted without Lenders' consent:
(A) a sale or other disposition of FF&E
in the ordinary course of business provided, (x) such FF&E is
obsolete or is not useful for the operation of the Asset where
such FF&E is located or such FF&E is replaced with FF&E of
substantially similar value and utility and (y) the FF&E
Financing with respect to such FF&E has been paid off or
otherwise satisfied;
(B) a sale, conveyance, alienation,
hypothecation, encumbrance or transfer of the stock of
Bristol;
(C) a sale, conveyance, alienation,
hypothecation, encumbrance or transfer of the equity interest
of any shareholder of Bristol; and
(D) a sale, conveyance, alienation,
hypothecation, encumbrance or transfer of the stock of BHOC;
provided that in the case of clause (A) above no monetary Default or
Event of Default shall have occurred and remain uncured and in the
case of clauses (B), (C) and (D) above which results in a Change in
Control of Bristol or BHOC: (x) Borrower shall give Administrative
Agent written notice of such transfer together with copies of all
instruments effecting such transfer not less than seven (7) days prior
to the date of such transfer; (y) such transfer does not and will not
result in the termination or dissolution of Borrower, by operation of
law or otherwise; and (z) the single purpose nature and bankruptcy
remoteness of Borrower and each of its shareholders, general partners
or members after such transfer is satisfactory to Administrative Agent
and, at the request of
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Lenders, Borrower shall have delivered to Administrative Agent a
Non-Consolidation Opinion, such other opinions and title insurance
endorsements as may be reasonably requested by Administrative Agent
and, if a Securitization has occurred or is expected to occur,
Administrative Agent shall have received written confirmation from the
Rating Agencies rating the Securities in the Securitization that such
sale or transfer will not result in a qualification, downgrade or
withdrawal of the ratings then applicable to such Securities, together
with evidence reasonably satisfactory to Administrative Agent that the
single purpose nature and bankruptcy remoteness of Borrower and each
of its shareholders, general partners or members following such
transfer is in accordance with the standards of the Rating Agencies
then rating, or expected or requested by Administrative Agent to rate,
the Securities in the Securitization;
(vii) Notwithstanding the prohibition contained in
Section 6.1(j)(i) above, Lenders' consent to the sale or transfer of
the Property in their entirety will not be unreasonably withheld after
consideration of all relevant factors, provided that the following
conditions are satisfied:
(A) no Event of Default or event which,
with the giving of notice or the passage of time or both,
would constitute an Event of Default shall have occurred and
remain uncured;
(B) the proposed transferee
("TRANSFEREE") shall be a reputable entity or person of good
character, creditworthy, with sufficient financial worth
considering the obligations assumed and undertaken, as
evidenced by financial statements and other information
reasonably requested by Lenders;
(C) the property manager selected by the
Transferee shall have sufficient experience in the ownership
and management of properties similar to the Property, and
Administrative Agent shall be provided with evidence thereof
satisfactory to Lenders in their reasonable discretion;
(D) Administrative Agent shall have
received a Non-Consolidation Opinion reasonably satisfactory
to Lenders in form and substance and from counsel reasonably
satisfactory to Administrative Agent and containing
assumptions, limitations and qualifications customary for
opinions of such type;
(E) if a Securitization has occurred,
Lenders shall have received written confirmation from the
Rating Agencies rating the Securities in the Securitization
that such sale or transfer will not result in a qualification,
downgrade or withdrawal of the ratings then applicable to such
Securities, together with evidence reasonably satisfactory to
Lenders that the single purpose nature and bankruptcy
remoteness of Borrower and its shareholders, partners or
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members following such sale or transfer are in accordance with
the standards of such Rating Agencies; or if a Securitization
has not occurred, Administrative Agent shall have received
evidence reasonably satisfactory to Lenders that the single
purpose nature and bankruptcy remoteness of Borrower and its
shareholders, partners or members following such sale or
transfer are in accordance with the standards of two of the
Rating Agencies;
(F) In the case of a Transfer of the
Property by way of a sale or transfer of all of the Assets
only, Borrower and the Transferee shall have executed and
delivered to Administrative Agent an assumption agreement and
such other documents as Administrative Agent may request
(collectively, the "ASSUMPTION AGREEMENTS") under which the
Transferee shall assume and be obligated to each Lender for
the Debt and all obligations of Borrower under the Notes, this
Agreement, the Mortgage and the other Loan Documents, which
Assumption Agreements shall be in form and substance
acceptable to Lenders and the Rating Agencies referenced in
clause (E) above and shall state the Transferee's agreement to
abide by and be bound by the terms in the Notes, this
Agreement, the Mortgage and the other Loan Documents;
(G) Administrative Agent shall have
received such opinions and title insurance endorsements as may
be reasonably requested by Administrative Agent or any Lender;
(H) Borrower shall have submitted to
Administrative Agent, not less than thirty (30) days prior to
the date of such assumption, the Assumption Agreements. Such
documents shall be in a form appropriate in the jurisdiction
in which each Asset is located and satisfactory to Lenders in
their sole discretion. In addition, Borrower shall have
provided all other documentation Administrative Agent
reasonably requires to be delivered by Borrower in connection
with such assumption, together with an Officer's Certificate
certifying that such documentation (x) is in compliance with
all Legal Requirements, (y) will effect such assumption in
accordance with the terms of this Agreement, and (z) will not
impair or otherwise adversely affect the Liens and other
rights of each Lender under the Loan Documents;
(I) Borrower shall have paid all
reasonable out-of-pocket costs and expenses incurred by
Administrative Agent and each Lender in connection with such
assumption (including reasonable attorney's fees and costs);
(J) All Franchise Agreements, IP License
Agreements, Liquor Licenses, and Liquor Agreements will remain
in effect and be validly transferred to the Transferee or a
subsidiary of the Transferee (or alternative provisions shall
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have been made that are reasonably satisfactory to
Administrative Agent and the Requisite Lenders).
(viii) Borrower hereby agrees to indemnify and
defend and hold Administrative Agent and each Lender harmless against
all taxes, filing fees and other amounts of the type set forth in
Section 4.1(cc) hereof, if any, imposed on Administrative Agent or any
Lender by virtue of its execution of the Assumption Agreements or by
reason of an assumption pursuant to this Section 6.1(l), including,
without limitation, any penalties, interest and attorneys' fees
incurred by Administrative Agent in connection therewith, and all such
charges shall be secured by the Lien of each Mortgage and bear
interest at the Default Rate until paid.
(k) Intellectual Property; Franchise Agreements.
(i) Intellectual Property. Borrower shall not,
and Parent shall not permit any Loan Party, to transfer (by way of
sale, conveyance, alienation, mortgage, encumbrance, pledge or
otherwise), in whole or in part, (other than transfers to each Lender
pursuant to the Loan Documents and non-exclusive licenses entered into
in the ordinary course of business of Borrower) any Intellectual
Property unless Borrower shall have reasonably determined that the
Intellectual Property so transferred is no longer material to the
business, operations, condition (financial or otherwise) or prospects
of Borrower.
(ii) License Agreements. Except under the
Property Management Agreements, the Borrower shall not and Parent
shall not permit any Loan Party to, enter into or otherwise become
obligated with respect to, any franchise agreement (as franchisor),
license agreement (as licensor) or similar agreement (in a similar
capacity) with respect to any Intellectual Property of Borrower or any
other Loan Party.
(iii) Franchise Agreements. Without the prior
written approval of the Requisite Lenders, which approval shall not be
unreasonably withheld, conditioned or delayed, the Borrower shall not,
and Parent shall not permit any Loan Party to, (i) take any action or
fail to take any action, in either case as may be required or
permitted by the terms of any Franchise Agreement with respect to any
Asset, with respect to the termination (by Borrower or such Loan
Party, the franchisor or any other Person, and for any reason),
renewal or extension thereof, (ii) amend, restate, supplement or
otherwise change, or waive or fail to enforce any provision of, any
Franchise Agreement with respect to any Asset in any material respect,
or (iii) enter into any new or replacement Franchise Agreement with
respect to any Asset (with the same franchisor or a different
franchisor); provided that (v) without the approval of the Requisite
Lenders, each Franchise Agreement in effect as of the date of this
Agreement or entered into, renewed, extended, amended, restated,
supplemented or otherwise changed pursuant to this
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subsection may be renewed or extended on substantially the same or
better terms as in effect at the time of such renewal or extension,
(w) without the approval of the Requisite Lenders, if a Franchise
Agreement with respect to any Asset shall have expired, Borrower may
operate such Asset without a Franchise Agreement under the "Harvey
Hotels", "Harvey Suites", "Bristol Hotels" or "Bristol Suites"
flag, (x) without the approval of the Requisite Lenders, Borrower may
execute Franchise Agreements to convert any Asset to a "Holiday Inn",
"Holiday Inn Select", "Crowne Plaza" or other flag licensed by Holiday
Inns Franchising, (y) with respect to a replacement Franchise
Agreement referred to in the preceding clause (iii), any Lender's
approval may be granted, withheld, conditioned or delayed in the sole
discretion of such Lender if, in its opinion, the franchisor under
such replacement Franchise Agreement shall have a national standing
and reputation less favorable than the general standing and reputation
of the franchisors under Franchise Agreements then covering the Asset
and (z) with respect to each action referred to in the preceding
clauses (i) or (iii) for which any Lender may reasonably require a
franchisor's estoppel and consent agreement, in accordance of the
effectiveness of such action, Borrower shall deliver to Administrative
Agent a franchisor's estoppel and consent agreement in substantially
the form of the estoppel and consent agreement delivered to
Administrative Agent pursuant to this Agreement or otherwise in form
and substance satisfactory to the Requisite Lenders.
(l) Accounts Receivable. The Borrower shall not, and
Parent shall not permit any Loan Party to, directly or indirectly, sell with
recourse or, except in the ordinary course of business and consistent with past
practices, discount or otherwise sell for less than the face value thereof, any
of its notes or accounts receivable.
(m) Management of Assets. Borrower shall not and Parent
shall not permit any Loan Party to enter into any management agreement or
similar agreement (other than a Franchise Agreement) delegating to any Person
other than Management Co. or another wholly owned Subsidiary of Bristol
substantial authority over the management, maintenance or operation of any
Asset.
VII. CASUALTY; CONDEMNATION; ESCROWS
SECTION 7.1 INSURANCE; CASUALTY AND CONDEMNATION.
7.1.1 INSURANCE. (a) Borrower, at its sole cost and
expense, for the mutual benefit of Borrower and Lenders, shall keep each Asset
insured and obtain and maintain during all times that any sum is outstanding
under the Notes or the other Loan Documents (the "TERM") policies of insurance
insuring against loss or damage by fire and lightning and against loss or
damage by all other risks and hazards covered by a standard extended coverage
insurance policy, including, without limitation, riot and civil commotion,
vandalism, malicious mischief, burglary and theft. Such insurance shall be in
an amount equal to the greatest of (i) the then full
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replacement cost of such Asset (except in the case of earthquake insurance),
without deduction for physical depreciation, including but not limited to the
replacement cost of FF&E on site at such Asset (ii) the outstanding principal
balance of the Loan, and (iii) such amount that the insurer would not deem
Borrower a co-insurer under said policies. The policies of insurance carried
in accordance with this paragraph shall (i) be paid annually in advance, unless
the insurance provider permits monthly payments, in which case such payments
shall be made on or prior to the date on which such payments are due and
payable and (ii) contain a "Replacement Cost Endorsement" with a waiver of
depreciation.
(b) Borrower, at its sole cost and expense, for the
mutual benefit of Borrower and Lenders, shall also obtain and maintain during
the Term the following policies of insurance:
(i) Flood insurance if any part of any Asset is
located in an area identified by the Federal Emergency Management
Agency as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance
Program in an amount at least equal to the Allocated Loan Amount for
such Asset or the maximum limit of coverage available with respect to
the Property under said program, whichever is less;
(ii) Comprehensive public liability insurance,
including broad form property damage, blanket contractual and personal
injuries (including death resulting therefrom) coverages and
containing minimum limits per Asset per occurrence of $1,000,000 and
$3,000,000 in the aggregate for any policy year. In addition, at
least $100,000,000 excess and/or umbrella liability insurance in the
aggregate for any policy year shall be obtained and maintained during
the Term for any and all claims, including all legal liability imposed
upon Borrower or any other Loan Party and all court costs and
attorneys' fees incurred in connection with the ownership, operation
and maintenance of each Asset;
(iii) Rental loss and/or business interruption
insurance in an amount equal to the greater of (A) the estimated Net
Operating Income for each Asset for the next succeeding eighteen (18)
month period or (B) the projected Operating Expenses (plus Debt
Service) for the maintenance and operation of such Asset for the next
succeeding eighteen (18) month period. The amount of such insurance
shall be increased from time to time during the Term as and when the
estimate of Net Operating Income or projected Operating Expenses, as
may be applicable, increases;
(iv) Insurance against loss or damage from (A)
leakage of sprinkler systems and (B) explosion of steam boilers, air
conditioning equipment, high pressure piping, machinery and equipment,
pressure vessels or similar apparatus now or hereafter installed in
any of the Improvements (without exclusion for explosions), in an
amount at least equal to $3,000,000 per Asset;
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(v) Worker's compensation insurance with respect
to any employees of Borrower, as required by any Governmental
Authority or Legal Requirement except for Texas if Borrower elects not
to subscribe to the workers' compensation statute, in which case
Borrower shall have a benefit program and employers' legal liability
coverage reasonably acceptable to Administrative Agent to respond to
claims that would otherwise be covered by a standard policy of
employers' liability insurance;
(vi) During any period of repair or restoration,
builder's "all risk" insurance in an amount equal to not less than the
full insurable value of each Asset against such risks (including,
without limitation, fire and extended coverage and collapse of the
Improvements to agreed limits) as Administrative Agent may reasonably
request, in form and substance acceptable to Administrative Agent;
(vii) If any Asset is or becomes a "non-conforming
use" under applicable zoning and building ordinances, ordinance or law
coverage to compensate for the cost of demolition and the increased
cost of construction for such Asset;
(viii) Earthquake insurance, as reasonably
determined by Administrative Agent with respect to each Asset located
in California, or another area at high risk of earthquake, in an
amount equal to the probable maximum loss which could be sustained by
such Asset on account of an earthquake;
(ix) Liquor liability and dram shop insurance on
such basis and in such amounts as shall be reasonably required by
Administrative Agent in a minimum amount of $1,000,000 per occurrence
and $3,000,000 in the aggregate; and
(x) Such other insurance as may from time to time
be reasonably required by any Lender in order to protect its
interests, including, without limitation, earthquake and hurricane
insurance.
(c) All policies of insurance (the "POLICIES") required
pursuant to this Section 7.1.1 shall (i) be issued by companies approved by
Administrative Agent and licensed to do business in each state where an Asset
is located and, after the earlier of April 1, 1998 and the date that any policy
of insurance expires, with a claims paying ability rating of "AA" or better by
Standard & Poor's Ratings Services, unless Administrative Agent in its
reasonable discretion agrees to approve companies with a claims paying ability
rating of lower than "AA" and such companies are acceptable to the Rating
Agency which is, or is expected to, rate the Securities; (ii) name
Administrative Agent, as agent for Lenders, and its successors and/or assigns
as their interest may appear as the mortgagee; (iii) contain a non-
contributory standard mortgagee clause and a mortgagee's loss payable
endorsement, or their equivalents, naming Administrative Agent, as agent for
Lenders, as the person to which all payments made by such insurance company
shall be paid; (iv) contain a waiver of subrogation against Administrative
Agent and Lenders; (v) be
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maintained throughout the Term without cost to Administrative Agent or Lenders;
(vi) be assigned and certified copies thereof delivered to Administrative
Agent; (vii) not contain a deductible clause in excess of $250,000 (except in
the case of earthquake insurance which may contain a deductible clause no
greater than five percent (5%) of the fair market value of such Asset); (viii)
contain such provisions as Administrative Agent deems reasonably necessary or
desirable to protect the interest of the Lenders, including, without
limitation, endorsements providing that neither Borrower, Administrative Agent
nor any other Person shall be a co-insurer under said Policies and that
Administrative Agent shall receive at least thirty (30) days prior written
notice of any modification, reduction or cancellation of any of the Policies;
and (ix) otherwise be approved by Administrative Agent in the exercise of its
reasonable judgment as to amounts, form, risk coverage, deductibles, loss
payees and insurers. Borrower shall pay the premiums for such Policies (the
"INSURANCE PREMIUMS") as the same become due and payable and shall furnish to
Administrative Agent evidence of the renewal of each of the Policies with
receipts for the payment of the Insurance Premiums or other evidence of such
payment reasonably satisfactory to Administrative Agent (provided, however,
that Borrower is not required to furnish such evidence of payment to
Administrative Agent in the event that such Insurance Premiums have been paid
by the Lenders pursuant to Section 7.3 hereof). If Borrower does not furnish
such evidence and receipts at least thirty (30) days prior to the expiration of
any expiring Policy, then Administrative Agent may procure, but shall not be
obligated to procure, such insurance and pay the Insurance Premiums therefor,
and Borrower agrees to reimburse the Lenders (through the Administrative Agent)
for the cost of such Insurance Premiums promptly on demand. Within thirty (30)
days after request by Administrative Agent, Borrower shall obtain such
increases in the amounts of coverage required hereunder as may be reasonably
requested by Administrative Agent, taking into consideration changes in the
value of money over time, changes in liability laws, changes in prudent customs
and practices, and the like. In the event Borrower satisfies the requirements
under this Section 7.1.1 through the use of a Policy covering more than one
Asset, Borrower shall provide evidence satisfactory to Administrative Agent
that the Insurance Premiums for each Asset covered by such Policy are
separately allocated under such Policy and payment of such allocation shall
continue such Policy as to such Asset notwithstanding any other payment of
premiums, or, if no such allocation is available at any time during the Term,
Administrative Agent shall have the right to increase the Tax and Insurance
Escrow in an amount sufficient to purchase a non-blanket Policy covering the
Property from insurance companies which qualify under this Agreement.
Notwithstanding anything contained in this Section 7.1 to the contrary,
Administrative Agent acknowledges that (i) Schedule XXVI sets forth the manner
in which the insurance maintained by Borrower (or such other Loan Party which
owns any Assets) deviates from the standards set forth in this Section 7.1 and
(ii) that so long as Borrower (or such Loan Party) maintains insurance meeting
the requirements of this Section, as amended by Schedule XXVI, same shall not
constitute a Default hereunder, provided however, that prior to March 31, 1998
Borrower must give notice to Administrative Agent of its (or such Loan Party's)
election to continue to maintain insurance meeting the requirements of this
Section 7.1, as amended by Schedule XXVI, if Borrower fails to give such notice
by March 31, 1998 thereafter Borrower will be required to and will cause
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each other Loan Party to maintain insurance which meets the requirements of
this Section 7.1 without giving effect to Schedule XXVI.
(d) If any Asset is damaged or destroyed, in whole or in
part, by fire or other casualty (a "CASUALTY"), Borrower shall give prompt
written notice thereof to Administrative Agent. Following the occurrence of a
Casualty, Borrower, regardless of whether insurance proceeds are available,
shall, except as provided in Section 7.1.2(b), promptly proceed to restore,
repair, replace or rebuild the same to be of at least equal value and of
substantially the same character as prior to such damage or destruction, all to
be effected in accordance with applicable law. The reasonable out-of-pocket
expenses incurred by Administrative Agent in the adjustment and collection of
insurance proceeds shall become part of the Debt and be secured by the Mortgage
and shall be reimbursed by Borrower to Administrative Agent upon demand.
7.1.2 CASUALTY AND APPLICATION OF PROCEEDS. (a) In case of
loss or damages covered by any of the Policies, the following provisions shall
apply:
(i) In the event of a Casualty that is less than
$250,000 (not including any deductible permitted to be maintained
hereunder which is paid by Borrower), Borrower may settle and adjust
any claim without the consent of Administrative Agent, provided that
such adjustment is carried out in a competent and timely manner and
the proceeds of any such policy shall be due and payable solely to
Administrative Agent and held in escrow by Administrative Agent in the
Loss Proceeds Subaccount.
(ii) In the event a Casualty shall equal or exceed
$250,000 (not including any deductible permitted to be maintained
hereunder which is paid by Borrower), then and in that event,
Administrative Agent will consult with Borrower as to the settlement
and adjustment of the claim but may thereafter settle and adjust any
claim without the consent of Borrower if Borrower and Administrative
Agent are unable to agree as to such matters and agree with the
insurance company or companies on the amount to be paid on the loss
and the proceeds of any such policy shall be due and payable solely to
Administrative Agent, as agent for Lenders, and held in escrow by
Administrative Agent, as agent for Lenders, in the Loss Proceeds
Subaccount. Administrative Agent shall not be required to consult
with Borrower if an Event of Default is then continuing.
(b) In the event of a Casualty with respect to an Asset
where the loss is in an aggregate amount less than thirty percent (30%) of the
Allocated Loan Amount for such Asset and if, in the reasonable judgment of
Administrative Agent, the Asset can be restored within twelve (12) months after
the occurrence of the Casualty and prior to maturity of the Note to an economic
unit not less valuable (including an assessment of the impact of the
termination of any Tenant Leases due to such Casualty) and not less useful than
the same was prior to the Casualty, and after such restoration will adequately
secure the Allocated Loan Amount for such Asset,
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then, if no Default or Event of Default shall have occurred and be then
continuing, the proceeds of insurance shall be deposited directly into the
Deposit Account, whereupon such insurance proceeds shall be transferred to the
Loss Proceeds Subaccount where, after reimbursement of any reasonable
out-of-pocket expenses incurred by Administrative Agent, such proceeds shall be
maintained and applied to pay for the cost of restoring, repairing, replacing
or rebuilding the Asset or part thereof subject to the Casualty (the
"RESTORATION"), in the manner set forth herein. Borrower hereby covenants and
agrees to commence and diligently to prosecute such Restoration; provided that:
(i) Borrower shall pay all costs (and if required by Administrative Agent, in
the event Administrative Agent determines in its reasonable discretion that
Borrower is likely not to have sufficient Mortgaged Property Gross Cash Flow in
excess of Operating Expenses therefore Borrower shall deposit the total thereof
with Administrative Agent, in advance) of such Restoration in excess of the net
proceeds of insurance made available pursuant to the terms hereof; (ii) the
Restoration shall be done in compliance with all applicable laws, rules and
regulations; and (iii) Administrative Agent shall have received evidence
reasonably satisfactory to it that, during the period of the Restoration, the
sum of (A) income derived from the Property, as reasonably determined by
Administrative Agent, plus (B) proceeds of rent loss insurance or business
interruption insurance, if any, to be paid, will equal or exceed the sum of (1)
expenses in connection with the operation of the Property, (2) the Debt Service
under the Loan, and (3) the other payments required pursuant to Section
10.9.1(a) hereof or Section 10.9.2(a) hereof, as applicable. Notwithstanding
anything to the contrary contained in this Section 7.1.2, Borrower may, in its
sole discretion, elect not to undertake the Restoration of an Asset and to
instead defease a portion of the Notes (in accordance with the terms of Section
2.3.3) and cause the Asset which suffered the Casualty to be Partially Released
in accordance with and subject to Section 2.4.
(c) Except as provided above, the proceeds of insurance
collected upon any Casualty and any other funds contributed by Borrower under
Section 7.1.2(b) shall be deposited directly into the Deposit Account and at
the option of the Requisite Lenders and Administrative Agent in their sole
discretion, be applied to the payment of the Debt (after reimbursement of any
expenses incurred by Administrative Agent) or transferred into the Loss
Proceeds Subaccount where (after reimbursement of any expenses incurred by
Administrative Agent) such proceeds and other funds shall be maintained and
applied to pay for the cost of any Restoration in the manner set forth herein.
If the proceeds of insurance collected upon a Casualty are applied by Lenders
to payment of the Debt pursuant to this Section 7.1.2, Borrower may elect to
prepay a portion of the Loan sufficient to obtain a Partial Release of the
Asset which is the subject of the Casualty pursuant to Section 2.4.3 hereof
provided Borrower shall have satisfied or caused to be satisfied the following
conditions (the "CASUALTY RELEASE EVENT"):
(i) such prepayment shall be made on the first
scheduled payment date occurring after Borrower shall have
provided Administrative Agent with thirty (30) days
irrevocable prior written notice of its intent to make such
repayment, which notice shall have been delivered to
Administrative Agent no later than
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thirty (30) days after such proceeds of insurance are applied to
payment of the Debt; and
(ii) all of the requirements of Section 2.4.3 shall
have been satisfied.
Any such application to the Debt or repayment of the Debt pursuant to this
clause (c) shall be without any prepayment consideration or premium except that
if a Default or an Event of Default has occurred and is continuing, then
Borrower shall pay to Administrative Agent, an additional amount equal to the
Yield Maintenance Premium, if any, that would be required under Section 2.3.3
hereof if a Defeasance Deposit was to be made by Borrower. Any such
application to the Debt or repayment of the Debt pursuant to this clause (c)
shall be applied to those payments of principal and interest last due under the
Note but shall not postpone or reduce any payments otherwise required pursuant
to the Note other than such last due payments.
(d) In the event Borrower is entitled to reimbursement
out of insurance proceeds held by Administrative Agent, such proceeds shall be
disbursed from the Loss Proceeds Subaccount from time to time upon
Administrative Agent being furnished with: (i) evidence satisfactory to
Administrative Agent of the estimated cost of completion of the Restoration;
(ii) funds, or at Administrative Agent's option, assurances satisfactory to
Administrative Agent that such funds are or will become available, sufficient
in addition to the proceeds of insurance to complete the proposed Restoration;
(iii) evidence reasonably acceptable to Administrative Agent that all work in
connection with which the reimbursement is being requested has been performed
and paid for which shall include, if the estimated cost of the Restoration
exceeds the lesser of $250,000 and ten percent (10%) of the Allocated Loan
Amount with respect to such Asset, such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, bonds, plats
of survey and such other evidences of cost, payment and performance as
Administrative Agent may reasonably require and approve; and (iv) all plans and
specifications for such Restoration, such plans and specifications to be
delivered and approved by Administrative Agent (such approval not to be
unreasonably withheld) prior to commencement of any work if the estimated cost
of the Restoration exceeds the lesser of $250,000 and ten percent (10%) of the
Allocated Loan Amount with respect to such Asset. In addition, no payment made
prior to the final completion of the Restoration shall exceed ninety percent
(90%) of the value of the work performed from time to time; funds other than
proceeds of insurance shall be disbursed prior to disbursement of such
proceeds; and at all times, the undisbursed balance of such proceeds remaining
in the hands of Administrative Agent, together with funds deposited for that
purpose or irrevocably committed to the satisfaction of Administrative Agent by
or on behalf of Borrower for that purpose, shall be at least sufficient in the
reasonable judgment of Administrative Agent to pay for the cost of completion
of the Restoration, free and clear of all Liens or claims for Lien. Any
surplus which may remain out of insurance proceeds held by Administrative Agent
after payment of such costs of Restoration shall be paid to Borrower.
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7.1.3 CONDEMNATION. (a) Borrower shall promptly give
Administrative Agent written notice of the actual or threatened commencement of
any condemnation or eminent domain proceeding against any of the Premises or
the Improvements or any part thereof (a "CONDEMNATION") and shall deliver to
Administrative Agent copies of any and all papers served in connection with
such Condemnation. Following the occurrence of a Condemnation, Borrower,
regardless of whether an Award (as hereinafter defined) is available, shall
promptly proceed to restore, repair, replace or rebuild the Property to the
extent practicable to be of at least equal value and of substantially the same
character as prior to such Condemnation, all to be effected in accordance with
applicable law.
(b) Administrative Agent, is hereby irrevocably appointed
as Borrower's attorney-in-fact, coupled with an interest, with exclusive power
to collect, receive and retain any award or payment ("AWARD") for any taking
accomplished through a Condemnation and (after consultation with Borrower as to
the compromise or settlement of a claim, if no Event of Default is then
continuing) to make any compromise or settlement in connection with such
Condemnation, subject to the provisions of this Section. Notwithstanding any
taking in connection with a Condemnation by any public or quasi-public
authority (including, without limitation, any transfer made in lieu of or in
anticipation of such a Condemnation), Borrower shall continue to pay the Debt
at the time and in the manner provided for in the Note, this Agreement, the
Mortgages and the other Loan Documents and the Debt shall not be reduced unless
and until any Award shall have been actually received and applied by
Administrative Agent to expenses of collecting the Award and to discharge of
the Debt. Lenders shall not be limited to the interest paid on the Award by
the condemning authority but shall be entitled to receive out of the Award
interest at the rate or rates provided in the Notes. Borrower shall cause any
Award that is payable to Borrower to be paid directly to Administrative Agent,
as agent for Lenders.
(c) In the event of any Condemnation with respect to an
Asset where the Award is in an aggregate amount less than twenty percent (20%)
of the Allocated Loan Amount for such Asset, and if, in the reasonable judgment
of Administrative Agent, the Asset can be restored within twelve (12) months
after the occurrence of the Condemnation and prior to maturity of the Notes to
an economic unit not less valuable (including an assessment of the impact of
the termination of any Tenant Leases due to such Condemnation) and not less
useful than the same was prior to the Condemnation, and after such restoration
will adequately secure the outstanding balance of the Notes, then, if no
Default or Event of Default shall have occurred and be then continuing, the
proceeds of the Award shall be deposited directly into the Deposit Account,
whereupon such proceeds shall be transferred to the Loss Proceeds Subaccount
where, after reimbursement of any reasonable out-of-pocket expenses incurred by
Administrative Agent, such proceeds shall be maintained and applied to
reimburse Borrower for the cost of restoring, repairing, replacing or
rebuilding the Asset or part thereof subject to Condemnation (the "CONDEMNATION
RESTORATION"), in the manner set forth herein. Borrower hereby covenants and
agrees to commence and diligently to prosecute such Condemnation Restoration;
provided that:
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(i) Borrower shall pay all costs (and if required by Administrative Agent, in
the event Administrative Agent determines in its sole reasonable discretion
that Borrower is likely not to have sufficient Mortgaged Property Gross Cash
Flow in excess of Operating Expenses therefore, Borrower shall deposit the
total thereof with Administrative Agent in advance) of such Condemnation
Restoration in excess of the Award made available pursuant to the terms hereof;
(ii) the Condemnation Restoration shall be done in compliance with all
applicable laws, rules and regulations; and (iii) Administrative Agent shall
have received evidence reasonably satisfactory to it that, during the period of
the Condemnation Restoration, the sum of (A) income derived from the Property,
as reasonably determined by Administrative Agent, plus (B) proceeds of rent
loss insurance or business interruption insurance, if any, to be paid, will
equal or exceed the sum of (1) expenses in connection with the operation of the
Property, (2) the Debt Service under the Loan, and (3) any other payments
required pursuant to Section 10.9.1(a) hereof or Section 10.9.2(a) hereof, as
applicable. Notwithstanding anything to the contrary contained in this Section
7.1.2, Borrower may, in its sole discretion, elect not to undertake the
Condemnation Restoration of an Asset and to instead defease a portion of the
Notes (in accordance with the terms of Section 2.3.3) and cause the Asset which
has suffered the Condemnation to be Partially Released in accordance with and
subject to Section 2.4 hereof.
(d) Except as provided above, the proceeds of the Award
collected upon any Condemnation and any other funds contributed by Borrower
under Section 7.1.3(c) shall be deposited directly into the Deposit Account
and, at the option of the requisite Lenders and Administrative Agent, in their
sole discretion, be applied to the payment of the Debt, after reimbursement of
any expenses incurred by Administrative Agent, or transferred into the Loss
Proceeds Subaccount where, after reimbursement of any expenses incurred by
Administrative Agent, such proceeds and other funds shall be maintained and
applied to reimburse Borrower for the cost of the Condemnation Restoration in
the manner set forth herein. If the Award collected upon a Condemnation is
applied by Lenders to payment of the Debt pursuant to this Section 7.1.3
Borrower may elect to prepay a portion of the Loan sufficient to obtain a
Partial Release of the Asset which is the subject of the Condemnation pursuant
to Section 2.4.3 hereof provided Borrower shall have satisfied or caused to be
satisfied the following conditions (the "CONDEMNATION RELEASE EVENT"):
(i) such prepayment shall be made on the first
scheduled payment date occurring after Borrower shall have
provided Administrative Agent with thirty (30) days
irrevocable prior written notice of its intent to make such
repayment, which notice shall have been delivered to
Administrative Agent no later than thirty (30) days after such
proceeds of Award collected upon such Condemnation are applied
to payment of the Debt; and
(ii) all of the requirements of Section 2.4.3
shall have been satisfied.
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Any such application to the Debt or repayment of the Debt pursuant to this
clause (d) shall be without any prepayment consideration or premium except that
if a Default or an Event of Default has occurred and is continuing, then
Borrower shall pay to Administrative Agent, an additional amount equal to the
Yield Maintenance Premium, if any, that would be required under Section 2.3.3
hereof if a Defeasance Deposit was to be made by Borrower. Any such
application to the Debt or repayment of the Debt pursuant to this clause (d)
shall be applied to those payments of principal and interest last due under the
Note but shall not postpone or reduce any payments otherwise required pursuant
to the Note other than such last due payments.
(e) In the event Borrower is entitled to reimbursement
out of the Award received by Administrative Agent, such proceeds shall be
disbursed from the Loss Proceeds Subaccount from time to time upon
Administrative Agent being furnished with: (i) evidence satisfactory to
Administrative Agent of the estimated cost of completion of the Condemnation
Restoration; (ii) funds, or at Administrative Agent's option, assurances
satisfactory to Administrative Agent that such funds are or will become
available, sufficient in addition to the proceeds of the Award to complete the
Condemnation Restoration; (iii) evidence reasonably acceptable to
Administrative Agent that all work in connection with which the reimbursement
is being requested has been performed and paid for which shall include, if the
estimated cost of the Condemnation Restoration exceeds the lessor of $250,000
and ten percent (10%) of the Allocated Loan Amount with respect to such Asset,
such architect's certificates, waivers of lien, contractor's sworn statements,
title insurance endorsements, bonds, plats of survey and such other evidences
of costs, payment and performance as Administrative Agent may reasonably
require and approve, if the estimated cost of the Restoration is less than the
lesser of $250,000 and ten percent (10%) of the Allocated Loan Amount with
respect to such Asset, an Officer's Certificate certifying that the Borrower
has obtained the foregoing; and (iv) all plans and specifications for such
Condemnation Restoration, such plans and specifications to be delivered and
approved by Administrative Agent (such approval not to be unreasonably
withheld) prior to commencement of work if the estimated cost of the
Condemnation Restoration exceeds the lessor of $250,000 and ten percent (10%)
of the Allocated Loan Amount with respect to such Asset. In addition, no
payment made prior to the final completion of the Condemnation Restoration
shall exceed ninety percent (90%) of the value of the work performed from time
to time; funds other than proceeds of the Award shall be disbursed prior to
disbursement of such proceeds; and at all times, the undisbursed balance of
such proceeds remaining in the hands of Administrative Agent, together with
funds deposited for that purpose or irrevocably committed to the satisfaction
of Administrative Agent by or on behalf of Borrower for that purpose, shall be
at least sufficient in the reasonable judgment of Administrative Agent to pay
for the costs of completion of the Condemnation Restoration, free and clear of
all Liens or claims for Lien. Any surplus which may remain out of the Award
received by Administrative Agent, after payment of such costs of Condemnation
Restoration shall, in the sole and absolute discretion of Administrative Agent,
be retained by Lenders and applied pro- rata to payment of the Debt.
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SECTION 7.2 REQUIRED REPAIRS; REQUIRED REPAIR FUNDS.
7.2.1 REQUIRED REPAIRS; DEPOSITS. Borrower shall perform the
repairs at each Asset, as more particularly set forth on Schedule II attached
hereto (such repairs hereinafter referred to as "PROPERTY REQUIRED REPAIRS").
Borrower shall complete each of the Property Required Repairs on or before the
required deadline for each repair as set forth on Schedule II attached hereto.
7.2.2 RELEASE OF REQUIRED REPAIR FUNDS. Administrative Agent
shall disburse to Borrower the funds deposited in the Required Repair
Subaccount (the "REQUIRED REPAIR FUND") upon satisfaction by Borrower of each
of the following conditions: (i) Borrower shall submit a written request for
payment to Administrative Agent at least twenty (20) days prior to the date on
which Borrower requests such payment be made, specifying the Property Required
Repairs to be paid; (ii) on the date such request is received by Administrative
Agent and on the date such payment is to be made, no monetary Default or Event
of Default shall exist and remain uncured and will not be cured as a result of
such disbursement; (iii) Administrative Agent shall have received an Officers'
Certificate from Borrower (A) stating that all Property Required Repairs at the
Asset to be funded by the requested disbursement have been completed in a good
and workmanlike manner and in accordance with all applicable Legal
Requirements, such certificate to be accompanied by a copy of any license,
permit or other approval by any Governmental Authority required to commence
and/or complete such Property Required Repairs, (B) identifying each Person
that supplied materials or labor in connection with the Property Required
Repairs to be funded by the requested disbursement, and (C) stating that each
such Person has been paid in full or will be paid in full upon such
disbursement, such certificate to be accompanied by lien waivers or other
evidence of payment reasonably satisfactory to Administrative Agent; (iv) at
Administrative Agent's option, a title search for the Asset indicating that the
Asset is free from all Liens not previously approved by Administrative Agent
(except for Permitted Encumbrances); and (v) Administrative Agent shall have
received such other evidence as Administrative Agent shall reasonably request
that the Property Required Repairs at the Asset to be funded by the requested
disbursement have been completed and are paid for or will be paid upon such
disbursement to Borrower. Administrative Agent shall not be required to make
any disbursement from the Required Repair Subaccount with respect to any Asset
unless such requested disbursement is in an amount equal to or greater than
$25,000 (or a lesser amount if the total amount in the Required Repair
Subaccount is less than $25,000, in which case only one disbursement of the
amount remaining in the Required Repair Subaccount shall be made) and such
disbursement shall be made only upon satisfaction of each condition contained
in this Section 7.2.2. Provided no Default or Event of Default has occurred,
and remains uncured Administrative Agent shall cause the Deposit Bank to
deposit into Clearing Account B any amount remaining in the Required Repair
Fund after all Property Required Repairs have been completed and, from time to
time promptly after the request of Borrower, any amount in the Required Repair
Fund which is in excess of 125% of the aggregate cost to complete the Property
Required Repairs specified on Schedule II attached which have not been
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completed, as reasonably determined by Administrative Agent, in accordance with
the requirements of this Section 7.2. Except as provided herein,
Administrative Agent shall cause the Deposit Bank to deposit into the
Replacement Reserve Subaccount any amounts remaining in the Required Repair
Fund after all Property Required Repairs have been completed.
7.2.3 FAILURE TO PERFORM REQUIRED REPAIRS. It shall be an
Event of Default under this Agreement if (i) Borrower does not complete the
Property Required Repairs at each Asset where such repairs are required within
thirty (30) days the of the required deadline for each repair as set forth on
Schedule II attached hereto and (ii) Borrower does not satisfy each condition
contained in Section 7.2.2 hereof.
SECTION 7.3 TAX AND INSURANCE ESCROW FUND.
Borrower shall pay to Administrative Agent, as agent for
Lenders, on the eleventh day of each calendar month (a) one-twelfth of the
Taxes that Administrative Agent estimates will be payable during the next
ensuing twelve (12) months in order to accumulate with Administrative Agent
sufficient funds to pay all such Taxes at least thirty (30) days prior to the
date such Taxes will become delinquent (it being agreed that Taxes will be
deemed delinquent on or before the date on which penalties or interest begin to
accrue thereon) and (b) one-twelfth of the Insurance Premiums that
Administrative Agent estimates will be payable for the renewal of the coverage
afforded by the Policies for the succeeding annual period upon the expiration
thereof in order to accumulate with Administrative Agent sufficient funds to
pay all such Insurance Premiums at least thirty (30) days prior to the
expiration of the Policies (said amounts in clauses (a) and (b) above
hereinafter called the "TAX AND INSURANCE ESCROW FUND"). The Tax and Insurance
Escrow Fund and the payments of interest or principal or both, payable pursuant
to the Notes shall be added together and shall be paid as an aggregate sum by
Borrower to Administrative Agent. Administrative Agent will apply the Tax and
Insurance Escrow Fund to payments of Taxes and Insurance Premiums required to
be made by Borrower pursuant to Section 5.1 hereof and under each Mortgage,
subject to Borrower's right to protest such taxes under Section 5.1(b) hereof.
In making any payment relating to the Tax and Insurance Escrow Fund,
Administrative Agent may do so according to any bill, statement or estimate
procured from the appropriate public office (with respect to Taxes) or insurer
or agent (with respect to Insurance Premiums), without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax,
assessment, sale, forfeiture, tax lien or title or claim thereof. If the
amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for
Taxes and Insurance Premiums pursuant to Section 5.1 hereof, Administrative
Agent shall, at the sole discretion of the Requisite Lenders, return any excess
to Borrower or credit such excess against future payments to be made to the Tax
and Insurance Escrow Fund. Any amount remaining in the Tax and Insurance
Escrow Fund after the Debt has been paid in full shall be returned to Borrower.
If at any time Administrative Agent reasonably determines that the Tax and
Insurance Escrow Fund is not or will not be sufficient to pay the items set
forth in clauses (a) and (b) above, Administrative Agent shall notify Borrower
of such determination and Borrower shall
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increase its monthly payments to Administrative Agent by the amount that
Administrative Agent estimates is sufficient to make up the deficiency at least
thirty (30) days prior to delinquency of the Taxes and/or thirty (30) days
prior to expiration of the Policies, as the case may be.
SECTION 7.4 REPLACEMENTS AND REPLACEMENT RESERVE.
7.4.1 REPLACEMENT RESERVE FUND. On each date that a
regularly scheduled payment of principal or interest is due under the Notes,
Borrower shall deposit with Administrative Agent a monthly deposit in the
amount equal to one-twelfth of an amount equal to four percent (4%) of annual
Gross Income from Operations, until the third anniversary of the Closing Date
and thereafter five percent (5%) of annual Gross Income from Operations.
Amounts so deposited shall hereinafter be referred to as the "REPLACEMENT
RESERVE FUND." Administrative Agent may reassess its estimate of the amount
necessary for the Replacement Reserve Fund from time to time and may increase
the monthly amounts required to be deposited into the Replacement Reserve Fund
upon thirty (30) days written notice to Borrower if Administrative Agent
determines in its reasonable discretion after reviewing Borrower's capital
expenditure plans that an increase is necessary to maintain the proper
maintenance and operation of the Property in accordance with past practices.
7.4.2 DISBURSEMENTS FROM REPLACEMENT RESERVE SUBACCOUNT. (a)
Administrative Agent shall make disbursements from the Replacement Reserve
Subaccount to pay Borrower only for the cost of replacements to and maintenance
of the Property to the extent the same constitute capital expenditures in
accordance with GAAP (collectively, the "REPLACEMENTS") in the manner provided
in this Section 7.4.2. Administrative Agent shall not be obligated to make
disbursements, from the Replacement Reserve Fund for costs which are to be
reimbursed from the Required Repair Fund.
(b) Administrative Agent shall, upon written request from
Borrower and satisfaction of the requirements set forth in this Section 7.4.2
and Section 7.4.3 of this Agreement, disburse to Borrower (within twenty (20)
days of Borrower's satisfaction of the requirements of Section 7.4.2 and
Section 7.4.3 with respect thereto) amounts from the Replacement Reserve
Subaccount necessary to pay for the actual approved costs of Replacements or to
reimburse Borrower therefor, upon completion of such Replacements (or, upon
partial completion in the case of Replacements made pursuant to Section
7.4.2(e)) as determined by Administrative Agent. In no event shall
Administrative Agent be obligated to disburse funds from the Replacement
Reserve Subaccount if a monetary Default or an Event of Default exists and will
not be cured as a result of such disbursement.
(c) Each request for disbursement from the Replacement
Reserve Subaccount shall be in a form reasonably specified or approved by
Administrative Agent and shall specify (i) the specific Replacements for which
the disbursement is requested, (ii) the quantity and price of each item
purchased, if the Replacement includes the purchase or replacement of specific
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items, (iii) the price of all materials (grouped by type or category) used in
any Replacement other than the purchase or Replacement of specific items, and
(iv) the cost of all contracted labor or other services applicable to each
Replacement for which such request for disbursement is made. With each
request, Borrower shall certify that all Replacements have been made in
accordance with all Legal Requirements of any Governmental Authority having
jurisdiction over the Property. Each request for disbursement shall include
copies of invoices for all items or materials purchased and all contracted
labor or services provided and each request shall include evidence satisfactory
to Administrative Agent of payment of all such amounts. Except as provided in
Section 7.4.2(e), each request for disbursement from the Replacement Reserve
Subaccount shall be made only after completion of the Replacement for which
disbursement is requested. Borrower shall provide Administrative Agent
evidence of completion satisfactory to Administrative Agent in its reasonable
judgment.
(d) Borrower shall pay all invoices in connection with
the Replacements with respect to which a disbursement is requested prior to
submitting such request for disbursement from the Replacement Reserve
Subaccount unless all such invoices do not exceed $25,000, in which case
Administrative Agent shall disburse the amount for such invoices directly to
Borrower and Borrower covenants and agrees to promptly pay such invoices. In
addition, as a condition to any disbursement, Administrative Agent may require
Borrower to obtain lien waivers from each contractor, supplier, materialman,
mechanic or subcontractor who receives payment in an amount equal to or greater
than $25,000 for completion of its work or delivery of its materials. Any lien
waiver delivered hereunder shall conform to the requirements of applicable law
and shall cover all work performed and materials supplied (including equipment
and fixtures) for any Asset by that contractor, supplier, subcontractor,
mechanic or materialman through the date covered by the current reimbursement
request.
(e) If (i) the cost of a Replacement exceeds $25,000 and
(ii) the contractor performing such Replacement requires periodic payments
pursuant to the terms of a written contract, a request for reimbursement from
the Replacement Reserve Subaccount may be made after completion of a portion of
the work under such contract, provided (A) such contract requires payment upon
completion of such portion of the work, (B) the materials for which the request
is made are on site at appropriate Asset and are properly secured or have been
installed in such Asset, (C) all other conditions in this Agreement for
disbursement have been satisfied, (D) funds remaining in the Replacement
Reserve Subaccount, together with deposits to be made into such account under
Section 7.4.1 are or will be, in Administrative Agent's judgment, sufficient to
complete such Replacement and other Replacements when required, and (E) if
required by Administrative Agent, each contractor or subcontractor receiving
payments under any contract exceeding $10,000, shall provide to Administrative
Agent a waiver of lien with respect to amounts which have been paid to that
contractor or subcontractor.
(f) Borrower shall not make a request for disbursement
from the Replacement Reserve Subaccount more frequently than once in any
calendar month and (except in connection
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with the final disbursement) the total cost of all Replacements in any request
shall not be less than $10,000. Any amount remaining in the Replacement
Reserve Fund after the Debt has been paid in full shall be returned to
Borrower.
7.4.3 PERFORMANCE OF REPLACEMENTS. (a) Borrower shall make
Replacements when required in order to keep each Asset in condition and repair
consistent with other hotels of similar quality, in the same market segment and
in the metropolitan area in which such Asset is located, and to keep each Asset
or any portion thereof from deteriorating. Borrower shall complete all
Replacements in a good and workmanlike manner as soon as practicable following
the commencement of making each such Replacement.
(b) Administrative Agent, as agent for Lenders, reserves
the right, at its option, to approve all contracts or work orders, providing
for a contract sum of $250,000 or more, with materialmen, mechanics, suppliers,
subcontractors, contractors or other parties providing labor or materials in
connection with the Replacements, which approval will not be unreasonably
withheld. Upon Administrative Agent's request, Borrower shall assign any
contract or subcontract to the Secured Parties.
(c) In the event Administrative Agent determines in its
reasonable discretion that any Replacement is not being performed in a
workmanlike or timely manner or that any Replacement has not been completed in
a workmanlike or timely manner, Borrower shall be in Default hereunder and
Administrative Agent shall have the option to withhold disbursement for such
unsatisfactory Replacement and if an Event of Default shall occur,
Administrative Agent may proceed under existing contracts or contract with
third parties to complete such Replacement and to apply the Replacement Reserve
Fund toward the labor and materials necessary to complete such Replacement,
without providing any prior notice to Borrower, and to exercise any and all
other remedies available to Administrative Agent and Lenders upon an Event of
Default hereunder.
(d) In order to facilitate Administrative Agent's
completion or making of the Replacements pursuant to Section 7.4.3(c) above,
Borrower grants Administrative Agent the right to enter onto the Property and
perform any and all work and labor necessary to complete or make the
Replacements and/or employ watchmen to protect the Property from damage. All
sums so expended by Administrative Agent shall be deemed to have been advanced
under the Loan to Borrower and secured by each Mortgage. For this purpose,
Borrower constitutes and appoints Administrative Agent its true and lawful
attorney-in-fact with full power of substitution to complete or undertake the
Replacements in the name of Borrower, if and to the extent Administrative Agent
is entitled to do so under this Section 7.4. Such power of attorney shall be
deemed to be a power coupled with an interest and cannot be revoked. Borrower
empowers said attorney-in-fact as follows: (i) to use any funds in the
Replacement Reserve Subaccount for the purpose of making or completing the
Replacements; (ii) to make such additions, changes and corrections to the
Replacements as shall be necessary or desirable to complete the Replacements;
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(iii) to employ such contractors, subcontractors, agents, architects and
inspectors as shall be required for such purposes; (iv) to pay, settle or
compromise all existing bills and claims which are or may become Liens against
such Asset, or as may be necessary or desirable for the completion of the
Replacements, or for clearance of title; (v) to execute all applications and
certificates in the name of Borrower which may be required by any of the
contract documents; (vi) in its reasonable discretion, to prosecute and defend
all actions or proceedings in connection with such Asset or the rehabilitation
and repair of such Asset; and (vii) to do any and every act which Borrower
might do in its own behalf to fulfill the terms of this Agreement.
(e) Nothing in this Section 7.4.3 shall: (i) make
Administrative Agent responsible for making or completing the Replacements;
(ii) require Administrative Agent to expend funds in addition to the
Replacement Reserve Fund to make or complete any Replacement; (iii) obligate
Administrative Agent to proceed with the Replacements; or (iv) obligate
Administrative Agent to demand from Borrower additional sums to make or
complete any Replacement.
(f) Borrower shall permit Administrative Agent and
Administrative Agent's agents and representatives (including, without
limitation, Administrative Agent's engineer, architect or inspector) or third
parties making Replacements pursuant to this Section 7.4.3 to enter onto such
Asset, after reasonable advance notice, during normal business hours (subject
to the rights of guests of the hotel and tenants under their Tenant Leases) to
inspect the progress of any Replacements and all materials being used in
connection therewith, to examine all plans and shop drawings relating to such
Replacements which are or may be kept at such Asset, and to complete any
Replacements made pursuant to this Section 7.4.3. Borrower shall cause all
contractors and subcontractors to cooperate with Administrative Agent or
Administrative Agent's representatives or such other persons described above in
connection with inspections described in this Section 7.4.3(f) or the
completion of Replacements pursuant to this Section 7.4.3.
(g) Administrative Agent may require an inspection of
such Asset (at Lenders, sole cost, except if (i) a Default or Event of Default
shall have occurred and be continuing or (ii) either (x) the amount of the
requested disbursement with respect to such Asset is greater than $100,000, (y)
the aggregate amount of all disbursements made with respect to such Asset in
any one year period exceeds $250,000 or (z) the total cost of the Replacement
(as determined by Administrative Agent in its reasonable discretion) in
connection with which Borrower is requesting a disbursement exceeds $250,000,
then in any such case such inspection shall be at Borrower's sole cost and
expense) prior to making a monthly disbursement from the Replacement Reserve
Subaccount in order to verify completion of the Replacements for which
reimbursement is sought. Administrative Agent may require that such inspection
be conducted by an appropriate independent qualified professional selected by
Administrative Agent and/or may require a copy of a certificate of completion
by an independent qualified professional acceptable to Administrative Agent
prior to the disbursement of any amounts from the Replacement Reserve
Subaccount. If Borrower is required to pay the expense of the inspection
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as required hereunder, Borrower shall pay such expense whether such inspection
is conducted by Administrative Agent or by an independent qualified
professional.
(h) The Replacements and all materials, equipment,
fixtures, or any other item comprising a part of any Replacement shall be
constructed, installed or completed, as applicable, free and clear of all
mechanic's, materialman's or other liens (except for those Liens existing on
the date of this Agreement which have been approved in writing by
Administrative Agent and Permitted Encumbrances).
(i) Before each disbursement from the Replacement Reserve
Subaccount, Administrative Agent may require Borrower to provide Administrative
Agent with a search of title to such Asset effective to the date of the
disbursement, which search shows that no mechanic's or materialmen's liens or
other Liens of any nature (other than Permitted Encumbrances) have been placed
against such Asset since the date of recordation of the Mortgage and that title
to such Asset is free and clear of all Liens (other than the Lien of the
Mortgage, Permitted Encumbrances and any other Liens previously approved in
writing by Lenders, if any), provided, however, such title search shall not be
required with respect to any disbursement unless (x) the amount of the
requested disbursement with respect to such Asset is greater than $100,000, (y)
the aggregate amount of all disbursements made with respect to such Asset in
any one year period exceeds $250,000 or (z) the total cost of the Replacement
(as determined by Administrative Agent in its reasonable discretion) in
connection with which Borrower is requesting a disbursement exceeds $250,000.
(j) All Replacements shall comply with all applicable
Legal Requirements of all Governmental Authorities having jurisdiction over
such Asset and applicable insurance requirements, including, without
limitation, applicable building codes, special use permits, environmental
regulations and requirements of insurance underwriters.
(k) In addition to any insurance required under the Loan
Documents, Borrower shall provide or cause to be provided workmen's
compensation insurance (or alternative coverage permitted hereunder), builder's
risk, and public liability insurance and other insurance to the extent required
under applicable law in connection with a particular Replacement. All such
policies shall be in form and amount reasonably satisfactory to Administrative
Agent. All such policies which can be endorsed with standard mortgagee clauses
making loss payable to Administrative Agent or its assigns shall be so
endorsed. Certified copies of such policies shall be delivered to
Administrative Agent and Lenders.
7.4.4 FAILURE TO MAKE REPLACEMENTS. (a) Upon the occurrence
of an Event of Default Administrative Agent may use the Replacement Reserve
Fund (or any portion thereof) for any purpose, including, but not limited to,
completion of the Replacements as provided in Section 7.4.3, or for any other
repair or Replacement to the Property or toward payment of the Debt as provided
in Section 10.9.3. Administrative Agent's right to withdraw and apply the
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Replacement Reserve Fund shall be in addition to all other rights and remedies
provided to Administrative Agent and Lenders under this Agreement and the other
Loan Documents.
(b) Except as set forth in Section 10.9.3, nothing in
this Agreement shall obligate Administrative Agent to apply all or any portion
of the Replacement Reserve Fund on account of an Event of Default to payment of
the Debt or in any specific order or priority.
7.4.5 BALANCE IN THE REPLACEMENT RESERVE SUBACCOUNT. The
insufficiency of any balance in the Replacement Reserve Subaccount shall not
relieve Borrower from its obligation to fulfill all preservation and
maintenance covenants in the Loan Documents. Any amount remaining in the
Replacement Reserve Subaccount after the Debt has been paid in full shall be
remitted to Borrower.
7.4.6 INDEMNIFICATION. Borrower shall indemnify
Administrative Agent and each Lender and hold Administrative Agent and each
Lender harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations, costs and expenses (including,
without limitation, litigation costs and reasonable attorneys fees and
expenses) arising from or in any way connected with the performance of the
Replacements unless due to Administrative Agent's (or any Lenders') wilful
misconduct or gross negligence. Borrower shall assign to Administrative Agent
all rights and claims Borrower may have against all Persons supplying labor or
materials in connection with the Replacements; provided, however, that
Administrative Agent may not pursue any such right or claim unless an Event of
Default has occurred and remains uncured.
SECTION 7.5 INTENTIONALLY DELETED
SECTION 7.6 GROUND RENT ESCROW FUND.
Borrower shall pay to Administrative Agent on the eleventh day
of each calendar month (a) one-twelfth of the Ground Rent that Administrative
Agent estimates will be payable during the next ensuing twelve (12) months in
order to accumulate with Administrative Agent sufficient funds to pay all such
Ground Rent at least thirty (30) days prior to their respective due dates (the
"GROUND RENT ESCROW FUND"). Administrative Agent will apply the Ground Rent
Escrow Fund to payments of Ground Rent when due as required to be made by
Borrower pursuant to Section 5.1 hereof. In making any payment relating to the
Ground Rent Fund, Administrative Agent may do so according to any bill,
statement or estimate procured from the Ground Lessor, without inquiry into the
accuracy of such bill, statement or estimate. If the amount of the Ground Rent
Escrow Fund shall exceed the amounts due for Ground Rent and pursuant to
Section 5.1 hereof, Administrative Agent shall, at the sole discretion of the
Requisite Lenders, return any excess to Borrower or credit such excess against
future payments to be made to the Ground Rent Escrow Fund. If at any time
Administrative Agent reasonably determines that the Ground Rent Escrow Fund is
not or will not be sufficient to pay the Ground Rent,
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Administrative Agent shall notify Borrower of such determination and Borrower
shall increase its monthly payments to Administrative Agent by the amount that
Administrative Agent estimates is sufficient to make up the deficiency at least
thirty (30) days prior to its due date. Notwithstanding anything to the
contrary contained in this Section 7.6, provided (x) there is on deposit in the
Deposit Account sufficient funds to pay one months Ground Rent due in
connection with all Assets and (ii) no Cash Trap Period exists, Borrower shall
not be required to deposit funds into the Ground Rent Escrow Fund as required
by this Section 7.6. Any amount remaining in the Ground Rent Escrow Fund after
the Debt has been paid in full shall be returned to Borrower.
VIII. DEFAULTS
SECTION 8.1 EVENT OF DEFAULT.
(a) Each of the following events shall constitute an
event of default hereunder (an "EVENT OF DEFAULT"):
(i) any portion of the Debt is not paid when due;
(ii) subject to Borrower's right to contest Taxes
and Other Charges pursuant to Section 5.1, any of the Taxes or Other
Charges are not paid when the same become delinquent;
(iii) the Policies are not kept in full force and
effect, or certified copies of the Policies are not delivered to
Administrative Agent within ten (10) Business Days of request;
(iv) except as permitted in Section 6.1(j) hereof,
Borrower or any Loan Party transfers or encumbers any portion of any
Asset or other Collateral without the Requisite Lenders' and the
Administrative Agent's prior written consent;
(v) any representation or warranty made by
Borrower or any other Loan Party herein or in any other Loan Document,
or in any report, certificate, financial statement or other
instrument, agreement or document furnished hereunder or thereunder,
shall have been false or misleading in any material respect as of the
date the representation or warranty was made, provided, however if
such false or misleading representation or warranty is susceptible of
being cured within thirty (30) Business days, the same shall be an
Event of Default hereunder only if the same is not cured within a
reasonable time not to exceed sixty (60) Business Days after notice
from Administrative Agent;
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(vi) Borrower or any other Loan Party shall make
an assignment for the benefit of creditors;
(vii) a receiver, liquidator or trustee shall be
appointed for Borrower (or any other Loan Party) or Borrower (or any
other Loan Party) shall be adjudicated a bankrupt or insolvent, or any
petition for bankruptcy, reorganization or arrangement pursuant to
federal bankruptcy law, or any similar federal or state law, shall be
filed by or against, consented to or acquiesced in by Borrower (or
such Loan Party), or any proceeding for the dissolution or liquidation
of Borrower or any other Loan Party shall be instituted; provided,
however, that if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by Borrower or such
Loan Party, then the same shall be an Event of Default hereunder only
if the same is not discharged, stayed or dismissed within sixty (60)
days after the date of such appointment or adjudication, the date such
petition is first filed or the date such proceeding is instituted, as
the case may be;
(viii) Borrower or any other Loan Party attempts to
assign its rights under this Agreement or any of the other Loan
Documents or any interest herein or therein in contravention of the
Loan Documents;
(ix) Borrower breaches any of its negative
covenants contained in Section 6.1 (except with respect to Sections
6.1(a), 6.1(b), 6.1(g), and 6.1(k), only if Borrower fails to cure any
default thereunder within ten (10) days after any Loan Party becomes
aware of or receives notice of such default) or any covenant contained
in Section 4.1(dd) or 5.1(bb) hereof; any other Loan Party fails to
include in their certificate of incorporation or other organizational
documents the covenants, representations or warranties set forth in
Section 4.1(dd) hereof as if directly made by it, or breaches or
alters any of such covenants, representations or warranties; or any of
the partners, members or shareholders of such Loan Parties which owns
a 49% or greater interest therein alters or breaches any of the
separateness covenants contained in such Loan Party's certificate of
incorporation;
(x) with respect to any term, covenant or
provision set forth herein which specifically contains a notice
requirement or grace period, Borrower or any other Loan Party shall be
in default under such term, covenant or condition after the giving of
such notice or the expiration of such grace period;
(xi) any of the assumptions contained in that
certain Non-Consolidation Opinion delivered to Administrative Agent in
connection with the Loan, or in any other Non-Consolidation Opinion
delivered subsequent to the closing of the Loan, is or shall become
untrue in any material respect;
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(xii) Borrower or Parent shall continue to be in
Default under any of the other terms, covenants or conditions of this
Agreement not specified in subsections (i) to (xi) above, or (xiv),
(xv), (xvi), (xvii) or (xviii) below, for ten (10) days after notice
to Borrower or Parent from Administrative Agent, in the case of any
Default which can be cured by the payment of a sum of money, or for
thirty (30) days after notice to Borrower or Parent from
Administrative Agent in the case of any other Default; provided,
however, that if such non-monetary Default is susceptible of cure but
cannot reasonably be cured within such 30-day period and provided
further that Borrower shall have commenced to cure such Default within
such 30-day period and thereafter diligently and expeditiously
proceeds to cure the same, such 30-day period shall be extended for
such time as is reasonably necessary for Borrower in the exercise of
due diligence to cure such Default, such additional period not to
exceed sixty (60) days;
(xiii) there shall be default under any Mortgage or
any of the other Loan Documents beyond any applicable cure periods
contained in such documents, whether as to Borrower, any other Loan
Party, any Asset or any other Collateral, or any other such event
shall occur or condition shall exist, if the effect of such event or
condition is to accelerate the maturity of any portion of the Debt or
to permit Administrative Agent to accelerate the maturity of all or
any portion of the Debt;
(xiv) except as may be permitted otherwise by this
Agreement, (x) any Franchise Agreement with respect to any Asset or
any consent or comfort letter delivered by any franchisor under any
such Franchise Agreement shall cease to be in full force and effect or
(y) any party thereto shall deny or disaffirm its obligations
thereunder or shall default in the due performance or observance of
any material term, covenant or agreement on its part to be performed
or observed pursuant thereto and any applicable cure period shall have
expired, and in any such event the Borrower shall have failed to
either (a) replace such Franchise Agreement within 60 days of such
default (after the expiration of any such applicable cure period) or
disaffirmation, as the case may be, with a franchise agreement
approved in writing by Administrative Agent or (b) operate the
applicable Asset under a tradename owned by Bristol and referred to in
clause (w) of subsection 6.1(k)(iii);
(xv) if any representation contained in Section
4.1(mm), (nn) and (oo) shall become untrue;
(xvi) (a) failure of any Loan Party to pay when due
any monetary obligation contained in any Ground Lease, in each case
beyond the end of any grace or cure period provided therefor (but in
no event longer than five days, without extension); (b) occurrence of
any other event or condition which, with the giving of notice or lapse
of time or both, would cause, or would permit any lessor under any
Ground Lease to cause, an acceleration, a cancellation or a
termination, as against any Loan Party thereto,
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of such Ground Lease, in each case after giving effect to any grace or
cure period therefor (but in no event longer than five days without
any extension); or (c) failure by any Loan Party to permit
Administrative Agent and/or its representatives at all reasonable
times upon reasonable prior written notice to make investigation or
examination concerning such Loan Party's performance and observance of
the terms, covenants and conditions of a Ground Lease;
(xvii) at any time after the execution and delivery
thereof, (x) any Loan Document or any material provision thereof shall
cease to be in full force and effect (other than in accordance with
its terms) or shall be declared null and void or the Secured Parties
shall not have or shall cease to have a valid and perfected first
priority Lien or security interest in any Collateral or Asset
purported to be covered, in each case other than with respect to
Permitted Encumbrances, other than as a result of the failure of
Administrative Agent to take any action within its control, or (y) any
Loan Party shall contest in writing the validity or enforceability of
any Loan Document in writing or deny in writing that it has any
further liability under any Loan Document to which it is a party; or
(xviii) any money judgment, writ or warrant of
attachment or similar process involving individually or in the
aggregate at any time an amount in excess of $2,500,000 (in either
case to the extent not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against Borrower or any other Loan Party or
any of their respective assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days (or in any
event later than five days prior to the date of any proposed sale
thereunder); or
(xix) any Loan Party shall fail to pay any principal
of or premium or interest on any indebtedness of such Person having a
principal amount of $250,000 or more (excluding indebtedness evidenced
by the Notes) when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise); or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such indebtedness,
if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such indebtedness; or any
such indebtedness shall become or be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled
required prepayment), or any Loan Party shall be required to
repurchase or offer to repurchase such indebtedness, prior to the
stated maturity thereof; or
(xx) a default has occurred and continues beyond
any applicable cure period under any Property Management Agreement (or
any successor property management agreement) if such default permits
the property manager to terminate or
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cancel such Property Management Agreement (or any successor property
management agreement) unless a replacement property Manager is
appointed pursuant to Section 6.1(v) hereof.
(b) Upon the occurrence of an Event of Default (other
than an Event of Default described in clauses (vi), (vii) or (viii) above) and
at any time thereafter, Administrative Agent may (or at the request of the
Requisite Lenders, shall) in addition to any other rights or remedies available
to it pursuant to this Agreement and the other Loan Documents or at law or in
equity, take such action, without notice or demand, that Administrative Agent
(or such Requisite Lenders) deems advisable to protect and enforce its rights
against Borrower or any other Loan Party and in and to the Property or any
other Collateral, including, without limitation, declaring the Debt to be
immediately due and payable, and Administrative Agent may enforce or avail
itself of any or all rights or remedies provided in the Loan Documents against
Borrower or any other Loan Party and the Property or any other Collateral,
including, without limitation, all rights or remedies available at law or in
equity; and upon any Event of Default described in clauses (vi), (vii) or
(viii) above, the Debt and all other obligations of Borrower or any other Loan
Party hereunder and under the other Loan Documents shall immediately and
automatically become due and payable, without notice or demand, and, to the
extent allowed by applicable law, Borrower hereby expressly waives any such
notice or demand, anything contained herein or in any other Loan Document to
the contrary notwithstanding.
SECTION 8.2 REMEDIES.
(a) Upon the occurrence of an Event of Default, all or
any one or more of the rights, powers, privileges and other remedies available
to Administrative Agent against Borrower (or any other Loan Party) under this
Agreement or any of the other Loan Documents executed and delivered by, or
applicable to, Borrower (or any other Loan Party) or at law or in equity may
(or at the request of the Requisite Lenders, shall) be exercised by
Administrative Agent at any time and from time to time, whether or not all or
any of the Debt shall be declared due and payable, and whether or not
Administrative Agent shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Loan
Documents with respect to the Property or any other Collateral. Any such
actions taken by Administrative Agent shall be cumulative and concurrent and
may be pursued independently, singly, successively, together or otherwise, at
such time and in such order as the Requisite Lenders and Administrative Agent
may determine in their sole discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of
Administrative Agent and Lenders permitted by law, equity or contract or as set
forth herein or in the other Loan Documents. Without limiting the generality
of the foregoing, Borrower agrees that, to the extent permitted by applicable
law, if an Event of Default is continuing (i) Administrative Agent is not
subject to any "one action" or "election of remedies" law or rule, and (ii) all
Liens and other rights, remedies or privileges provided to the Secured Parties
shall remain in full force and effect until Administrative Agent has exhausted
all of its remedies
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against each Asset and the Mortgage has been foreclosed, sold and/or otherwise
realized upon in satisfaction of the Debt or the Debt has been paid in full.
(b) Administrative Agent shall have the right from time
to time to partially foreclose any Mortgage or combination of Mortgages in any
manner and for any amounts secured by such Mortgages then due and payable as
determined by the Requisite Lenders and Administrative Agent in their sole
discretion, including, without limitation, in the event: (i) Borrower defaults
beyond any applicable grace period in the payment of one or more scheduled
payments of principal and interest, Administrative Agent may (or at the request
of the Requisite Lenders, shall) foreclose any Mortgage or combination of
Mortgages to recover such delinquent payments or (ii) Administrative Agent
elects, or is directed by the Requisite Lenders, to accelerate less than the
entire outstanding principal balance of the Loan, Administrative Agent may
foreclose any Mortgage or combination of Mortgages to recover so much of the
principal balance of the Loan as Administrative Agent may accelerate and such
other sums secured by such Mortgage or Mortgages as Administrative Agent or the
Requisite Lenders may elect. Notwithstanding one or more partial foreclosures,
each Asset shall remain subject to the applicable Mortgage to secure payment of
sums secured by such Mortgage and not previously recovered.
(c) Administrative Agent shall have the right from time
to time to sever the Notes and the other Loan Documents into more separate
notes, mortgages and other security documents (the "SEVERED LOAN DOCUMENTS"),
in such denominations as the Requisite Lenders and Administrative Agent shall
determine in their sole discretion for purposes of evidencing and enforcing the
rights and remedies of the Lenders provided hereunder (provided Administrative
Agent may not increase the principal balance of the Debt or otherwise adversely
affect (except to a de-minimis extent) the rights or interest of Borrower,
Parent or any other Loan Party under this Agreement or any other Loan
Document). Borrower shall and Parent shall cause each Loan Party to execute
and deliver to Administrative Agent from time to time, promptly after its
request, a severance agreement and such other documents as Administrative shall
request in order to effect the severance described in the preceding sentence,
all in form and substance reasonably satisfactory to Administrative Agent and
the Requisite Lenders. Borrower and Parent each hereby absolutely and
irrevocably appoint Administrative Agent as their true and lawful attorney,
coupled with an interest, in their name and stead to make and execute all
documents necessary or desirable to effect the aforesaid severance, Borrower
and Parent each ratifying all that its said attorney shall do by virtue
thereof; provided, however, that Administrative Agent shall not make or execute
any such documents under such power until three (3) days after notice has been
given to Borrower by Administrative Agent of its intent to exercise its rights
under such power.
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SECTION 8.3 REMEDIES CUMULATIVE.
The rights, powers and remedies of Administrative Agent and
Lenders under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lenders may have against Borrower or any other
Loan Party pursuant to this Agreement or the other Loan Documents, or existing
at law or in equity or otherwise. Such rights, powers and remedies may be
pursued singly, concurrently or otherwise, at such time and in such order as
Lenders and Administrative Agent, may determine in their sole discretion. No
delay or omission to exercise any remedy, right or power accruing upon an Event
of Default shall impair any such remedy, right or power or shall be construed
as a waiver thereof, but any such remedy, right or power may be exercised from
time to time and as often as may be deemed expedient. A waiver of one Default
or Event of Default with respect to Borrower or any other Loan Party shall not
be construed to be a waiver of any subsequent Default or Event of Default by
Borrower or such Loan Party or to impair any remedy, right or power consequent
thereon. Any and all amounts collected or retained by Lenders or
Administrative Agent after an Event of Default has occurred, including, but not
limited to, interest at the Default Rate, late charges or any escrowed amount,
may be applied by Lenders or Administrative Agent to payment of the Debt as set
forth in Section 10.9.3.
IX. SPECIAL PROVISIONS
SECTION 9.1 SALE OF NOTES AND SECURITIZATION.
At the request of the holder of the Notes, Borrower shall and
Parent shall cause each Loan Party to use reasonable efforts to facilitate the
consummation of the sale of the Notes or participation therein or the
securitization (such sale and/or securitization, the "SECURITIZATION") of rated
single or multi-class securities (the "SECURITIES") secured by or evidencing
ownership interests in the Notes and each Mortgage, and shall cooperate with
and, to the extent not already required to be provided by Borrower under this
Agreement, provide Administrative Agent and Lenders with all information and
materials obtainable by Borrower or any Loan Party which may be required in the
marketplace or by the Rating Agencies in connection with the Securitization,
including, without limitation, to:
(a) (i) provide such financial and other information with
respect to the Property, the other Collateral, Borrower, the other Loan Parties
and the Property Manager, (ii) provide budgets relating to each Asset or the
Property, and (iii) to perform or permit or cause to be performed or permitted
such site inspection, appraisals, market studies, environmental reviews and
reports (Phase I's and, if appropriate, Phase II's), engineering reports and
other due diligence investigations of each Asset, as may be requested by the
holders of the Notes or the Rating Agencies or as may be necessary or
appropriate in connection with the Securitization (the "PROVIDED INFORMATION"),
together with appropriate verification and/or
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consents of the Provided Information through letters of auditors or opinions of
counsel of independent attorneys acceptable to Administrative Agent, Lenders
and the Rating Agencies;
(b) at Borrower's expense, cause counsel to render or
update opinions (which may be relied upon by the Rating Agencies) as to
non-consolidation, or any other opinion customary in securitization
transactions with respect to the Property and Borrower and its Affiliates
(including without limitation the other Loan Parties), which counsel and
opinions shall be reasonably satisfactory to the holders of the Notes and the
Rating Agencies;
(c) make such representations and warranties as of the
closing date of the Securitization with respect to the Property, the other
Collateral, Borrower, the other Loan Parties and the Loan Documents as are
customarily provided in securitization transactions and as may be reasonably
requested by the holders of the Notes or the Rating Agencies and consistent
with the facts covered by such representations and warranties as they exist on
the date thereof, including the representations and warranties made in the Loan
Documents but excluding any representations or warranties, if any, which were
made solely as of the Closing Date; and
(d) execute such amendments to the Loan Documents and
organizational documents, enter into a lockbox or similar arrangement with
respect to the Rents and establish and fund such reserve funds (including,
without limitation, reserve funds for deferred maintenance and capital
improvements) as may be reasonably requested by the holders of the Notes or the
Rating Agencies or otherwise to effect the Securitization; provided, however,
that Borrower shall not be required to modify or amend any Loan Document if
such modification or amendment would (i) change the interest rate, the stated
maturity or the amortization of principal set forth in the Notes or (ii) modify
or amend any other material economic terms or conditions of the Loan or rights
or interests or Borrower, Parent or any other Loan Party under the Loan
Documents, except to a de-minimis extent.
All reasonable third party costs and expenses incurred by Administrative Agent
and Lenders in connection with the Securitization which are attributable to
Borrower (or any other Loan Party), the Loan Documents, the Property or the
other Collateral or this Section 9.1, including, without limitation, fees
charged by any Rating Agency (other than rating surveillance fees), shall be
paid by Borrower within ten (10) days after demand of Administrative Agent (the
"SECURITIZATION EXPENSES"); provided, however, that in no event shall such
costs and expenses exceed one half of one percent (.5%) of the original
principal balance of the Loan. The Securitization Expenses shall be used by
Administrative Agent to pay its costs and expenses as set forth above and any
portion of the Securitization Expenses not expended in connection with the
Securitization shall be promptly returned to Borrower. Thirty (30) days prior
to any Securitization, Borrower may require Administrative Agent to provide an
accounting as to the amount and itemization of the Securitization Expense
Administrative Agent and Lenders have already spent, any additional amount
required to be expended in connection with such Securitization and the identity
of the purchaser of the Residual Amount.
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SECTION 9.2 SECURITIZATION INDEMNIFICATION.
(a) Borrower understands that certain of the Provided
Information and the Required Records may be included in disclosure documents in
connection with the Securitization, including, without limitation, a prospectus
or private placement memorandum (each, a "DISCLOSURE DOCUMENT") and may also be
included in filings with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "SECURITIES ACT"), or the Securities
and Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or provided or made
available to investors or prospective investors in the Securities, the Rating
Agencies, and service providers relating to the Securitization. In the event
that the Disclosure Document is required to be revised prior to the sale of all
Securities, Borrower will and Parent will cause each Loan Party to cooperate
with the holders of the Notes in updating the Disclosure Document by providing
all current information necessary to keep the Disclosure Document accurate and
complete in all material respects.
(b) Borrower agrees to, and Parent shall cause each Loan
Party to, provide in connection with each of (i) a preliminary and a private
placement memorandum or (ii) a preliminary and final prospectus, as applicable,
an indemnification certificate (A) certifying that Borrower and each other Loan
Party has carefully examined such memorandum or prospectus, as applicable,
including, without limitation, the sections entitled "Special Considerations,"
"Description of the Mortgages," "Description of the Mortgage Loans and
Mortgaged Properties," "The Manager," "The Borrower" and "Certain Legal Aspects
of the Mortgage Loan," and such sections (and any other sections reasonably
requested) do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading, (B)
indemnifying Administrative Agent and Lenders (and for purposes of this Section
9.2, Administrative Agent and Lenders hereunder shall include its officers and
directors), the Affiliate of Nomura Securities International, Inc. ("NOMURA")
that has filed the registration statement relating to the Securitization (the
"REGISTRATION STATEMENT"), each of its directors, each of its officers who have
signed the Registration Statement and each person or entity who controls the
Affiliate within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act (collectively, the "NOMURA GROUP"), and each of Nomura, BT
Alex. Brown Incorporated, each of its directors and each person who controls
Nomura or BT Alex. Brown Incorporated, as the case may be, within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act
(collectively, the "UNDERWRITER GROUP") for any losses, claims, damages or
liabilities (the "LIABILITIES") to which any Lender, Administrative Agent, the
Nomura Group or the Underwriter Group may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in such sections or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated in such sections or necessary in order to
make the statements in such sections, in light of the circumstances under which
they were made, not misleading, and (C) agreeing to reimburse Administrative
Agent, Lenders, the Nomura Group
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and the Underwriter Group for any reasonable legal or other out-of-pocket
expenses reasonably incurred by Administrative Agent, Lenders and the Nomura
Group and the Underwriting Group in connection with investigating or defending
the Liabilities; provided, however, that Borrower (or such Loan Party) will be
liable in any such case under clauses (B) or (C) above only to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
such untrue statement or omission made therein in reliance upon and in
conformity with information furnished to Administrative Agent (or any Lender)
by or on behalf of Borrower or any Loan Party in connection with the
preparation of the memorandum or prospectus or in connection with the
underwriting of the Debt, including, without limitation, financial statements
of Borrower or any Loan Party and operating statements, Rent Rolls,
environmental site assessment reports and property condition reports with
respect to each Asset. This indemnity agreement will be in addition to any
liability which Borrower may otherwise have.
(c) In connection with filings under the Exchange Act,
Borrower agrees to indemnify (i) Administrative Agent, Lenders, the Nomura
Group and the Underwriter Group for Liabilities to which Administrative Agent,
Lenders, the Nomura Group or the Underwriter Group may become subject insofar
as the Liabilities arise out of or are based upon the omission or alleged
omission to state in the Provided Information or Required Records a material
fact required to be stated in the Provided Information or Required Records in
order to make the statements in the Provided Information or Required Records,
in light of the circumstances under which they were made, not misleading and
(ii) reimburse Administrative Agent, Lenders, the Nomura Group or the
Underwriter Group for any reasonable legal or other out-of-pocket expenses
reasonably incurred by Administrative Agent, the Nomura Group or the
Underwriter Group in connection with defending or investigating the
Liabilities.
(d) Promptly after receipt by an indemnified party under
this Section 9.2 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 9.2, notify the indemnifying party in
writing of the commencement thereof, but the omission to so notify the
indemnifying party will not relieve the indemnifying party from any liability
which the indemnifying party may have to any indemnified party hereunder except
to the extent that failure to notify causes prejudice to the indemnifying
party. In the event that any action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled, jointly with any other indemnifying party,
to participate therein and, to the extent that it (or they) may elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party. After notice
from the indemnifying party to such indemnified party under this Section 9.2
and the assumption by the indemnifying party of the defense thereof, the
indemnifying party shall not be liable for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, if the
defendants in any such action include both the indemnified party and the
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indemnifying party and the indemnified party shall have reasonably concluded
that there are any legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties. The indemnifying party shall not be liable for the expenses of
more than one separate counsel unless an indemnified party shall have
reasonably concluded that there may be legal defenses available to it that are
different from or additional to those available to another indemnified party.
(e) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 9.2(b), (c) or (d) is for any reason held to be unenforceable by an
indemnified party in respect of any losses, claims, damages or liabilities (or
action in respect thereof) referred to therein which would otherwise be
indemnifiable under Section 9.2(b), (c) or (d), the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result
of such losses, claims, damages or liabilities (or action in respect thereof);
provided, however, that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. In determining the amount of contribution to which the
respective parties are entitled, the following factors shall be considered:
(i) Nomura's and Borrower's relative knowledge and access to information
concerning the matter with respect to which claim was asserted; (ii) the
opportunity to correct and prevent any statement or omission; and (iii) any
other equitable considerations appropriate in the circumstances. Nomura and
Borrower hereby agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation.
(f) The liabilities and obligations of Borrower, Parent,
Lenders and Administrative Agent under this Section 9.2 shall survive the
termination of this Agreement and the satisfaction and discharge of the Debt.
(g) Notwithstanding anything to the contrary in this
Section 9.2, no Person shall be entitled to be indemnified hereunder with
respect to any liabilities that arise from the bad faith, recklessness or
wilful violation of law of such Person.
SECTION 9.3 RATING SURVEILLANCE.
Administrative Agent or its Affiliates will retain the Rating
Agencies to provide rating surveillance services on any certificates issued in
a Securitization. Such rating surveillance will be at the expense of Lenders.
SECTION 9.4 INTENTIONALLY DELETED
SECTION 9.5 INTENTIONALLY DELETED
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SECTION 9.6 INDEMNIFICATION AGAINST TAX.
Borrower indemnifies and agrees to defend and hold
Administrative Agent and each Lender harmless against all real estate transfer,
mortgage recording, documentary stamp and intangible taxes and other amounts
(other than income taxes) imposed on Administrative Agent or such Lender by
virtue of such party's execution of any of the Loan Documents or by reason of
the Loan, including any penalties, interest and attorneys' fees incurred by
Lenders in connection therewith, and all such charges shall be secured by the
Lien of each Mortgage and bear interest at the Default Rate until paid.
SECTION 9.7 SPLITTING THE LOAN.
Administrative Agent shall have the right from time to time to
sever the Notes and the other Loan Documents into one or more separate notes,
mortgages and other security documents (the "SEVERED LOAN DOCUMENTS") in such
denominations as the requisite Lenders and Administrative Agent shall determine
in their sole discretion for purposes of evidencing and enforcing its rights
and remedies provided hereunder, provided, however, that the terms, provisions
and clauses of the Severed Loan Documents shall be no more adverse to Borrower
than those contained in the Notes, this Agreement, the Security Deed and the
other Loan Documents. Borrower shall and Parent shall cause each Loan Party to
execute and deliver to Administrative Agent from time to time, promptly after
the request of Administrative Agent, a severance agreement and such other
documents as Administrative Agent shall reasonably request in order to effect
the severance described in the preceding sentence, all in form and substance
reasonably satisfactory to Administrative Agent. Borrower and Parent each
hereby absolutely and irrevocably appoint Administrative Agent as their true
and lawful attorney, coupled with an interest, in its name and stead to make
and execute all documents necessary or desirable to effect the aforesaid
severance, Borrower and Parent each ratifying all that its said attorney shall
do by virtue thereof; provided, however, that Administrative Agent shall not
make or execute any such documents under such power until three (3) days after
notice has been given to Borrower by Administrative Agent of Lenders' intent to
exercise its rights under such power.
X. CENTRAL CASH MANAGEMENT
SECTION 10.1 SERVICER.
At the option of Administrative Agent, as agent for Lenders,
the Loan may be serviced by a servicer/trustee (the "SERVICER") selected by
Administrative Agent and Administrative Agent may delegate all or any portion
of its responsibilities under this Agreement and the other Loan Documents to
the Servicer. The cost of the Servicer (the "SERVICING FEES") shall not exceed
0% of the original principal amount of the Notes per annum and shall be due and
payable monthly by Borrower at the same time that the monthly scheduled
payments on Debt are due and payable.
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SECTION 10.2 ESTABLISHMENT OF ACCOUNTS.
10.2.1 ESTABLISHMENT OF CLEARING ACCOUNT. In order to
further secure the performance by Borrower of the Obligations and as a material
inducement for Lenders to make the Loan in accordance with terms of this
Agreement, the Notes and the Mortgages, Borrower hereby acknowledges, confirms
and covenants that: (i) Borrower has established separate accounts (each
individually a "CLEARING ACCOUNT A") in the name of Administrative Agent
Lenders or Lenders' designee; (ii) Borrower has established a separate account
("CLEARING ACCOUNT B") in the name of Borrower or Borrower's designee in a bank
to be designated by Borrower; (iii) each Clearing Account A will be subject to
the sole dominion, control and discretion of Administrative Agent, as agent for
Lenders or its designee, subject to the terms, covenants and conditions of this
Agreement; (iv) Clearing Account B will be subject to the sole dominion,
control and discretion of Borrower or its designee, subject to the terms,
covenants and conditions of this Agreement; (v) Administrative Agent, as agent
for Lenders or its designee shall have the sole right to make withdrawals from
each Clearing Account A; (vi) Borrower or its designee shall have the sole
right to make withdrawals from Clearing Account B; and (vii) neither Borrower
nor any other Person claiming on behalf of or through Borrower shall have any
right or authority, whether express or implied, to close or to make use of, or
withdraw any Account Proceeds from any Clearing Account A. Each Clearing
Account A and Clearing Account B shall be assigned the federal tax
identification number of Borrower, which number is 75-2724573.
10.2.2 ESTABLISHMENT OF DEPOSIT ACCOUNT AND SUBACCOUNTS. (a)
Administrative Agent has established a separate account, in the name of
Administrative Agent, as agent for Lenders, entitled the "Deposit Account for
Nomura Asset Capital Corporation as Mortgagee of "Bristol Lodging Company" (the
"DEPOSIT ACCOUNT"). Administrative Agent shall or shall cause the Deposit Bank
to maintain on a ledger entry basis the following subaccounts (the
"SUBACCOUNTS") entitled:
(i) Tax and Insurance Escrow Subaccount (the "TAX
AND INSURANCE ESCROW SUBACCOUNT");
(ii) Monthly Debt Service Subaccount (the "MONTHLY
DEBT SERVICE SUBACCOUNT");
(iii) Replacement Reserve Subaccount (the
"REPLACEMENT RESERVE SUBACCOUNT");
(iv) Required Repair Subaccount (the "REQUIRED
REPAIR SUBACCOUNT");
(v) Loss Proceeds Subaccount (the "LOSS PROCEEDS
SUBACCOUNT");
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(vi) Security Deposit Subaccount (the "SECURITY
DEPOSIT SUBACCOUNT");
(viii) Borrower's Remainder Subaccount (the
"BORROWER'S REMAINDER SUBACCOUNT");
(ix) Ground Rent Subaccount (the "GROUND RENT
SUBACCOUNT");
(b) In order to further secure the performance by
Borrower of the Obligations and as a material inducement for Lenders to make
the Loan in accordance with terms of this Agreement, the Notes and each
Mortgage, Borrower hereby acknowledges and confirms that: (i) Administrative
Agent as its designee has established the Deposit Account in the name of
Administrative Agent, as agent for Lenders; (ii) the Deposit Account will be
subject to the sole dominion, control and discretion of Administrative Agent as
its designee, subject to the terms, covenants and conditions of this Agreement;
(iii) Administrative Agent or its designee shall have the sole right to make
withdrawals from the Deposit Account; and (d) neither Borrower nor any other
Person claiming on behalf of or through Borrower shall have any right or
authority, whether express or implied, to close or to make use of, or withdraw
any Account Proceeds from, the Deposit Account. The Deposit Account shall be
assigned the federal tax identification number of Borrower, which number is
75-2724573.
SECTION 10.3 DEPOSITS INTO CLEARING ACCOUNT.
(a) Within one (1) Business Day after receipt of the same
by Borrower or any agent or Person acting on behalf of Borrower, including,
without limitation, any Property Manager engaged by Borrower in connection with
any Asset or any other Loan Party, Borrower shall and Parent shall cause each
Loan Party to directly deposit (or cause to be deposited) all Rent and other
Mortgaged Property Gross Cash Flow and all Security Deposits into the Clearing
Account A for such Asset. Without limiting the generality of the foregoing:
(i) Borrower shall cause all Rent, payable on account of
any Tenant Lease, and Security Deposits, payable on account of any
Tenant Lease, to be transmitted directly to the Clearing Account A for
the Asset in connection with which the Rent is being paid, by each
Person granted a possessory interest or right to use or occupy all or
any portion of such Asset pursuant to a Tenant Lease (collectively,
the "TENANTS"), without such Rent or Security Deposits at any time
being under the control of Borrower or any of its agents or employees,
by executing and delivering to each Tenant under a Tenant Lease,
whether such Tenant Lease is presently effective or executed after the
date hereof, an irrevocable letter of direction (the "PAYMENT
DIRECTION LETTER") in the form attached hereto as Exhibit A, advising
each Tenant to directly deposit into such Clearing Account A at the
address set forth in the Payment Direction Letter, promptly when due,
all Rent and Security Deposits payable to Borrower as landlord under
the Tenant Leases.
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Borrower represents, warrants and covenants that it shall deliver the
Payment Direction Letter (i) on or prior to the date hereof with
respect to Tenant Leases executed on or prior to the date hereof and
(ii) contemporaneously with the execution and delivery of all other
Tenant Leases after the date hereof. Neither Borrower nor the
Property Manager shall (i) terminate, amend, revoke or alter any
Payment Direction Letter by amending any Tenant Lease or otherwise or
(ii) direct or cause any Tenant to pay Rent in any manner other than
as specifically provided in the Payment Direction Letter.
(ii) Borrower shall cause all Credit Card Receivables to
be transmitted directly to the Clearing Account A for the Asset in
connection with which the Rent is being paid, by the Credit Card Payor
without such Credit Card Receivables at any time being under the
control of Borrower or any of its agents or employees, by executing
and delivering to each Credit Card Payor, an irrevocable letter of
direction (the "CREDIT CARD PAYOR PAYMENT DIRECTION LETTER") in the
form attached hereto as Exhibit B, advising each Credit Card Payor to
directly deposit into such Clearing Account A at the address set forth
in the Credit Card Payor Payment Direction Letter, promptly when due,
all Credit Card Receivables payable to Borrower. Borrower represents,
warrants and covenants that it shall deliver the Credit Card Payor
Payment Direction Letter (i) on or prior to the date hereof with
respect to each person who is a Credit Card Payor on the date hereof
and (ii) on or prior to accepting any other credit card for payment,
to each additional Credit Card Payor. Neither Borrower nor the
Property Manager shall (i) terminate, amend, revoke or alter any
Credit Card Payor Payment Direction Letter or (ii) direct or cause any
Credit Card Payor to pay Credit Card Receivables in any manner other
than as specifically provided in the Credit Card Payor Payment
Direction Letter.
(b) Borrower and Parent agree (i) not to commingle, or
permit any other Loan Party to commingle, any such Mortgaged Property Gross
Cash Flow or Security Deposits which it receives with other funds of Borrower
or any other Loan Party, (ii) that Borrower or any other Loan Party, as the
case may be, is holding Mortgaged Property Gross Cash Flow and Security
Deposits which it receives in an express trust for the benefit of Lenders until
all Mortgaged Property Gross Cash Flow and Security Deposits which it receives
are deposited into the Clearing Account A for the appropriate Asset and (iii)
to transmit or cause any other Loan Party to transmit such Mortgaged Property
Gross Cash Flow or Security Deposits which it receives into the Clearing
Account A for the Asset in connection with which such Mortgaged Property Gross
Cash Flow or Security Deposit was generated within one (1) Business Day after
receipt thereof.
(c) Borrower shall notify Administrative Agent (or cause
each Clearing Bank to notify Administrative Agent) contemporaneously with the
making of each deposit into any Clearing Account A under this Section which is
made by Borrower or any agent or Person on behalf of Borrower (other than
deposits made by Tenants or Credit Card Payors directly into Clearing Account
A) of the amount and date of such payment, which notification shall contain a
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breakdown of the amount of Rent, Loss Proceeds and other Mortgaged Property
Gross Cash Flow and Security Deposits included in the deposit. Said
notification shall be accompanied by such supporting documentation as
Administrative Agent may reasonably require. Any deposit made by or on behalf
of Borrower into any Clearing Account A shall be deemed deposited into such
Clearing Account A when the funds in respect of such deposit shall become
available funds.
SECTION 10.4 TRANSFERS TO DEPOSIT ACCOUNT AND CLEARING
ACCOUNT B.
10.4.1 TRANSFERS FROM CLEARING ACCOUNT. (a) Subject to
clauses (b) and (c) below, Borrower shall cause the Clearing Bank to transfer,
on a daily basis by wire transfer or via the automated clearing house ("ACH")
system, amounts constituting available funds on deposit in Clearing Account A
in excess of $1,000 to the Deposit Account (the "MINIMUM BALANCE").
Simultaneously with any transfer to the Deposit Bank pursuant to this Section
10.4.1, the Clearing Bank shall send to the Deposit Bank, Administrative Agent
or its designee, and Borrower, via telecopy, a wire transfer or ACH system
advice setting forth the amount transferred.
(b) Prior to the Optional Prepayment Date, if no Cash
Trap Event shall have occurred or if (i) a Cash Trap Event shall have occurred
and (ii) the Cash Trap Period shall have expired or been terminated or waived
by Lenders and Administrative Agent in their sole discretion, then
Administrative Agent shall (subject to Administrative Agent again being
permitted to cause transfers from Clearing Account A to the Deposit Account
pursuant to Section 10.4.1, if a Cash Trap Event shall have occurred) cause
each Clearing Bank to distribute on a daily basis by wire transfer or via the
ACH system, any amounts constituting available funds on deposit in each
Clearing Account A (which do not constitute Loss Proceeds, Material Security
Deposits or Rent paid more than one month in advance) to Clearing Account B.
(c) Prior to the Optional Prepayment Date, if a Cash Trap
Event shall have occurred and the Cash Trap Period shall not have expired or
been terminated by the Lenders and Administrative Agent in their sole
discretion, then provided no Event of Default has occurred and is continuing
and sufficient funds (which do not constitute Loss Proceeds, Material Security
Deposits or Rent paid more than one month in advance) have been transferred to
the Deposit Account during the applicable Collection Period to distribute and
pay the amounts set forth in Section 10.9.1(a)(i)- (vi) on the next occurring
Distribution Date, Administrative Agent shall, subject to Section 10.9.3 and
10.12 hereof cause each Clearing Bank to distribute on a daily basis by wire
transfer or via the ACH system any additional amounts constituting available
funds on deposit in each Clearing Account A during the remainder of the
applicable Collection Period (which do not constitute Loss Proceeds, Material
Security Deposits, or Rent paid more than one month in advance) to Clearing
Account B.
(d) Borrower shall notify the Clearing Bank if any funds
deposited in Clearing Account A constitute Loss Proceeds, Material Security
Deposits or Rent paid more than one
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month in advance, in sufficient time for the Clearing Bank to transfer such
funds to the Deposit Account. If any funds constituting Loss Proceeds,
Material Security Deposits or Rent paid more than one month in advance are
transferred to Clearing Account B, Borrower shall immediately transfer such
funds to the Deposit Account.
10.4.2 INSUFFICIENT FUNDS IN THE DEPOSIT ACCOUNT. Except as
otherwise expressly provided in this Agreement, all payments from time to time
in respect of the Loan (to the extent not independently funded by Mortgaged
Property Gross Cash Flow deposited into a Clearing Account A) and all
prepayments and other amounts paid by Borrower hereunder (other than fees and
expenses paid on the Closing Date) shall be remitted by Borrower to
Administrative Agent for deposit into the Deposit Account. The obligations of
Borrower under this Agreement and the other Loan Documents to pay principal and
interest and the other costs, expenses, charges, fees and payments payable
under this Agreement and the other Loan Documents, including, without
limitation, funding of the Tax and Insurance Escrow Subaccount and the
Replacement Reserve Subaccount and the Ground Rent Subaccount as required in
Sections 7.3, 7.4 and 7.6 is not limited to the amount of Mortgaged Property
Gross Cash Flow deposited into the Deposit Account, if any, and available for
the purpose of paying such amounts. In the event that the amounts available in
the Deposit Account for the payment of principal and interest or such other
costs, expenses, charges, fees or payments to be paid therefrom, or the amounts
allocated to the Subaccounts for the payment of costs, expenses, charges, fees
or payments to be paid therefrom, are not sufficient to permit the same to be
paid as and when due, then prior to the Disbursement Date immediately preceding
such due date (or in the case of Debt Service, on or prior to such date),
Borrower shall deposit into the Deposit Account such additional funds as may be
required in order to permit the timely payment of all such items (such deposits
being herein called "BORROWER CONTRIBUTION DEPOSITS"). Borrower's ignorance of
the amounts in Clearing Account A, the Deposit Account or any Subaccount
available for the purpose of making the required payments therefrom shall not
be a defense to the failure of Borrower to timely make Borrower Contribution
Deposits as required pursuant to the preceding sentence.
SECTION 10.5 INITIAL DEPOSITS INTO THE SUBACCOUNTS.
On or prior to the Closing Date, Borrower will deposit or will
cause to be deposited into the Deposit Account for allocation to the
Subaccounts the amounts set forth in the settlement statement which was
executed in connection with the Loan and as more particularly set forth on
Schedule I attached hereto.
SECTION 10.6 PLEDGE OF ACCOUNTS; EVENT OF DEFAULT.
As additional security for the payment of all sums due under
the Loan and the performance of all other terms, conditions and covenants of
this Agreement and the other Loan Documents on Borrower's part to be paid and
performed, Borrower hereby pledges, assigns and
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grants to the Secured Parties a continuing perfected security interest in and
to and a first lien upon: (a) the Deposit Account (including each Subaccount)
and each Clearing Account A and all of the Borrower's right, title and interest
in and to all cash, property or rights transferred to or deposited into the
Deposit Account and each Clearing Account A from time to time by or on behalf
of Borrower in accordance with the provisions of this Agreement, (b) all
earnings, investments and securities held in the Deposit Account, and (c) any
and all proceeds of the foregoing (subject to the rights of Tenants whose
Security Deposits were allocated to the Security Deposit Subaccount). Borrower
further agrees to execute, acknowledge, deliver, file or do, at its sole cost
and expense, all other acts, assignments, notices, agreements and other
instruments as Administrative Agent may reasonably require in order to
effectuate, assure, convey, secure, assign and transfer unto Administrative
Agent any of the rights granted by this Section. Borrower shall not further
pledge, assign or grant a security interest in the Deposit Account, any
Subaccount or any Clearing Account A or permit any other Lien to attach thereto
or any levy to be made thereon, or any UCC-1 Financing Statement (except those
naming Administrative Agent as secured party) to be filed with respect thereto.
SECTION 10.7 INVESTMENT OF ACCOUNT FUNDS.
(a) So long as no Event of Default has occurred, all or a
portion of the funds deposited in the Deposit Account shall be invested and
reinvested by Administrative Agent pursuant to written instructions from
Borrower in one or more Eligible Investments; provided, however, that such
funds shall be invested in Eligible Investments in a manner that will permit
Administrative Agent to meet the payment obligations hereunder and any such
direction from Borrower shall contain a certification from Borrower (which may
be conclusively relied upon by Administrative Agent) that any such investments
constitute Eligible Investments. In the absence of any instructions from
Borrower or after the occurrence of an Event of Default, the funds deposited in
the Deposit Account shall be invested and reinvested by Administrative Agent in
securities or obligations described in clause (a) under the definition of
Eligible Investments and, in the case of an Event of Default, Borrower shall
have no authority to direct the investment of such funds. Funds deposited in
any Clearing Account A shall not be invested without Administrative Agent's
consent, which consent shall not be unreasonably withheld provided such
investment (x) is an Eligible Investment and (ii) shall mature on or prior to
the Business Day immediately following the investment of such funds.
(b) All interest, income, earnings or other gain from
investment of the funds deposited in the Deposit Account shall be credited to
the Deposit Account, net of any service charges to the Deposit Account, and any
loss resulting from such investments shall be charged to the Deposit Account.
Borrower shall include and report such interest, income, earnings and other
gain in its income for Federal, state and local income and franchise tax
purposes. Administrative Agent shall not be responsible for any losses with
respect to any investment in Eligible Investments of the funds deposited in the
Deposit Account or for any losses resulting from early withdrawal thereof under
Section 10.7(c) even if such investments in Eligible
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Investments were made at the direction of Administrative Agent, and Borrower
shall bear the risk of all losses with respect to any such investments in
Eligible Investments (including any loss resulting from early withdrawal
thereof under Section 10.7(c)).
(c) Administrative Agent is hereby authorized and
empowered at any time and from time to time, without notice to Borrower or any
other Person, to cause any such investments to be sold or converted to cash in
order to make the disbursements required to be made from the Deposit Account
(and each Subaccount) in accordance with the terms of this Agreement, whether
or not at the time of such sale or conversion, such investments shall have
matured.
SECTION 10.8 REQUISITIONS.
10.8.1 SUBMISSION OF REQUISITIONS. If a Cash Trap Event
shall have occurred and the Cash Trap Period shall not have expired or been
terminated by the Requisite Lenders and Administrative Agent in their sole
discretion, no later than five (5) Business Days prior to the first day of each
Collection Period occurring after such Cash Trap Event, Borrower will submit to
Administrative Agent a Requisition for all Operating Expenses (each, a
"REQUISITION") that Borrower reasonably anticipates will be payable in respect
of each Asset during the following Collection Period.
10.8.2 CONTENT OF REQUISITIONS. No Requisition shall request
payment of amounts which were requested and paid in a previous Collection
Period (or otherwise previously paid by Borrower). Each Requisition shall be
accompanied by such supporting documentation as Administrative Agent may
reasonably require. Each Requisition shall also contain a certification
executed by Borrower confirming that Borrower has expended all amounts released
to it under the previous month's Requisition in the manner contemplated by such
Requisition (or listing any variances), and such certification shall specify
that portion, if any, of the aggregate amount of the prior month's Requisition
that was not expended by Borrower (the "UNUSED REQUISITION AMOUNT"). In
addition, each Requisition shall contain a certification confirming which
amounts requested are, or are not, budgeted in the current Approved Annual
Operating Budget. Each Requisition, commencing with the Requisition for the
calendar month following the Optional Prepayment Date and each Requisition
thereafter (each a "POST OPTIONAL PREPAYMENT DATE REQUISITION"), must be
approved by Administrative Agent. To the extent that the amount requested in a
Requisition is budgeted in the current Approved Annual Operating Budget for an
Asset, or is not in excess of one hundred and five percent (105%) of the
budgeted amount, such amount shall be deemed to be approved by Administrative
Agent. All other amounts requested in any Post Optional Prepayment Date
Requisition must be approved by the Requisite Lenders and Administrative Agent
in their sole discretion.
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SECTION 10.9 DISBURSEMENTS FROM THE DEPOSIT ACCOUNT.
10.9.1 PRIOR TO THE OPTIONAL PREPAYMENT DATE. (a) From time
to time during each Collection Period (but not less than once during any two
week period) which is prior to the Optional Prepayment Date, Administrative
Agent shall, subject to Sections 10.9.3 and 10.12, cause the Deposit Bank to
distribute the amounts then held as collected funds in the Deposit Account
(other than (A) Loss Proceeds which shall be allocated to the Loss Proceeds
Subaccount, (B) Security Deposits which shall be allocated to the Security
Deposit Subaccount and (C) any Rent which is paid for more than one month in
advance, which shall be retained in the Deposit Account until payment thereof
is due under the applicable Tenant Lease) in the following order of priority
satisfying in full, to the extent required and possible, each priority before
making any distribution with respect to any succeeding priority:
(i) First, with respect to any Asset which is a
Leasehold Estate, to the funding of the Ground Rent Subaccount, in an
amount required to be paid to Administrative Agent pursuant to Section
7.6 hereof with respect to Ground Rent;
(ii) Second, to the funding of the Tax and
Insurance Escrow Subaccount, in the amount required to be paid to
Administrative Agent pursuant to Section 7.3 hereof with respect to
Taxes and Insurance Premiums;
(iii) Third, to the funding of the Monthly Debt
Service Subaccount, in payment of the monthly installment due under
the Note in an amount equal to the Monthly Debt Service Payment Amount
as set forth in the Note (to be applied first to the payment of
interest computed at the Initial Interest Rate with the remainder of
the Monthly Debt Service Amount applied to reduction of the
outstanding principal balance of the Notes);
(iv) Fourth, to the Monthly Debt Service
Subaccount, in payment of all other amounts then due and owing to
Lenders under the terms of this Agreement or any of the other Loan
Documents, including, without limitation, any amounts payable by
Borrower in connection with a Securitization pursuant to Sections 9.1
and 9.3 hereof;
(v) Fifth, to the funding of the Replacement
Reserve Subaccount, in the amount required to be paid to
Administrative Agent pursuant to Section 7.4 hereof;
(vi) Sixth [INTENTIONALLY DELETED];
(vii) Seventh, if a Cash Trap Event shall have
occurred and the Cash Trap Period shall not have expired (or been
terminated by Administrative Agent in the sole discretion of
Administrative Agent and Lenders), to the Borrower Remainder
Subaccount, in the amount equal to the Operating Expenses (including
any Management
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Fee) set forth in the Requisition submitted during the immediately
preceding Collection Period (but excluding any amounts in the
Requisition which are to be paid pursuant to any other clause in this
Section 9.9.1(a)); provided, however, that if there is an outstanding
Unused Requisition Amount with respect to prior Requisitions, then the
amount to be released to the Borrower Remainder Subaccount under this
clause (vii) shall be reduced by an amount equal to such Unused
Requisition Amount; and
(viii) Eighth, the balance, if any, to the Borrower
Remainder Subaccount.
(b) Borrower will apply all amounts paid to Borrower
pursuant to Section 10.9.1(a)(vii) only for the purposes set forth in the
Requisition applicable thereto.
10.9.2 AFTER THE OPTIONAL PREPAYMENT DATE. (a) In the event
that Borrower does not prepay the entire Debt on the Optional Prepayment Date
and provided no Event of Default shall have occurred, then from time to time
(but not less than once during any two week period) during each Collection
Period which is after the Optional Prepayment Date, Administrative Agent shall,
subject to Section 10.12, cause the Deposit Bank to distribute the amounts then
held as collected funds in the Deposit Account (other than (A) Loss Proceeds
which shall be allocated to the Loss Proceeds Subaccount, (B) Security Deposits
which shall be allocated to the Security Deposit Subaccount, and (C) any Rent
which is paid for more than one month in advance, which shall be retained in
the Deposit Account until payment thereof is due under the applicable Tenant
Lease) in the following order of priority satisfying in full, to the extent
required and possible, each priority before making any distribution with
respect to any succeeding priority:
(i) First, with respect to any Asset which is a
Leasehold Estate, to the funding of the Ground Rent Subaccount in an
amount required to be paid to Administrative Agent pursuant to Section
7.6 hereof with respect to Ground Rent;
(ii) Second, to the funding of the Tax and
Insurance Escrow Subaccount, the amount required to be paid to
Administrative Agent pursuant to Section 7.3 hereof with respect to
Taxes and Insurance Premiums;
(iii) Third, to the funding of the Monthly Debt
Service Subaccount, in payment of the monthly installment due under
the Notes in an amount equal to the Monthly Debt Service Payment
Amount as set forth in the Notes (to be applied first to the payment
of interest computed at the Initial Interest Rate with the remainder
of the Monthly Debt Service Payment Amount applied to reduction of the
outstanding principal balance of the Notes);
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(iv) Fourth, to the Borrower Remainder Subaccount,
in an amount equal to the Operating Expenses (excluding any Management
Fees) set forth in the Post Optional Prepayment Date Requisition
submitted during the preceding Collection Period (but excluding any
amounts which are to be paid pursuant to any other clause in this
Section 10.9.2(a)), but only to the extent that such Operating
Expenses have been approved by Administrative Agent as provided in
Section 10.8.2; provided, however, that if there is an outstanding
Unused Requisition Amount with respect to prior Requisitions, then the
amount to be released to the Borrower Remainder Subaccount under this
clause (iv) shall be reduced by an amount equal to such Unused
Requisition Amount;
(v) Fifth, to the funding of the Replacement
Reserve Subaccount, the amount required to be paid to Administrative
Agent pursuant to Section 7.4 hereof;
(vi) Sixth [INTENTIONALLY DELETED];
(vii) Seventh, to the Borrower Remainder
Subaccount, in an amount equal to Management Fees set forth in the
Post Optional Prepayment Date Requisition submitted during the
preceding Collection Period, to the extent approved by Administrative
Agent as provided in Section 10.8.2 hereof;
(viii) Eighth, to the Monthly Debt Service
Subaccount, in payment of the outstanding principal balance of the
Note until the Notes have been paid in full;
(ix) Ninth, to Administrative Agent and Lenders,
in payment of any other amounts due and unpaid to Administrative Agent
and Lenders under the Loan Documents;
(x) Tenth, to Lenders, in payment of any
outstanding and unpaid Accrued Interest; and
(xi) Eleventh, the balance, if any, to the
Borrower Remainder Subaccount.
(b) Administrative Agent and Borrower shall cause the
Lock-Box Agreements executed in connection with the Loan to be revised and
amended, if necessary, to comply with the preceding order and priority.
Nonpayment of the Accrued Interest in monthly installments as provided above as
a result of insufficient Mortgaged Property Gross Cash Flow shall not be a
Default. Nonpayment of all or any part of the amounts set forth in clauses (i)
through (viii) as a result of insufficient Mortgaged Property Gross Cash Flow
shall be an Event of Default.
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(c) Borrower will apply all amounts paid to Borrower
pursuant to Section 10.9.2(a)(iv) only for the purposes set forth in the Post
Optional Prepayment Date Requisition applicable thereto.
10.9.3 UPON EVENT OF DEFAULT. Upon the occurrence of any
Event of Default, Administrative Agent may (or if directed by the Requisite
Lenders, shall) apply sums then present in the Deposit Account or any
Subaccount thereof and all sums thereafter deposited into the Deposit Account
(other than Security Deposits to the extent any Tenant may have a right to the
return of such Security Deposit) to the payment of the Debt, completion of the
Property Required Repairs, Taxes and Other Charges, Insurance Premiums and all
other sums payable pursuant to this Agreement and the other Loan Documents in
such order, proportion and priority as the Requisite Lenders and Administrative
Agent may determine in their sole discretion, except that Administrative Agent
shall apply funds (if any) on deposit in the Ground Rent Subaccount for payment
of due and unpaid Ground Rent prior to application for any other purpose.
Administrative Agent's right to withdraw and apply amounts in the Deposit
Account shall be in addition to all other rights and remedies provided under
this Agreement, the other Loan Documents, and at law or in equity.
SECTION 10.10 DISBURSEMENTS FROM CERTAIN SUBACCOUNTS.
10.10.1 DISBURSEMENTS FROM THE TAX AND INSURANCE ESCROW
SUBACCOUNT. Except as otherwise provided herein, Administrative Agent shall
cause the funds in the Tax and Insurance Escrow Subaccount to be disbursed by
the Deposit Bank in accordance with the terms of Section 7.3.
10.10.2 DISBURSEMENTS FROM THE REPLACEMENT RESERVE
SUBACCOUNT. Except as otherwise provided herein, Administrative Agent shall
cause funds in the Replacement Reserve Subaccount to be disbursed by the
Deposit Bank in accordance with the terms of Section 7.4.
10.10.3 DISBURSEMENTS FROM THE SECURITY DEPOSIT SUBACCOUNT.
In the event that Borrower receives a request from any Tenant (or the holder of
a reservation of Function Space) for a disbursement from the Security Deposit
Subaccount of all or any portion of such Tenant's (or such holder of a
reservation of Function Space) Security Deposit, Borrower shall immediately
give Administrative Agent written notice of such request. Upon receipt of such
notice by Administrative Agent, Administrative Agent shall review the same and
shall approve or disapprove such request in its reasonable discretion within
ten (10) Business Days after receipt of such notice from Borrower. In the
event that Administrative Agent approves a disbursement of all or any portion
of the funds in the Security Deposit Subaccount, Administrative Agent shall
cause the Deposit Bank to disburse such funds: (x) if payable to Borrower, into
Clearing Account B (provided, if a Cash Trap Period exists such funds shall be
retained in the Deposit Account but released from the Security Deposit
Subaccount and allocated in the same manner as Rent in accordance with Section
10.9.1 and 10.9.2, as applicable); or (y) if payable to any
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Person other than Borrower, at the time and in the manner specified by
Borrower. Notwithstanding the foregoing, nothing contained in this Section
10.10.3 shall be deemed to impose upon Administrative Agent any obligation to
perform or discharge any obligation of Borrower as landlord under any of the
Tenant Leases or in connection with any Function Space. In the event the funds
in the Security Deposit Subaccount are insufficient at any time to permit
disbursement of the full amount requested by a Tenant (or the holder of a
reservation of Function Space) and approved by Administrative Agent,
Administrative Agent shall cause the disbursement of such funds as are
available in the Security Deposit Subaccount or may, in its sole discretion and
subject to applicable law, refuse to cause the disbursement of any funds from
the Security Deposit Subaccount until there exist sufficient funds to pay the
full amount requested. Under no circumstances shall Administrative Agent be
obligated under this Section 10.10.3 to disburse or cause the disbursement of
any funds with respect to Security Deposits other than those on deposit in the
Security Deposit Subaccount.
10.10.4 DISBURSEMENTS FROM THE LOSS PROCEEDS SUBACCOUNT.
Except as otherwise provided herein, Administrative Agent shall cause funds in
the Loss Proceeds Subaccount to be disbursed by the Deposit Bank in accordance
with the terms of Section 7.1.
10.10.5 DISBURSEMENTS FROM THE REQUIRED REPAIR SUBACCOUNT.
Except as otherwise provided herein, Administrative Agent shall cause funds in
the Required Repair Subaccount to be disbursed by the Deposit Bank pursuant to
the terms of Section 7.2.
10.10.6 DISBURSEMENTS FROM THE BORROWER REMAINDER SUBACCOUNT.
Except as otherwise provided herein, Administrative Agent shall cause the funds
in the Borrower Remainder Subaccount to be disbursed at least once each week by
wire transfer or via the ACH System to the Clearing Bank for deposit into
Clearing Account B.
10.10.7 DISBURSEMENTS FROM THE MONTHLY DEBT SERVICE
SUBACCOUNT. Administrative Agent shall cause the funds in the Monthly Debt
Service Subaccount to be disbursed to Lenders or their designee on the
Disbursement Date occurring immediately following the relevant Collection
Period.
10.10.8 INTENTIONALLY DELETED
10.10.9 DISBURSEMENTS FROM THE GROUND RENT SUBACCOUNT.
Except as otherwise provided herein, Administrative Agent shall cause funds in
the Ground Rent Subaccount to be disbursed by the Deposit Bank in accordance
with the terms of Section 7.6.
10.10.10 INTENTIONALLY DELETED
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SECTION 10.11 LOCK-BOX AGREEMENTS.
Borrower represents, warrants and covenants that it shall
execute and comply with those certain Clearing Account Agreements (the
"CLEARING AGREEMENTS"), each dated on or about the Closing Date and that
certain Deposit Account Agreement (the "DEPOSIT AGREEMENT"), dated as of the
date hereof among Borrower, Administrative Agent and Lenders and various
financial institutions (the Clearing Agreements and the Deposit Agreement and
any modifications, amendments, replacements or substitutions thereof are
hereinafter collectively referred to as the "LOCK-BOX AGREEMENTS"). Borrower
shall pay all costs and expenses required under the Lock-Box Agreements.
SECTION 10.12 REQUIRED RATIO.
From and after the date of the Notes through but not including
the Maturity Date, Borrower shall achieve, and within forty-five (45) days of
the end of each calendar quarter (the "DSCR DETERMINATION DATE") provide
evidence to Administrative Agent of the achievement for the Property of, a Debt
Service Coverage Ratio of not less than 1.15 to 1.0 for the twelve (12) full
calendar months immediately preceding the end of such calendar quarter. If at
any time such ratio (the "REQUIRED RATIO") is not maintained and a Cash Trap
Period exists (or occurs at any time prior to the next DSCR Determination
Date), the Requisite Lenders and Administrative Agent, in their sole
discretion, shall have the right to retain all Mortgaged Property Gross Cash
Flow which would otherwise be payable to the Borrower Remainder Subaccount
pursuant to Section 10.9.1(a)(viii) (or Section 10.9.2(a)(xi), if applicable)
in that month and each succeeding calendar month in the Deposit Account (for
payment of the amounts described in Sections 10.9.1(a)(i), (ii), (iii), (iv),
(v), (vi) and (vii) (or, in the case where Section 10.9.2 is applicable,
Sections 10.9.2(a)(i), (ii), (iii), (iv), (v), (vi), (vii), (viii) and (ix)) in
the order of priority therein set forth until the Required Ratio is achieved as
of any subsequent DSCR Determination Date for the twelve (12) full calendar
months preceding the end of such subsequent calendar quarter. If the Required
Ratio is achieved as of any one DSCR Determination Date, then subject to
Administration Agent being again permitted to retain such Mortgaged Property
Gross Cash Flow in the Deposit Account in accordance with the immediately
preceding sentence, any Mortgaged Property Gross Cash Flow retained in the
Deposit Account pursuant to the immediately preceding sentence and not
theretofore used to satisfy Borrower's obligations set forth in Sections
10.9.1(a)(i), (ii), (iii), (iv), (v), (vi) or (vii) (or, in the case where
Section 10.9.2 is applicable, Sections 10.9.2(a)(i), (ii), (iii), (iv), (v),
(vi), (vii), (viii), (ix) or (x)) shall be applied to items set forth in
Section 10.9.1(a) (or Section 10.9.2(a), if applicable) in the order of
priority therein set forth. All calculations of the Debt Service Coverage
Ratio shall be subject to verification by Administrative Agent.
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XI. MISCELLANEOUS
SECTION 11.1 SURVIVAL.
This Agreement and all covenants, agreements, representations
and warranties made herein and in the certificates delivered pursuant hereto
shall survive the making by Lenders of the Loan and the execution and delivery
to Lenders of the Notes, and shall continue in full force and effect so long as
all or any of the Debt is outstanding and unpaid unless a longer period is
expressly set forth herein or in the other Loan Documents. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the legal representatives, successors and assigns of such
party. All covenants, promises and agreements in this Agreement, by or on
behalf of Borrower, Parent or any other Loan Party, shall inure to the benefit
of the legal representatives, successors and assigns of Lenders.
SECTION 11.2 INTENTIONALLY DELETED.
SECTION 11.3 GOVERNING LAW.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW
YORK, AND MADE BY ADMINISTRATIVE AGENT AND EACH LENDER AND ACCEPTED BY BORROWER
AND PARENT IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE DELIVERED
PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE
PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE
UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD
TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF
AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION
AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND
PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE ASSET IS LOCATED, IT
BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH
STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY
AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING
HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER AND
PARENT, EACH HEREBY
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UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTES, AND THIS AGREEMENT AND
THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST
ADMINISTRATIVE AGENT, LENDERS, BORROWER OR ANY OTHER LOAN PARTY ARISING OUT OF
OR RELATING TO THIS AGREEMENT MAY AT ADMINISTRATIVE AGENT'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW
YORK, AND BORROWER AND PARENT EACH WAIVE ANY OBJECTIONS WHICH THEY,
INDIVIDUALLY OR COLLECTIVELY, MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR
FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER AND
PARENT EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT IN
ANY SUIT, ACTION OR PROCEEDING. BORROWER AND PARENT DO HEREBY DESIGNATE AND
APPOINT THE CORPORATION SERVICE COMPANY AT 375 HUDSON STREET, NEW YORK, NEW
YORK 10014, AS EACH OF THEIR AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS
BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT,
ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND
AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN
NOTICE OF SAID SERVICE MAILED OR DELIVERED TO BORROWER, OR PARENT, AS
APPROPRIATE, IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON BORROWER OR PARENT, AS APPROPRIATE, IN ANY
SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER AND PARENT
EACH (I) SHALL GIVE PROMPT NOTICE TO ADMINISTRATIVE AGENT OF ANY CHANGED
ADDRESS OF THEIR AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME
TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW
YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND
ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A
SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW
YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
SECTION 11.4 AMENDMENTS; WAIVERS.
11.4.1 No amendment, modification, termination or waiver of
any provision of this Agreement or of the Notes, and no consent to any
departure by Borrower therefrom, shall in any event be effective without the
written concurrence of Requisite Lenders; provided that (i) no
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such amendment, modification, termination, waiver or consent shall be effective
without the written concurrence of all Lenders if such amendment, modification,
termination, waiver or consent (1) increases the amount of any of the
Commitments or reduces the principal amount of the Loan; (2) changes in any
manner the definition of "Pro Rata Share" or the definition of "Requisite
Lenders"; (3) changes in any manner any provision of this Agreement which, by
its terms, expressly requires the approval or concurrence of a specified
percentage of Lenders; (4) postpones the scheduled final maturity date of the
Loan; (5) postpones the date on which any interest or any fees are payable;
decreases the interest rate borne by the Loan or the amount of any fees payable
hereunder; (6) releases any Lien granted in favor of Administrative Agent with
respect to a material portion of the Collateral, except as specifically
provided herein; (7) releases Parent or any other Loan Party from its
obligations under the Affiliate Guaranty, other than in accordance with the
terms of the Loan Documents; or (8) changes in any manner the provisions
contained in this Section 11.4, 11.13 or 11.18(c), (ii) no amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the Lender which is the holder of
that Note; and (iii) no amendment, modification, termination or waiver of any
provision of Article 12 or of any other provision of this Agreement which, by
its terms, expressly requires the approval or concurrence of the Administrative
Agent shall be effective without the written concurrence of the Administrative
Agent. The Administrative Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall Borrower to any
other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this Section 11.4 shall be binding upon each Lender at the time
outstanding, each future Lender and, if signed by Borrower, on Borrower.
11.4.2 If the Administrative Agent notifies any Lender that
one or more requirements set forth in Section 3.1 hereof will not be satisfied,
or that performance of all or any part of such requirement will be deferred,
and, subsequent to such notification, such Lender delivers (or continues to
authorize delivery of) its signature page hereto, then such Lender shall be
deemed to have waived (subject to any conditions set forth in the applicable
notice) such requirement as a condition precedent to the effectiveness of the
Commitments.
SECTION 11.5 DELAY NOT A WAIVER.
Neither any failure nor any delay on the part of
Administrative Agent and Lenders in insisting upon strict performance of any
term, condition, covenant or agreement, or exercising any right, power, remedy
or privilege hereunder, or under the Notes or under any other Loan Document, or
any other instrument given as security therefor, shall operate as or constitute
a waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of
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limitation, by accepting payment after the due date of any amount payable under
this Agreement, the Notes or any other Loan Document, Administrative Agent and
Lenders shall not be deemed to have waived any right either to require prompt
payment when due of all other amounts due under this Agreement, the Notes or
the other Loan Documents, or to declare a default for failure to effect prompt
payment of any such other amount.
SECTION 11.6 NOTICES.
All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing
(including by facsimile) and shall be effective for all purposes if hand
delivered or sent by (a) certified or registered United States mail, postage
prepaid, or (b) expedited prepaid delivery service, either commercial or United
States Postal Service, with proof of attempted delivery, or by facsimile (with
answer back acknowledged), addressed as follows:
If to Borrower: Bristol Lodging Company
14295 Midway Road
Dallas, Texas 75244
Attention: General Counsel
Telephone: (972)
Facsimile: (972)
with a copy to:
Munsch Hardt Kopf Harr & Dinan, P.C.
1445 Ross Avenue
Suite 4000
Dallas, Texas 75202
Attention: William T. Cavanaugh, Jr., Esq.
Telephone: (214) 855-7500
Facsimile: (214) 855-7584
If to Parent: Bristol Lodging Holding Company
14295 Midway Road
Dallas, Texas 75244
Attention: General Counsel
Telephone: (972)
Facsimile: (972)
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with a copy to:
Munsch Hardt Kopf Harr & Dinan, P.C.
1445 Ross Avenue
Suite 4000
Dallas, Texas 75202
Attention: William T. Cavanaugh, Jr., Esq.
Telephone: (214) 855-7500
Facsimile: (214) 855-7584
If to Administrative Agent Nomura Asset Capital Corporation
or Nomura Asset Capital Two World Financial Center, Building B
Corporation, as lender: New York, New York 10281
Attention: Sheryl McAfee
Telephone: (212) 667-9300
Facsimile: (212) 667-1260
with a copy to:
Nomura Asset Capital Corporation
Two World Financial Center,
New York, New York 10281
Attention: Barry Funt, Esq., General Counsel
Telephone: (212) 667-1845
Facsimile: (212) 667-1567
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: J. Philip Rosen, Esq.
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
If to Co-Agent or Bankers Trust Company
Bankers Trust Company, as lender: 130 Liberty Street
New York, New York 10006
Attention: Jacques Brand
Telephone: (212) 250-8123
Facsimile: (212) 669-0764
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with a copy to:
O'Melveny & Myers, LLP
Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Drake S. Tempest, Esq.
Telephone: (212) 326-2000
Facsimile: (212) 326-2061
or at such other address and person as shall be designated from time to time by
any party hereto, as the case may be, in a written notice to the other parties
hereto in the manner provided for in this Section. A notice shall be deemed to
have been given: in the case of hand delivery, at the time of delivery; in the
case of registered or certified mail, when delivered or the first attempted
delivery on a Business Day; or in the case of expedited prepaid delivery and
facsimile, upon the first attempted delivery on a Business Day.
SECTION 11.7 TRIAL BY JURY.
BORROWER AND PARENT EACH HEREBY AGREE NOT TO ELECT A TRIAL BY
JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION
ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND PARENT, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. ADMINISTRATIVE AGENT AND EACH LENDER IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
SECTION 11.8 HEADINGS.
The Article and/or Section headings and the Table of Contents
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
SECTION 11.9 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement
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shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
SECTION 11.10 PREFERENCES/MARSHALLING PREFERENCES.
Administrative Agent and Lenders shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments by
Borrower to any portion of the obligations of Borrower hereunder. To the
extent Borrower makes a payment or payments to Administrative Agent or any
Lender, which payment or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, receiver or any other party under any bankruptcy
law, state or federal law, common law or equitable cause, then, to the extent
of such payment or proceeds received, the obligations hereunder or part thereof
intended to be satisfied shall be revived and continue in full force and
effect, as if such payment or proceeds had not been received by Administrative
Agent or such Lender, as the case may be. Neither Administrative Agent nor any
Lenders shall be under any obligation to marshal any assets in favor of
Borrower, any other Loan Party or any other party or against or in payment of
any or all of the Obligations.
SECTION 11.11 WAIVER OF NOTICE.
Borrower and Parent shall not be entitled to any notices of
any nature whatsoever from Administrative Agent except with respect to matters
for which this Agreement or the other Loan Documents specifically and expressly
provide for the giving of notice by Administrative Agent to Borrower or Parent,
as appropriate, and except with respect to matters for which Borrower or Parent
is not, pursuant to applicable Legal Requirements, permitted to waive the
giving of notice. Borrower and Parent each hereby expressly waive the right to
receive any notice from Administrative Agent with respect to any matter for
which this Agreement or the other Loan Documents do not specifically and
expressly provide for the giving of notice by Administrative Agent to Borrower
or Parent, as appropriate.
SECTION 11.12 REMEDIES OF BORROWER.
In the event that a claim or adjudication is made that
Administrative Agent or its agents have acted unreasonably or unreasonably
delayed acting in any case where, by law or under this Agreement or the other
Loan Documents, Administrative Agent or such agent, as the case may be, has an
obligation to act reasonably or promptly, Borrower and Parent each agree that
neither Administrative Agent nor its agents shall be liable for any monetary
damages (including without limitation consequential or punitive damages), and
Borrower's or Parent's sole remedies shall be limited to commencing an action
seeking injunctive relief or declaratory judgment. The parties hereto agree
that any action or proceeding to determine whether
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Administrative Agent has acted reasonably shall be determined by an action
seeking declaratory judgment.
SECTION 11.13 EXPENSES; INDEMNIFICATION.
(a) Borrower covenants and agrees to pay, or if Borrower fails
to pay to reimburse, Administrative Agent upon receipt of written notice from
Administrative Agent for all reasonable out-of-pocket costs and expenses
(including reasonable attorneys' fees and disbursements) incurred by
Administrative Agent and Lenders in connection with (i) the preparation,
negotiation, execution and delivery of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated hereby and
thereby and all the costs of furnishing all opinions by counsel for Borrower or
any other Loan Party (including, without limitation, any opinions requested by
Administrative Agent and Lenders as to any legal matters arising under this
Agreement or the other Loan Documents with respect to the Property or any other
Collateral); (ii) Borrower's or any other Loan Party's ongoing performance of
and compliance with Borrower's or such Loan Party's respective agreements and
covenants contained in this Agreement and the other Loan Documents on its part
to be performed or complied with after the Closing Date, including, without
limitation, confirming compliance with environmental and insurance
requirements; (iii) Administrative Agent's ongoing performance and compliance
with all agreements and conditions contained in this Agreement and the other
Loan Documents on its part to be performed or complied with after the Closing
Date; (iv) the negotiation, preparation, execution, delivery and administration
of any consents, amendments, waivers or other modifications to this Agreement
and the other Loan Documents and any other documents or matters requested by
Administrative Agent; (v) securing Borrower's or any other Loan Party's
compliance with any requests made pursuant to Section 9.1 hereof (subject to
the limitations contained in such Section); (vi) the filing and recording of
the Loan Documents, title insurance and reasonable fees and expenses of counsel
for providing to Lenders all required legal opinions, and other similar
expenses incurred in creating and perfecting the Liens in favor of
Administrative Agent's pursuant to this Agreement and the other Loan Documents;
(vii) enforcing or preserving any rights, in response to third party claims or
the prosecuting or defending of any action or proceeding or other litigation,
in each case against, under or affecting Borrower, any other Loan Party, this
Agreement, the other Loan Documents, the Property, any other Collateral, or any
other security given for the Loan; and (viii) enforcing any obligations of or
collecting any payments due from Borrower or any other Loan Party under this
Agreement, the other Loan Documents or with respect to any Asset or other
Collateral or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or of
any insolvency or bankruptcy proceedings; provided, however, that Borrower
shall not be liable for the payment of any such costs and expenses to the
extent the same arise by reason of the bad faith, recklessness or willful
violations of law of Administrative Agent as determined by a court of competent
jurisdiction in a final non-appealable judgment or order. Any cost and
expenses due and payable to Lenders or Administrative Agent may be paid from
any amounts in the Deposit Account.
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(b) Borrower agrees to indemnify and hold harmless
Administrative Agent and Lenders and their respective Affiliates, and the
directors, officers, employees, agents, attorneys, consultants and advisors of
or to any of the foregoing (including, without limitation, those retained in
connection with the satisfaction or attempted satisfaction of any of the
conditions set forth in Section 3) (each of the foregoing being an
"INDEMNITEE") from and against any and all claims, damages, liabilities,
obligations, losses, penalties, actions, judgments, suits, costs, disbursements
and expenses of any kind or nature (including, without limitation, fees and
disbursements of counsel to any such Indemnitee and experts, engineers and
consultants and the costs of investigation and feasibility studies) which may
be imposed on, incurred by or asserted against any such Indemnitee in
connection with or arising out of any investigation, litigation or proceeding,
whether or not any such Indemnitee is a party thereto, whether direct,
indirect, or consequential and whether based on any federal, state or local law
or other statutory regulation, securities or commercial law or regulation, or
under common law or in equity, or on contract, tort or otherwise, in any manner
relating to or arising out of or based upon or attributable to this Agreement,
any other Loan Document, any document delivered hereunder or thereunder, any
Obligation, or any act, event or transaction related or attendant to any
thereof, including, without limitation, (i) arising from any breach of
Borrower's obligations under Section 2.2 or any Environmental Claim or any
remedial action arising out of or based upon anything relating to real property
owned or leased by the Borrower or any other Loan Party (collectively, the
"INDEMNIFIED MATTERS"); provided, however, that the Borrower shall not have any
obligation under this Section 11.13(b) to an Indemnitee with respect to any
Indemnified Matter caused by or resulting from the bad faith, recklessness or
willful violations of law of Indemnitee as determined by a court of competent
jurisdiction in a final non-appealable judgment or order.
(c) The Borrower agrees that any indemnification or other
protection provided to any Indemnitee pursuant to this Agreement (including,
without limitation, pursuant to this Section 11.13) or any other Loan Document
shall (i) survive payment of the Obligations and (ii) inure to the benefit of
any Person who was at any time an Indemnitee under this Agreement or any other
Loan Document.
SECTION 11.14 EXHIBITS AND SCHEDULES INCORPORATED.
The exhibits and schedules annexed hereto are hereby
incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.
SECTION 11.15 SETOFF.
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default the
Administrative Agent and each Lender (provided that no Lender shall exercise
any right under this Section 11.15 without the prior written consent of the
Administrative Agent) is hereby authorized by Borrower at any time or from time
to time,
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without notice to Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including indebtedness evidenced by certificates
of deposit, whether matured or unmatured, but not including trust accounts) and
any other indebtedness at any time held or owing by the Administrative Agent to
or for the credit or the account of Borrower against and on account of the
obligations and liabilities of Borrower to the Administrative Agent under this
Agreement and the Notes, including all claims of any nature or description
arising out of or connected with this Agreement or any other Loan Document,
irrespective of whether or not (i) the Administrative Agent shall have made any
demand hereunder or (ii) the principal of or the interest on the Loan or any
other amounts due hereunder shall have become due and payable pursuant to this
Agreement and although said obligations and liabilities, or any of them, may be
contingent or unmatured.
SECTION 11.16 RATABLE SHARING.
The Lenders hereby agree among themselves that if any of them
shall, whether by voluntary payment (other than a voluntary prepayment of Loans
made and applied in accordance with this Agreement), by realization upon
security, through the exercise of any right under the Loan Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, fees and other amounts then due and
owing to that Lender hereunder or under the other Loan Documents (collectively,
the "AGGREGATE AMOUNTS DUE" to such Lender) which is greater than the
proportion received by any other Lender in respect of the Aggregate Amounts Due
to such other Lender, then the Lender receiving such proportionately greater
payment shall (i) notify Administrative Agent and each other Lender of the
receipt of such payment and (ii) apply a portion of such payment to purchase
participations (which it shall be deemed to have purchased from each seller of
a participation simultaneously upon the receipt by such seller of its portion
of such payment) in the Aggregate Amounts Due to the other Lender so that all
such recoveries of Aggregate Amounts Due shall be shared by all Lenders in
proportion to the Aggregate Amounts Due to them; provided, however, that if all
or part of such proportionately greater payment received by such purchasing
Lender is thereafter recovered from such Lender upon the bankruptcy or
reorganization of Borrower or otherwise, those purchases shall be rescinded and
the purchase prices paid for such participations shall be returned to such
purchasing Lender ratably to the extent of such recovery, but without interest.
Borrower and each Loan Party expressly consents to the foregoing arrangement
and agrees that any holder of a participation so purchased may exercise any and
all rights of banker's lien, set-off or counterclaim with respect to any and
all monies owing by Borrower to that holder with respect thereto as fully as if
that holder were owed the amount of the participation held by that holder.
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SECTION 11.17 OFFSETS, COUNTERCLAIMS AND DEFENSES.
Any assignee of Lenders' interest in and to this Agreement,
the Notes and the other Loan Documents shall take the same free and clear of
all offsets, counterclaims or defenses which are unrelated to such documents
which Borrower or any other Loan Party may otherwise have against any assignor
of such documents, and Borrower shall not and Parent shall not permit any Loan
Party, to interpose or assert any such unrelated counterclaim or defense in any
action or proceeding brought by any such assignee upon such documents and any
such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by
Borrower, Parent and each other Loan Party.
SECTION 11.18 NO JOINT VENTURE OR PARTNERSHIP; NO THIRD
PARTY BENEFICIARIES; INDEPENDENT NATURE OF LENDERS' RIGHTS.
(a) Borrower, Parent, Administrative Agent and Lenders
intend that the relationships created hereunder and under the other Loan
Documents be solely that of borrower, agent and lenders. Nothing herein or
therein is intended to create a joint venture, partnership, tenancy-in-common
or joint tenancy relationship between Borrower, Parent, Administrative Agent
and Lenders nor to grant Lenders any interest in the Property other than that
of mortgagee or lender.
(b) This Agreement and the other Loan Documents are
solely for the benefit of Lenders, Administrative Agent, as agent for Lenders,
Borrower and Parent and nothing contained in this Agreement or the other Loan
Documents shall be deemed to confer upon anyone other than Lenders,
Administrative Agent, as agent for Lenders, Borrower and Parent (including
without limitation any other Loan Party) any right to insist upon or to enforce
the performance or observance of any of the obligations contained herein or
therein. All conditions to the obligations of Lenders to make the Loan
hereunder are imposed solely and exclusively for the benefit of Lenders and no
other Person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lenders will refuse
to make the Loan in the absence of strict compliance with any or all thereof
and no other Person shall under any circumstances be deemed to be a beneficiary
of such conditions, any or all of which may be freely waived in whole or in
part by Lenders if, in Lenders' sole discretion, Lenders deem it advisable or
desirable to do so.
(c) The obligations of the Lenders hereunder are several
and no Lender shall be responsible for the obligations or Commitment of any
other Lender hereunder. Nothing contained herein or in any other Loan
Document, and no action taken by the Lenders pursuant hereto or thereto, shall
be deemed to constitute the Lenders as a partnership, an association, a joint
venture or any other kind of entity. The amounts payable at any time hereunder
to each Lender shall be a separate and independent debt, and each Lender shall
be entitled to protect and enforce its rights arising out of this Agreement and
it shall not be necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose.
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SECTION 11.19 PUBLICITY.
All news releases, publicity or advertising by Borrower or its
Affiliates (including any other Loan Party) through any media intended to reach
the general public which refers to the Loan Documents or the financing
evidenced by the Loan Documents or to Lenders, Nomura or any of their
Affiliates shall be subject to the prior written approval of the Requisite
Lenders not to be unreasonably withheld.
SECTION 11.20 WAIVER OF COUNTERCLAIM.
Borrower and Parent each hereby waive the right to assert a
counterclaim, other than a compulsory counterclaim, in any action or proceeding
brought against it by Administrative Agent or its agents.
SECTION 11.21 CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.
In the event of any conflict between the provisions of this
Loan Agreement and any of the other Loan Documents, the provisions of this Loan
Agreement shall control. The parties hereto acknowledge that they were
represented by competent counsel in connection with the negotiation, drafting
and execution of the Loan Documents and that such Loan Documents shall not be
subject to the principle of construing their meaning against the party which
drafted same. Borrower and Parent acknowledge that, with respect to the Loan,
Borrower shall rely solely on their own judgment and advisors in entering into
the Loan without relying in any manner on any statements, representations or
recommendations of Lenders or any parent, subsidiary or Affiliate of Lenders.
Lenders shall not be subject to any limitation whatsoever in the exercise of
any rights or remedies available to it under any of the Loan Documents or any
other agreements or instruments which govern the Loan by virtue of the
ownership by it or any parent, subsidiary or Affiliate of Lenders of any equity
interest any of them may acquire in Borrower, and Borrower hereby irrevocably
waives the right to raise any defense or take any action on the basis of the
foregoing with respect to Lenders' exercise of any such rights or remedies.
Borrower and Parent acknowledge that Lenders engage in the business of real
estate financings and other real estate transactions and investments which may
be viewed as adverse to or competitive with the business of Borrower, Parent or
their Affiliates.
SECTION 11.22 BROKERS AND FINANCIAL ADVISORS.
(a) Borrower and Parent hereby represents that no Loan Party
has dealt with any financial advisors, brokers, underwriters, placement agents,
agents or finders in connection with the transactions contemplated by this
Agreement. Borrower hereby agrees to indemnify and hold Administrative Agent
harmless from and against any and all claims, liabilities, costs and expenses
of any kind in any way relating to or arising from a claim by any Person that
such Person acted on behalf of any Loan Party in connection with the
transactions contemplated
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herein. The provisions of this Section 11.22 shall survive the expiration and
termination of this Agreement and the payment of the Debt.
(b) Lenders hereby represent that Lenders have not dealt with
any financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this Agreement.
Lenders hereby agree to indemnify and hold Borrower harmless from and against
any and all claims, liabilities, costs and expenses of any kind in any way
relating to or arising from a claim by any Person that such Person acted on
behalf of Lenders in connection with the transactions contemplated herein. The
provisions of this Section 11.22 shall survive the expiration and termination
of this Agreement and the payment of the Debt.
SECTION 11.23 PRIOR AGREEMENTS.
This Agreement and the other Loan Documents contain the entire
agreement of the parties hereto and thereto in respect of the transactions
contemplated hereby and thereby, and all prior agreements among or between such
parties, whether oral or written, including, without limitation, the Commitment
Letter dated August 12, 1997 (as same may be amended) between Borrower and
Lenders, are superseded by the terms of this Agreement and the other Loan
Documents.
SECTION 11.24 APPROVALS.
If in any Loan Document Lenders have agreed to not
unreasonably withhold its consent then, promptly after Lenders' denial of any
such consent, Lenders agree to provide Borrower a reasonably detailed statement
of the reasons for such denial.
SECTION 11.25 RELIANCE.
Borrower and Parent acknowledge that its representations,
warranties, covenants and agreements contained in this Agreement and the other
Loan Documents (including without limitation covenants and agreements to pay
Release Prices), are material inducements to Lenders to enter into this
Agreement and to make the Loan, that Lenders have already relied on such
representations, warranties, covenants and agreements in entering into this
Agreement and agreeing to make the Loan (notwithstanding any investigation
heretofore or hereafter made by or on behalf of Lenders), and that Lenders will
continue to rely on such representations, warranties, covenants and agreements
in their future dealings with the Loan Parties. Borrower and Parent agree that
its representations, warranties, covenants and agreements contained in this
Agreement and the other Loan Documents, are reasonable in purpose and scope.
Borrower and Parent represent and warrant that they have reviewed this
Agreement and the other Loan Documents with its legal counsel and that it
knowingly and voluntarily is entering into this Agreement and the other Loan
Documents following consultation with legal counsel.
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SECTION 11.26 COUNTERPARTS.
This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document. Delivery of an executed counterpart of a
signature page of this Agreement by telefacsimile shall be effective as
delivery of a manually executed counterpart of this Agreement.
SECTION 11.27 ADMINISTRATIVE AGENT'S DISCRETION; SUCCESSOR
AGENTS.
Whenever pursuant to this Agreement or any other Loan Document
the Administrative Agent exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to the
Administrative Agent, the decision of the Administrative Agent to approve or
disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided) be in
the sole discretion of the Administrative Agent. The Borrower acknowledges and
agrees that, notwithstanding anything in this Agreement to the contrary,
certain decisions to be made by the Administrative Agent under, or under
amendments, supplements or other modification to, this Agreement may be subject
to or determined by the further decision by the Lenders or a percentage of the
Lenders. The Borrower acknowledges that, in the event of the resignation or
removal of the Administrative Agent or a successor Administrative Agent
hereunder, a successor Administrative Agent may be appointed by the Lenders and
agrees that such successor Administrative Agent shall succeed to all of the
rights and duties of the Administrative Agent and collateral agent under the
Loan Documents but shall not be liable for any breach of any Loan Document by
any predecessor Administrative Agent.
SECTION 11.28 MAXIMUM AMOUNT. It is expressly stipulated and
agreed to be the intent of Borrower and Lenders at all times to comply with
applicable state law or applicable United States federal law (to the extent
that it permits Lenders to contract for, charge, take, reserve or receive a
greater amount of interest than under state law) and that this paragraph shall
control every other covenant and agreement in this Agreement, each Mortgage and
the other Loan Documents. If the applicable law (state or federal) is ever
judicially interpreted so as to render usurious any amount called for under
this Agreement, each Mortgage or any of the other Loan Documents or contracted
for, charged, taken, reserved or received with respect to the Debt, or if
Lenders' exercise of the option to accelerate the Maturity Date or any
prepayment by Borrower results in Borrower having paid any interest in excess
of that permitted by applicable law, then it is Borrower's and Lenders' express
intent that all excess amounts theretofore collected by Lenders, shall be
credited on the principal balance of the Notes and all other Debt and the
provisions of this Agreement, each Mortgage and the other Loan Documents
148
<PAGE> 155
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder.
All sums paid or agreed to be paid to Lenders, for the use, forbearance or
detention of the Debt shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full stated term of
the Debt until payment in full so that the rate or amount of interest on
account of the Debt does not exceed the maximum lawful rate from time to time
in effect and applicable to the Debt for so long as the Debt is outstanding.
XII. AGENTS
SECTION 12.1 APPOINTMENT OF THE ADMINISTRATIVE AGENT AND
COLLATERAL AGENT.
Nomura Asset Capital Corporation is hereby appointed as the
Administrative Agent and collateral agent hereunder and under the other Loan
Documents and each Lender hereby authorizes the Administrative Agent to act as
its agent in accordance with the terms of this Agreement and the other Loan
Documents. The Administrative Agent agrees to act upon the express conditions
contained in this Agreement and the other Loan Documents, as applicable. The
provisions of this Section 12.1 are solely for the benefit of the
Administrative Agent and the Lenders and no Loan Party shall have any rights as
a third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement, the Administrative Agent shall act
solely as an agent of the Lenders and does not assume and shall not be deemed
to have assumed any obligation towards or relationship of agency or trust with
or for Borrower or any Loan Party.
SECTION 12.2 APPOINTMENT OF SUPPLEMENTAL COLLATERAL AGENTS.
12.2.1 It is the purpose of this Agreement and the other Loan
Documents that there shall be no violation of any law of any jurisdiction
denying or restricting the right of banking corporations or associations to
transact business as agent or trustee in such jurisdiction. It is recognized
that in case of litigation under this Agreement or any of the other Loan
Documents, and in particular in case of the enforcement of any of the Loan
Documents, or in case the Administrative Agent deems that by reason of any
present or future law of any jurisdiction it may not exercise any of the
rights, powers or remedies granted herein or in any of the other Loan Documents
or take any other action which may be desirable or necessary in connection
therewith, it may be necessary that the Administrative Agent appoint an
additional individual or institution as a separate trustee, co-trustee,
collateral agent or collateral co- agent (any such additional individual or
institution being referred to herein individually as a "SUPPLEMENTAL COLLATERAL
AGENT" and collectively as "SUPPLEMENTAL COLLATERAL AGENTS").
149
<PAGE> 156
12.2.2 In the event that the Administrative Agent appoints a
Supplemental Collateral Agent with respect to any Collateral, (i) each and
every right, power, privilege or duty expressed or intended by this Agreement
or any of the other Loan Documents to be exercised by or vested in or conveyed
to the Administrative Agent with respect to such Collateral shall be
exercisable by and vest in such Supplemental Collateral Agent to the extent,
and only to the extent, necessary to enable such Supplemental Collateral Agent
to exercise such rights, powers and privileges with respect to such Collateral
and to perform such duties with respect to such Collateral, and every covenant
and obligation contained in the Loan Documents and necessary to the exercise or
performance thereof by such Supplemental Collateral Agent shall run to and be
enforceable by either the Administrative Agent or such Supplemental Collateral
Agent, and (ii) the provisions of this Section 12 and of Sections 11.13 that
refer to the Administrative Agent shall inure to the benefit of such
Supplemental Collateral Agent and all references therein to the Administrative
Agent shall be deemed to be references to the Administrative Agent and/or such
Supplemental Collateral Agent, as the context may require.
12.2.3 Should any instrument in writing from the Borrower or
any other Loan Party be required by any Supplemental Collateral Agent so
appointed by the Administrative Agent for more fully and certainly vesting in
and confirming to him or it such rights, powers, privileges and duties, the
Borrower shall, or shall cause such Loan Party to, execute, acknowledge and
deliver any and all such instruments promptly upon request by the
Administrative Agent. In case any Supplemental Collateral Agent, or a
successor thereto, shall die, become incapable of acting, resign or be removed,
all the rights, powers, privileges and duties of such Supplemental Collateral
Agent, to the extent permitted by law, shall vest in and be exercised by the
Administrative Agent until the appointment of a new Supplemental Collateral
Agent.
SECTION 12.3 POWERS; DUTIES SPECIFIED.
Each Lender irrevocably authorizes the Administrative Agent to
take such action on such Lender's behalf and to exercise such powers, rights
and remedies hereunder and under the other Loan Documents as are specifically
delegated or granted to the Administrative Agent by the terms hereof and
thereof, together with such powers, rights and remedies as are reasonably
incidental thereto. The Administrative Agent shall have only those duties and
responsibilities that are expressly specified in this Agreement and the other
Loan Documents. The Administrative Agent may exercise such powers, rights and
remedies and perform such duties by or through its agents or employees. The
Administrative Agent shall not have, by reason of this Agreement or any of the
other Loan Documents, a fiduciary relationship in respect of any Lender; and
nothing in this Agreement or any of the other Loan Documents, expressed or
implied, is intended to or shall be so construed as to impose upon the
Administrative Agent any obligations in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein.
150
<PAGE> 157
SECTION 12.4 NO RESPONSIBILITY FOR CERTAIN MATTERS.
The Administrative Agent shall not be responsible to any
Lender for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any other Loan Document or
for any representations, warranties, recitals or statements made herein or
therein or made in any written or oral statements or in any financial or other
statements, instruments, reports or certificates or any other documents
furnished or made by the Administrative Agent to the Lenders or by or on behalf
of Borrower or any Loan Party to the Administrative Agent or any Lender in
connection with the Loan Documents and the transactions contemplated thereby or
for the financial condition or business affairs of Borrower, any Loan Party or
any other Person liable for the payment of any Obligations, nor shall the
Administrative Agent be required to ascertain or inquire as to the performance
or observance of any of the terms, conditions, provisions, covenants or
agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loan or as to the existence or possible existence of any Event
of Default or Default. Anything contained in this Agreement to the contrary
notwithstanding, the Administrative Agent shall not have any liability arising
from confirmations of the amount of outstanding Loan or the component amounts
thereof.
SECTION 12.5 EXCULPATORY PROVISIONS.
Neither the Administrative Agent nor any of its officers,
directors, employees or agents shall be liable to the Lenders for any action
taken or omitted by the Administrative Agent under or in connection with any of
the Loan Documents except to the extent caused by the Administrative Agent's
gross negligence or willful misconduct. The Administrative Agent shall be
entitled to refrain from any act or the taking of any action (including the
failure to take an action) in connection with this Agreement or any of the
other Loan Documents or from the exercise of any power, discretion or authority
vested in it hereunder or thereunder unless and until the Administrative Agent
shall have received instructions in respect thereof from Requisite Lenders (or
such other Lenders as may be required to give such instructions under Section
11.4) and, upon receipt of such instructions from Requisite Lenders (or such
other Lenders, as the case may be), the Administrative Agent shall be entitled
to act or (where so instructed) refrain from acting, or to exercise such power,
discretion or authority, in accordance with such instructions. Without
prejudice to the generality of the foregoing, (i) the Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Borrower, Parent and its Subsidiaries),
accountants, experts and other professional advisors selected by it; and (ii)
no Lender shall have any right of action whatsoever against the Administrative
Agent as a result of the Administrative Agent acting or (where so instructed)
refraining from acting under this Agreement or any of the other Loan Documents
in accordance with the instructions of Requisite Lenders (or such other Lenders
as may be required to give such instructions under Section 11.4).
151
<PAGE> 158
SECTION 12.6 ADMINISTRATIVE AGENT ENTITLED TO ACT AS LENDER.
The agency hereby created shall in no way impair or affect any
of the rights and powers of, or impose any duties or obligations upon, the
Administrative Agent in its individual capacity as a Lender hereunder. With
respect to its participation in the Loan, the Administrative Agent shall have
the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not performing the duties and functions delegated to it
hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless
the context clearly otherwise indicates, include the Administrative Agent in
its individual capacity. The Administrative Agent and its Affiliates may
accept deposits from, lend money to and generally engage in any kind of
banking, trust, financial advisory or other business with Borrower or any of
its Affiliates as if it were not performing the duties specified herein, and
may accept fees and other consideration from Parent, Borrower and its
Subsidiaries for services in connection with this Agreement and otherwise
without having to account for the same to Lenders.
SECTION 12.7 INDEPENDENT CREDIT ANALYSIS.
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Borrower
and each Loan Party in connection with the making of the Loan hereunder and
that it has made and shall continue to make its own appraisal of the
creditworthiness of Borrower and each Loan Party. The Administrative Agent
shall not have any duty or responsibility, either initially or on a continuing
basis, (i) to make any such investigation or any such appraisal on behalf of
the Lenders or (ii) except as provided in Section 12.8 below, to provide any
Lender with any credit or other information with respect thereto, whether
coming into its possession before the making of the Loan or at any time or
times thereafter, and the Administrative Agent shall not have any
responsibility with respect to the accuracy of or the completeness of any
information provided to any Lender.
SECTION 12.8 DELIVERY OF CERTAIN DOCUMENTS.
The Administrative Agent shall deliver to the Lenders,
reasonably promptly after receipt from the Borrower the financial statements,
certificates and other items delivered pursuant to subsections 5.1(j). In
addition, reasonably promptly after the effectiveness of any written amendment,
waiver or consent in accordance with the provisions of Section 11.4, the
Administrative Agent shall deliver a copy of such amendment, waiver or consent
to each Lender. Upon the request of any Lender, the Administrative Agent shall
deliver, reasonably promptly after receipt from the Borrower, any item required
to be delivered to the Administrative Agent pursuant to this Agreement.
152
<PAGE> 159
SECTION 12.9 INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally
agrees to indemnify the Administrative Agent, to the extent that the
Administrative Agent shall not have been reimbursed by the Borrower, for and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including reasonable counsel fees
and disbursements) or disbursements of any kind or nature whatsoever which may
be imposed on, incurred by or asserted against the Administrative Agent in
exercising its powers, rights and remedies or performing its duties hereunder
or under the other Loan Documents or otherwise in its capacity as the
Administrative Agent in any way relating to or arising out of this Agreement or
the other Loan Documents. If any indemnity furnished to the Administrative
Agent for any purpose shall, in the opinion of the Administrative Agent, be
insufficient or become impaired, the Administrative Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against until such additional indemnity is furnished.
SECTION 12.10 SUCCESSOR ADMINISTRATIVE AGENT.
The Administrative Agent may resign at any time by giving 30
days' prior written notice thereof to Lenders and may be removed by Requisite
Lenders for the Administrative Agent's bad faith, recklessness or willful
misconduct. Upon any such notice of resignation or removal Requisite Lenders
shall have the right, upon five Business Days' notice to Borrower, to appoint a
successor Administrative Agent. Upon the acceptance of any appointment as the
Administrative Agent hereunder by a successor Administrative Agent, that
successor Administrative Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring or removed
Administrative Agent and the retiring or removed Administrative Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Administrative Agent's resignation or removal hereunder as
the Administrative Agent, the provisions of this Section 12.10 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
the Administrative Agent under this Agreement.
SECTION 12.11 SECURITY DOCUMENTS.
Each Lender hereby further authorizes the Administrative
Agent, on behalf of and for the benefit of the Lenders, to enter into each
Security Document as secured party, and each Lender agrees to be bound by the
terms of each Security Document; provided that the Administrative Agent shall
not (i) enter into or consent to any written amendment, modification,
termination or waiver of any provision contained in any Security Document, or
(ii) release any Collateral (except as otherwise expressly permitted or
required pursuant to the terms of this Agreement or the applicable Security
Document), in each case without the prior consent of Requisite Lenders (or, if
required pursuant to Section 11.4, all Lenders); provided further, however,
that, without further written consent or authorization from the Lenders, the
153
<PAGE> 160
Administrative Agent may execute any documents or instruments necessary to (a)
release any Lien encumbering any item of Collateral that is the subject of a
sale or other disposition of assets permitted by this Agreement or that is
otherwise required to be released pursuant to this Agreement or to which
Requisite Lenders have otherwise consented. Anything contained in any of the
Loan Documents to the contrary notwithstanding, the Administrative Agent and
each Lender hereby agree that (1) no Lender shall have any right individually
to realize upon any of the Collateral under any Security Document, it being
understood and agreed that all rights and remedies under the Security Documents
may be exercised solely by the Administrative Agent for the benefit of the
Lenders in accordance with the terms thereof, and (2) in the event of a
foreclosure by the Administrative Agent on any of the Collateral pursuant to a
public or private sale, the Administrative Agent or any Lender may be the
purchaser of any or all of such Collateral at any such sale and the
Administrative Agent, as agent for and representative of the Lenders (but not
any Lender or the Lenders in its or their respective individual capacities
unless Requisite Lenders shall otherwise agree in writing) shall be entitled,
for the purpose of bidding and making settlement or payment of the purchase
price for all or any portion of the Collateral sold at any such public sale, to
use and apply any of the Obligations as a credit on account of the purchase
price for any collateral payable by the Administrative Agent at such sale.
SECTION 12.12 PAYEE OF NOTE TREATED AS OWNER.
The Administrative Agent may deem and treat the payee of any
Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof shall have been filed with the
Administrative Agent. Any request, authority or consent of any person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee or assignee of that Note or of any Note or Notes
issued in exchange therefor.
154
<PAGE> 161
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed by their duly authorized representatives, all as of the day
and year first above written.
BORROWER: BRISTOL LODGING COMPANY, a
Delaware corporation
By:
------------------------------------
Name: Joel M. Eastman
Title: Vice President
GUARANTOR: BRISTOL LODGING HOLDING COMPANY,
Delaware corporation
By:
------------------------------------
Name: Joel M. Eastman
Title: Vice President
<PAGE> 162
ADMINISTRATIVE AGENT: NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
By:
-------------------------------------
Name: Christopher M. Tierney
Title: Vice President
CO-AGENT: BANKERS TRUST COMPANY, a New York banking
corporation
By:
-------------------------------------
Name:
Title:
<PAGE> 163
CO-LENDER: NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
By:
-----------------------------------
Name: Christopher M. Tierney
Title: Vice President
CO-LENDER: BANKERS TRUST COMPANY, a New York banking
corporation
By:
-----------------------------------
Name:
Title:
<PAGE> 164
SCHEDULE I
INITIAL DEPOSITS ON THE CLOSING DATE
<TABLE>
<CAPTION>
SUBACCOUNT AMOUNT
<S> <C>
Monthly Debt Service Subaccount $0.00
Tax and Insurance Escrow Subaccount $2,132,550.30
Replacement Reserve Subaccount $359,899.00
Required Repair Subaccount $30,000.00
Loss Proceeds Subaccount $0.00
Security Deposit Subaccount $150,000.00
(Function Spare only)
Ground Rent Subaccount $30,215.00
Borrower's Remainder Subaccount $0.00
</TABLE>
<PAGE> 165
SCHEDULE II
REQUIRED REPAIRS
ASSET ITEM OF REPAIR REQUIRED COMPLETION DATE
<PAGE> 166
SCHEDULE III
RENT ROLL
(See Attached)
<PAGE> 167
SCHEDULE IV
ALLOCATED LOAN AMOUNT
<PAGE> 168
SCHEDULE V
FRANCHISE AGREEMENTS
(See Attached)
<PAGE> 169
SCHEDULE VI
LIQUOR LICENSES
(See Attached)
<PAGE> 170
SCHEDULE VII
ASSETS
(See Attached)
<PAGE> 171
SCHEDULE VIII
Intentionally Deleted
<PAGE> 172
SCHEDULE IX
Intentionally Deleted
<PAGE> 173
SCHEDULE X
INTENTIONALLY DELETED
<PAGE> 174
SCHEDULE XI
IP LICENSE AGREEMENTS
(See Attached)
<PAGE> 175
SCHEDULE XII
INTELLECTUAL PROPERTY
(See Attached)
<PAGE> 176
SCHEDULE XIII
SUBSIDIARIES
(See Attached)
<PAGE> 177
SCHEDULE XIV
TENANT LEASES
(See Attached)
<PAGE> 178
SCHEDULE XV
EXISTING DEBT
(See Attached)
<PAGE> 179
SCHEDULE XVI
TAXES
(See Attached)
<PAGE> 180
SCHEDULE XVII
MORTGAGE CAPS
(See Attached)
<PAGE> 181
SCHEDULE XVIII
LENDER'S SHARE
<TABLE>
LENDER SHARE
- ------ -----
<S> <C>
1. Nomura Asset Capital Corporation $72,500,000
2. Bankers Trust Company $72,500,000
</TABLE>
<PAGE> 182
SCHEDULE XIX
PRINCIPAL PLACES OF BUSINESS
(See Attached)
<PAGE> 183
SCHEDULE XX
Intentionally Deleted
<PAGE> 184
SCHEDULE XXI
PRIOR ASSIGNMENTS OF COLLATERAL
(See Attached)
<PAGE> 185
SCHEDULE XXII
ASSETS LOCATED IN FLOOD ZONES
(See Attached)
<PAGE> 186
SCHEDULE XXIII
LEASING REQUIREMENTS
To be agreed upon by Administrative Agent and Borrowers subsequent to the
Closing Date.
<PAGE> 187
SCHEDULE XXIV
CASUALTIES
(See Attached)
<PAGE> 188
SCHEDULE XXV
TAX AND INSURANCE AMOUNTS
(To be delivered post-closing)
<PAGE> 189
SCHEDULE XXVI
INSURANCE VARIATIONS
(See Attached)
<PAGE> 190
EXHIBIT A
PAYMENT DIRECTION LETTER
[BORROWER]
VIA CERTIFIED MAIL - RETURN RECEIPT REQUESTED
[TENANT]
[ADDRESS 1]
[ADDRESS 2]
[ADDRESS 3]
re:
Ladies and Gentlemen:
This is to advise you that the hotel has been transferred to Bristol
Lodging Company, a wholly owned indirect subsidiary of Bristol Hotel Company,
in connection with a refinancing of the hotel by Nomura Asset Capital
Corporation. In order to implement Lender's Cash Management System:
1. From and after the date hereof, all rent and other sums and
charges due by you to us or otherwise payable to the landlord under your lease
(including, without limitation, any security deposit) or as a result of your
occupancy at ___________________ _________________ (whether due in the past,
present or future) should be made payable to Clearing Account A for Nomura
Asset Capital Corporation as Mortgagee of ____________________________ and
sent to the clearing bank, _________________________, at . You should continue
to send all rent and other sums and charges as directed by this letter until you
receive other written instructions from our lender, Nomura Asset Capital
Corporation.
2. _________________________________, the managing agent for your
leased space, will continue to manage your leased space.
<PAGE> 191
Should you have any questions concerning this letter, please do not
hesitate to contact the managing agent.
Very truly yours,
Bristol Lodging Company
By:
--------------------------
Name: Joel M. Eastman
Title: Vice President
BRISTOL HOTEL ASSET COMPANY
By:
-------------------------------
Name: Joel M. Eastman
Title: Vice President
<PAGE> 192
EXHIBIT B
CREDIT CARD PAYOR PAYMENT DIRECTION LETTER
BRISTOL LODGING COMPANY
VIA CERTIFIED MAIL
RETURN RECEIPT REQUESTED
[CREDIT CARD PAYOR]
[ADDRESS 1]
Dear sir:
This is to advise you that from and after the date hereof, all sums,
charges and receivables payable by you to us, on account of that certain
[INSERT DESCRIPTION OF AGREEMENT BY WHICH PAYMENTS ARE MADE] should be payable
to "Nomura Asset Capital Corporation, as Administrative Agent" at the following
account:
Name: Nomura Asset Capital Corporation as Administrative
Agent for the lenders to Bristol Lodging Company
Account #:__________________________________
ABA #: ___________________________________
By countersigning below you agree to continue to send all sums and other sums
and charges as directed by this letter until you receive other written
instructions from Nomura Asset Capital Corporation.
Should you have any questions concerning this letter, please do not
hesitate to contact [________].
Very truly yours,
BRISTOL LODGING COMPANY,
a Delaware corporation
By:
--------------------------
Name:
Title:
[CREDIT CARD PAYOR]
By:
----------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.11
================================================================================
LOAN AGREEMENT
Dated as of October 10, 1997
Among
BRISTOL HOTEL ASSET COMPANY
as Domestic Borrower
BHAC CANADA INC.
as Canadian Borrower
NOMURA ASSET CAPITAL CORPORATION,
as Administrative Agent and Lender
BANKERS TRUST COMPANY,
as Co-Agent and Lender
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Principles of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
II. GENERAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 2.1 Loans Commitment; Disbursement to Borrowers . . . . . . . . . . . . . . . . . . . . . 36
2.1.1 The Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.1.2 Disbursement to Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.1.3 The Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.1.4 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.2 Resized Loans Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.2.1 The Resized Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.3 Loans Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.3.1 Repayment and Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.3.2 Casualty/Condemnation Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.3.3 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 2.4 Release of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
2.4.1 Release of an Asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
2.4.2 Substitution of an Asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 2.5 Assumption of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 2.6 Interest and Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.6.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
2.6.2 Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 2.7 Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.7.1 Making of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.7.2 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.7.3 Late Payment Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.7.4 Payments Received in the Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . 45
2.7.5 Apportionment of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.7.6 Distribution to Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 2.8 New Orleans Hotel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
III. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 3.1 Conditions Precedent to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 3.2 Conditions Precedent to the Additional Advance . . . . . . . . . . . . . . . . . . . . 55
Section 3.3 Conditions Precedent to any Substitution Event . . . . . . . . . . . . . . . . . . . . 57
Section 3.4 Conditions Precedent to Making the Resized Loans . . . . . . . . . . . . . . . . . . . 60
IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 4.1 Representations of Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 4.2 Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
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V. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 5.1 Borrowers' Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
VI. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 6.1 Borrowers' Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
VII. CASUALTY; CONDEMNATION; ESCROWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 7.1 Insurance; Casualty and Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . 100
7.1.1 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
7.1.2 Casualty and Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 103
7.1.3 Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 7.2 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 7.3 Tax and Insurance Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Section 7.4 Replacements and Replacement Reserve . . . . . . . . . . . . . . . . . . . . . . . . . 111
7.4.1 Replacement Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
7.4.2 Disbursements from Replacement Reserve Subaccount . . . . . . . . . . . . . . . . . . 111
7.4.3 Performance of Replacements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
7.4.4 Failure to Make Replacements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
7.4.5 Balance in the Replacement Reserve Subaccount . . . . . . . . . . . . . . . . . . . . 116
7.4.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Section 7.5 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Section 7.6 Ground Rent Escrow Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
VIII. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Section 8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Section 8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Section 8.3 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
IX. SPECIAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Section 9.1 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Section 9.2 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Section 9.3 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Section 9.4 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Section 9.5 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
Section 9.6 Indemnification Against Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Section 9.7 Splitting the Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
X. CENTRAL CASH MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Section 10.1 Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Section 10.2 Establishment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
10.2.1 Establishment of Clearing Account . . . . . . . . . . . . . . . . . . . . . . . . . . 125
10.2.2 Establishment of Deposit Accounts and Subaccounts . . . . . . . . . . . . . . . . . . 125
Section 10.3 Deposits into Clearing Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Section 10.4 Transfers to Deposit Accounts and Clearing Account B . . . . . . . . . . . . . . . . . 128
10.4.1 Transfers from Clearing Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
10.4.2 Insufficient Funds in the Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . 129
</TABLE>
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Section 10.5 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Section 10.6 Pledge of Accounts; Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . 130
Section 10.7 Investment of Account Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Section 10.8 Requisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
10.8.1 Submission of Requisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
10.8.2 Content of Requisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Section 10.9 Disbursements from the Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . . 132
10.9.1 Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
10.9.2 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
10.9.3 Upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Section 10.10 Disbursements from Certain Subaccounts . . . . . . . . . . . . . . . . . . . . . . . . 133
10.10.1 Disbursements from the Tax and Insurance Escrow Subaccount . . . . . . . . . . . . . . 133
10.10.2 Disbursements from the Replacement Reserve Subaccount . . . . . . . . . . . . . . . . 133
10.10.3 Disbursements from the Security Deposit Subaccount . . . . . . . . . . . . . . . . . . 133
10.10.4 Disbursements from the Loss Proceeds Subaccount . . . . . . . . . . . . . . . . . . . 134
10.10.5 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
10.10.6 Disbursements from the Borrower's Remainder Subaccount . . . . . . . . . . . . . . . . 134
10.10.7 Disbursements from the Monthly Debt Service Subaccount . . . . . . . . . . . . . . . . 134
10.10.8 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
10.10.9 Disbursements from the Ground Rent Subaccount . . . . . . . . . . . . . . . . . . . . 135
10.10.10 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Section 10.11 Lock-Box Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Section 10.12 Required Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Section 11.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Section 11.2 Intentionally Deleted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Section 11.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Section 11.4 Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Section 11.5 Delay Not a Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
Section 11.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Section 11.7 Trial by Jury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Section 11.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Section 11.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Section 11.10 Preferences/Marshalling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Section 11.11 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Section 11.12 Remedies of Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
Section 11.13 Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
Section 11.14 Exhibits and Schedules Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . 144
Section 11.15 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Section 11.16 Ratable Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
Section 11.17 Offsets, Counterclaims and Defenses . . . . . . . . . . . . . . . . . . . . . . . . . 145
Section 11.18 No Joint Venture or Partnership; No Third Party Beneficiaries; Independent Nature
of Lenders' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
Section 11.19 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
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Section 11.20 Waiver of Counterclaim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Section 11.21 Conflict; Construction of Documents; Reliance . . . . . . . . . . . . . . . . . . . . 147
Section 11.22 Brokers and Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Section 11.23 Prior Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Section 11.24 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Section 11.25 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Section 11.26 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Section 11.27 Administrative Agent's Discretion; Successor Agents . . . . . . . . . . . . . . . . . 149
Section 11.28 Maximum Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Section 11.28 Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
XII. AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Section 12.1 Appointment of Administrative Agent and Collateral Agent . . . . . . . . . . . . . . . 151
Section 12.2 Appointment of Supplemental Collateral Agents . . . . . . . . . . . . . . . . . . . . 151
Section 12.3 Powers; Duties Specified . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
Section 12.4 No Responsibility for Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . 152
Section 12.5 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
Section 12.6 Administrative Agent Entitled to Act as Lender. . . . . . . . . . . . . . . . . . . . 153
Section 12.7 Independent Credit Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
Section 12.8 Delivery of Certain Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
Section 12.9 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
Section 12.10 Successor Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Section 12.11 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Section 12.12 Payee of Notes Treated as Owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
</TABLE>
SCHEDULES
Schedule I - Intentionally Deleted
Schedule II - Intentionally Deleted
Schedule III - Rent Roll
Schedule IV - Allocated Loan Amount
Schedule V - Franchise Agreements
Schedule VI - Liquor Licenses, Liquor Agreements & Property Management
Agreements
Schedule VII - Assets
Schedule VIII - Intentionally Deleted
Schedule IX - Intentionally Deleted
Schedule X - Intentionally Deleted
Schedule XI - IP License Agreements
Schedule XII - Intellectual Property
Schedule XIII - Subsidiaries
Schedule XIV - Tenant Leases
Schedule XV - Existing Debt
Schedule XVI - Taxes and Assessments
Schedule XVII - Mortgage Caps
Schedule XVIII - Lender's Share
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Schedule XIX - Principal Places of Business
Schedule XX - Intentionally Deleted
Schedule XXI - Prior Assignments of Collateral
Schedule XXII - Assets Located in Flood Zones
Schedule XXIII - Leasing Requirements
Schedule XXIV - Casualties
Schedule XXV - Insurance Variations
Schedule XXVI - Special Assets
Schedule XXVII - Tax and Insurance Amounts
EXHIBITS
Exhibit A - Payment Direction Letter
Exhibit B - Credit Card Payor Payment Direction Letter
Exhibit C - Resized Loan Agreement
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EXHIBIT 10.11
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of October 10, 1997 (subject to
Section 11.30 hereof) (as amended, restated, replaced, supplemented or
otherwise modified from time to time, this "AGREEMENT"), is among BRISTOL HOTEL
ASSET COMPANY, a Delaware corporation, having an address at 14295 Midway Road,
Dallas, Texas 75244 ("DOMESTIC BORROWER"), BHAC CANADA INC., an Ontario
corporation, having an address at c/o Holiday Inn- Toronto Yorkdale, 340
Dufferin Street, Toronto, Ontario, MGA 2V1, Canada and having its chief
executive offices at 14295 Midway Road, Dallas, Texas 75244 ("CANADIAN
BORROWER"; Domestic Borrower and Canadian Borrower are sometimes hereinafter
referred to as a "BORROWER" and collectively as the "BORROWERS"), THE LENDERS
LISTED ON THE SIGNATURE PAGES HEREOF (individually referred to as "LENDER" and
collectively as "LENDERS"), NOMURA ASSET CAPITAL CORPORATION, a Delaware
corporation, having an address at Two World Financial Center, Building B, New
York, New York 10281 as administrative agent and collateral agent for Lenders
(in such capacity, "ADMINISTRATIVE AGENT") and BANKERS TRUST COMPANY, a New
York banking corporation, having an address at 130 Liberty Street, New York,
New York 10006 as co-agent for Lenders (in such capacity, the "CO-AGENT").
All capitalized terms used herein shall have the respective
meanings set forth in Article I hereof.
W I T N E S S E T H:
WHEREAS, those certain (x) promissory notes executed by
Domestic Borrower (the "EXISTING NOTES") in connection with the Existing
Facility, (y) mortgages, deeds of trust or deeds to secure debt executed by
Domestic Borrower or certain other Loan Parties (other than Canadian Borrower)
in connection with the Existing Facility (the "EXISTING MORTGAGES") and (z)
other loan documents executed and delivered by Domestic Borrower and/or certain
other Loan Parties (such other documents together with the Existing Notes and
the Existing Mortgages are hereinafter referred to as the "EXISTING LOAN
DOCUMENTS") in connection with the Existing Facility, were assigned to Lenders;
WHEREAS, Domestic Borrower desires to modify the Existing Loan
Documents to provide for the Domestic Loans from Lenders and as otherwise
provided herein; and
WHEREAS, Canadian Borrower desires to obtain the Canadian Loan
from Lenders;
WHEREAS, Lenders are willing to make the Loans to Borrowers,
subject to and in accordance with the terms of this Agreement and the other
Loan Documents.
<PAGE> 8
NOW, THEREFORE, in consideration of the making of the Loans by
Lenders to Borrowers and the covenants, agreements, representations and
warranties set forth in this Agreement, the parties hereto hereby covenant,
agree, represent and warrant as follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1 DEFINITIONS.
For all purposes of this Agreement, except as otherwise
expressly required or unless the context clearly indicates a contrary intent:
"ABM" shall have the meaning set forth in Section 3.1(bb).
"ACCOUNT PROCEEDS" shall mean all Mortgaged Property Gross
Cash Flow and any and all other sums in any Clearing Account A or any Deposit
Account, as applicable, from time to time.
"ACH" shall have the meaning set forth in Section 10.4.1.
"ACQUISITION DOCUMENTS" shall mean the Acquisition Credit
Facility Agreement and those certain other documents executed in connection the
Acquisition Facility, each such document being in a form and substance as
approved by Administrative Agent on or prior to the Closing Date, in each case
as such agreement and other documents shall be amended, restated, supplemented
or otherwise modified from time to time pursuant to the terms of this
Agreement.
"ACQUISITION FACILITY CREDIT AGREEMENT" shall mean that
certain Credit Agreement, dated as of October 10, 1997 among BHOC and Bristol
Hospitality Holding Company, as borrowers, the lenders party thereto, Bankers
Trust Company, as agent, and Bank One, Texas, N.A. and Wells Fargo Bank,
National Association, as co-agents, as such agreement shall be amended,
restated, supplemented or otherwise modified from time to time pursuant to the
terms of this Agreement.
"ACQUISITION FACILITY" shall mean that certain credit facility
to be advanced pursuant to the Acquisition Credit Facility Agreement.
"ADDITIONAL ADVANCE" shall mean the second advance of the
Domestic Loan to be made on the Advance Closing Date which advance will be in
the aggregate principal amount of $100,000,000.00. It being understood that
Domestic Borrower had the right to seek an advance under the revolving portion
of the Existing Facility, Borrower repaid the revolving credit portion of the
Existing Facility in an amount of at least 100,000,000 and such repaid amount
is being re-advanced hereunder as the Additional Advance, provided, that the
terms hereof shall govern all
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<PAGE> 9
aspects of the Additional Advance and provided further, that if any portion of
such Additional Advance is repaid, in no event shall Domestic Borrower be
entitled to re-borrow such funds.
"ADDITIONAL ADVANCE EARLY PREPAYMENT" shall have the meaning
set forth in Section 3.2(b).
"ADVANCE" shall have the meaning set forth in Section 2.1.1.
"ADVANCE CLOSING DATE" shall mean December 1, 1997.
"AFFILIATE" shall mean, as to any Person, any other Person
that, directly or indirectly, is in control of, is controlled by or is under
common control with such Person or is a director or officer of such Person or
of an Affiliate of such Person.
"AFFILIATE GUARANTY" shall mean that certain Affiliate
Guaranty (or Amended and Restated Affiliate Guaranty), dated the date hereof,
executed by each of the Subsidiaries (other than Canadian Borrower) and
Domestic Borrower as such Affiliate Guaranty may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
"AGGREGATE AMOUNTS DUE" shall have the meaning set forth in
Section 11.16.
"ALLOCATED LOAN AMOUNT" shall mean for a particular Asset the
dollar amount set forth on Schedule IV for such Asset or with respect to a
Substitution Added Asset, the dollar amount determined by Administrative Agent
in accordance with Section 3.3(d)(ii) hereof.
"ALTA" shall mean American Land Title Association, or any
successor thereto.
"ANNUAL OPERATING BUDGET" shall have the meaning specified in
Section 5.1(q).
"APPROVED ANNUAL OPERATING BUDGET" shall have the meaning set
forth in Section 5.1(q).
"APPROVED PROPERTY MANAGER STANDARD" shall mean the standard
of business operations, practices and procedures customarily employed by
entities having a senior executive with at least ten (10) years' experience in
the management of hotels substantially similar to such Asset in the regions
where such Asset is located and that manages or has managed not less than ten
(10) such hotels.
"ASSET" shall mean individually, at any time, each real
property and hotel and other improvements thereon and FF&E and personal
property in connection therewith then owned by any of the Borrowers or any
other Loan Party or in which any of the Borrowers or any of such other Loan
Parties own a Leasehold Estate now or hereafter encumbered by a Mortgage
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<PAGE> 10
(or in the case of a Special Asset, subject to a Negative Pledge), together
with all rights pertaining thereto which collectively comprise the Asset as
more particularly described in each Mortgage and referred to therein as the
Mortgaged Property. For all purposes of this Agreement (including but not
limited to the determination of Allocated Loan Amounts and Release Prices) the
following pairs of hotels shall be considered as one Asset (i) Downtown Atlanta
Farfield Inn and Courtyard by Marriott and (ii) Houston Galleria Farfield Inn
and Courtyard by Marriott (iii) Houston I-10 East Hampton and Farfield Inn.
"ASSIGNMENT OF LEASES" shall mean with respect to each of the
Assets, the certain first priority Assignment of Leases and Rents (or Amended
and Restated Assignment of Leases and Rents), dated as of the date hereof (or
with respect to a Substitution Added Asset, dated as of the Substitution Date),
from either Borrower (or in the case of each Asset owned by any Loan Party
other than either Borrower, such other Loan Party), as assignor, to
Administrative Agent, as assignee, assigning to Administrative Agent, as agent
for Lenders, all of such Borrower's (or such other Loan Party's) interest in
and to the Tenant Leases and Rents of each such Asset as security for the Loans
(in the case of Domestic Assets) or the Canadian Loans (in the case of Assets
located in Canada), as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time, provided, however, with
respect to the Special Assets, "Assignment of Leases" shall mean the certain
first priority Assignment of Rents (or Amended and Restated Assignment of
Rents), dated as of the date hereof from Domestic Borrower (or in the case of
each Special Asset owned by any Loan Party other than Domestic Borrower, such
other Loan Party), as assignor, to Administrative Agent, as assignee, assigning
to Administrative Agent, as agent for Lenders, all of such Domestic Borrower's
(or such other Loan Party's) interest in and to the Rents of each such Special
Asset as security for the Loans, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
"ASSUMPTION AGREEMENTS" shall have the meaning set forth in
Section 6.1(j)(vii)(F).
"AUTHORIZATION" means any authorization, approval, franchise,
license, variance, land use entitlement, sewer and waste water discharge
permit, storm water discharge permit, air pollution authorization to operate,
certificate of occupancy, municipal water and sewer connection permit, and any
like or similar permit now or hereafter required for the construction or
renovation of any Improvements located on any Asset or for the use, occupancy
or operation of any Asset and all amendments, modifications, supplements and
addenda thereto.
"AWARD" shall have the meaning set forth in Section 7.1.3(b).
"BANKRUPTCY CODE" shall mean Title 11 of the United States
Code, as amended.
"BASIC CARRYING COSTS" shall mean, with respect to each Asset,
the sum of the following costs associated with such Asset for the relevant
Fiscal Year or payment period:
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(i) real property taxes with respect to such Asset and (ii) insurance premiums
with respect to such Asset.
"BENCHMARK YIELD" shall be calculated by interpolating the
yield of the 6.250% U.S. Treasury maturing on February 15, 2007 at the time of
calculation and the yield of the 6.500% U.S. Treasury maturing on November 15,
2026 at the time of calculation.
"BHOC" shall mean Bristol Hotel Operating Company, a Delaware
corporation.
"BIG SIX ACCOUNTING FIRM" shall mean Ernst and Young, Coopers
and Lybrand, Price Waterhouse, Deloitte & Touche, KPMG Peat Marwick or Arthur
Andersen & Co. or any successor entity.
"BORROWERS" shall mean collectively the Canadian Borrower and
Domestic Borrower.
"BORROWERS CONTRIBUTION DEPOSITS" shall have the meaning set
forth in Section 10.4.2.
"BORROWERS' REMAINDER SUBACCOUNT" shall have the meaning set
forth in Section 10.2.2(a).
"BREAKAGE AMOUNT" means an amount equal to the product of (i)
Breakage Principal and (ii) the Price Difference as of the appropriate Breakage
Date.
"BREAKAGE DATE" shall be each date on which any portion of the
principal balance under each Note is repaid.
"BREAKAGE PRINCIPAL" shall equal the principal balance of each
Note repaid on each Breakage Date.
"BRISTOL" shall mean Bristol Hotel Company, a Delaware
corporation.
"BRISTOL DEFAULT" shall occur if (i) Bristol or any direct or
indirect subsidiary of Bristol (including without limitation any Loan Party and
BHOC) shall fail to pay any principal of or premium or interest on any
indebtedness of such Person having a principal amount of $1,000,000 or more
(excluding Indebtedness evidenced by the Notes) when the same becomes due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise); (ii) any other event shall occur or condition shall
exist under any agreement or instrument relating to any such indebtedness, if
the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such indebtedness; (iii) or any such
indebtedness shall become or be declared to be due and payable, or required to
be prepaid (other
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<PAGE> 12
than by a regularly scheduled required prepayment), or Bristol or any direct or
indirect subsidiary of Bristol (including without limitation any Loan Party or
BHOC) shall be required to repurchase or offer to repurchase such indebtedness
(unless such Person is not in default under such indebtedness), prior to the
stated maturity thereof. Notwithstanding the foregoing a Bristol Default shall
not occur if Bristol or any direct or indirect subsidiary of Bristol (other
than a Loan Party) shall be in default in connection with any indebtedness
which is not recourse (except with respect to an environmental indemnity or a
guaranty of recourse carveouts) to Bristol or any direct or indirect subsidiary
of Bristol; provided such non-recourse indebtedness and any other non-recourse
indebtedness of Bristol and any direct or indirect subsidiary of Bristol in
connection with which such Person has been or is in default shall not (x) in
the aggregate have a principal amount outstanding in excess of $100,000,000 and
(y) be secured by a lien, in the aggregate, on more than two hotels or other
similarly significant assets of such Person. For purposes of the foregoing,
recourse debt shall be considered non-recourse debt if the borrower of such
debt is a special purpose entity which would not be reasonably expected to be
consolidated with any of its Affiliates and no other Person is liable with
respect to such indebtedness (except with respect to an environmental indemnity
or a guaranty of recourse carveouts.)
"BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or any other day on which national banks in New York, New York are not
open for business.
"CANADIAN ASSETS" shall mean each Asset located in Canada and
which is owned by Canadian Borrower.
"CANADIAN BORROWER" shall mean BHAC Canada Inc., an Ontario
corporation, together with its successors and assigns.
"CANADIAN COLLATERAL SECURITY AGREEMENT" means the Pledge and
Security Agreement dated as of the date hereof, executed and delivered by
Canadian Borrower, Canadian Management Co., and Administrative Agent as
security for the Canadian Loan pursuant to which the Canadian Borrower will
pledge and grant a security interest in the collateral described therein to
Secured Parties, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.
"CANADIAN DEBT SERVICE" shall mean, with respect to any
particular period of time, scheduled principal and interest payments due and
payable under the Canadian Notes.
"CANADIAN DEBT SERVICE COVERAGE RATIO" shall mean a ratio for
the applicable period in which: (a) the numerator is the Net Operating Income
generated by the Canadian Assets for such period as set forth in the statements
required hereunder (except that in the case of any Canadian Asset encumbered by
a Mortgage which secures less than the maximum amount of the Canadian Loan, the
Net Operating Income included in the numerator on account of such Canadian
Asset shall be no greater than the lesser of (x) the Net Operating Income for
such
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Canadian Asset as determined by Lender on the Closing Date (or Substitution
Date in the case of a Canadian Asset which was or is a Substitution Added
Asset) for the same period preceding the Closing Date (or Substitution Date in
the case of a Substitution Added Asset) and (y) only in the case of a Canadian
Asset which was or is a Substitution Added Asset, the Net Operating Income for
the corresponding Substitution Removed Asset as determined by Lender on the
Closing Date for the same period preceding the Closing Date), and (b) the
denominator is the Canadian Debt Service for such period.
"CANADIAN LOAN" shall mean the loan made by Lenders to
Canadian Borrower in the original aggregate principal amount set forth in, and
evidenced by, the Canadian Notes executed and delivered by Canadian Borrower
and secured by the Mortgage and the other Loan Documents executed and delivered
by Borrowers and/or other Loan Parties.
"CANADIAN MANAGEMENT CO." shall mean BHMC Canada Inc., an
Ontario corporation and a wholly owned subsidiary of Canadian Borrower.
"CANADIAN NOTES" shall mean each Promissory Note dated as of
the date hereof, made by Canadian Borrower (and guaranteed by Domestic Borrower
pursuant to the Affiliate Guaranty) in favor of each Lender, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
"CANADIAN REMAINING PROPERTY" shall mean all Canadian Assets
which are, at the date of determination, subject to the lien of a Mortgage
(including any Substitution Added Asset to be included as a Canadian Asset in
the case of a Substitution Event and excluding any Canadian Assets in
connection with which Canadian Borrower is requesting a Partial Release).
"CANADIAN REMAINING PROPERTY DSCR" shall mean the ratio of (i)
Net Operating Income of the Canadian Remaining Property for the twelve (12)
full months preceding the applicable Prepayment Date or Substitution Date, as
the case may be (except that in the case of any Canadian Asset encumbered by a
Mortgage which secures less than the maximum amount of the Canadian Loan, the
Net Operating Income included in the numerator on account of such Canadian
Asset shall be no greater than the lesser of (x) the Net Operating Income for
such Canadian Asset as determined by Lender on the Closing Date (or
Substitution Date in the case of a Canadian Asset which was or is a
Substitution Added Asset) for the same period preceding the Closing Date (or
Substitution Date in the case of a Substitution Added Asset) and (y) only in
the case of a Canadian Asset which was or is a Substitution Added Asset, the
Net Operating Income for the corresponding Substitution Removed Asset as
determined by Lender on the Closing Date for the same period preceding the
Closing Date) to (ii) Canadian Debt Service for the twelve (12) full months
next following the applicable Prepayment Date or Substitution Date as the case
may be (using the balance of the Canadian Loan after payment of the Release
Price for the Canadian Assets in connection with which Canadian Borrower is
requesting a Partial Release and all Canadian Assets previously Partially
Released) without substituting a Substitution Asset.
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<PAGE> 14
"CASH TRAP EVENT" shall mean each of (i) the occurrence of a
monetary Default, an Event of Default or a Bristol Default and (ii) the failure
of Borrowers to cause at least ninety percent (90%) of the sum of (x) annual
Mortgaged Property Gross Cash Flow of the Property and (y) Security Deposits to
be timely deposited into a Clearing Account A, as evidenced by the audited
financial statements delivered to Administrative Agent pursuant to Section
5.1(j) hereof, and in each case, notice to Borrowers that Administrative Agent
is declaring a Cash Trap Event.
"CASH TRAP PERIOD" shall mean a date starting on the date of a
Cash Trap Event and ending on a date which is the later of the twelve (12)
month anniversary of the Cash Trap Event (or if later, the twelve month
anniversary of the occurrence of an event which would have caused a Cash Trap
Event to occur but for a prior event having already caused a Cash Trap Event)
and a date on which (i) no Default, Event of Default or Bristol Default is
continuing, (ii) Borrowers shall have provided to Administrative Agent audited
financial statements (or in the case of a Cash Trap Event caused by a monetary
Default, an Event of Default or a Bristol Default, unaudited operating
statements) pursuant to Section 5.1(j) hereof evidencing that for the prior
twelve (12) month period at least ninety percent (90%) of the sum of Mortgaged
Property Gross Cash Flow of the Property and Security Deposits shall have been
timely deposited into a Clearing Account A and (iii) (x) Canadian Borrower
shall have achieved, and provided evidence to Administrative Agent of the
achievement, as of the last day of the preceding calendar month, a Canadian
Debt Service Coverage Ratio for the Canadian Assets for the preceding twelve
(12) month period ending with such calendar month of not less than 1.55 to 1.0
and (y) Domestic Borrower shall have achieved, and provided evidence to
Administrative Agent of the achievement, as of the last day of the preceding
calendar month, a Domestic Debt Service Coverage Ratio for the Domestic Assets
for the preceding twelve (12) month period ending with such calendar month of
not less than 1.55 to 1.0
"CASUALTY" shall have the meaning specified in Section
7.1.1(d).
"CASUALTY/CONDEMNATION PREPAYMENTS" shall have the meaning set
forth in Section 2.3.2.
"CASUALTY RELEASE DATE" shall mean the date on which a
Casualty Release Event Occurs.
"CASUALTY RELEASE EVENT" shall have the meaning set forth in
Section 7.1.2.
"CHANGE IN CONTROL" shall mean (i) a transfer, hypothecation,
conveyance, alienation, mortgage, encumbrance or pledge by which an aggregate
of more than 49% of the equity interest of a Person (including by way of the
transfer, hypothecation, conveyance, alienation, mortgage, encumbrance or
pledge of any direct or indirect legal or beneficial interest in any
constituent partner, member or shareholder of such Person) shall be vested in
or pledged to any other Person who does not, as of the Closing Date, own more
than 49% of such Person or
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<PAGE> 15
(ii) a transfer of the power to direct or cause the direction of management and
policies of such Person through the direct or indirect transfer of voting
securities or other ownership interests, by contract or otherwise. A Change in
Control shall not include the resignation, removal or replacement of the chief
executive officer, chief financial officer, other senior management or any
director (other than an Independent Director) of such Person.
"CLEARING ACCOUNT A" shall have the meaning set forth in
Section 10.2.1.
"CLEARING ACCOUNT B" shall have the meaning set forth in
Section 10.2.1.
"CLEARING AGREEMENTS" shall have the meaning set forth in
Section 10.11, each individually a Clearing Agreement.
"CLEARING BANK" shall mean those commercial or savings banks
selected by Borrowers and approved by Administrative Agent in its reasonable
discretion in which a Clearing Account A is maintained.
"CLOSING DATE" shall mean the date of the funding of the
Loans.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time, any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
"COLLATERAL" means, collectively, all property, whether real,
personal or mixed, tangible or intangible, owned or to be owned or leased or to
be leased or otherwise held or to be held by a Loan Party or in which a Loan
Party has or shall acquire an interest, to the extent of the Loan Party's
interest therein, now or hereafter granted, assigned, transferred, mortgaged or
pledged to the Secured Parties, or in which a Lien is granted to the Secured
Parties, to secure all or any part of the Obligations, whether pursuant to the
Loan Documents or otherwise, including, without limitation, the Assets, the
Tenant Leases and Rents and rights under the Property Management Agreements,
and any and all proceeds of the foregoing, but excluding the Excluded Assets.
"COLLATERAL SECURITY AGREEMENTS" shall mean collectively the
Domestic Collateral Security Agreement and the Canadian Collateral Security
Agreement.
"COLLECTION PERIOD" shall mean, with respect to any
Disbursement Date, the period of time commencing on and including the eleventh
(11th) day of the calendar month preceding the calendar month in which such
Disbursement Date occurs to and including the tenth (10th) day of the calendar
month in which such Disbursement Date occurs, provided that the first
Collection Period shall commence on the Closing Date.
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"COMMITMENT" means the commitment of each Lender to make or
maintain both the Domestic Loan and the Canadian Loan pursuant to Section
2.1.1, and "Commitments" mean such commitments of all Lenders in the aggregate.
"CONDEMNATION" shall have the meaning set forth in
Section 7.1.3(a).
"CONDEMNATION PROCEEDS" shall mean any Award in respect of any
Condemnation.
"CONDEMNATION RELEASE DATE" shall mean the date on which a
Condemnation Release Event Occurs.
"CONDEMNATION RELEASE EVENT" shall have the meaning set forth
in Section 7.1.3.
"CONDEMNATION RESTORATION" shall have the meaning set forth in
Section 7.1.3(c).
"CONSENT AND SUBORDINATION OF PROPERTY MANAGER" shall mean the
Consent and Agreement of Manager and Subordination of Management Agreement
dated as of the date hereof (or with respect to a Substitution Added Asset,
dated as of the Substitution Date), executed by the Property Manager and
Canadian Management Company, respectively, as managers, in favor of
Administrative Agent.
"CREDIT CARD RECEIVABLES" shall mean any receivable payable to
or for the benefit of any Borrower (or any other Loan Party) by a Credit Card
Payor.
"CREDIT CARD PAYOR" shall mean American Express, Discover,
Diners Club and all other credit card issuers (or merchant banks acting on
behalf of either Borrower (or any other Loan Party) with respect to credit
cards issuers) whose credit cards are accepted for payment at the Property.
"CREDIT CARD PAYOR PAYMENT DIRECTION LETTER" shall have the
meaning set forth in Section 10.3(a) hereof.
"DEBT" shall mean the outstanding principal amount set forth
in, and evidenced by, the Domestic Notes and the Canadian Notes together with
all interest accrued and unpaid thereon and all other sums (including any
Repayment Premium) due to Lenders in respect of the Loans under the Domestic
Notes and the Canadian Notes, this Agreement, each Mortgage or any other Loan
Document.
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"DEBT SERVICE" shall mean, with respect to any particular
period of time, scheduled principal and interest payments due and payable under
the Notes.
"DEBT SERVICE COVERAGE RATIO" shall mean a ratio for the
applicable period in which: (a) the numerator is the Net Operating Income for
such period as set forth in the statements required hereunder (except that in
the case of any Asset encumbered by a Mortgage which secures less than the (x)
maximum amount of the Canadian Loan, if such Asset is a Canadian Asset or (y)
the Maximum Loan Amount, if such Asset is a Domestic Asset, the Net Operating
Income included in the numerator on account of such Asset shall be no greater
than the lesser of (x) the Net Operating Income for such Asset as determined by
Lender on the Closing Date (or Substitution Date in the case of an Asset which
was or is a Substitution Added Asset) for the same period preceding the Closing
Date (or Substitution Date in the case of a Substitution Added Asset) and (y)
only in the case of an Asset which was or is a Substitution Added Asset, the
Net Operating Income for the corresponding Substitution Removed Asset as
determined by Lender on the Closing Date for the same period preceding the
Closing Date), and (b) the denominator is the Debt Service for such period.
"DEFAULT" shall mean the occurrence of any event hereunder or
under any other Loan Document which, but for the giving of notice or the
passage of time, or both, would be an Event of Default.
"DEFAULT RATE" shall mean, with respect to the Loans, a rate
per annum equal to 500 basis points above the Interest Rate; provided, however,
in no event shall such rate exceed the maximum rate permitted by applicable
law.
"DEPOSIT ACCOUNTS" shall mean those certain accounts
established and maintained pursuant to Section 10.2.2(a) of this Agreement and
the Deposit Agreements for collecting and retaining all the Rents and other
revenue and income from the Property.
"DEPOSIT AGREEMENTS" shall have the meaning set forth in
Section 10.11.
"DEPOSIT BANK" shall mean the commercial or savings bank in
which the Deposit Accounts are maintained.
"DEVELOPMENT" means the erection or other construction or
installation of Improvements on real property that is then substantially
unimproved or from which all or substantially all of the existing Improvements
thereon have been removed or will be removed in connection with such erection,
construction or installation. Development does not include restorations and
renovations provided, such restorations or renovations are permitted by the
terms of this Agreement.
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<PAGE> 18
"DISBURSEMENT DATE" shall mean the eleventh (11th) day of each
calendar month, or if such eleventh (11th) day is not a Business Day, the next
succeeding Business Day.
"DOMESTIC ASSET" shall mean each Asset located in the United
States and owned by any Loan Party other than Canadian Borrower or Canadian
Management Co..
"DOMESTIC BORROWER" shall mean Bristol Hotel Asset Company, a
Delaware corporation, together with its successors and assigns.
"DOMESTIC DEBT SERVICE" shall mean, with respect to any
particular period of time, scheduled principal and interest payments due and
payable under the Domestic Notes.
"DOMESTIC DEBT SERVICE COVERAGE RATIO" shall mean a ratio for
the applicable period in which: (a) the numerator is the Net Operating Income
generated by the Domestic Assets for such period as set forth in the statements
required hereunder (except that in the case of any Domestic Asset encumbered by
a Mortgage which secures less than the Maximum Loan Amount, the Net Operating
Income included in the numerator on account of such Domestic Asset shall be no
greater than the lesser of (x) the Net Operating Income for such Domestic Asset
as determined by Lender on the Closing Date (or Substitution Date in the case
of a Domestic Asset which was or is a Substitution Added Asset) for the same
period preceding the Closing Date (or Substitution Date in the case of a
Substitution Added Asset), and (y) only in the case of an Asset which was or is
a Substitution Added Asset, the Net Operating Income for the corresponding
Substitution Removed Asset as determined by Lender on the Closing Date for the
same period preceding the Closing Date), and (b) the denominator is the
Domestic Debt Service for such period.
"DOMESTIC COLLATERAL SECURITY AGREEMENT" means the Pledge and
Security Agreement (or Amended and Restated Pledge and Security Agreement)
dated as of the date hereof, executed and delivered by Domestic Borrower, the
Loan Parties (other than the Canadian Borrower and Canadian Management Co.),
and Administrative Agent as security for the (x) Loans made to Borrowers or (y)
the Affiliate Guaranty, pursuant to which the Loan Parties (other than the
Canadian Borrower and Canadian Management Co.) will pledge and grant a security
interest in the collateral described therein to Secured Parties, as the same
may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
"DOMESTIC LOAN" shall mean the loan made by Lenders to
Domestic Borrower in the original aggregate principal amount set forth in, and
evidenced by, the Domestic Notes executed and delivered by Domestic Borrower
and secured by the Mortgage and the other Loan Documents executed and delivered
by Domestic Borrower and/or other Loan Parties (excluding the Canadian Borrower
and Canadian Management Co.).
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<PAGE> 19
"DOMESTIC NOTES" shall mean each Promissory Note dated as of
the date hereof, made by Domestic Borrower in favor of each Lender, as the same
may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
"DOMESTIC REMAINING PROPERTY" shall mean all Domestic Assets
which are, at the date of determination, subject to the lien of a Mortgage
(including any Substitution Added Asset to be included as a Domestic Asset in
the case of a Substitution Event and excluding any Domestic Assets in
connection with which Domestic Borrower is requesting a Partial Release) or are
subject to a Negative Pledge (in the case of a Special Asset).
"DOMESTIC REMAINING PROPERTY DSCR" shall mean the ratio of (i)
Net Operating Income of the Domestic Remaining Property for the twelve (12)
full months preceding the applicable Prepayment Date or Substitution Date, as
the case may be (except that in the case of any Domestic Asset encumbered by a
Mortgage which secures less than the Maximum Loan Amount, the Net Operating
Income included in the numerator on account of such Domestic Asset shall be no
greater than the lesser of (x) the Net Operating Income for such Domestic Asset
as determined by Lender on the Closing Date (or Substitution Date in the case
of a Domestic Asset which was or is a Substitution Added Asset) for the same
period preceding the Closing Date (or Substitution Date in the case of a
Substitution Added Asset), and (y) only in the case of an Asset which was or is
a Substitution Added Asset, the Net Operating Income for the corresponding
Substitution Removed Asset as determined by Lender on the Closing Date for the
same period preceding the Closing Date) to (ii) Domestic Debt Service for the
twelve (12) full months next following the applicable Prepayment Date or
Substitution Date as the case may be (using the balance of the Domestic Loan
after payment of the Release Price for the Domestic Assets in connection with
which Domestic Borrower is requesting a Partial Release and all Domestic Assets
previously Partially Released) without substituting a Substitution Asset.
"DSCR DETERMINATION DATE" shall have the meaning set forth in
Section 10.12.
"ELIGIBLE INVESTMENT" shall mean one or more of the following
obligations or securities payable on demand or having a scheduled maturity on
or before the Business Day preceding the day on which the amounts invested
pursuant hereto are required to be disbursed in accordance herewith and having
at all times the required ratings, if any, provided for in this definition:
(a) obligations of, or obligations fully guaranteed as to
payment of principal and interest by, the United States or any agency
or instrumentality thereof provided such obligations are backed by the
full faith and credit of the United States of America, including,
without limitation, obligations of: the U.S. Treasury (all direct or
fully guaranteed obligations), the Farmers Home Administration
(certificates of beneficial ownership), the General Services
Administration (participation certificates), the U.S. Maritime
Administration (guaranteed Title XI financing), the Small Business
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<PAGE> 20
Administration (guaranteed participation certificates and guaranteed
pool certificates), the U.S. Department of Housing and Urban
Development (local authority bonds) and the Washington Metropolitan
Area Transit Authority (guaranteed transit bonds); provided, however,
that the investments described in this clause (i) must have a
predetermined fixed dollar of principal due at maturity that cannot
vary or change, (ii) if rated by Standard & Poor's Ratings Services,
must not have an "r" highlighter affixed to their rating, (iii) must
have an interest rate tied to a single interest rate index plus a
fixed spread (if any) that moves proportionately with that index if
such investments have a variable rate of interest, and (iv) must not
be subject to liquidation prior to their maturity;
(b) Federal Housing Administration debentures;
(c) obligations of the following United States government
sponsored agencies: Federal Home Loans Mortgage Corp. (debt
obligations), the Farm Credit System (consolidated systemwide bonds
and notes), the Federal Home Loans Banks (consolidated debt
obligations), the Federal National Mortgage Association (debt
obligations), the Student Loans Marketing Association (debt
obligations), the Financing Corp. (debt obligations), and the
Resolution Funding Corp. (debt obligations); provided, however, that
the investments described in this clause (i) must have a predetermined
fixed dollar of principal due at maturity that cannot vary or change,
(ii) if rated by Standard & Poor's Ratings Services, must not have an
"r" highlighter affixed to their rating, (iii) must have an interest
rate tied to a single interest rate index plus a fixed spread (if any)
that moves proportionately with that index if such investments have a
variable rate of interest, and (iv) must not be subject to liquidation
prior to their maturity;
(d) federal funds, unsecured certificates of deposit,
time deposits, bankers' acceptances and repurchase agreements of any
bank, the short term obligations of which are rated in the highest
short term rating categories by at least two Rating Agencies provided,
however, that the investments described in this clause (i) must have a
predetermined fixed dollar of principal due at maturity that cannot
vary or change, (ii) if rated by Standard & Poor's Ratings Services,
must not have an "r" highlighter affixed to their rating, (iii) must
have an interest rate tied to a single interest rate index plus a
fixed spread (if any) that moves proportionately with that index if
such investments have a variable rate of interest, and (iv) must not
be subject to liquidation prior to their maturity;
(e) fully Federal Deposit Insurance Corporation-insured
demand and time deposits in, or certificates of deposit of, or
bankers' acceptances issued by, any bank or trust company, savings and
loan association or savings bank; provided, however, that the
investments described in this clause (i) must have a predetermined
fixed dollar of principal due at maturity that cannot vary or change,
(ii) if rated by Standard & Poor's Ratings Services, must not have an
"r" highlighter affixed to their rating, (iii) must have an interest
rate tied to a single interest rate index plus a fixed spread (if any)
that moves
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<PAGE> 21
proportionately with that index if such investments have a variable
rate of interest, and (iv) must not be subject to liquidation prior to
their maturity;
(f) debt obligations rated by at least two Rating
Agencies in their highest long-term unsecured rating categories;
provided, however, that the investments described in this clause (i)
must have a predetermined fixed dollar of principal due at maturity
that cannot vary or change, (ii) if rated by Standard & Poor's Ratings
Services, must not have an "r" highlighter affixed to their rating,
(iii) must have an interest rate tied to a single interest rate index
plus a fixed spread (if any) that moves proportionately with that
index if such investments have a variable rate of interest, and (iv)
must not be subject to liquidation prior to their maturity;
(g) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations payable on
demand or on a specified date not more than one year after the date of
issuance thereof) that is rated by at least two Rating Agencies in
their highest short-term unsecured debt rating; provided, however,
that the investments described in this clause (i) must have a
predetermined fixed dollar of principal due at maturity that cannot
vary or change, (ii) if rated by Standard & Poor's Ratings Services,
must not have an "r" highlighter affixed to their rating, (iii) must
have an interest rate tied to a single interest rate index plus a
fixed spread (if any) that moves proportionately with that index if
such investments have a variable rate of interest, and (iv) must not
be subject to liquidation prior to their maturity;
(h) the Federated Prime Obligation Money Market Fund (the
"Fund") so long as the Fund is rated "AAA" by each Rating Agency; and
provided, however, that no obligation or security shall be an Eligible
Investment if (x) the right to receive principal and interest payments derived
from the underlying investment provides a yield to maturity in excess of 120%
of the yield to maturity at par of such underlying investment or (y) such
investment has a maturity in excess of one year from the date of acquisition of
such investment or (z) such obligation or security evidences a right to receive
only interest payments.
"EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as
defined in Section 3(3) of ERISA which (i) is currently maintained or
contributed to by any Loan Party or any of their respective ERISA Affiliates,
or (ii) was at any time within the preceding five years maintained or
contributed to by any Loan Party or any of their respective ERISA Affiliates to
the extent any of them could reasonably be expected to incur liability with
respect to such employee benefit plan.
"ENVIRONMENTAL CLAIM" means any accusation, allegation, notice
of violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any Governmental Authority or any other Person
for any damage, including, without limitation,
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<PAGE> 22
personal injury (including sickness, disease or death), tangible or intangible
property damage, contribution, indemnity, indirect or consequential damages,
damage to the environment, damage to natural resources, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or restrictions, in each case relating to, resulting from or in
connection with a Hazardous Substance and relating to any Loan Party or any
Asset.
"ENVIRONMENTAL INDEMNITY" shall mean the Environmental and
Hazardous Substance Indemnification Agreement dated as of the date hereof (or
with respect to a Substitution Added Asset, dated as of the Substitution Date),
executed by Borrowers in connection with the Loans for the benefit of Lenders,
as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
"EQUIPMENT" means, with respect to any Asset, all machinery,
apparatus, equipment, fittings, fixtures, furniture, furnishings and articles
of personal property (including any such article constituting a fixture) of
every kind and nature whatsoever owned or leased now or in the future by either
of the Borrowers or any other Loan Party, and either located upon the real
property related to such Asset, or any part thereof, or used in connection with
the present use, maintenance, operation or occupancy of the related
Improvements as a hotel or motel or any other future occupancy or use of such
Improvements, including, without limitation, all heating, lighting, laundry,
incinerating, loading, unloading, swimming pool, landscaping, garage and power
equipment and supplies, engines, pipes, pumps, tanks, motors, conduits,
switchboards, plumbing, lifting, cleaning, fire prevention, fire extinguishing,
refrigerating, ventilating, and communications apparatus, luggage or food
carts, dollies, air cooling and air conditioning apparatus, elevators,
escalators, shades, awnings, screens, storm doors and windows, stoves,
freezers, refrigerators, cabinets, dressers, cooking utensils, dishes,
silverware, kitchen appliances and restaurant equipment and supplies,
computers, reservation systems, software, cash registers, card keys, telephone
switchboards, partitions, ducts and compressors, carpets, rugs, bed frames,
springs, mattresses, sheets, pillow cases, pillows, blankets, bed spreads,
stationery, tables, desks, chairs, sofas, bureaus, dressers, benches, window
curtains, telephones, televisions, radios, lamps, mirrors, paintings, wall
hangings, decorations, clothes hangers, bathroom fixtures, shower curtains,
towels, medicine cabinets, and hotel cleaning equipment and supplies, and all
additions, substitutions and replacements thereof, wherever located, together
with all attachments, components, parts, equipment and accessories installed
thereon or affixed thereto and all the present and future "goods",
"equipment" and "fixtures" (as such terms are defined in the Uniform
Commercial Code) and other personal property of either of the Borrowers or such
other Loan Party, including, without limitation, any such personal property and
fixtures which are leased, and all repairs, attachments, betterments, renewals,
replacements, substitutions and accessions thereof and thereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
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<PAGE> 23
"ERISA AFFILIATE" means, with respect to any Person, (i) any
corporation which is, or was at any time, a member of a controlled group of
corporations within the meaning of Section 414(b) of the Code of which such
Person is a member; (ii) any trade or business (whether or not incorporated)
which is a member of a group of trades or businesses under common control
within the meaning of Section 414(c) of the Code of which such Person is a
member; and (iii) any member of an affiliated service group within the meaning
of Section 414(m) or (o) of the Code of which such Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is a member. Any former ERISA Affiliate of any Loan Party shall continue
to be considered an ERISA Affiliate of such Loan Party, within the meaning of
this definition with respect to the period during which such entity was an
ERISA Affiliate of such Loan Party and with respect to liabilities arising
after such period for which such Loan Party could be liable under the Code or
ERISA.
"ERISA EVENT" means (i) a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan (excluding those for which the provision for 30-day
notice to the PBGC has been waived by regulation), (ii) the failure to meet the
minimum funding standard of Section 412 of the Code with respect to any Pension
Plan (whether or not waived in accordance with Section 412(d) of the Code) or
the failure to make by its due date a required installment under Section 412(m)
of the Code with respect to any Pension Plan or the failure to make any
required contribution to a Multiemployer Plan, in the case of any such failure,
by a material amount, (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate
such plan in a distress termination described in Section 4041(c) of ERISA, (iv)
the withdrawal by any Loan Party, or any of their respective ERISA Affiliates
from any Pension Plan with two or more contributing sponsors or the termination
of any such Pension Plan resulting in liability pursuant to Section 4063 or
4064 of ERISA, (v) the institution by the PBGC of proceedings to terminate any
Pension Plan, or the occurrence of any event or condition which might
constitute grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan, (vi) the imposition of liability on
any Loan Party or any of their respective ERISA Affiliates pursuant to Section
4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of
ERISA, (vii) the withdrawal by any Loan Party or any of their respective ERISA
Affiliates in a complete or partial withdrawal (within the meaning of Sections
4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential
material liability therefor, or the receipt by any Loan Party or any of their
respective ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA,
(viii) the occurrence of an act or omission which could give rise to the
imposition on any Loan Party or any of their respective ERISA Affiliates of
material fines, penalties, taxes or related charges under Chapter 43 of the
Code or under Section 409 or Section 502(c)(2), (i) or (l), or Section 4071 of
ERISA in respect of any Employee Benefit Plan, (ix) the assertion of a material
claim (other than routine claims for benefits) against any Employee Benefit
Plan other than a Multiemployer Plan or the assets
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<PAGE> 24
thereof, or against any Loan Party or any of their respective ERISA Affiliates
in connection with any such Employee Benefit Plan, (x) receipt from the
Internal Revenue Service of notice of the failure of any Pension Plan (or any
other Employee Benefit Plan intended to be qualified under Section 401(a) of
the Code) to qualify under Section 401(a) of the Code, or the failure of any
trust forming part of any Pension Plan to qualify for exemption from taxation
under Section 501(a) of the Code or (xi) the imposition of a Lien pursuant to
Section 401(a)(29) or 412(n) of the Code or pursuant to ERISA with respect to
any Pension Plan.
"EVENT OF DEFAULT" shall have the meaning set forth in Section
8.1(a).
"EXCLUDED ASSETS" means the rights of either of the Borrowers
or any other Loan Party under Property Management Agreements, liquor licenses,
Authorizations, service contracts, equipment leases, purchase agreements,
collective bargaining agreements and other agreements, but in each case only if
by their terms or by law they may not or cannot be pledged or assigned by
either of the Borrowers or such Loan Party to Administrative Agent or Lenders.
"EXISTING FACILITY" shall mean that certain credit facility
advanced pursuant to the First Amended and Restated Credit Agreement, dated as
of April 28, 1997, among Domestic Borrower and Canadian Borrower, as borrowers,
Bristol, as guarantor, the lenders named therein, Bankers Trust Company, as
agent and Bank One, Texas, N.A. and Wells Fargo Bank, National Association, as
co-agents.
"EXISTING LOAN DOCUMENTS" shall have the meaning set forth in
the first recital.
"EXISTING NOTES" shall have the meaning set forth in the first
recital.
"EXISTING MORTGAGES" shall have the meaning set forth in the
first recital.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by Administrative Agent from three Federal funds
brokers of recognized standing selected by Administrative Agent.
"FF&E" means, with respect to any Asset, any furniture,
fixtures and equipment located thereon or therein and owned or leased by either
of the Borrowers or any other Loan Party, including, without limitation, the
Equipment.
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<PAGE> 25
"FF&E FINANCINGS" shall mean purchase money financing (and
refinancing thereof not to exceed the outstanding principal balance thereof nor
to be secured by additional FF&E) of FF&E located on and used in connection
with any Asset including but not limited to a lease of FF&E which would be
accounted for as a capital lease on a balance sheet prepared in conformity with
GAAP.
"FISCAL YEAR" shall mean each twelve month period commencing
on January 1 and ending on December 31 during the term of the Loans.
"FRANCHISE AGREEMENTS" means each of the franchise agreements
listed on Schedule V annexed hereto, together with the most recent related core
modernization plan or other property improvement plan required by the
respective franchisor, as each such agreement or property improvement plan may
be amended, restated, supplemented or otherwise modified or replaced from time
to time in accordance with the terms of this Agreement.
"FRANCHISE FEES" shall mean all fees payable by any franchisee
pursuant to any Franchise Agreements (including without limitation, marketing
fees).
"FUNCTION SPACE" shall mean with respect to any Asset, any
conference rooms, ballrooms, banquet facilities or other similar accommodations
at such Asset.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as of the date of the applicable financial report.
"GAIN" means the Breakage Amount, expressed as a positive
number, if the Breakage Amount is a negative number.
"GOVERNMENTAL AUTHORITY" shall mean any court, board, agency,
commission, office or authority of any nature whatsoever for any governmental
unit (federal, state, county, district, municipal, city or otherwise) whether
now or hereafter in existence.
"GROSS INCOME FROM OPERATIONS" shall mean all income, computed
on an accrual basis in accordance with GAAP, derived from the ownership and
operation of the Property (or of each Asset, as applicable) from whatever
source, including, but not limited to, all Rent, utility charges, escalations,
forfeited security deposits, service fees or charges, license fees, parking
fees, rent concessions or credits, and any business interruption and rent loss
insurance proceeds, but excluding (a) sales, use and occupancy or other taxes
on receipts required to be accounted for by either Borrower to any government
or governmental agency, (b) refunds and uncollectible accounts, (c) sales of
furniture, fixtures and equipment, (d) proceeds of casualty insurance and
condemnation awards, (e) interest on credit accounts, (f) proceeds of any
financing, (g) proceeds of any sale, exchange or transfer of the Property or
any part thereof or interest therein,
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(h) capital contributions or loans to either Borrower, and (i) any other
non-operating or extraordinary nonrecurring revenue.
"GROUND LEASE" shall, at any time, mean each lease pursuant to
which either of the Borrowers or any other Loan Party has acquired a Leasehold
Estate.
"GROUND LESSOR" shall mean the Landlord under any Ground
Lease.
"GROUND RENT" shall mean all rents (including, without
limitation, fixed minimum rent and percentage rent) and rent equivalents and
other consideration of whatever form or nature payable to or for the account of
or benefit of the Ground Lessor under any Ground Lease.
"GROUND RENT ESCROW FUND" shall have the meaning set forth in
Section 7.6.
"GROUND RENT SUBACCOUNT" shall have the meaning set forth in
Section 10.2.2.
"GUARANTEED INDEBTEDNESS" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation (for purposes of this definition only "primary obligations")
of any other Person (for purposes of this definition only "primary obligor") in
any manner including, without limitation, any obligation or arrangement of such
Person (a) to purchase or repurchase any such primary obligation, (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
condition of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, or (d) to indemnify the owner of such primary obligation
against loss in respect thereof.
"HAZARDOUS SUBSTANCE" shall have the meaning ascribed thereto
in the Environmental Indemnity.
"HOLIDAY INNS FRANCHISING" shall mean Holiday Inns
Franchising, Inc., a Delaware corporation or any Affiliate thereof.
"HOUSTON HOTEL" shall have the meaning ascribed thereto in
that certain Loan Agreement, dated as of October 10, 1997, among Lenders,
Administrative Agent, Co-Agent, Bristol Lodging Company and Bristol Lodging
Holding Company with respect to the $145,000,000 Loan.
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<PAGE> 27
"IMPROVEMENTS" shall have the meaning, (x) with respect to
each Asset other than a Special Asset, as set forth in the Mortgage with
respect to such Asset and (y) with respect to each Special Asset, as set forth
in the Negative Pledge with respect to such Asset.
"INDEMNITEE" shall have the meaning set forth in Section
11.13(b).
"INDEMNIFIED MATTERS" shall have the meaning set forth in
Section 11.13(b).
"INDEPENDENT" shall mean, when used with respect to any
Person, a Person who (a) is in fact independent, (b) does not have any direct
financial interest in either Borrower, or in any Affiliate of either of the
Borrowers or any Affiliate of any constituent partner, shareholder, member or
beneficiary of either Borrower (including without limitation any Loan Party),
and (c) is not connected with either of the Borrowers or any Affiliate of
either Borrower or any Affiliate of any constituent partner, shareholder,
member or beneficiary of either Borrower as an officer, employee, promoter,
underwriter, trustee, partner, member, director or person performing similar
functions (including without limitation any Loan Party). Notwithstanding the
foregoing, Curt Boisfontaine shall not be deemed to be not Independent solely
by virtue of the fact that he is acting as an "independent director" of any of
Borrowers' Affiliates. Whenever it is herein provided that any Independent
Person's opinion or certificate shall be provided, such opinion or certificate
shall state that the Person executing the same has read this definition and is
Independent within the meaning thereof.
"INDEPENDENT DIRECTOR" shall have the meaning set forth in
Section 4.1(dd)(xv).
"INITIAL ADVANCE" shall have the meaning set forth in Section
2.1.1 hereof.
"INITIAL DEBT SERVICE COVERAGE RATIO" shall mean 1.65 to 1.
"INSURANCE PREMIUMS" shall have the meaning set forth in
Section 7.1.1(c) hereof.
"INSURANCE PROCEEDS" shall mean all proceeds received,
damages, claims and rights of action, and rights thereto under insurance
policies required to be maintained by Borrowers or relating to any Asset or any
portion thereof.
"INTEREST ACCRUAL PERIOD" means, with respect to a
Disbursement Date, the period commencing on and including the 11th day of the
month preceding the month in which such Disbursement Date occurs (or, in the
case of the first Disbursement Date, the Closing Date) and ending on and
including the 10th day of the month in which such Disbursement Date occurs,
except that the first Interest Accrual Period shall be the period commencing on
and including the Closing Date to and including the tenth (10th) day of the
first month immediately following the
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Closing Date; provided, however, that no Interest Accrual Period shall extend
beyond the Maturity Date.
"INTELLECTUAL PROPERTY" means, as of any date of
determination, all patents, trademarks, tradenames, copyrights, technology,
know-how and processes used in or necessary for the conduct of the business of
Borrowers (or any other Loan Party) as conducted on such date of determination
that are material to the business, operations or condition (financial or
otherwise) of Borrowers or any other Loan Party including any of the foregoing
licensed to any Loan Party by other Persons.
"INTEREST RATE" shall mean a rate per annum equal to seven and
sixty-six one hundredths percent (7.66%).
"IP LICENSE AGREEMENTS" means, collectively, the agreements
(other than the Franchise Agreements) pursuant to which any Loan Party has
rights to use any Intellectual Property owned by any other Person.
"LEASING COMMISSIONS" shall mean any leasing commission
incurred by Borrowers or any other Loan Party in connection with any new Tenant
Lease or modification, renewal or extension of an existing Tenant Lease.
"LEASEHOLD ESTATE" shall, at any time, mean any leasehold
estate of Borrowers or any other Loan Party in real property and improvements
now or hereafter encumbered by a Mortgage (or in the case of the Special
Assets, subject to a Negative Pledge) together with all right, title interest
and privileges of such Borrower or any other Loan Party in, to, under or
otherwise by nature of the lease creating such leasehold estate, as such lease
may be amended, restated, replaced, supplemented or modified from time to time.
"LEGAL REQUIREMENTS" shall mean all federal, state,
provincial, county, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities affecting any Asset or any part thereof or the
construction, use, alteration or operation thereof, or any part thereof,
whether now or hereafter enacted and in force, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to Borrowers, at any time in force affecting any Asset or any part
thereof, including, without limitation, any which may (i) require repairs,
modifications or alterations in or to such Asset or any part thereof, or (ii)
in any way limit the use and enjoyment thereof.
"LICENSES" shall have the meaning set forth in Section 4.1(v).
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"LIEN" shall mean any mortgage, deed of trust, debenture,
lien, pledge, hypothecation, assignment, security interest, or any other
encumbrance, charge or transfer of, on or affecting any Asset or any portion
thereof or any interest therein, any Collateral or any portion thereof or any
interest therein, or either of the Borrowers or any other Loan Party,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, the filing of any financing statement, any option
(including any purchase option, call option or similar option), trust or other
preferential arrangement having the same economic effect of any of the
foregoing, and mechanic's, materialmen's and other similar liens and
encumbrances.
"LIQUOR AGREEMENTS" means, collectively, the Liquor Operations
Servicing Agreements and the Liquor Leases listed on Schedule VI annexed
hereto, as any such agreement may be amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof and
hereof.
"LIQUOR COST EVIDENCE" shall have the meaning set forth in
Section 3.1(aa).
"LIQUOR LEASES" means each Tenant Lease entered into between a
Property Manager, as lessor, and the holder of a Liquor License in respect of
an Asset, in each case in connection with the sale of alcoholic beverages at
such Asset, substantially in the form approved by Administrative Agent on or
before the Closing Date or in such other form as may be reasonably acceptable
to Administrative Agent, as any such Tenant Lease may be amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms thereof and hereof.
"LIQUOR LICENSES" means, collectively, the licenses set forth
on Schedule VI annexed hereto and each other license issued by the Department
of Alcoholic Beverage Control or similar state, provincial or local agency to a
Subsidiary of Domestic Borrower or in respect of any Asset, in each case in
connection with the sale of alcoholic beverages at such Asset.
"LIQUOR OPERATIONS SERVICING AGREEMENTS" means, collectively,
the sub-management agreements entered into between a Property Manager, as
sub-manager, and either of Borrowers or a Subsidiary of Domestic Borrower as a
holder of a Liquor License, substantially in the form approved by
Administrative Agent on or before the Closing Date or in such other form as may
be reasonably acceptable to Administrative Agent, as any such sub-management
agreement may be amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms thereof and hereof.
"LOANS" shall mean collectively the Domestic Loan and the
Canadian Loan.
"LOAN PARTY" shall mean each of Domestic Borrower, Canadian
Borrower and each Subsidiary.
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"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the
Notes, each Mortgage, each Assignment of Leases, each Negative Pledge, the
Environmental Indemnity, the Consent and Subordination of Property Manager, the
Omnibus Management and Liquor License Agreement, the Collateral Security
Agreements, the Affiliate Guaranty, the other Security Documents and any other
document pertaining to the Property or any of the Assets as well as all other
documents executed and/or delivered by either of the Borrowers or any other
Loan Party in connection with the Loans.
"LOCK-BOX AGREEMENTS" shall have the meaning set forth in
Section 10.11.
"LOSS" means the Breakage Amount if the Breakage Amount is a
positive number.
"LOSS PROCEEDS" shall mean Insurance Proceeds or Condemnation
Proceeds.
"LOSS PROCEEDS SUBACCOUNT" shall have the meaning set forth in
Section 10.2.2(a).
"MANAGEMENT CO." means Bristol Hotel Management Corporation,
a Delaware corporation and a wholly owned subsidiary of BHOC.
"MANAGEMENT FEES" means, collectively, all hotel management
fees (however characterized, including base fees, trade name fees, incentive
fees, special incentive fees, termination fees and all fees in respect of
liquor license operations) and all other fees or charges payable to the
Property Manager for the management and operation of an Asset, any other
Collateral or any part thereof.
"MATERIAL ADVERSE CHANGE" shall mean a material adverse change
in or effect on (i) the assets, operations, or condition (financial or
otherwise) of either of the Borrowers or the other Loan Parties, (ii) either of
the Borrower's ability to pay the Debt in accordance with the terms hereof and
otherwise comply with the material terms of this Agreement, (iii) any Loan
Party's ability to comply with the material terms of any of the Loan Documents,
(iv) any of the Assets or the other material Collateral, or (v) the Secured
Parties' Lien on any Asset or the other material Collateral or the priority of
such Lien.
"MATERIAL LEASE" means: (i) for any Tenant Lease entered into
prior to the Closing Date, each Tenant Lease determined by the Requisite
Lenders and Administrative Agent in their sole discretion to be material to
Borrowers or the operation of Borrowers' business; and (ii) for any Tenant
Lease entered into after the Closing Date, (w) any Tenant Lease which is not a
lease of retail or restaurant space or to a service provider (such as a lease
to an airline ticket agent or to an overnight courier) (x) any Tenant Lease
necessary for the operation of any Asset, (y) any Tenant Lease which
individually generates two percent (2%) or more, or together with previously
existing Tenant Leases generates more than five percent (5%) of the Mortgaged
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Property Gross Cash Flow for such Asset or (z) any Tenant Lease which could
reasonably be expected to cause a Material Adverse Change.
"MATERIAL SECURITY DEPOSITS" shall mean a Security Deposit (x)
with respect to a Tenant Lease in an amount in excess of $5,000.00 and (y) with
respect to a Function Space in an amount in excess of $10,000.00.
"MATURITY DATE" shall mean the date on which the final payment
of principal of the Notes becomes due and payable as therein provided, whether
at the Stated Maturity, by declaration of acceleration, or otherwise.
"MAXIMUM COMMITMENT" shall have the meaning set forth in
Section 2.2.1 hereof.
"MAXIMUM LOAN AMOUNT" shall mean $455,000,000.00.
"MAXIMUM MANAGEMENT FEE" shall mean an amount not greater than
the greater of (x) five percent (5%) per annum of Gross Income from Operations
for each Asset and (y) the fee generally charged by third party managers of
hotels substantially similar to such Asset (as reasonably determined by
Administrative Agent) in the same region as such Asset but in no event in
excess of seven percent (7%) per annum of Gross Income from Operations for each
Asset.
"MAXIMUM PERMITTED TRADE PAYABLES AND FF&E FINANCINGS" shall
mean (x) Permitted Trade Payables which are outstanding for more than sixty
(60) days and (y) FF&E Financings, in the aggregate for clause (x) and clause
(y) not to exceed $350,000 per Asset and $16,537,500 for the Property.
"MINIMUM BALANCE" shall have the meaning set forth in Section
10.4.1.
"MONTHLY DEBT SERVICE SUBACCOUNT" shall have the meaning set
forth in Section 10.2.2(a).
"MORTGAGE" shall mean with respect to each of the Assets
(other than the Special Assets), that certain first priority (w) Mortgage,
Assignment of Leases and Rents and Security Agreement (or Amended and Restated
Mortgage Assignment of Leases and Rents and Security Agreement), (x) Deed of
Trust, Assignment of Leases and Rents and Security Agreement (or Amended and
Restated Deed of Trust Assignment of Leases and Rents and Security Agreement),
(y) Deed to Secure Debt, Assignment of Leases and Rents and Security Agreement
(or Amended and Restated Deed to Secure Debt Assignment of Leases and Rents and
Security Agreement) or (z) debenture and debenture pledge agreement (in the
case of each Canadian Asset), dated as of the date hereof (or with respect to a
Substitution Added Asset, dated as of the Substitution Date), executed and
delivered by either Borrower (or in the case of each Asset (other than the
Special
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<PAGE> 32
Assets) owned by any Loan Party other than either Borrower, such other Loan
Party) as security for the Loans (in the case of Domestic Assets) or the
Canadian Loans (in the case of Canadian Assets) made to Borrowers and
encumbering such Asset, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
"MORTGAGED PROPERTY" shall have the same meaning as Asset.
"MORTGAGED PROPERTY GROSS CASH FLOW" shall mean, for any
period, all Rents and other income or revenue received with respect to the
Property, on a cash basis, including, without limitation, Loss Proceeds.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan that is a
"multiemployer plan", as defined in Section 3(37) of ERISA.
"NEGATIVE PLEDGE" shall mean with respect to each of the
Special Assets, that certain Amended and Restated Memorandum of Agreement Not
to Transfer or Mortgage, dated as of the date hereof, executed and delivered by
each Loan Party which owns a Special Asset, in connection with the Loans made
to Borrowers and to which such Special Asset is subject, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time, by which such Loan Party irrevocably agrees that without the written
consent of Administrative Agent and the Requisite Lenders, that such Loan Party
shall not and has no power to grant, create or suffer to exist any mortgage,
deed of trust, deed to secure debt, pledge, hypothecation, assignment, deposit,
arrangement, encumbrance, lien (statutory or other), security interest or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever intended to secure payment, upon or with respect
to any Special Asset except as permitted herein.
"NET OPERATING INCOME" shall mean, for any period, the Gross
Income From Operations, LESS the sum of:
(i) Operating Expenses in an amount equal to actual
Operating Expenses payable by either of the Borrowers (or in
the case of each Asset owned by any Loan Party other than
either of the Borrowers, such other Loan Party) for the
consecutive full twelve (12) months (or such other applicable
period) immediately preceding the date of determination
(except real property taxes and Insurance Premiums, which
shall be included only to the extent of the greater of (1) the
actual amounts payable and (2) the amounts payable in future
periods as a result of any reassessment actually made (with
respect to real estate taxes) or changes to Insurance
Premiums). Operating Expenses shall (a) exclude Franchise
Fees, extraordinary expenses (as reasonably determined by
Administrative Agent), Management Fees and capital
expenditures, (b) be adjusted (as reasonably determined by
Administrative Agent) for any items that are non-recurring or
not
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<PAGE> 33
supported by historical statements (as reasonably determined
by Administrative Agent) and (c) be adjusted (as reasonably
determined by Administrative Agent) if any Asset has been in
operation for less than the full twelve (12) months
immediately preceding the date of determination; plus
(ii) Franchise Fees in an amount equal to the
greater of (A) actual Franchise Fees for such period and (B)
an amount equal to the actual marketing fees to be paid under
Franchise Agreements for such period plus a per annum amount
equal to five percent (5%) of "revenues from room rentals" at
the Property (determined in accordance with the Uniform
System); plus
(iii) Management Fees in an amount equal to the
greater of (A) the per annum amount equal to 3.5% of the Gross
Income from Operations of the Property and (B) actual
management fees payable to the Property Manager for such
period; plus
(iv) a reserve for capital expenditures in an amount
equal to five percent (5%) of Gross Income from Operations;
plus
(v) such other deductions from and adjustments to
Gross Income from Operations and adjustments to Operations
Expenses consistent with the standards applied by Rating
Agencies including, without limitation, adjustments to actual
occupancy rates and expenses as Administrative Agent, in its
reasonable discretion, shall require for other matters or
factors that impact thereon.
"NEW ORLEANS HOTEL" shall have the meaning ascribed thereto in
that certain Loan Agreement, dated as of October 10, 1997, among Lenders,
Administrative Agent, Co-Agent, Bristol Lodging Company and Bristol Lodging
Holding Company with respect to the $145,000,000 Loan.
"NOTES" shall mean collectively the Canadian Notes and the
Domestic Notes.
"OBLIGATIONS" shall mean any and all debt, liabilities and
obligations of Borrowers and the other Loan Parties to Lenders under the Loan
Documents, including, without limiting the generality of the foregoing, the
Debt and the debt, liabilities and obligations pursuant to the Affiliate
Guaranty.
"OCCUPANCY/ROOM RATE STATISTICS" shall mean for any period, a
report, in a form and content reasonably acceptable to Administrative Agent,
setting forth on an Asset by Asset basis (x) average room rates for each Asset
during such period and (y) occupancy statistics for each Asset during such
period.
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"OFFICERS' CERTIFICATE" shall mean a certificate delivered to
Administrative Agent by Domestic Borrower which is signed by an authorized
senior officer of Domestic Borrower.
"OMNIBUS MANAGEMENT AND LIQUOR LICENSE AGREEMENT" means the
Agreement regarding Liquor Leases, Servicing Agreements, Property Management
Agreements and Liquor Licenses dated as of the date hereof, executed and
delivered by Borrowers and certain other Loan Parties as security for the Loans
(in the case of Domestic Assets) or the Canadian Loan (in the case of Canadian
Assets), as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
"O&M PLAN" shall have the meaning set forth in Section
3.1(bb).
"OPERATING EXPENSES" shall mean the total of all expenditures
of whatever kind, computed on an accrual basis in accordance with GAAP for all
purposes other than in connection with a Requisition which shall be computed on
the cash basis, relating to the operation, maintenance and management of the
Property, but excluding any non-cash charge or non-operating items such as
depreciation, debt service, income taxes and capital expenditures and other
expenses similar to those capitalized on or excluded from the Financial
Statements for the 12 months ending December 31, 1996 audited by Arthur
Anderson LLP which were delivered to Lenders in connection with the funding of
the Loans on the Closing Date.
"OTHER CHARGES" shall mean all maintenance charges,
impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining any Asset, now or hereafter levied or assessed or
imposed against the Property or any part thereof and which may create a Lien
against any Asset or any part thereof.
"PARTIAL RELEASE" shall mean, with respect to a particular (x)
Asset (other than a Special Asset), a discharge, release satisfaction or
similar instrument necessary or sufficient to release an Asset and the
Collateral related to such Asset (other than any substitute collateral pledged
pursuant to Section 2.3.3 hereof) from the Lien of the Mortgage encumbering
such Asset and from the other Security Documents encumbering such Collateral
and (y) Special Asset, a discharge, release satisfaction or similar instrument
necessary or sufficient to release such Special Asset and the Collateral
related to such Special Asset from the Negative Pledge with respect to such
Asset and from the other Security Documents, if any, encumbering such
Collateral.
"PAYMENT DIRECTION LETTER" shall have the meaning set forth in
Section 10.3(a) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor thereto).
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"PENSION PLAN" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue
Code or Section 302 of ERISA.
"PERMITTED ENCUMBRANCES" shall mean, with respect to each
Asset, collectively: (a) the Liens created by or permitted under the Loan
Documents (including without limitation Liens securing FF&E Financings and
Permitted Trade Payables which in the aggregate do not exceed Maximum Permitted
Trade Payables and FF&E Financings), (b) all Liens, encumbrances and other
matters disclosed in the Title Insurance Policies relating to such Asset or any
part thereof, (c) Liens, if any, for Taxes imposed by any Governmental
Authority and Other Charges not yet delinquent, (d) statutory liens for labor
or materials securing sums not yet due and payable (or with respect to which a
Borrower has removed any such lien of record within 60 days of such sum
becoming due and payable, by posting a bond or otherwise), (e) rights of
tenants, as tenants only, under Tenant Leases approved or deemed approved by
Administrative Agent, (f) judgments provided such judgments are being appealed
by a Borrower and a stay of execution has been granted with respect thereto and
such Borrower has either deposited 125% of the value of such judgments with
Administrative Agent or posted a bond reasonably satisfactory to Administrative
Agent, (g) rights of guests to occupy rooms of any Asset but only if permitted
by Section 5.1(t) and (h) mechanics, materialmen and other similar liens and
encumbrances that are bonded and thereby deemed released of record in a manner
reasonably satisfactory to Administrative Agent.
"PERMITTED GUARANTY" shall mean: (i) a guaranty executed by
Domestic Borrower, either (x) of the Subordinate Notes or (y) if and only if
the holders of the Subordinate Notes release the guaranty executed by Domestic
Borrower, of the Acquisition Facility in a form and substance acceptable to the
Requisite Lenders and Administrative Agent in their sole discretion (and as
such guaranty shall be amended in the sole discretion of the Administrative
Agent and the Requisite Lenders); and (ii) those two certain guaranties
executed by Domestic Borrower in favor of LaSalle National Bank, as trustee
(successor to Nomura Asset Capital Corporation), each dated as of January 26,
1996.
"PERMITTED PLEDGE" shall mean (i) a pledge of the stock of
BHOC which pledge shall secure the Subordinate Notes and be in a form and
substance acceptable to Administrative Agent and the Requisite Lenders in their
sole discretion, and (ii) either (x) a pledge of the stock of Domestic Borrower
which pledge shall secure the Subordinate Notes or (y) if and only if the
holders of the Subordinate Notes release their pledge, a pledge of the stock of
Domestic Borrower which pledge shall secure the Acquisition Facility and in
each case in a form attached to the Acquisition Facility Credit Agreement or
otherwise in a form and substance acceptable to the Requisite Lenders and
Administrative Agent in their sole discretion (and as such pledge shall be
amended in the sole discretion of the Administrative Agent and the Requisite
Lenders.)
"PERMITTED TRADE PAYABLES" shall mean unsecured trade payables
which are customarily and actually required to be satisfied within thirty (30)
days.
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"PERSON" shall mean any individual, corporation, partnership,
limited liability company, joint venture, estate, trust, unincorporated
association, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on
behalf of any of the foregoing.
"POLICIES" shall have the meaning specified in Section
7.1.1(c).
"POTENTIAL CANADIAN RESIZED COLLATERAL" shall have the meaning
set forth in Section 2.2.1(a).
"POTENTIAL DOMESTIC RESIZED COLLATERAL" shall have the meaning
set forth in Section 2.2.1(a).
"POTENTIAL RESIZED COLLATERAL" shall mean collectively the
Potential Canadian Resized Collateral and the Potential Domestic Resized
Collateral.
"PREMISES" shall have the meaning, with respect to each Asset,
as set forth in the Mortgage with respect to such Asset or in the case of the
Special Assets shall mean that certain real property described on Exhibit A of
the Negative Pledge with respect to such Special Asset.
"PREPAYMENT DATE" shall have the meaning set forth in Section
2.3.3.
"PRICE DIFFERENCE" [means, as of the day of calculation: (i)
only for the first $100,000,000 of the principal balance of the Notes which is
repaid, the difference obtained by subtracting 1 from the quotient obtained by
dividing (x) the present value (as determined below) of the Remaining First
Tranche Payments, determined as if the Loan were funded on the day of
calculation, by (y) the Maximum Loan Amount; (ii) only for the next $30,000,000
of the principal balance of the Notes which is repaid, the difference obtained
by subtracting 1 from the quotient obtained by dividing (x) the present value
(as determined below) of the Remaining Second Tranche Payments, determined as
if the Loan were funded on the day of calculation, by (y) the Maximum Loan
Amount; and (iii) only for all other repayments (in excess of repayments of the
first $130,000,000 of the Notes) of the principal balance of the Notes which is
repaid, the difference obtained by subtracting 1 from the quotient obtained by
dividing (x) the present value (as determined below) of the Remaining Third
Tranche Payments, determined as if the Loan were funded on the day of
calculation, by (y) the Maximum Loan Amount. The present value of the
Remaining First Tranche Payments, Remaining Second Tranche Payments, and
Remaining Third Tranche Payments, shall each be calculated by discounting the
such payments by the Benchmark Yield. The Price Difference can be either
positive or negative.] [TO BE CONFIRMED]
"PROPERTY" shall mean collectively, at any time, the real
properties, the hotel and other improvements thereon and FF&E and personal
property in connection therewith, then
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owned by either of the Borrowers or any other Loan Party or in which either of
the Borrowers or such other Loan Party owns a Leasehold Estate and now or
hereafter encumbered by a Mortgage (or in the case of the portion of the
Property comprised of the Special Assets, subject to a Negative Pledge),
together with all rights pertaining to such properties and improvements, and
Leasehold Estate as each is more particularly described in the granting clauses
of each Mortgage and referred to therein as the "Mortgaged Property." The
Assets comprising the Property on the Closing Date (other than FF&E and
personal property) are listed on Schedule VII which Schedule may be revised
from time to time by Administrative Agent as existing Assets are released from
the Lien of a Mortgage (or in the case of a Special Asset, released from a
Negative Pledge) and new Assets are encumbered by the Lien of a Mortgage in
accordance with Section 2.4 hereof.
"PROPERTY MANAGEMENT AGREEMENT" means, a property management
agreement which is reasonably acceptable to Administrative Agent, entered into
by and between either of the Borrowers (or in the case of each Asset owned by
any Loan Party other than either of the Borrowers, such Loan Party) and the
Property Manager, pursuant to which the Property Manager is to provide
management and other services with respect to each Asset, as any such
management agreement may be amended, restated, supplemented or otherwise
modified from time to time with the consent of Administrative Agent.
"PROPERTY MANAGER" shall mean any Person that manages an Asset
pursuant to a Property Management Agreement which unless otherwise reasonably
approved by Administrative Agent (x) in the case of the Domestic Assets, shall
be Management Co. and (y) in the case of the Canadian Assets, shall be Canadian
Management Co.
"PROPERTY MANAGER CONTROL NOTICE" shall have the meaning set
forth in Section 5.1(v).
"PRO RATA SHARE" or "PRO RATA" means, with respect to each
Lender, the quotient obtained by dividing the Commitment of such Lender by the
Commitments of all Lenders; provided, however, that if the Commitments have
been terminated or have expired, it means the quotient obtained by dividing the
outstanding principal amount of the Loans of such Lender by the outstanding
principal amount of all Loans of all Lenders.
"RATING AGENCY" shall mean each of Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Moody's Investors Service,
Inc., Duff & Phelps Credit Rating Co. and Fitch Investors Service, Inc. or any
other nationally-recognized statistical rating agency which has been approved
by Administrative Agent.
"RELEASE PRICE" for an Asset shall mean 125% (or in the case
of a Casualty Release Event, a Condemnation Release Event or a Special Asset
Early Repayment, 100%) of the Allocated Loan Amount of such Asset, less
insurance proceeds and casualty awards
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applicable to such Asset which shall have been applied in reduction of the
principal amount of the Loans in accordance with Section 2.3.2(a) hereof plus
such additional sums necessary to satisfy the conditions to release set forth
in Section 2.4 hereof.
"REMAINING FIRST TRANCHE PAYMENTS" shall mean all successive
future scheduled debt service payments which would be payable under the Notes
assuming (i) the Notes mature on the twelfth anniversary of the Closing Date
and (ii) an interest rate of (__%) [insert rate locked in connection with the
1st tranche].
"REMAINING SECOND TRANCHE PAYMENTS" shall mean all successive
future scheduled debt service payments which would be payable under the Notes
assuming (i) the Notes mature on the twelfth anniversary of the Closing Date
and (ii) an interest rate of (__%) [insert rate locked in connection with the
2nd tranche].
"REMAINING THIRD TRANCHE PAYMENTS" shall mean all successive
future scheduled debt service payments which would be payable under the Notes
assuming (i) the Notes mature on the twelfth anniversary of the Closing Date
and (ii) an interest rate of (__%) [insert rate locked in connection with the
3rd tranche].
"RENT" shall mean all rents (including, without limitation,
fixed minimum rent and percentage rent), rent equivalents, moneys payable as
damages or in lieu of rent or rent equivalents, royalties (including, without
limitation, all oil and gas or other mineral royalties and bonuses), income,
issues, profits, royalties, room receipts, rack charges, vending machine
receipts, food and beverage receipts, concession fees and charges, public
assembly room receipts, receivables, receipts, expense reimbursements and
recoveries from tenants, guests and customers, revenues, deposits (including,
without limitation, security, utility and other deposits), accounts, cash,
issues, profits, charges for services rendered, and other consideration of
whatever form or nature received by or paid to or for the account of or benefit
of either of the Borrowers or their agents or employees from any and all
sources arising from or attributable to the Property and proceeds, if any, from
business interruption or other loss of income insurance.
"RENT ROLL" shall have the meaning set forth in Section
5.1(t)(i).
"REPAYMENT PREMIUM" shall mean: (i) from the Closing Date
through the first anniversary of the Closing Date (x) with respect to the first
$100,000,000 of the principal balance under the Notes which is repaid, 1% of
the principal amount repaid plus Losses or minus Gains (y) for all other
repayments of the principal balance under the Notes, 2% of the principal
balance under the Notes which is repaid plus Losses or minus Gains; and (ii)
from the first anniversary of the Closing Date through the Maturity Date, 2% of
the principal amount being repaid for each prepayment plus Losses or minus
Gains. The payment of a Repayment Premium by Borrowers shall not reduce the
outstanding principal balance of the Notes.
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"REPLACEMENT RESERVE FUND" shall have the meaning set forth
in Section 7.4.1.
"REPLACEMENT RESERVE SUBACCOUNT" shall have the meaning set
forth in Section 10.2.2(a).
"REPLACEMENTS" shall have the meaning set forth in Section
7.4.2(a).
"REQUIRED RATIO" shall have the meaning set forth in Section
10.12.
"REQUISITE LENDERS" means Lenders having or holding more than
50% of the sum of the Commitments of all Lenders, or if such Commitments have
terminated or expired, Lenders having or holding more than 50% of the aggregate
principal amount of the outstanding Loans.
"REQUISITION" shall have the meaning set forth in Section
10.8.1.
"RESIZED ADVANCE" shall mean collectively the Resized Canadian
Advance and the Resized Domestic Advance.
"RESIZED BORROWERS" shall mean collectively the Resized
Canadian Borrower and the Resized Domestic Borrower.
"RESIZED CANADIAN ADJUSTED DSCR" shall mean a ratio for the
applicable period in which (a) the numerator is the aggregate Net Operating
Income (as defined in the Resized Loan Agreement) for the Resized Canadian Loan
Collateral for such period (as calculated by Administrative Agent in its
reasonable discretion based on the criteria then used by the Rating Agencies)
and (b) the denominator is the greater of (x) the aggregate amount of scheduled
principal and interest which would be payable on the Resized Canadian Notes
from the Resized Closing Date through the first anniversary thereof based on
the Interest Rate, constant payments and a 25 year amortization and (y) 10.48%
of the Resized Canadian Loan Amount.
"RESIZED CANADIAN ADVANCE" shall have the meaning set forth in
Section 2.2.1.
"RESIZED CANADIAN BORROWER" shall mean a newly formed special
purpose bankruptcy remote corporation, limited liability company or limited
partnership (i) which is wholly owned by Resized Parent; (ii) which, upon and
after execution and delivery of the Resized Loan Documents, would be in full
compliance with all of the representations, warranties and covenants set forth
the Resized Loan Documents and all such representations, warrants and covenants
shall be true and correct including without limitation Section 4.1(dd) of the
Resized Loan Agreement, (iii) to whom the Resized Canadian Loan Collateral is
transferred and (iv) which assumes the Resized Canadian Loan. Notwithstanding
the foregoing, at the Requisite Lenders' and Administrative Agent's reasonable
discretion, in lieu of Canadian Borrower
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assigning the Canadian Loan to Resized Canadian Borrower, Administrative Agent
may permit Canadian Borrower to remain as borrower of the Resized Canadian Loan
provided, (x) Canadian Borrower complies with the requirements set forth in (i)
and (ii) above for the Resized Canadian Borrower, (y) such structure will not
result in a qualification, downgrade or withdrawal of the rating which will be
applicable to any securities (or other instrument) issued or expected to be
issued in connection with a Secondary Market Transaction involving the Resized
Loans and (z) Administrative Agent is provided with such evidence as shall be
reasonably satisfactory to Administrative Agent that the single purpose nature
and bankruptcy remoteness of Canadian Borrower, each of its shareholders,
general partners and members is in accordance with the standards of the Rating
Agencies expected or requested by Administrative Agent to rate any securities
(or other instrument) issued or expected to be issued in connection with a
Secondary Market Transaction involving the Resized Loans.
"RESIZED CANADIAN LOAN" shall mean the Canadian Loan in the
principal amount of the Resized Canadian Loan Amount and if the Resized
Canadian Borrower is not the Canadian Borrower, as such loan is assumed by
Resized Canadian Borrower on the Resizing Closing Date.
"RESIZED CANADIAN LOAN AMOUNT" shall mean the sum of (x) the
outstanding principal amount of the Canadian Loan after (i) a Partial Release
has been obtained in accordance with Section 2.4.1 for all of the Assets other
than the Potential Resized Collateral and (ii) all of the other Resized
Closing Conditions have been satisfied plus (x) the Resized Canadian Advance,
if any.
"RESIZED CANADIAN LOAN COLLATERAL" shall mean all of the
Canadian Assets or other Collateral deemed by the Requisite Lenders and
Administrative Agent in their sole discretion to be Securitizable Assets.
"RESIZED CANADIAN MAXIMUM AMOUNT" shall mean an amount
determined by Administrative Agent which is equal to the lesser of the amounts
which would, if such lesser amount were the outstanding principal balance of
the Resized Canadian Notes, (i) provide a Resized Canadian Adjusted DSCR for
the Resized Canadian Loan Collateral for the twelve (12) full calendar months
immediately preceding the Resizing Closing Date equal to 1.65 to 1 and (ii) be
equal to 75% of the fair market value of the Resized Canadian Loan Collateral,
as determined by the Requisite Lenders and Administrative Agent in their sole
discretion.
"RESIZED CANADIAN NOTES" shall mean that certain note (or
notes) executed by Resized Canadian Borrower payable to Lenders and evidencing
the Resized Loans.
"RESIZED CLOSING CONDITIONS" shall have the meaning set forth
in Section 2.2.1.
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"RESIZING CLOSING DATE" shall mean the eleventh day of the
month immediately following the second anniversary of the Closing Date.
"RESIZING DATE" shall mean the date which is one hundred
twenty (120) days prior to the Resizing Closing Date.
"RESIZING DATE NOTICE" shall have the meaning set forth in
Section 2.2.1(a).
"RESIZING DILIGENCE PERIOD" shall mean the one-hundred and
twenty day period immediately prior to the Resizing Date.
"RESIZED DOMESTIC ADVANCE" shall have the meaning set forth in
Section 2.2.1.
"RESIZED DOMESTIC ADJUSTED DSCR" shall mean a ratio for the
applicable period in which (a) the numerator is the aggregate Net Operating
Income (as defined in the Resized Loan Agreement) for the Resized Domestic Loan
Collateral for such period (as calculated by Administrative Agent in its
reasonable discretion based on the criteria then used by the Rating Agencies)
and (b) the denominator is the greater of (x) the aggregate amount of scheduled
principal and interest which would be payable on the Resized Domestic Notes
from the Resized Closing Date through the first anniversary thereof based on
the Interest Rate, constant payments and a 25 year amortization and (y) 10.48%
of the Resized Domestic Loan Amount.
"RESIZED DOMESTIC BORROWER" shall mean a newly formed special
purpose bankruptcy remote corporation, limited liability company or limited
partnership (i) which is wholly owned by Resized Parent; (ii) which, upon and
after execution and delivery of the Resized Loan Documents, would be in full
compliance with all of the representations, warranties and covenants set forth
the Resized Loan Documents and all such representations, warrants and covenants
shall be true and correct including without limitation Section 4.1(dd) of the
Resized Loan Agreement, (iii) to whom the Resized Domestic Loan Collateral is
transferred and (iv) which assumes the Resized Domestic Loan. Notwithstanding
the foregoing, at the Requisite Lenders' and Administrative Agent's reasonable
discretion, in lieu of Domestic Borrower assigning the Domestic Loan to Resized
Domestic Borrower, Administrative Agent may permit Domestic Borrower to
continue to be the borrower of the Resized Domestic Loan provided, (x) Domestic
Borrower complies with the requirements set forth in (i) and (ii) above for the
Resized Domestic Borrower, (y) such structure will not result in a
qualification, downgrade or withdrawal of the rating which will be applicable
to any securities (or other instrument) issued or expected to be issued in
connection with a Secondary Market Transaction involving the Resized Loans and
(z) Administrative Agent is provided with such evidence as shall be reasonably
satisfactory to Administrative Agent that the single purpose nature and
bankruptcy remoteness of Domestic Borrower, each of its shareholders, general
partners and members is in accordance with the standards of the Rating Agencies
expected or requested by Administrative Agent to rate
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any securities (or other instrument) issued or expected to be issued in
connection with a Secondary Market Transaction involving the Resized Loans.
"RESIZED DOMESTIC LOAN" shall mean the Domestic Loan in the
principal amount of the Resized Domestic Loan Amount and if the Resized
Domestic Borrower is not the Domestic Borrower, as such loan is assumed by
Resized Domestic Borrower on the Resizing Closing Date.
"RESIZED DOMESTIC LOAN AMOUNT" shall mean the sum of (x) the
outstanding principal amount of the Domestic Loan after (i) a Partial Release
has been obtained in accordance with Section 2.4.1 for all of the Assets other
than the Potential Resized Collateral and (ii) all of the other Resized
Closing Conditions have been satisfied plus (x) the Resized Domestic Advance,
if any.
"RESIZED DOMESTIC LOAN COLLATERAL" shall mean all of the
Domestic Assets or other Collateral deemed by the Requisite Lenders and
Administrative Agent in their sole discretion to be Securitizable Assets.
"RESIZED DOMESTIC MAXIMUM AMOUNT" shall mean an amount
determined by Administrative Agent which is equal to the lesser of the amounts
which would, if such lesser amount were the outstanding principal balance of
the Resized Domestic Notes, (i) provide a Resized Domestic Adjusted DSCR for
the Resized Domestic Loan Collateral for the twelve (12) full calendar months
immediately preceding the Resizing Closing Date equal to 1.65 to 1 and (ii) be
equal to 75% of the fair market value of the Resized Domestic Loan Collateral,
as determined by the Requisite Lenders and Administrative Agent in their sole
discretion.
"RESIZED DOMESTIC NOTES" shall mean that certain note (or
notes) executed by Resized Domestic Borrower payable to Lenders and evidencing
the Resized Loans.
"RESIZED LIQUOR SUBSIDIARY" shall have the meaning set forth
in Section 2.2.1(c).
"RESIZED LOANS" shall mean collectively the Resized Canadian
Loan and the Resized Domestic Loan.
"RESIZED LOAN AGREEMENT" shall mean a Loan Agreement in
substantially the form as attached hereto as Exhibit C.
"RESIZED LOANS AMOUNT" shall mean the sum of (x) the Resized
Domestic Loan Amount plus (x) the Resized Canadian Loan Amount.
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"RESIZED LOANS COLLATERAL" shall mean collectively the Resized
Canadian Loan Collateral and the Resized Domestic Loan Collateral.
"RESIZED LOAN DOCUMENTS" shall have the meaning set forth in
Section 3.4.1(b).
"RESIZED LOANS INFORMATION DELIVERIES" shall have the meaning
set forth in Section 3.4.1(a).
"RESIZED MAXIMUM TRADE PAYABLES" shall mean the dollar amount
obtained when the number of Assets comprising the Resized Loans Collateral is
multiplied by $262,500.
"RESIZED NOTES" shall mean collectively the Resized Canadian
Notes and the Resized Domestic Notes.
"RESIZED PARENT" shall mean a corporation, limited partnership
or limited liability company (i) which, if the Resized Domestic Borrower is not
Domestic Borrower, is wholly owned by Domestic Borrower, (ii) which owns all of
the equity interest in Resized Borrowers, and (iii) whose certificate of
incorporation or other organizational documents contains covenants,
representations and warranties substantially similar to those set forth in
Section 4.1(dd) of the Resized Loan Agreement.
"RESIZED REQUIRED REPAIR DEPOSIT" shall be an amount,
determined by Administrative Agent consistent with its then actively applied
underwriting criteria, based on 125% of the cost of deferred maintenance
required to be performed during the first year occurring after the Resizing
Closing Date at each of the Assets which comprise the Resized Loans Collateral.
"RESIZED TAX AND INSURANCE DEPOSIT" shall mean an amount
which, when added to the monthly Tax Payments and Insurance Premiums payable by
Resized Borrowers pursuant to the Resized Loan Agreement, will be sufficient to
pay, at least 30 days prior to the dates such amounts would become delinquent,
all Taxes and Insurance Premiums payable in connection with the Resized Loans
Collateral which are due and payable in the twelve (12) months following the
Resizing Closing Date.
"RESTORATION" shall have the meaning set forth in Section
7.1.2(b).
"SECONDARY MARKET TRANSACTION" shall mean any transaction, in
which a Lender (i) sells a loan, the note and the other loan documents executed
in connection with such loan to one or more investors as a whole loan, (ii)
participates such loan to one or more investors, (iii) deposits such loan, such
note and such other loan documents with a trust, which trust may sell
certificates to investors evidencing an ownership interest in the trust assets,
or (iv) otherwise sells such loan or interest therein to investors.
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"SECURED PARTIES" shall mean Lenders and Administrative Agent.
"SECURITY DEPOSIT SUBACCOUNT" shall have the meaning set forth
in Section 10.2.2(a).
"SECURITY DEPOSITS" shall mean all security (whether cash,
letter of credit or otherwise) given to either Borrower (or in the case of each
Asset owned by a Loan Party other than either Borrower, such other Loan Party)
or any agent or Person acting on behalf of either Borrower (or in the case of
each Asset owned by a Loan Party other than either Borrower, such other Loan
Party) in connection with (x) the Tenant Leases or (y) a Function Space.
"SECURITY DOCUMENTS" shall mean, collectively, the Mortgages,
the Assignments of Leases, the Collateral Security Agreements, the Negative
Pledges, the Assumption Agreements, the Lock-Box Agreement, the Omnibus
Management and Liquor License Agreement, and all deeds of trust, deeds to
secure debt, mortgages, debentures, security agreements, pledge agreements,
assignments and all other instruments or documents (including UCC-1 financing
statements, fixture filings, amendments of financing statements or similar
documents required or advisable in order to perfect or maintain the Liens
created by the Security Documents) delivered by any Person pursuant to this
Agreement or any of the other Loan Documents, in order to grant to the Secured
Parties Liens in real, personal or mixed property of such Person, and to
maintain such Liens or as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"SECURITIZABLE ASSETS" shall mean any Asset which, if such
Asset was security for a loan, the Requisite Lenders and Administrative Agent
would deem such loan, in their sole discretion, to be eligible to be included
in a Secondary Market Transaction.
"SENIOR NOTE CONSENT" shall mean that certain Indenture
Supplement No. 3, Consent and Amendment No.1 to Pledge Agreement dated on or
about the date hereof and executed by Bristol, Domestic Borrower, BHOC and The
Bank of New York, as trustee with respect to the Subordinate Notes.
"SERVICER" shall have the meaning set forth in Section 10.1.
"SERVICING FEES" shall have the meaning set forth in Section
10.1.
"SEVERED LOAN DOCUMENTS" shall have the meaning set forth in
Section 8.2(c).
"SPE MEMBER" shall have the meaning set forth in Section
4.1(dd)(xiv).
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"SPECIAL ASSETS" shall mean those certain Assets listed on
Schedule XXVI for each such Asset, so long as such Asset is (x) not encumbered
by a Mortgage and (y) the Tenant Leases with respect to such Asset are not
assigned to Secured Parties.
"SPECIAL ASSET EARLY REPAYMENT" shall have the meaning set
forth in Section 5.1(bb).
"SPECIAL ASSET TRANSFER DATE" shall mean the date that one of
the Special Assets owned by Domestic Borrower is transferred to Special
Subsidiary in accordance with Section 5.1(bb).
"SPECIAL HARVEY ENTITIES" shall mean collectively (i) Harvey
Hotels Financing I., Inc., a Delaware corporation, (ii) Harvey Hotels Financing
II., Inc., a Delaware corporation, (iii) Harvey Hotels Investments I., Ltd., a
Delaware corporation and (iv) Harvey Hotels Investments II., Ltd., a Delaware
corporation. No Special Harvey Entity shall be deemed a Subsidiary or a Loan
Party.
"SPECIAL SUBSIDIARY" shall mean Bristol California Company, a
Delaware corporation and a Subsidiary hereunder and which at the Closing Date
and until the Special Asset Transfer Date (i) has and will continue to have no
assets, (ii) is not and will continue not to be indebted to any Person, and
(iii) conducts no business and will not conduct any business.
"STATE" shall mean the State of New York.
"STATED MATURITY" shall mean October 11, 2003.
"SUBACCOUNTS" shall have the meaning set forth in Section
10.2.2(a).
"SUBORDINATE NOTE DOCUMENTS" shall mean those certain
documents executed in connection with the Subordinate Notes, each such document
being in a form and substance as approved by Administrative Agent on or prior
to the Closing Date, in each case as such documents shall be amended, restated,
supplemented or otherwise modified from time to time pursuant to the terms of
this Agreement.
"SUBORDINATE NOTES" shall mean those notes issued by Bristol
pursuant to that certain Indenture, dated as of December 18, 1995, as amended,
among Bristol, BHAC, BHOC and The Bank of New York, as trustee, in each case as
such documents shall be amended, restated, supplemented or otherwise modified
from time to time pursuant to the terms of this Agreement.
"SUBSIDIARY" shall mean those entities, named on Schedule
XIII.
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"SUBSTITUTION ADDED ASSET" shall have the meaning set forth in
Section 2.4.2.
"SUBSTITUTION DATE" the date on which any Substitution Event
occurs.
"SUBSTITUTION DILIGENCE PERIOD" shall mean the sixty (60) days
prior to any Substitution Date.
"SUBSTITUTION EVENT" shall have the meaning set forth in
Section 2.4.2.
"SUBSTITUTION NOTICE" shall have the meaning set forth in
Section 2.4.2.
"SUBSTITUTION REMOVED ASSET" shall have the meaning set forth
in Section 2.4.2.
"SUPPLEMENTAL COLLATERAL AGENT" shall have the meaning set
forth in Section 12.2.1.
"SURVEY" shall mean a survey of each Asset prepared by a
surveyor licensed in the jurisdiction where such Asset is located and
satisfactory to Administrative Agent and the company or companies issuing the
Title Insurance Policy applicable to such Asset, and containing a certification
of such surveyor satisfactory to Administrative Agent.
"TAX AND INSURANCE ESCROW FUND" shall have the meaning set
forth in Section 7.3.
"TAX AND INSURANCE ESCROW SUBACCOUNT" shall have the meaning
set forth in Section 10.2.2(a).
"TAXES" shall mean all real estate and personal property
taxes, assessments, water rates or sewer rents now or hereafter levied or
assessed or imposed against an Asset or any part thereof, including, but not
limited to, (a) any ad valorem real and tangible personal property taxes levied
against an Asset and (b) any intangible personal property tax levied or imposed
on any Lender with respect to its ownership in the Loans.
"TENANTS" shall have the meaning set forth in Section 10.3(a).
"TENANT LEASE" shall mean any lease (or, to the extent of the
interest therein of either of the Borrowers, any sublease or sub-sublease),
letting, license, concession or other agreement (whether written or oral and
whether now or hereafter in effect) pursuant to which any person is granted a
possessory interest (other than (x) as a guest who personally occupies a room
in any Asset which is a hotel for less than 30 days) or (y) Function Space for
a period of less than 7 days) in, or right to use or occupy all or any portion
of, any space in any Asset, and every modification, amendment or other
agreement relating to such lease, sublease, sub-sublease
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or other agreement entered into in connection with such lease, sublease,
sub-sublease or other agreement and every guarantee of the performance and
observance of the covenants, conditions and agreements to be performed and
observed by the other party thereto.
"TERM" shall have the meaning set forth in Section 7.1.1(a).
"TITLE INSURANCE POLICY" shall mean the ALTA (or in the case
of any (x) Asset located in Texas, the Texas equivalent or (y) Canadian Asset,
the Canadian equivalent) mortgagee title insurance policy in the form
(acceptable to Administrative Agent) issued with respect to each Asset and
insuring the lien of the Mortgage encumbering each such Asset.
"TRANSFER" shall have the meaning set forth in Section
6.1(j)(ii).
"TRANSFEREE" shall have the meaning set forth in Section
6.1(j)(vii)(B).
"UCC" or "UNIFORM COMMERCIAL CODE" shall mean, with respect to
any Asset, the Uniform Commercial Code as in effect in the applicable state,
commonwealth or jurisdiction in which such Asset is located (or any equivalent
or similar legislation, including without limitation, the Personal Property
Security Act, R.S.O. 1990, c.P.10).
"UNIFORM SYSTEM" shall mean the Uniform System of Accounts for
Hotels, 8th Revised Edition, 1986, as published by the Hotel Association of New
York City, as the same may be further revised from time to time.
"UNUSED REQUISITION AMOUNT" shall have the meaning set forth
in Section 10.8.2.
"U.S. OBLIGATIONS" shall mean direct non-callable United
States of America government securities as defined in Section 2(a)(16) of the
Investment Company Act of 1940 (15 U.S.C. 80a-1).
"$145,000,000 LOAN" shall mean that certain loan made by
Lenders to Bristol Lodging Company in the original principal amount of
$145,000,000.
SECTION 1.2 PRINCIPLES OF CONSTRUCTION.
All references to sections, schedules and exhibits are to
sections, schedules and exhibits in or to this Agreement unless otherwise
specified. Unless otherwise specified, the words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified, all meanings attributed to defined
terms herein shall be equally applicable to both the singular and plural forms
of the terms so defined. The terms
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"Lender" and "Administrative Agent" include their respective successors and
assigns who become a party hereto pursuant to the terms of this Agreement.
II. GENERAL TERMS
SECTION 2.1 LOANS' COMMITMENT; DISBURSEMENT TO BORROWERS.
2.1.1 THE LOANS. Lenders severally agree to advance their
pro-rata share of the aggregate amount of $275,708,475.00 in connection with
the assignment of the Existing Facility and the Existing Notes to Lenders.
Domestic Borrower and Canadian Borrower represent and warrant to Lenders that
(i) there will be outstanding under the Existing Facility on the Closing Date
the principal sum of $452,000,000.00 and (ii) Domestic Borrower and Canadian
Borrower have no defenses to and waive all offsets, claims or counterclaims
they may have with respect to the Existing Facility and the Existing Notes.
Domestic Borrower acknowledges that on the Closing Date in respect of the
Domestic Loan it will cause the Domestic Loan to be paid down to the amount of
$275,708,475.00 in connection with the release of certain collateral securing
the Existing Facility; such sums will be re-advanced on the Closing Date in an
amount up to $43,052,525. Subject to and upon the terms and conditions set
forth herein, each Lender hereby severally agrees that the Existing Facility,
when added to the Canadian Loan, shall equal the Maximum Loan Amount and to
make its pro rata portion (such pro-rata portion being in the original
principal amount for each Lender as set forth opposite its name on Schedule
XVIII) available to each Borrower in one or more advances (each an "ADVANCE").
The Loans shall mature on the Maturity Date. Domestic Borrower hereby agrees
that on the Closing Date, the amount of the Domestic Loan shall be in the
amount of $318,761,000.00 on the Closing Date and Canadian Borrower hereby
agrees that on the Closing Date, the amount of the Canadian Loan shall be in
the amount of $36,239,000.00 on the Closing Date (each an "INITIAL ADVANCE")
and that the outstanding aggregate principal amount of the Loans shall be
$355,000,000.00. Lenders shall make the Additional Advance to Borrowers upon
satisfaction of the conditions contained in Section 3.2 hereof including but
not limited to Administrative Agent's receipt of the items specified in Section
3.2(a), (c)(ii) and (c)(v) from time to time within the thirty (30) days
preceding the Advance Closing Date in sufficient time for Administrative Agent
and its counsel to review the same prior to the Advance Closing Date.
2.1.2 DISBURSEMENT TO BORROWERS. Domestic Borrower may
request and receive only two Advances hereunder in respect of the Domestic Loan
and Canadian Borrower may request and receive only one Advance hereunder in
respect of the Canadian Loan. Any amount borrowed and repaid hereunder in
respect of the Loans may not be reborrowed. Borrowers shall, on the Closing
Date, receive the Initial Advance and on the Advance Closing Date, the
Additional Advance, subject to the direction given by each of the Borrowers as
to the application of the Loans proceeds to the items set forth in Section
2.1.4.
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2.1.3 THE NOTES. Each Lender's pro-rata portion of the Loans
shall be evidenced by Domestic Notes of Domestic Borrower and by Canadian Notes
of Canadian Borrower, each in favor of such Lender and each in the original
principal amount of such Lender's interest in the Canadian Loan and the
Domestic Loan, respectively. The Loans shall bear interest as provided in the
Notes and in Section 2.6 hereof and shall be subject to repayment as provided
in the Notes and in Section 2.3 hereof. The holder of each Note shall be
entitled to the benefits of this Agreement and the Loans shall be secured by
the Mortgage, the Assignment of Leases and the other Loan Documents. Lenders
are hereby authorized to endorse on a schedule attached to each Note (or on a
continuation of such schedule attached to such Note and made a part thereof) an
appropriate notation evidencing the date and amount of the Additional Advance
advanced under such Note. Such schedules shall, absent manifest error,
constitute prima facie evidence of the accuracy of the information contained
therein. The failure of Lenders to make a notation on the schedules to such
Notes as aforesaid shall not affect the obligations of Borrowers hereunder or
under the Notes or any other Loan Document in any respect. The Domestic Loan
shall constitute one general obligation of the Domestic Borrower to Lenders and
shall be secured by the security interests and Liens now or hereafter granted
upon all of the Domestic Assets and by all of the security interests and Liens
at any time or times currently or hereafter granted by the Domestic Borrower to
the Secured Parties; the Canadian Borrower shall have no obligations under the
Domestic Loan and the Domestic Loan shall not be secured by any of the Canadian
Assets. The Canadian Loan shall constitute one general obligation of Canadian
Borrower to Lenders (which obligation shall be guaranteed by Domestic Borrower
and the other Loan Parties under the Affiliate Guaranty)and shall be secured by
the security interests and Liens now or hereafter granted upon all of the
Property and by all of the security interests and Liens at any time or times
currently or hereafter granted by the Domestic Borrower or Canadian Borrower to
the Secured Parties.
2.1.4 USE OF PROCEEDS. (a) Domestic Borrower shall use, in
the following order of priority, the proceeds of the Domestic Loan disbursed to
it pursuant to Section 2.1 to (i) repay and discharge any existing loans
relating to the Domestic Assets (other than (x) Permitted Trade Payables and
FF&E Financing which do not in the aggregate exceed the Maximum Permitted Trade
Payables and FF&E Financings, to the extent Domestic Borrower elects in its
sole discretion not to repay such indebtedness from the proceeds of the Loans
and (y) that portion of the Existing Facility which has been assigned to
Lenders), (ii) pay all past-due Basic Carrying Costs, if any, in respect of the
Domestic Assets, (iii) pay reasonable out-of-pocket costs and expenses incurred
in connection with the closing of the Loans, as approved by Administrative
Agent and (iv) any other corporate purpose (including payment of a dividend to
a shareholder).
(b) Canadian Borrower shall use, in the following order of
priority, the proceeds of the Canadian Loan disbursed to it pursuant to Section
2.1 to (i) repay to Domestic Borrower amounts owed under that certain
promissory note dated as of October 26, 1997 executed by 1255905 Ontario
Limited and made payable to the order of Domestic Borrower in partial payment
of the purchase price of the stock of Canadian Borrower (prior to its
amalgamation with
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1255905 Ontario Limited on October 27, 1997), (ii) pay all past-due Basic
Carrying Costs, if any, in respect of the Canadian Assets, (iii) pay reasonable
out-of-pocket costs and expenses incurred in connection with the closing of the
Loans, as approved by Administrative Agent and (iv) any other corporate purpose
(including payment of a dividend to a shareholder).
SECTION 2.2 RESIZED LOANS.
2.2.1 THE RESIZED LOANS. If the Resized Borrowers are not
the Borrowers, then Borrowers agree to cause the Resized Borrowers to assume
the respective Loans on the Resizing Closing Date and Lenders agree to permit
such assumption provided the terms and conditions of this Section 2.2.1 are
satisfied. Borrowers agree in connection therewith to satisfy all of the
following conditions set forth in this Section 2 no later than the date
required therefor as hereinafter provided (collectively the "RESIZING
CONDITIONS") and if Borrowers and Resized Borrowers so satisfy the Resizing
Conditions and the outstanding principal amount of the (x) Canadian Loan is
less than the Resized Canadian Maximum Amount on the Resizing Closing Date,
Lenders severally agree to advance the amount of such deficit and Canadian
Borrower agrees to cause the Resized Canadian Borrower to borrow such amount
(such advance, the "RESIZED CANADIAN ADVANCE") and/or (y) Domestic Loan is less
than the Resized Domestic Maximum Amount on the Resizing Closing Date, Lenders
severally agree to advance the amount of such deficit and Domestic Borrower
agrees to cause the Resized Domestic Borrower to borrow such amount (such
advance, the "RESIZED DOMESTIC ADVANCE"). Notwithstanding the foregoing, each
Lender shall not be obligated to advance to (x) Canadian Borrower more than
such Lender's Pro-Rata Share of the Resized Canadian Advance and (y) Domestic
Borrower more than such Lender's Pro-Rata Share of the Resized Domestic Advance
and no Lender shall be obligated to advance in the aggregate an amount in
excess of the amount set forth on Schedule XVIII hereof opposite such Lender's
name as its maximum commitment ("MAXIMUM COMMITMENT"):
(a) Resizing Notice. No less than one hundred and twenty
(120) days prior to the Resizing Date, Borrowers shall deliver to
Administrative Agent a notice (the "RESIZING DATE NOTICE") in form acceptable
to Administrative Agent specifying the proposed principal amount of the Resized
Loans together with a list of potential Assets and related Collateral which
each Borrower proposes constitute Securitizable Assets to serve as the Resized
Loans Collateral (which shall, in the aggregate for the Domestic Resized Loan
and the Canadian Resized Loan consist of at least ten (10) Assets and related
Collateral which are Securitizable Assets). On or before the Resizing Date,
Lenders shall inform Borrowers of the Canadian Assets which are Securitizable
Assets and thus will serve as the Resized Loans Collateral (the "POTENTIAL
CANADIAN RESIZED COLLATERAL") and the Domestic Assets which are Securitizable
Assets and thus will serve as the Resized Loans Collateral (the "POTENTIAL
DOMESTIC RESIZED COLLATERAL"), in each case subject to (x) Resized Borrowers'
fulfillment of all of the terms and conditions of the Resized Loan Agreement on
the Resized Closing Date and (y) Borrowers' fulfillment of all of the terms and
conditions of this Agreement applicable thereto on the Resized Closing Date.
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(b) Deliveries, Payments and Other Conditions. Borrowers
shall have caused Resized Borrowers to deliver to Administrative Agent all of
the documents and other deliveries required pursuant to Section 3.4 hereof, on
or prior to the dates set forth therein for delivery thereof and all the other
conditions set forth therein shall have been otherwise satisfied.
(c) Transfer of Resized Collateral to Resized Borrowers. On
the Resizing Closing Date, (x) if the Resized Canadian Borrower is not the
Canadian Borrower, the Resized Canadian Loan Collateral in its entirety shall
have been duly and validly transferred to Resized Canadian Borrower and (y) if
the Resized Domestic Borrower is not the Domestic Borrower, the Resized
Domestic Loan Collateral in its entirety shall have been duly and validly
transferred to Resized Domestic Borrower, and all Liquor Licenses and Liquor
Agreements, used in connection with or which are otherwise necessary or
beneficial for the operation of the Resized Loans Collateral shall have been
transferred to one or more special purpose bankruptcy remote subsidiaries,
acceptable to Administrative Agent, which are wholly owned by Resized Parent
(the "RESIZED LIQUOR SUBSIDIARY"); provided, however, if Borrowers are unable
to transfer all such Liquor Licenses and Liquor Agreements to Resized Liquor
Subsidiary and Borrowers suggest an alternative structure satisfactory to the
Requisite Lenders and Administrative Agent in their sole discretion, which
alternative structure will not result in a qualification, downgrade or
withdrawal of the rating which will be applicable to any securities (or other
instrument) issued in connection with a Secondary Market Transaction involving
the Resized Loans, then Borrowers shall not be required to transfer the Liquor
Licenses and Liquor Agreements which are unable to be transferred to Resized
Liquor Subsidiary.
(d) No Release of Borrower. Any assumption of the Canadian
Loan by Resized Canadian Borrower or of the Domestic Loan by Resized Domestic
Borrower shall not release such Borrowers from their obligations under this
Agreement. In the event that Administrative Agent and Lenders agree in their
sole discretion to release any Borrower from its obligations under this
Agreement and the other Loan Documents following an assumption of the Loans
hereunder, such Borrowers' obligations under this Agreement shall survive such
release to the extent provided in Section 11.1 hereof and any other provisions
hereof which by their terms survive the repayment of the Loans.
(e) Resized Loan Collateral. If any of the Asset are not
included in the Resized Loan Collateral, for 2 years following the Resizing
Closing Date, Borrowers shall be prohibited from financing such Assets with any
Person who intends to include a loan secured by such Assets in a securitization
of rated single or multi-class securities secured by or evidencing ownership
interests in the notes evidencing such loan and/or mortgage securing such loan.
Borrowers' obligation under this Section 2.2.1(e) shall survive any
termination, satisfaction or assignment of the Notes this Agreement, and the
other Loan Documents or the exercise by Lenders of any of its rights or
remedies thereunder.
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SECTION 2.3 LOANS' PREPAYMENT.
2.3.1 REPAYMENT AND PREPAYMENT. Borrowers shall repay any
outstanding principal indebtedness of the Loans in full on the Maturity Date of
the Loans, together with interest thereon to (but excluding) the date of
repayment plus the Repayment Premium applicable thereto, if any. Other than as
set forth in Sections 2.2.1, 2.3.2, 2.3.3, 7.1.2(c) and 7.1.3(d) Borrowers
shall have no right to prepay all or any portion of the Loans prior to the
Stated Maturity. If prior to the Stated Maturity Date and following the
occurrence of any Event of Default, Borrowers shall tender payment of an amount
sufficient to satisfy the Debt, such tender by Borrowers shall be deemed to be
voluntary and Borrowers shall pay, in addition to the Debt, plus the Repayment
Premium applicable to such tender. Each voluntary prepayment permitted
hereunder shall be made on a scheduled payment date and include all accrued and
unpaid interest up to but not including such scheduled payment date or, if not
paid on a scheduled payment date, include interest that would have accrued on
such prepayment through the next regularly scheduled payment date and include
the Repayment Premium applicable thereto.
2.3.2 CASUALTY/CONDEMNATION PREPAYMENTS. The Loans are
subject to mandatory and voluntary prepayment in certain instances of Casualty
and Condemnation (each, a "CASUALTY/CONDEMNATION PREPAYMENT"), in the manner
and to the extent set forth in Section 7.1.2 and Section 7.1.3 hereof. Each
Casualty/Condemnation Prepayment shall be made on a scheduled payment date and
include all accrued and unpaid interest up to but not including such scheduled
payment date or, if not paid on a scheduled payment date, include interest that
would have accrued on such prepayment through the next regularly scheduled
payment date.
2.3.3 VOLUNTARY PREPAYMENTS. (a) Provided no Event of
Default exists, at any time prior to the Maturity Date, Borrowers may
voluntarily prepay any portion of the Loans provided, however, at all times the
Property must be comprised of at least ten (10) Assets which are Securitizable
Assets. Each prepayment by Borrowers shall be subject to the satisfaction of
the following conditions precedent (and the conditions precedent set forth in
Section 2.2.1 if such prepayment is in connection with the Resized Loans):
(i) Unless Borrowers shall have delivered to
Administrative Agent the Resizing Date Notice pursuant to Section
2.2.1. with respect to such prepayment, Borrowers shall provide not
less than thirty (30) days prior written notice to Administrative
Agent (which notice shall be irrevocable except as hereinafter
provided in this Section 2.3.1) specifying a regularly scheduled
payment date on which the prepayment is to occur; provided, however,
prior to the date which is ten (10) days before the date for
prepayment specified by Borrowers in such notice, Borrowers shall be
permitted to revoke such notice and if so revoked such notice shall
not accelerate the Maturity Date; such notice shall indicate the
principal amount of the Domestic Notes and/or Canadian Notes to be
prepaid and shall list the Assets, if any, which either or both
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of the Borrowers request the Secured Parties release from the Lien of
a Mortgage (or in the case of a Special Asset, from a Negative Pledge)
pursuant to Section 2.4 hereof;
(ii) Together with the principal amount of the Notes
which is being prepaid, Borrowers shall pay to each Lender all accrued
and unpaid interest on the principal balance of the Notes held by such
Lender thereon to but not including the regularly scheduled payment
date on which the prepayment is to occur (the "PREPAYMENT DATE") and
shall pay to Lenders the Repayment Premium with respect thereto;
provided, however, that no Repayment Premium (other than Losses and
Gains) shall be required to be paid in connection with a Special Asset
Early Repayment or an Additional Advance Early Prepayment. If for any
reason the Prepayment Date is not a regularly scheduled payment date,
Borrowers shall also pay interest that would have accrued on the Notes
through the next regularly scheduled payment date;
(iii) Borrowers shall pay to each Lender all other
sums, not including scheduled interest or principal payments, due
under the Notes, this Agreement, the Mortgage and the other Loan
Documents;
(iv) Borrowers shall deliver an Officer's
Certificate certifying that the requirements set forth in this Section
2.3.3(a) and, if applicable, 2.4 have been satisfied;
(v) Borrowers shall deliver such other certificates,
documents or instruments as Administrative Agent and Lenders may
reasonably request;
(vi) Borrowers shall pay all reasonable
out-of-pocket costs and expenses of Administrative Agent and Lenders
incurred in connection with the prepayment, including any costs and
expenses associated with a release of one or more Liens as provided in
Section 2.4 hereof as well as reasonable attorneys' fees and expenses;
and
(vii) no Event of Default may exist on the
Prepayment Date which is not cured by the occurrence of such
prepayment.
SECTION 2.4 RELEASE OF PROPERTY/SUBSTITUTION OF PROPERTY.
Except as set forth in this Section 2.4 or Section 2.2.1, no
repayment or prepayment of all or any portion of the Notes shall cause, give
rise to a right to require, or otherwise result in, the release of the Lien of
any of Mortgage on any Asset or of any other Security Document on any other
Collateral or any Negative Pledge on any Special Asset.
2.4.1 RELEASE OF AN ASSET. (a) If either of the Borrowers
is prepaying a portion of the Notes and the requirements of Section 2.3, and if
applicable 2.2.1, have been satisfied, or if either of the Borrowers has
elected to replace one or more Assets with substitute hotel
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properties and the requirements of Section 2.4.2 shall have been
satisfied, Administrative Agent shall provide such Borrower (or any
appropriate other Loan Party) with a Partial Release with respect to
one or more Assets provided such Borrower shall have satisfied or
cause to have satisfied the following conditions:
(i) there exists no Default (unless such Default
will be cured by the prepayment or Substitution Event, Casualty
Release Event or Condemnation Release Event, as applicable) or Event
of Default;
(ii) the (x) Domestic Remaining Property DSCR is not
less than the Initial Debt Service Coverage Ratio and (y) Canadian
Remaining Property DSCR is not less than the Initial Debt Service
Coverage Ratio;
(iii) with respect to any Partial Release after the
Resizing Date, Borrower shall have provided to Administrative Agent
evidence satisfactory to Administrative Agent, in its sole discretion,
that the principal outstanding under the (x) Domestic Notes after the
Partial Release is not greater than 75% of the fair market value of
the Potential Domestic Resized Collateral and (y) Canadian Notes after
the Partial Release is not greater than 75% of the fair market value
of the Potential Canadian Resized Collateral; which evidence may
include, if reasonably requested by Administrative Agent, an MAI
appraisal report (prepared in compliance with the requirements for the
appraisals delivered in connection with the funding of the Loan on the
Closing Date) in form and substance and prepared by an appraiser
acceptable to Administrative Agent;
(iv) in the case of a Casualty Release Event,
Condemnation Release Event, or a prepayment with respect to a portion
of the Notes pursuant to Section 2.3 hereof, the portion of the Notes
which such Borrower repays pursuant to Section 7.1.2(c), 7.1.3(d) or
2.3, and if applicable 2.2.1, in connection with such Partial Release
(x) is equal to or greater than the aggregate Release Price for the
Assets which such Borrower is requesting to be released (without
giving effect to the Repayment Premium) and (y) if the Asset being
released is a Domestic Asset, the Release Price for such Asset is
applied to reduce the principal balance of the Domestic Notes or if
the Asset being released is a Canadian Asset, the Release Price for
such Asset is applied to reduce the principal balance of the Canadian
Notes; provided, Borrowers shall not be permitted to prepay the Loans
with funds: (i) that result in a pledge of the direct or indirect
ownership interests of either of the Resized Borrowers or their
constituent members, partners or shareholders (except as otherwise
permitted by Section 6.1(j) hereof), or a lien on any of the Domestic
Assets which remain after giving effect to such Partial Release Assets
or otherwise result in either Resized Borrower breaching any of its
representations, warranties or covenants under the Resized Loan
Agreement or the other Resized Loan Documents; or (ii) from one or
more loans, secured by the Assets which either Borrower is requesting
to be released, if the lender of such loan intends to include
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such loan in a securitization of rated single or multi-class
securities secured by or evidencing ownership interests in the notes
evidencing such loan and/or mortgage securing such loan.
(v) Borrowers shall have paid all reasonable
out-of-pocket costs and expenses of Administrative Agent and Lenders
(including reasonable attorneys fees and expenses) arising in
connection with any partial releases, including, but not limited to,
reasonable legal fees of counsel, all title insurance premiums arising
as a result of endorsements reasonably required by Administrative
Agent in connection with such partial release, and all other costs
arising in connection with the execution and delivery of the Partial
Release;
(vi) Borrowers shall have delivered to
Administrative Agent one or more endorsements, if available in the
applicable jurisdiction, to the Title Policies for each Asset, other
than the Asset in connection with which such Partial Release is being
provided, insuring that after giving effect to such Partial Release,
the liens created by the remaining Mortgages and insured by the
applicable Title Policies remain in full force and effect;
(vii) Borrowers shall have provided to
Administrative Agent and Lenders such other documents and evidence as
Administrative Agent or such Lenders, as the case may be shall
reasonably require in order to establish compliance with the
provisions of this Section 2.4.1;
(viii) the parties to any and all guaranties,
including without limitation the Affiliate Guaranty, shall execute a
reaffirmation of their guaranties, in form and content acceptable to
Administrative Agent, pursuant to which each party shall reaffirm
their liabilities and obligations thereunder notwithstanding the
release of any collateral securing the Loans; and
(ix) the Property shall comprise at least ten (10)
Assets which are Securitizable Assets (including, in the case of a
Substitution Event, any Substitution Added Assets) after giving effect
to the Partial Release.
(b) In connection with the Partial Release, Borrowers shall
submit to Administrative Agent, not less than fourteen (14) days prior to the
Prepayment Date or the Substitution Date, the Casualty Release Date or the
Condemnation Release Date, as applicable, a Partial Release for the Asset and
the related Collateral for execution by Administrative Agent. Such Partial
Release shall be in a form appropriate in the jurisdiction in which each such
Asset is located and satisfactory to the Requisite Lenders and Administrative
Agent in their sole discretion. In addition, each of the Borrowers (and any
other Loan Party requested by Administrative Agent to do so) shall provide all
other documentation Administrative Agent
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reasonably requires to be delivered by such Borrower (or such Loan Party) in
connection with such Partial Release, together with an Officer's Certificate
certifying as to the matters set forth in Sections 2.4(i), (ii) and (iii) in
reasonable detail and certifying that such documentation (i) is in compliance
with all Legal Requirements, and (ii) will effect such Partial Release in
accordance with the terms of this Agreement.
(c) Any Partial Release pursuant to this Section may only
occur on a day that a regularly scheduled payment of principal and interest is
due under the Notes.
(d) Upon a Partial Release of any Asset, or other item of
Collateral pursuant to this Section 2.4.1, such Asset shall cease to be an
Asset, a part of the Property and an item of Collateral for purposes of this
Agreement (other than for purposes of any indemnity applicable to such Asset).
(e) Notwithstanding anything to the contrary contained
herein, the Secured Parties shall not be required to release the Lien of any
Mortgage (or any Negative Pledge) or any Asset or other Collateral or of any
other Security Document prior to the date that Administrative Agent makes the
Additional Advance.
2.4.2 SUBSTITUTION OF AN ASSET. Provided no Default (unless
such Default will be cured by the Substitution Event) or Event of Default
exists, at any time after the Advance Closing Date and prior to the Maturity
Date, Borrowers may elect to replace one or more Assets and related Collateral
(the "SUBSTITUTION REMOVED ASSETS") with substitute hotel properties and
related property ("SUBSTITUTION ADDED ASSETS") provided each such substitution
(a "SUBSTITUTION EVENT") shall be subject to the satisfaction of the conditions
precedent set forth in Sections 2.4.1 and 3.3 hereof and no less than sixty
(60) days prior to the Substitution Date, Borrowers shall have delivered to
Administrative Agent a notice of their desire to substitute one or more
Substitution Added Assets for one or more Substitution Removed Assets (the
"SUBSTITUTION NOTICE") in form acceptable to Administrative Agent specifying
(i) a regularly scheduled payment date on which the Substitution Event is to
occur, (ii) the one or more proposed Substitution Removed Assets which either
or both of the Borrowers are requesting Administrative Agent, on behalf of
Lenders, to release from the Lien of one or more Mortgages (or in the case of a
Special Asset, to release from a Negative Pledge) and (iii) the one or more
proposed Substitution Added Assets either or both of the Borrowers are
requesting to be added to the Property and to be encumbered by one or more
Mortgages and other Security Documents, provided, further, that for any
Substitution Removed Asset which is (x) a Canadian Asset, the corresponding
Substitution Added Asset must be located in Canada and (y) a Domestic Asset,
the corresponding Substitution Added Asset must be located in the United States
unless Borrowers and Administrative Agent agree to amend the Loan Documents in
order to create a substitute framework, acceptable to Administrative Agent and
the Requisite Lenders in their sole discretion, which would allow a Canadian
Asset to be substitute for a Domestic Asset and a Domestic Asset to be
substituted for a Canadian Asset.
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SECTION 2.5 ASSUMPTION OF LOANS.
Borrowers acknowledge that each Lender, in agreeing to make
its pro-rata portion of the Loans available, has examined and relied on the
creditworthiness and experience of each of the Borrowers and the other Loan
Parties in owning and operating properties such as the Property, and that each
Lender will continue to rely on such Borrower's or such Loan Party's ownership
and operation (subject to the Property Management Agreement) of the Property as
a means of maintaining the value of the Property as security for repayment of
the Debt. Borrowers acknowledge that each Lender has a valid interest in
maintaining the value of the Property so as to ensure that, should Borrowers
default in the repayment of the Debt, such Lender can recover the Debt by a
sale of the Property by Administrative Agent, as agent for Lenders.
Accordingly, except as otherwise expressly permitted in Section 6.1(j) of this
Agreement, Borrowers shall not and shall not allow any other Loan Party to,
without the prior written consent of each Lender, transfer the Property, any
Asset or any part thereof, or permit the Property, any Asset or any part
thereof to be transferred.
SECTION 2.6 INTEREST AND PRINCIPAL.
2.6.1 GENERALLY. Borrowers shall repay the principal balance
of the Loans, with interest thereon to be computed for the applicable Interest
Accrual Period on the unpaid principal balance from time to time outstanding at
the Interest Rate, as follows: (i) one installment of interest only on October
28, 1997, for the period commencing on (and including) October 28, 1997 and
ending on (and including) November 10, 1997 and (ii) one installment of
interest only on December 11, 1997 and on the eleventh day of each calendar
month thereafter (or if such eleventh day is not a Business Day, the next day
which is a Business Day). The entire principal sum together with all accrued
and unpaid interest thereon and together with the Repayment Premium applicable
thereto, if any, shall be paid on the Maturity Date, all in accordance with the
terms and provisions set forth in the Notes. Funds collected in either Deposit
Account pursuant to this Agreement shall be disbursed (including, without
limitation, disbursements from the Monthly Debt Service Subaccount) in
accordance with Section 10.9 hereof.
2.6.2 DEFAULT RATE. Borrowers agree that upon the occurrence
of an Event of Default: (a) Lenders shall be entitled to receive and Borrowers
shall pay to Administrative Agent, for the account of Lenders' interest on the
entire unpaid principal sum of the Loans and any other amounts (including
interest to the extent permitted by applicable law and post-petition interest
in any proceeding under the Bankruptcy Code or other applicable bankruptcy or
insolvency laws) due at the Default Rate, and (b) on the eleventh day of each
month (or if such eleventh day is not a Business Day, the next day which is a
Business Day) during which such Event of Default shall continue, Administrative
Agent shall cause the Deposit Bank to distribute to Lenders, pro-rata, the
amounts then held as collected funds in each Deposit Account and the
Subaccounts (other than Security Deposits to the extent any Tenant may have any
right to the return of such Security Deposit), such amounts to be applied by
Administrative Agent as set
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forth in Section 10.9.3 hereof. Interest at the Default Rate, to the extent
not paid, shall be added to the Debt and shall be secured by the Mortgage.
This Section, however, shall not be construed as an agreement or privilege to
extend the date of payment of the Debt, nor as a waiver of any other right or
remedy accruing to Administrative Agent and Lenders by reason of the occurrence
of any Event of Default. The acceptance of any payment of Mortgaged Property
Gross Cash Flow shall not be deemed to cure or constitute a waiver of any Event
of Default. Administrative Agent, at the direction of the Requisite Lenders,
retains its rights under the Loan Documents to accelerate and to continue to
demand payment of the Debt upon the happening of any Event of Default, despite
any payment of Mortgaged Property Gross Cash Flow.
SECTION 2.7 PAYMENTS AND COMPUTATIONS.
2.7.1 MAKING OF PAYMENTS. Each payment by either of the
Borrowers hereunder or under the Notes shall be made in funds settled through
the New York Clearing House Interbank Payments System or other funds
immediately available to Administrative Agent by 11:00 a.m., New York City
time, on the date such payment is due, to Administrative Agent by deposit to
the applicable Deposit Account. Whenever any payment hereunder or under the
Notes shall be stated to be due on a day which is not a Business Day, such
payment shall be made on the first Business Day thereafter.
2.7.2 COMPUTATIONS. Interest payable hereunder or under the
Notes by Borrowers shall be computed on the basis of the actual number of days
elapsed in each year over a 360-day year.
2.7.3 LATE PAYMENT CHARGE. If any principal, interest or any
other sums due under the Loan Documents is not paid by either or both of
Borrowers on or before the date which is five (5) days after the date on which
it is due, such Borrower or Borrowers shall pay to Administrative Agent upon
demand an amount, for distribution to the Lenders pro-rata, equal to the lesser
of three percent (3%) of such unpaid sum or the maximum amount permitted by
applicable law in order to defray the expense incurred by Administrative Agent
in handling and processing such delinquent payment and to compensate
Administrative Agent and each Lender for the loss of the use of such delinquent
payment. Any such amount shall be in addition to any other amounts required
under the Loan Documents (including, without limitation, Section 2.6.2 hereof)
and shall be secured by the Mortgage and the other Loan Documents.
2.7.4 PAYMENTS RECEIVED IN THE DEPOSIT ACCOUNTS.
Notwithstanding anything to the contrary contained in this Agreement or the
other Loan Documents, and provided no Event of Default has occurred and is
continuing, Borrowers' obligations with respect to the monthly payment of
principal and interest and amounts due for the Tax and Insurance Escrow Funds,
the Replacement Reserve Funds and any other payment reserves established
pursuant to this Agreement or any other Loan Documents shall be deemed
satisfied to the extent sufficient
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amounts are deposited in the appropriate Deposit Account to satisfy such
obligations on the Business Day prior to the date each such payment is
required.
2.7.5 APPORTIONMENT OF PAYMENTS. Aggregate principal and
interest payments, Repayment Premiums and late payment charges with respect to
the Loans shall be apportioned proportionately to Lenders' respective Pro Rata
Shares. Subject to Section 2.7.6, Administrative Agent shall promptly
distribute to each Lender, at its primary address set in Section 11.6 hereof or
at such other address as such Lender may request, its Pro Rata Share of all
such payments received by Administrative Agent when received by the Agent.
2.7.6 DISTRIBUTION TO LENDERS. Any payment received by
Administrative Agent for distribution to Lenders that is received by 2:00 P.M.
(New York time) on any day shall be paid to Lenders by the end of such day and,
if such amounts are not paid to Lenders on such date, shall bear interest,
payable on demand by Administrative Agent, until paid to Lenders at the Federal
Funds Rate.
2.7.7 CANADIAN INTEREST ACT. For purposes of the "Interest
Act (Canadian)", (i) whenever any interest or fee under this Agreement is
calculated using a rate based on a year of 360 days, the rate determined
pursuant to such calculation, when expressed as an annual rate, is equivalent
to (x) the applicable rate based on a year of 360 days, (y) multiplied by the
actual number of days in the calendar year in which the period for which such
interest or fee is payable (or compounded) ends, and (z) divided by 360, (ii)
the principle of deemed reinvestment of interest does not apply to any interest
calculation under this Agreement, and (iii) the rates of interest stipulated in
this Agreement are intended to be nominal rates and not effective rates or
yields.
SECTION 2.8 NEW ORLEANS HOTEL. If prior to December 31, 1997
the New Orleans Hotel is released as collateral for the $145,000,000 Loan,
Lenders agree that (x) the New Orleans Hotel shall become an Asset and (y) the
Domestic Loan shall be increased by an amount equal to the allocated loan
amount assigned to the New Orleans Hotel in connection with the $145,000,000
Loan provided, (i) Borrowers enter into such modifications of the Loan
Documents as required by the Requisite Lenders and Administrative Agent in
their sole discretion and (ii) Borrowers otherwise satisfy all matters set
forth in Section 3.1 with respect to the New Orleans Hotel.
SECTION 2.9 HOUSTON HOTEL. If prior to December 31, 1997 the
Houston Hotel is released as collateral for the $145,000,000 Loan, Lenders
agree that (x) the Houston Hotel shall become an Asset and (y) the Domestic
Loan shall be increased by an amount equal to the allocated loan amount
assigned to the Houston Hotel in connection with the $145,000,000 Loan
provided, (i) Borrowers enter into such modifications of the Loan Documents as
required by the Requisite Lenders and Administrative Agent in their sole
discretion and (ii) Borrowers otherwise satisfy all matters set forth in
Section 3.1 with respect to the Houston Hotel.
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III. CONDITIONS PRECEDENT
SECTION 3.1 CONDITIONS PRECEDENT TO CLOSING.
The obligation of each Lender to make its pro-rata portion of
the Loans available hereunder is subject to the fulfillment by Domestic
Borrower, Canadian Borrower and each Loan Party or waiver by Administrative
Agent and Lenders of the following conditions precedent no later than the
Closing Date:
(a) Representations and Warranties; Compliance with
Conditions. The representations and warranties of each of the Borrowers
contained in this Agreement and of each of the Borrowers and each other Loan
Party in the other Loan Documents shall be true and correct in all material
respects on and as of the Closing Date with the same effect as if made on and
as of such date, no Material Adverse Change has occurred and no Default or
Event of Default shall have occurred and be continuing or would result from the
consummation of the borrowing contemplated by the Loans; and each of the
Borrowers and each Loan Party shall be in compliance in all material respects
with all terms and conditions set forth in this Agreement and in each other
Loan Document on its part to be observed or performed.
(b) Loan Agreement and Notes. Each Lender shall have
received a copy of (x) this Agreement duly executed and delivered on behalf of
each of the Borrowers, (y) its Domestic Notes duly executed and delivered on
behalf of Domestic Borrower and (z) its Canadian Notes duly executed and
delivered on behalf of Canadian Borrower.
(c) Delivery of Loan Documents; Title Insurance; Reports.
(i) Mortgage, Assignment of Leases, Assignments of
Agreements, UCC, Etc. Administrative Agent shall have received from
the appropriate Borrower and, in the case of an Asset owned by any
Loan Party other than either Borrower, such other Loan Party, fully
executed and acknowledged counterparts of a Mortgage (or in the case
of a Special Asset, a Negative Pledge), the Assignment of Leases
relating to each of the Assets, and evidence (reasonably satisfactory
to Administrative Agent) that counterparts of such Mortgages (or in
the case of a Special Asset, such Negative Pledge) and such
Assignments of Leases have been delivered to the title company for
recording, in the reasonable judgment of Administrative Agent, so as
to effectively create upon such recording valid and enforceable Liens
upon each of the Assets, of the requisite priority, in favor of the
Secured Parties, subject only to the Permitted Encumbrances.
Administrative Agent shall have also received from each of the
Borrowers (and each other Loan Party, if applicable) fully executed
counterparts of the Environmental Indemnity, the Consent and
Subordination of Property Manager, and the Clearing Agreement
(together with a Payment Direction Letter or a Credit Card Payor
Payment Direction Letter, as applicable, addressed to each tenant and
Credit Card Payor,
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respectively, postage prepaid, return receipt requested) with respect
to each Asset, the Deposit Agreement, the Omnibus Management and
Liquor License Agreement, the Affiliate Guaranty and the Collateral
Security Agreements. Administrative Agent shall have also received
from each of the Borrowers and each other Loan Party (i) such
financing statements under the Uniform Commercial Code (or any
equivalent or similar legislation, including without limitation, the
Personal Property Security Act, R.S.O. 1990, c.P.10) as Administrative
Agent shall require with respect to the Assets and the other
Collateral, executed by the appropriate Borrower and all other
appropriate Persons and such financing statements shall have been
filed of record in the appropriate filing offices in each of the
appropriate jurisdictions or delivered to the title insurance company
issuing the Title Insurance Policy in connection with the Assets for
filing, in the reasonable judgment of Administrative Agent, so as to
effectively create upon such filing a valid and enforceable Lien on
the Assets of the requisite priority in favor of the Secured Parties,
subject only to the Permitted Encumbrances for such Asset and (ii) a
list of the principal places of business, tax identification numbers,
and doing business names for each of the Borrowers and each other Loan
Party, the partners, members or shareholders of each such Borrower or
such Loan Party, as applicable and the Property Manager, each as set
forth on Schedule XIX, and all other information as Administrative
Agent reasonably may require to properly file such UCC financing
statement, all certified by a managing member, general partner or
authorized officer of each of the Borrowers.
(ii) Title Insurance. Administrative Agent shall
have received the Title Insurance Policy with respect to each Asset
issued by a title company acceptable to Administrative Agent and dated
as of the Closing Date, with co-insurance and/or reinsurance and
direct access agreements acceptable to Administrative Agent. Such
Title Insurance Policy shall (A) provide coverage in amounts
satisfactory to Administrative Agent, (B) insure Lenders that each
Mortgage creates a valid first lien on each Asset (other than the
Special Assets) free and clear of all exceptions from coverage other
than Permitted Encumbrances and standard exceptions and exclusions
from coverage (as modified by the terms of any endorsements), (C)
contain such endorsements and affirmative coverages as Administrative
Agent may reasonably request and are available in the state or
province where each Asset is located, (D) show good and marketable
indefeasible title to each Leasehold Estate, if any, and fee simple
title to each other Asset vested in the appropriate Borrower or such
other Loan Party which owns such Asset and (E) name Administrative
Agent, as agent of Lenders, as the insured (other than with respect to
the Special Assets). Each Title Insurance Policy shall be assignable.
Administrative Agent also shall have received evidence that all
premiums in respect of the Title Insurance Policy have been paid.
Borrowers shall have paid to the title company issuing the Title
Insurance Policies or to the appropriate Governmental Authority all
recording and stamp taxes (including mortgage recording, intangible
and similar taxes) and fees payable in connection with recording each
Mortgage, each Assignment of Leases and each financing statement in
the appropriate state, county,
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parish or municipal offices. Administrative Agent shall have received
satisfactory UCC financing statement, tax lien, judgment, bankruptcy
litigation and other lien searches and reports conducted by a search
firm acceptable to Administrative Agent with respect to the Assets
from Borrowers and all other relevant Persons, such searches to be
conducted in each of the locations as shall be required by
Administrative Agent.
(iii) Survey. Administrative Agent shall have
received a current title survey for each of the Assets certified to
the title company and Administrative Agent, as agent for Lenders, and
their successors and assigns in form and content satisfactory to
Administrative Agent and prepared by a professional and properly
licensed land surveyor satisfactory to Administrative Agent in
accordance with the 1992 Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys. The survey should meet the
classification of an "Urban Survey" and the following additional items
from the list of "Optional Survey Responsibilities and Specifications"
(Table A) should be added to the survey: 2, 3, 4, 6, 7, 8, 9, 10, 11
and 13. Such surveys shall reflect the same legal description
contained in the Title Insurance Policy referred to in clause (ii)
above relating to each of the Assets and shall include, among other
things, a metes and bounds description of the real property comprising
part of each such Asset reasonably satisfactory to Administrative
Agent. The surveyor's seal shall be affixed to the survey and the
surveyor shall provide a certification for the survey in form and
substance acceptable to Administrative Agent. The surveyor's
certification shall include a statement as to whether the applicable
Asset is in an area identified by the Federal Emergency Management
Agency as an area having special flood hazards.
(iv) Insurance. Administrative Agent shall have
received valid certificates of insurance for the Policies required
hereunder, and evidence of the payment of all premiums then due and
payable and evidence that the current Policies will be renewed on the
same terms and conditions (or other terms and conditions acceptable to
Administrative Agent), all of which terms and conditions shall be
satisfactory to Administrative Agent. To the extent permitted by law,
Borrowers, for themselves and on behalf of each other Loan Party,
hereby irrevocably waive, release and discharge any and all rights of
action, demands and other claims of any kind or nature against
Administrative Agent arising from any failure of Administrative Agent
and Lenders to comply with the National Flood Insurance Act of 1968
(42 U.S.C. Sections 4001, et seq.), the Flood Disaster Protection Act
of 1973 or the National Flood Insurance Reform Act of 1994, including
any failure of Administrative Agent to provide Borrowers with written
notification within ten days prior to the Closing Date of whether any
Asset is in a special flood hazard area or whether federal disaster
relief assistance will be available in the event of flood damage to
any Asset.
(v) Zoning. Administrative Agent shall have
received a certificate of occupancy (or the equivalent) from the
applicable city or county agency allowing for
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occupancy and operation of each of the Assets reflecting the use of
such Assets on the Closing Date as hotels and, at Administrative
Agent's option, (A) letters or other evidence with respect to each
Asset from the appropriate Governmental Authorities (or other Persons)
concerning applicable zoning, subdivision, building, environmental and
other laws applicable to the Assets, (B) an ALTA 3.1 zoning
endorsement (or Canadian equivalent) for the Title Insurance Policy,
or (C) a zoning opinion letter, in substance reasonably satisfactory
to Administrative Agent. Administrative Agent shall have also
received evidence satisfactory to it that each Asset is independent of
any other real property for taxing purposes.
(vi) Encumbrances. Borrowers shall and shall cause
each other Loan Party to have taken or caused to be taken such actions
in such a manner so that the Secured Parties have a valid and
perfected Lien of first priority as of the Closing Date with respect
to the Mortgages (and Assignment of Leases) encumbering each Asset,
subject only to applicable Permitted Encumbrances, and Administrative
Agent shall have received satisfactory evidence thereof.
(d) Related Documents. Each additional document not
specifically referenced herein, but relating to the transactions contemplated
herein, shall have been duly authorized, executed and delivered by all parties
thereto and Administrative Agent shall have received and approved originals
thereof.
(e) Delivery of Organizational Documents/Consents. On or
before the Closing Date, Borrowers shall have delivered or caused to be
delivered to Administrative Agent, in sufficient copies for each Lender,
certified copies of all organizational documentation related to each of the
Borrowers, each other Loan Party and each general partner or member of each of
the Borrowers and each other Loan Party as Administrative Agent may request in
its sole discretion, including, without limitation, good standing certificates,
qualifications to do business in the appropriate jurisdictions, resolutions
authorizing the entering into of the Loans, the execution and delivery of the
Loan Documents, and incumbency certificates as may be requested by
Administrative Agent. Administrative Agent shall have received copies of all
consents, licenses and approvals, if any, required in connection with the
execution, delivery and performance by each of the Borrowers or any other Loan
Party and the validity and enforceability of the Loan Documents, and such
consents, licenses and approvals shall be in full force and effect.
(f) Opinions of Borrowers' Counsel. Administrative Agent
shall have received opinions of Borrowers' counsel, and the other Loan Parties'
counsel (including from counsel in each state or province where each Asset is
located), with respect to due execution, authority, enforceability (including
usury) of the Loan Documents and such other matters as Administrative Agent may
require, all such opinions to be in form, scope and substance satisfactory to
Administrative Agent and its counsel in their reasonable discretion.
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(g) Intentionally Deleted.
(h) Basic Carrying Costs. Borrowers shall and shall cause
each other Loan Party to have paid all Basic Carrying Costs relating to each of
the Assets which are in arrears, including, without limitation, (i) due but
unpaid insurance premiums relating to such Assets, (ii) currently due Taxes
(including any in arrears) relating to such Assets, (iii) currently due Other
Charges relating to such Assets, (iv) currently due Ground Rents with respect
to such Assets and (v) currently due Franchise Fees with respect to such
Assets, which amounts may be funded with proceeds of the Loans if such proceeds
are sufficient therefor.
(i) Completion of Proceedings. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated by this Agreement and the other Loan Documents and all documents
incidental thereto shall be satisfactory in form and substance to
Administrative Agent, and Administrative Agent shall have received all such
counterpart originals or certified copies of such documents as Administrative
Agent may reasonably request.
(j) Estoppel and Subordinations. Administrative Agent shall
have received an executed tenant estoppel letter and subordination agreement,
which shall be in form and substance satisfactory to Administrative Agent in
its sole but reasonable discretion, from each tenant under each Tenant Lease
listed on Schedule XIV at each Asset and such other estoppel letters as
Administrative Agent shall require in connection with each such Asset
(including from parties to reciprocal easement agreements, from Ground Lessors
and in connection with other documents affecting each such Asset).
(k) Payments. All payments, deposits or escrows required to
be made or established by Borrowers or any other Loan Party under this
Agreement, the Notes and the other Loan Documents on or before the Closing Date
shall have been paid (including without limitation the transfer of all security
deposits to the Security Deposit Subaccount). Administrative Agent, shall have
received (i) a settlement statement setting forth the disbursement of the Loans
in form and content satisfactory to Administrative Agent and (ii) Schedule
XXVII which sets forth all amounts payable with respect to the Property on
account of tax and insurance bills for the two calendar years prior to the
applicable Closing Date which Schedule XXVII shall be true and correct.
(l) Third Party Reports. Administrative Agent shall have
received a current seismic report (prepared by a specialist acceptable to
Administrative Agent for all Assets, reasonably requested by Administrative
Agent which are located in areas where there is a risk of the occurrence of an
earthquake), an MAI appraisal report (prepared in compliance with all Legal
Requirements, including Title XI of the Financing Institutions Reform, Recovery
and Enforcement Act of 1989, 12 U.S.C. Sections 331, et seq., as amended, and
any successor statute thereto and the regulations promulgated thereunder
("FIRREA")), structural engineering report (identifying, among other things,
(a) deferred maintenance for any Assets and the cost thereof
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and (b) a 10 year schedule of anticipated capital expenditures and the per
annum cost thereof) and environmental property condition report (Phase I
environmental reports for each Asset and Phase II reports and other
environmental investigation in all cases where environmental consultants
recommend such Phase II reports and/or further investigation or as
Administrative Agent otherwise determines are required); in respect of each of
the Assets, each addressed to Administrative Agent and Lenders and in form and
substance satisfactory to Administrative Agent and performed by an appraiser,
engineer or other professional satisfactory to Administrative Agent.
Notwithstanding the foregoing, in lieu of the reports required to be delivered
by this Section, Administrative Agent agrees to accept the (i) seismic reports,
(ii) MAI appraisal reports, (iii) structural engineering reports, and (iv)
environmental reports which were prepared in connection with the Existing
Facility, provided, such reports are (x) in a form and substance reasonably
acceptable to Administrative Agent, (y) were prepared by a firm reasonably
acceptable to Administrative Agent and (z) Administrative Agent receives
letters from each firm which prepared such reports permitting Administrative
Agent to rely on such reports.
(m) Financial Statements. Administrative Agent shall have
received unaudited historical operating statements for each Asset for the
Fiscal Year ended December 31, 1996 and for the consecutive full twelve (12)
months immediately preceding the Closing Date. Administrative Agent and
Borrowers shall agree on procedures to be performed by Arthur Anderson LLP and
reported upon on an Asset by Asset basis on or before December 15, 1997.
(n) Payoff Letters; Assignments. Administrative Agent shall
have received a true and correct copy of the payoff letters for all of the
existing debt encumbering each Asset. In addition, for all of the existing
debt encumbering each Asset which is to be assigned to Lenders, Administrative
Agent shall have received the original promissory notes endorsed to the order
of Administrative Agent, as agent for Lenders, the original mortgages together
with an original assignment thereof to Administrative Agent in form and
substance acceptable to Administrative Agent and representations from the
lender holding such existing debt as to the outstanding principal balance
thereof, no defaults existing thereunder and such other matters as
Administrative Agent may reasonably require.
(o) Rent Roll. Administrative Agent shall have received a
Rent Roll dated as of October 15, 1997, together with occupancy statistics for
the 12 month period ending December 31, 1996 and the twelve months ending
August 31, 1997, each in form and content acceptable to Administrative Agent
for each Asset and certified by Borrower or such other Loan Party which owns
such Asset as being true, correct, complete and accurate.
(p) Leases, Contracts and Permits. Administrative Agent
shall have received copies of (or been provided the opportunity to review) all
leases (including equipment leases), permits, licenses, appraisals,
authorizations and contracts related to each of the Assets.
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(q) Structuring Fee. Administrative Agent shall have
received an amount equal to one percent (1%) of the Maximum Loan Amount.
(r) Utilities. Administrative Agent shall have received
evidence that all utility services and parking required for each of the Assets
are available (which evidence may consist of the survey set forth in clause
(c)(iii) above for each of such Assets reflecting the utility and parking), and
evidence that each of such Assets is subject to tax assessment which is
separate from any other real property or improvements.
(s) Ground Lease Matters. No Asset shall be a Leasehold
Estate unless agreed to by Administrative Agent and Lenders in their sole
discretion; in which event (i) Administrative Agent shall have received from
the appropriate Borrower or such other Loan Party which owns such Asset (i)
such estoppel certificates, subordination agreements and other agreements in
form and substance satisfactory to Administrative Agent (ii) the Ground Lease
shall expire no earlier than ten (10) years after the Stated Maturity and shall
otherwise be on terms acceptable to the Requisite Lenders and Administrative
Agent in their sole discretion, including the financeability of such Ground
Lease, (iii) the appropriate Borrower or such other Loan Party which owns such
Asset shall have delivered to Administrative Agent (in sufficient copies for
each Lender) executed or conformed, certified copies of each of the Ground
Leases and all amendments and written waivers thereto entered into on or prior
to the Closing Date and (iv) the Ground Lease shall not be subordinate to any
lien and shall be the first lien against the fee simple estate in the real
property and improvements; which fee simple estate shall not be encumbered by a
mortgage unless agreed to by Administrative Agent and the Requisite Lenders in
their sole discretion.
(t) Property Management Agreements. Borrowers shall have
delivered to Administrative Agent (in sufficient copies for each Lender)
executed or conformed, certified copies of each of the Property Management
Agreements and all amendments and written waivers thereto entered into on or
before the Closing Date, as listed on Schedule VI annexed hereto, which
Property Management Agreements shall be satisfactory in form and substance to
the Requisite Lenders and Administrative Agent in their sole discretion; such
Property Management Agreements, as so amended or waived, shall be in full force
and effect and no material term or condition thereof shall have been further
amended, modified or waived in any material respect after the execution thereof
(other than the waiver of any Management Fee previously due and payable).
(u) Liquor Agreements. Borrowers shall have delivered to
Administrative Agent (in sufficient copies for each Lender) executed or
conformed, certified copies of each of the Liquor Agreements and all amendments
and written waivers thereto entered into on or before the Closing Date, as
listed on Schedule VI annexed hereto, which Liquor Agreements shall be
satisfactory in form and substance to the Requisite Lenders and Administrative
Agent in their sole discretion; such Liquor Agreements, as so amended or
waived, shall be in full force and effect and no material term or condition
thereof shall have been further amended, modified or
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waived after the execution thereof; and no Person shall have failed in any
material respect to perform any material obligation or covenant or satisfy any
material condition required by such Liquor Agreements to be performed or
complied with on or before the Closing Date.
(v) Franchise Agreements; Franchisor Comfort Letters.
Borrowers shall have delivered to Administrative Agent (in sufficient copies
for each Lender) executed or conformed, certified copies of each of the
Franchise Agreements and all amendments and written waivers thereto entered
into on or before the Closing Date, as listed on Schedule V annexed hereto,
which Franchise Agreements shall be reasonably satisfactory in form and
substance to Administrative Agent in all material respects; such Franchise
Agreements, as so amended or waived, shall be in full force and effect and no
material term or condition thereof shall have been further amended, modified or
waived after the execution thereof; and no Person shall have failed in any
material respect to perform any material obligation or covenant or satisfy any
material condition required by such Franchise Agreements to be performed or
complied with on or before the Closing Date, including, without limitation (but
only if the same constitutes a material obligation, covenant or condition),
obligations under property improvement plans and quality control plans required
by the respective franchisors to be performed within specified periods.
Borrowers shall have delivered to Administrative Agent original counterparts of
a franchisor's comfort letter with respect to each Franchise Agreement in
respect of each Asset acceptable in form and substance to Administrative Agent,
and duly executed by each franchisor under such Franchise Agreement.
(w) Senior Note Consent. Borrowers shall have delivered to
Administrative Agent an executed or conformed, certified copy of the Senior
Note Consent and such documents, as so amended, shall be in full force and
effect and no term or condition thereof shall have been further amended,
modified or waived after the execution thereof; and no Person shall have failed
in any material respect to perform any material obligation or covenant or
satisfy any material obligation or covenant or satisfy any material condition
required thereunder to be performed or complied with on or before the Closing
Date.
(x) IP License Agreements. Borrowers shall have delivered to
Administrative Agent (in sufficient copies for each Lender) executed or
conformed, certified copies of every IP License Agreement and all amendments
and written waivers thereto entered into on or before the Closing Date, as
listed on Schedule XI annexed hereto, which IP License Agreements shall be
reasonably satisfactory in form and substance to Administrative Agent in all
material respects; such IP License Agreements, as so amended or waived, shall
be in full force and effect and no material term or condition thereof shall
have been further amended, modified or waived after the execution thereof; and
no Person shall have failed in any material respect to perform any material
obligation or covenant or satisfy any material condition required by such IP
License Agreements to be performed or complied with on or before the Closing
Date; the Loan Parties shall have delivered evidence reasonably satisfactory in
form and substance to Administrative Agent that there is no material
Intellectual Property.
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(y) Room Rates. Administrative Agent shall have received
Occupancy/Room Rate Statistics for each Asset for the twelve (12) months ending
August 31, 1997.
(z) Stock Pledges. The Loan Parties shall have delivered to Administrative
Agent pursuant to each Collateral Security Agreement the stock certificates
(which certificates shall be accompanied by irrevocable undated stock powers
duly endorsed in blank and irrevocable proxies, all satisfactory in form and
substance to Administrative Agent), certificated partnership interests,
certificated limited liability company membership interests, promissory notes
and other instruments, (in each case duly endorsed to the order of
Administrative Agent, as Agent for Lenders, as secured party), representing the
capital stock, partnership interests, limited liability company membership
interests, promissory notes and other instruments to be pledged on the Closing
Date pursuant to the Collateral Security Agreements.
(aa) Liquor Cost Evidence. Borrowers have delivered to
Administrative Agent, in a form and substance satisfactory to Administrative
Agent, evidence that expenses incurred by each Subsidiary in connection with
each Liquor Agreement generally equal or exceed 50% of the revenue collected by
such Subsidiary in connection with each such Liquor Agreement ("LIQUOR COST
EVIDENCE").
(bb) O&M Plan. Borrowers shall have implemented an
operations and maintenance plan ("O&M PLAN") which shall be reasonably
satisfactory to Administrative Agent, for asbestos-bearing materials ("ABM")
that is consistent with the recommendations in the Environmental Protection
Agency's "Managing Asbestos in Place, A Building Owner's Guide to Operations
and Maintenance Programs for Asbestos-Containing Materials" (or in the case of
the Canadian Assets, Regulation 838 under the Occupational Health and Safety
Act (Ontario)) or any successor to such guide and which shall include, without
limitation, a plan for complying with all applicable laws with respect to ABM
and (to the extent required by such guide) the following program elements: (i)
notification (a program to tell workers, tenants and building occupants where
ABM is located, and how and why to avoid disturbing the ABMs); (ii)
surveillance (regular ABM surveillance to note, assess, and document changes in
the ABM's condition); (iii) controls (work control/permit system to control
activities which might disturb ABMs); (iv) work practices (operations and
maintenance work practices to avoid or minimize fiber release during activities
affecting ABM); (v) record keeping (to document operations and maintenance
activities); (vi) worker protection (medical and respiratory protection
programs, as applicable); and (vii) training (asbestos program manager and
custodial and maintenance staff training). A copy of each such O&M Plan shall
have been delivered to Administrative Agent.
SECTION 3.2 CONDITIONS PRECEDENT TO THE ADDITIONAL ADVANCE.
The obligation of Lenders to make the Additional Advance is subject to
fulfillment by each of the Borrowers and the other Loan Parties or waiver by
Administrative Agent and the Lenders of the following conditions precedent no
later than the date required therefore as hereinafter provided:
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(a) Certificates and Legal Matters. Such certificates and
documentation relating to the Additional Advance (including, without
limitation, all corporate and other proceedings) as Lenders shall reasonably
require, all documents and all legal matters in connection with the Additional
Advance shall be reasonably satisfactory in form and substance to
Administrative Agent.
(b) Representations and Warranties; Compliance with
Conditions. The representations and warranties of each of the Borrowers and
the other Loan Parties contained in this Agreement and the other Loan Documents
shall be true and correct in all material respects on and as of the Advance
Closing Date after giving effect to the making of the Additional Advance with
the same effect as if made on and as of such date, no Material Adverse Change
shall have occurred (provided however that if a Material Adverse Change shall
have occurred and as a result thereof the Additional Advance is not made by
Lenders, then prior to February 1, 1998 Borrower shall be permitted to repay
the entire principal balance of each Loan and obtain a Partial release for each
Asset (the "ADDITIONAL ADVANCE EARLY PREPAYMENT"), and no Default or Event of
Default shall have occurred and be continuing either before the making of the
Additional Advance or after giving effect to the Additional Advance.
(c) Document Deliveries. On or prior to the Advance Closing
Date, all of the conditions set forth in Section 3.1 with respect to the
Initial Advance shall have been fulfilled and each of the Borrowers shall, at
its sole cost and expense, deliver to Administrative Agent the following, in
form and content acceptable to Administrative Agent, with respect to the
Additional Advance that will not be cured as a result of the Additional
Advance:
(i) Advance Certificate. A certificate executed and
delivered by an authorized officer, director, general partner or
managing member of each of the Borrowers, as applicable certifying, as
of the Advance Closing Date, (x) as to the matter set forth in this
Section 3.2, (y) as to the principal amount outstanding under the
Notes, after taking into account the requested Additional Advance;
(ii) Title Policy. Administrative Agent shall have
received such endorsements to the Title Insurance Policies for each
Asset, in form and substance satisfactory to Requisite Lenders and
Administrative Agent in their sole discretion, as Administrative Agent
shall require including "bring down endorsements" to insure that,
after giving effect to the Additional Advances, the Liens created by
the applicable mortgages and insured by such Title Insurance Policies
are in full force and effect and unmodified; Borrowers shall provide
Administrative Agent with such evidence as is available in each state
(or other jurisdiction) as Administrative Agent may require in order
to satisfy Administrative Agent that the Additional Advance shall have
the same priority over liens or encumbrances against the Property as
the Initial Advance (including without limitation new title policies
for any Asset located where a "bring down endorsement" acceptable to
Lender is not available).
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(iii) Recording Charges. Evidence of payment of all
mortgage, mortgage recording, stamp, intangible and other similar
taxes, recording charges and filing fees, if any, incurred in
connection with the Additional Advance;
(iv) Expenses. Payment of all reasonable out of
pocket expenses of the transactions to be consummated on the Advance
Closing Date, including without limitation, all reasonable attorneys'
fees, appraisal fees, accounting fees, consultant fees, and other
expenses of Administrative Agent and Lenders;
(v) Updates to Legal Opinions. To the extent
Administrative Agent determines in its reasonable discretion that any
legal opinion delivered pursuant to Section 3.1(f) does not adequately
address the Additional Advance (including without limitation that the
Additional Advance shall have the same priority as the Initial Advance
and shall have no negative effect on the priority of the Liens created
by the Security Documents), Administrative Agent shall have received
updates to each such legal opinion. Such updates shall be in form,
scope and substance satisfactory to Administrative Agent and
Administrative Agent's counsel in their reasonable discretion and
shall, among other things, provide that the Additional Advance shall
have no effect on the priority of the Liens created by the Security
Documents.
(vi) Amendments to Loan Documents. Borrowers and
the other Loan Parties shall execute such amendments to the Loan
Documents, as reasonably requested by Administrative Agent, to ensure
that the Loan Documents secure the Loans subject only to the Permitted
Encumbrances, after giving effect to the Additional Advance and such
amendments shall be in form and substance satisfactory to
Administrative Agent.
(vii) Reaffirmation of Affiliate Guaranty. The
parties to any and all guaranties, including without limitation the
Affiliate Guaranty, shall execute a reaffirmation of their guaranties,
in form and content acceptable to Administrative Agent, pursuant to
which each party shall reaffirm their liabilities and obligations
thereunder notwithstanding the making of the Additional Advance.
(d) No Injunction. On the Advance Closing Date, no law or
regulation shall have been adopted, no order, judgment or decree of any
Governmental Authority shall have been issued and no litigation shall be
pending or threatened, which in the good faith judgment of Administrative Agent
would enjoin, prohibit or restrain, or impose or result in the imposition of
any material adverse condition upon, the making or repayment of the Additional
Advance or the Loans or the consummation of the transactions contemplated by
this Agreement or the other Loan Document.
(e) Acceptance of Borrowings. The acceptance by (x) Domestic
Borrower of the proceeds of the Additional Advance under the Domestic Notes and
(y) Canadian Borrower of the
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proceeds of the Additional Advance under the Canadian Notes, shall constitute a
representation and warranty by each of the Borrowers to Lenders that all of the
conditions to be satisfied under Section 3.2 in connection with the making of
the Additional Advance and Section 3.1 in connection with the Initial Advance
have been satisfied or waived by Administrative Agent.
(f) Form of Documents and Related Matters. The certificates,
agreements, and other documents and papers referred to in this Section 3.2
shall be delivered to Administrative Agent, and shall be reasonably
satisfactory in form and substance to Administrative Agent.
SECTION 3.3 CONDITIONS PRECEDENT TO ANY SUBSTITUTION EVENT.
The obligation of Administrative Agent to provide either
Borrower a Partial Release for any proposed Substitution Removed Asset pursuant
to Section 2.4.1 hereof is subject to fulfillment by Borrowers or waiver by
Lenders of the following conditions precedent no later than the date required
therefore as hereinafter provided:
(a) Information Deliveries. Borrowers shall have delivered
to Administrative Agent, pursuant to Section 2.4.2 hereof, the following in
form and substance satisfactory to the Requisite Lenders and Administrative
Agent in their sole discretion:
(i) Section 3.1 Deliveries. All of the deliveries
required to be delivered by Borrowers pursuant to Sections
3.1(c)(iii), (c)(iv), (c)(v); (e), (f), (j), (l), (m), (o), (p), (r)
and (s) on or prior to the Closing Date shall be delivered to
Administrative Agent with respect to the Substitution Added Asset;
(ii) Title. A preliminary title report consistent
with the provisions of Section 3.3(d)(iii) hereof for the Substitution
Added Asset; and
(iii) Other Documents. Such other certificates and
documentation relating to the Substitution Event as may have been
reasonably requested by Administrative Agent (including, without
limitation, all corporate and other proceedings), all documents
(including, without limitation, all documents referred to herein and
not appearing as exhibits hereto) and all legal matters in connection
with the Substitution Event shall be reasonably satisfactory in form
and substance to Administrative Agent.
(iv) Budgets. Borrowers shall have delivered, and
Administrative Agent shall have approved, the Approved Annual
Operating Budget (relating to each Substitution Added Asset) for the
remainder of the current Fiscal Year, amended in form and substance
satisfactory to the Requisite Lenders and Administrative Agent in
their sole discretion (which shall include a budget for Replacements
and Leasing Commissions) to reflect the Substitution Event.
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(b) Value. Borrowers shall have provided to Administrative
Agent such evidence as Administrative Agent shall require and Administrative
Agent shall have determined in its sole and absolute discretion that (i) the
market value of the Substitution Added Assets as determined pursuant to the
appraisals delivered pursuant to Section 3.3(a)(i) hereof exceeds the market
value of the Substitution Removed Assets as determined pursuant to Section
2.4.1(iii), and (ii) the Net Operating Income which will be generated from the
Substitution Added Assets shall equal or exceed the Net Operating Income for
the Substitution Removed Assets.
(c) Representations and Warranties; Compliance with
Conditions. The representations and warranties of all Loan Parties contained
in this Agreement and the other Loan Documents shall be true and correct in all
material respects on and as of the Substitution Date after giving effect to the
Substitution Event with the same effect as if made on and as of the
Substitution Date, no Material Adverse Change shall have occurred, and no
Default or Event of Default shall have occurred and be continuing (x) on the
Substitution Date which will not be cured by the Substitution Event or (y)
after giving effect to the Substitution Event.
(d) Document Deliveries. On or prior to the Substitution
Date, all of the conditions set forth in Section 3.1 with respect to the Loans
shall have been fulfilled and Borrowers shall, at their sole cost and expense,
deliver to Administrative Agent the following, in form and content acceptable
to the Requisite Lenders and Administrative Agent, in their sole discretion,
with respect to the Substitution Added Asset:
(i) Section 3.1 Deliveries. All of the deliveries,
payments and actions required to be delivered, paid or performed by
either of the Borrowers or any other Loan Party pursuant to Sections
3.1(c)(i), (c)(vi), (d), (f), (h), (i), (k), (n), (t), (u), (v), (x),
(y) and (z) on or prior to the Closing Date shall be delivered, paid
or performed with respect to the Substitution Added Asset on or prior
to the Substitution Date;
(ii) Substitution Certificate. A certificate
executed and delivered by an authorized officer, director, general
partner or managing member of each of the Borrowers, as applicable
certifying, as of the Substitution Date, (v) as to the matters set
forth in Section 3.3, (w) as to the principal amount outstanding under
the Notes, (x) as to the allocation of the Allocated Loan Amounts for
the Substitution Removed Assets among the Substitution Added Assets,
as determined by the Requisite Lenders and Administrative Agent in
their sole discretion and (y) as to the amount of the initial deposits
or monthly deposits, as determined by Administrative Agent, if
required to be made in connection with such Substitution Event
pursuant to Article 7 hereof;
(iii) Title Policy. A Title Policy and the other
deliveries consistent with Section 3.1(c)(ii) for the Substitution
Added Assets.
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(iv) Recording Charges. Evidence of payment of all
mortgage, mortgage recording, stamp, intangible and other similar
taxes, recording charges and filing fees, if any, incurred in
connection with each Mortgage, Assignment of Leases and other Loan
Document executed and delivered in connection with the Substitution
Event;
(v) Expenses. Payment of all reasonable
out-of-pocket expenses of the transactions to be consummated on the
Substitution Date, including without limitation, all reasonable
attorneys' fees, appraisal fees, accounting fees, consultant fees, and
other expenses of Administrative Agent and any Lender;
(vi) Updates to Schedules. To the extent required
by Administrative Agent, updates to all schedules and exhibits to this
Agreement.
(vii) Acquisition Documents. If either of the
Borrowers are purchasing the Substitution Added Asset from a third
party, copies of all documents with respect to such purchase
(including but not limited to copies of purchase contracts, deeds and
title policies).
(e) Site Inspection. Administrative Agent on behalf of
Lenders, shall have performed, or caused to be performed on its behalf, an
on-site due diligence review of the Substitution Added Asset and the results
thereof shall have been satisfactory to the Requisite Lenders and
Administrative Agent in their sole discretion.
(f) No Injunction. On the Substitution Date, no law or
regulation shall have been adopted, no order, judgment or decree of any
Governmental Authority shall have been issued and no litigation shall be
pending or threatened, which in the good faith judgment of Administrative Agent
would enjoin, prohibit or restrain, or impose or result in the imposition of
any material adverse condition upon, the making or repayment of the Loans or
the consummation of the transactions contemplated by this Agreement or the
other Loan Document.
(g) Form of Loan Documents and Related Matters. The
certificates, agreements, legal opinions and other documents and papers
referred to in this Section 3.3 shall be delivered to Administrative Agent, and
shall be reasonably satisfactory in form and substance to Administrative Agent
and Lenders (unless the form thereof is prescribed herein and except that the
Mortgages, Assignment of Leases, Environmental Indemnities, Clearing Account
Agreement and Consent and Subordination of Property Manager, shall be
consistent with the form of such document, delivered in connection with the
Closing except as may be required by Administrative Agent or its counsel to
take into account the particular Substitution Added Asset which is being
encumbered or circumstances in connection therewith (such as conforming the
documents to the requirements of local law and of Administrative Agent and
Lenders in the state (or jurisdiction) where the Substitution Added Asset is
located)).
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SECTION 3.4 CONDITIONS PRECEDENT TO RESIZING THE LOANS.
3.4.1 Borrowers shall satisfy the following conditions
precedent no later than the date required therefore as hereinafter provided:
(a) Resized Loan Information Deliveries. Resized Borrowers
shall have delivered to Administrative Agent, from time to time during the
Resizing Diligence Period in sufficient time to Administrative Agent and
Lenders to review same prior to the Resizing Date, the following (the "RESIZED
LOANS INFORMATION DELIVERIES") in form and substance satisfactory to
Administrative Agent:
(i) Section 3.1 Deliveries. All of the
deliveries required to be delivered by Borrowers pursuant to Sections
3.1(c)(iii), (c)(iv), (c)(v); (e), (f), (j), (l), (m), (o), (p), (r),
(s), (t), (u), (v), (x) and (y) of the Resized Loan Agreement on or
prior to the Resizing Closing Date shall be delivered to
Administrative Agent with respect to the Resized Loans Collateral;
(ii) Title. A preliminary title report consistent
with the provisions of Section 3.2(c)(ii) of the Resized Loan
Agreement for each Asset which comprises the Resized Loans Collateral;
and
(iii) Other Documents. Such other certificates and
documentation relating to the Resized Loans as may have been
reasonably requested by Administrative Agent (including, without
limitation, all corporate and other proceedings), all documents
(including, without limitation, all documents referred to herein) and
all legal matters in connection with the Resized Loans shall be
reasonably satisfactory in form and substance to Administrative Agent.
(iv) Budgets. Borrowers shall have delivered, and
Administrative Agent shall have approved, the Approved Annual
Operating Budget (relating to the Resized Loans Collateral) for the
remainder of the current Fiscal Year, amended in form and substance
satisfactory to the Requisite Lenders and Administrative Agent in
their sole discretion (which shall include a budget for Replacements
and Leasing Commissions) to reflect the Resized Loans Collateral.
(b) Document Deliveries. On or prior to the Resizing Closing
Date, all of the conditions set forth in the Resized Loan Agreement, including,
without limitation, Article III of the Resized Loan Agreement, shall have been
fulfilled including but not limited to delivery (and execution) by each Resized
Borrower, at its sole cost and expense, to Administrative Agent of (x) the
Resized Loan Agreement and the other loan documents attached as Exhibits to the
Resized Loan Agreement (the "RESIZED LOAN DOCUMENTS") each containing the
modifications set
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forth below and (y) the other deliveries (including without limitation new
title commitments and surveys) required pursuant to Article III of the Resized
Loan Agreement.
(i) Allocated Loan Amounts. The term "Allocated Loan
Amount" as used in the Resized Loan Documents shall be determined by
the Requisite Lenders and Administrative Agent in their sole
discretion except that (i) on the Resized Closing Date, the sum of the
Resized Allocated Loan Amounts for each Asset comprising the (x)
Resized Canadian Loan Collateral shall not exceed the Resized Canadian
Loan Amount and (y) Resized Domestic Loan Collateral shall not exceed
the Resized Domestic Loan Amount, and (ii) the Resized Allocated Loan
Amounts shall be based upon the relative Net Operating Income (as
defined in the Resized Loan Agreement) of each of the Assets
comprising the Resized Loans Collateral.
(ii) Stated Maturity/Optional Prepayment Date. The
term "Stated Maturity" as used in the Resized Loan Documents shall
mean the twenty-fifth (25th) anniversary of the Resizing Closing Date.
The term "Optional Prepayment Date" as used in the Resized Loan
Documents shall mean the tenth (10th) anniversary of the Resizing
Closing Date.
(iii) Maximum Permitted Trade Payables and FF&E
Financings. The term "Maximum Permitted Trade Payables and FF&E
Financings" as used in the Resized Loan Documents shall mean (x)
Permitted Trade Payables (as defined in the Resized Loan Agreement)
outstanding for more than sixty (60) days and (y) FF&E Financings, in
the aggregate for clause (x) and clause (y) not to exceed $350,000 per
Asset (as defined in the Resized Loan Agreement) comprising Resized
Loans Collateral and the Resized Maximum Trade Payables in the
aggregate for all Resized Loans Collateral.
(iv) Schedule I of the Resized Loan Agreement. The
initial deposit for the "Required Repair Subaccount" on Schedule I of
the Resized Loan Agreement shall be equal to the Resized Required
Repair Deposit. The initial deposit for the "Tax and Insurance Escrow
Subaccount" on Schedule I of the Resized Loan Agreement shall be equal
to the Resized Tax and Insurance Deposit. The initial deposit for the
"Security Deposit Subaccount" on Schedule I of the Resized Loan
Agreement shall be equal to the aggregate amount of all Security
Deposits in connection with the Resized Loans Collateral. All other
initial deposits required to be set forth on Schedule I of the Resized
Loan Agreement shall be determined by Administrative Agent in
accordance with the terms of the Resized Loan Agreement.
(v) Initial Interest Rate and Monthly Debt Service
Payment Amount. The term "Initial Interest Rate" as used in the
Resized Loan Documents shall equal the Interest Rate and the term
"Monthly Debt Service Payment Amount" shall be determined in
accordance with the terms of the Commitment referred to in Section
11.23 hereof.
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(vi) Other Modifications. The Resized Loan
Documents shall be modified as required by Administrative Agent or its
counsel to (i) take into account the particular assets which are being
encumbered and circumstances in connection therewith or with the
Resized Loans (including without limitation (x) conforming the
documents to the requirements of local law and of Lenders in the
states or provinces where the Resized Loans Collateral is located and
(y) preparing schedules and exhibits to the Resized Loan Documents to
reflect the resized Loan Collateral) and (ii) provide that the Resized
Loan Documents shall be amended and restated and that all obligations
and rights thereunder shall be assumed by the Resized Borrowers. If
the Resized Loans Collateral consists of any Assets which are located
in Canada, the Resized Loan Documents shall be modified to reflect the
terms and provisions of this Agreement and the other Loan Documents as
they relate to the Canadian Loan.
(c) Compliance with the terms of The Resized Loan Agreement.
In addition to any requirements set forth herein, Resized Borrowers, Resized
Parent and Resized Subsidiary shall have complied with all of the terms and
conditions set forth in the Resized Loan Agreement and all other documents
executed in connection therewith including but not limited to the Resized Loan
Documents.
(d) Representations and Warranties; Compliance with
Conditions. The representations and warranties of each of the Borrowers
contained in this Agreement and the other Loan Documents shall be true and
correct on and as of the Resizing Closing Date with the same effect as if made
on and as of such date, and no Default or Event of Default shall have occurred
and be continuing.
(e) Structuring Fee. If the Resized Loans Amount is greater
than the Maximum Loan Amount, Administrative Agent shall have received on the
Resized Closing Date an amount equal to one percent (1%) of such excess.
(f) No Injunction. On the Resized Closing Date, no law or
regulation shall have been adopted, no order, judgment or decree of any
Governmental Authority shall have been issued and no litigation shall be
pending or threatened, which in the good faith judgment of Administrative Agent
would enjoin, prohibit or restrain, or impose or result in the imposition of
any material adverse condition upon, the making or repayment of the Resized
Loans or the consummation of the transactions contemplated by the Resized Loan
Agreement or the other Loan Document (as defined in the Resized Loan
Agreement).
(g) Form of Loan Documents and Related Matters. The
certificates, agreements, legal opinions and other documents and papers
referred to in this Section 3.4 shall be delivered to Administrative Agent, and
shall be reasonably satisfactory in form and substance to Administrative Agent.
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(h) Guaranty. Administrative Agent shall have received a
guaranty, executed by Resized Parent and Resized Liquor Subsidiary, of the
obligations of Resized Borrowers in the form attached to the Resized Loan
Agreement as Exhibit C.
(i) Other Indebtedness. On the Resizing Closing Date, the
Requisite Lenders and Administrative Agent in their sole discretion, based upon
the standards of the Rating Agencies (with respect to securitization of rated
single or multi-class securities secured by or evidencing ownership interests
in notes and/or mortgage), may require that (i) Domestic Borrower shall not be
obligated under any Guaranteed Indebtedness and (ii) the stock of Domestic
Borrower shall not be encumbered, mortgaged or otherwise pledged to any Person.
(j) Consents. Administrative Agent shall have received
copies of all consents and approvals (including but not limited to in
connection with the Senior Notes and the Acquisition Facility) required in
connection with the execution, delivery and performance by Borrowers and
Resized Borrowers and the validity and enforceability of the Resized Loan
Documents and such consents and approvals shall be in full force and effect.
IV. REPRESENTATIONS AND WARRANTIES
SECTION 4.1 REPRESENTATIONS OF BORROWERS.
To induce Lenders and Administrative Agent to enter into this
Agreement, Domestic Borrower and Canadian Borrower represent and warrant as of
the Closing Date that:
(a) Organization. Each of the Borrowers and each other Loan
Party has been duly organized and is validly existing and in good standing with
requisite power and authority to own its properties and to transact the
businesses in which it is now engaged. Each of the Borrowers and each other
Loan Party is duly qualified to do business and is in good standing in each
jurisdiction where it is required to be so qualified in connection with its
properties, businesses and operations, except where such failure could not
reasonably be expected to cause, either individually or in the aggregate, a
Material Adverse Change. Each of the Borrowers and each other Loan Party
possesses all rights, licenses, permits and authorizations, governmental or
otherwise, necessary to entitle it to own its properties and to transact the
businesses in which it is now engaged (except where such failure could not
reasonably be expected to cause, either individually or in the aggregate, a
Material Adverse Change), and the sole business of each of the Borrowers and
each other Loan Party is the ownership, management and operation of the
Property and the other Collateral, respectively. All issued and outstanding
common stock of each of the Borrowers and each Loan Party which is a
corporation is duly and validly issued, fully paid and nonassessable.
(b) Proceedings. Each of the Borrowers and each other Loan
Party has taken all necessary action to authorize the execution, delivery and
performance of this Agreement and the
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other Loan Documents. This Agreement and such other Loan Documents have been
duly executed and delivered by or on behalf of Borrowers and each other Loan
Party and constitute legal, valid and binding obligations of Borrowers and such
Loan Parties which are parties thereto enforceable against Borrowers and each
other Loan Party in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization and similar laws affecting
rights of creditors generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(c) No Conflicts. The execution, delivery and performance of
this Agreement and the other Loan Documents by Borrowers and each other Loan
Party which is a party thereto will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance (other than
pursuant to the Loan Documents) upon any of the property or assets of Borrowers
or any other Loan Party pursuant to the terms of any indenture, mortgage, deed
of trust, loan agreement, partnership agreement, operating agreement,
certificate of incorporation, by-laws or other agreement or instrument to which
either of the Borrowers or any other Loan Party is a party or by which any of
Borrowers' or any other Loan Party's property or assets is subject, nor will
such action result in any violation of the provisions of any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over either of the Borrowers or any other Loan Party or any of
Borrowers' or any other Loan Party's properties or assets, and any consent,
approval, authorization, order, registration or qualification of or with any
court or any such regulatory authority or other governmental agency or body
required for the execution, delivery and performance by Borrowers or any other
Loan Party of this Agreement or any other Loan Documents to which it is a party
has been obtained and is in full force and effect, except where failure to so
comply will not then have caused and could not reasonably be expected to cause,
either individually or in the aggregate, a Material Adverse Change.
(d) Litigation. There are no actions, suits or proceedings
at law or in equity by or before any Governmental Authority or other agency now
pending or threatened against or affecting either of the Borrowers, any other
Loan Party or the Property or the other Collateral, which actions, suits or
proceedings, if determined against either of the Borrowers, any other Loan
Party or the Property or the other Collateral, could reasonably be expected to
cause, either individually or in the aggregate, a Material Adverse Change.
(e) Agreements. Neither of the Borrowers nor any other Loan
Party nor any subsidiary of Bristol (including without limitation any other
Loan Party) is a party to any agreement or instrument or subject to any
restriction which could reasonably be expected to cause a Material Adverse
Change. Neither of the Borrowers nor any other Loan Party is in default (and
no condition exists that, with the giving of notice or the passage of time or
both, would constitute a default) in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any agreement
or instrument to which it is a
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party or by which Borrowers, such Loan Party or any Asset or other Collateral
is bound which defaults, in the aggregate, will not then have caused and could
not reasonably be expected to cause, either individually or in the aggregate, a
Material Adverse Change. Other than the Loan Documents, the Acquisition
Documents and the Subordinate Note Documents, no agreement, instrument or other
restriction exists which limits the ability or right of any Loan Party to (w)
amend, restate or satisfy the terms and conditions of this Agreement or the
other Loan Documents, (x) refinance, prepay or repay the Debt, (y) acquire,
loan or dispose of any property or other asset, or any interest therein, or
acquire or enter into, or provide any services under any Property Management
Agreement or (z) otherwise conduct such Loan Party's business.
(f) Title. The appropriate Borrower or such other Loan Party
which owns any Asset has good, marketable and insurable title to the Leasehold
Estates comprising the Property, good marketable and insurable title in fee
simple to all of the other real property and improvements comprising the
Property and good title to the balance of the Collateral, free and clear of all
Liens whatsoever except the Permitted Encumbrances. Each Mortgage, when
properly recorded in the appropriate records and each of the other Security
Documents, together with any Uniform Commercial Code (or Canadian equivalent)
financing statements required to be filed in connection therewith, will create
(i) a valid, perfected, legally enforceable first priority lien on the
appropriate Asset and on the other Collateral, subject only to the Permitted
Encumbrances and (ii) perfected security interests in and to, and perfected
collateral assignments of, all personalty (including the Tenant Leases) and the
other Collateral, all in accordance with the terms thereof, in each case
subject only to any applicable Permitted Encumbrances. The Permitted
Encumbrances do not materially and adversely affect the value of any Asset, the
use of such Asset for the use being made thereof as of the date of this
Agreement, the operation of such Asset or either Borrower's ability to repay
the Loans in full. There are no claims for payment for work, labor or
materials affecting any Asset which are or may become a Lien prior to, or of
equal priority with, the Liens created by the Loan Documents other than the
Permitted Encumbrances.
(g) No Bankruptcy Filing. Neither of the Borrowers nor any
Loan Party is contemplating either the filing of a petition by it under any
state or federal bankruptcy or insolvency laws or the liquidation of all or a
major portion of its assets or property, and neither Borrower has knowledge of
any Person contemplating the filing of any such petition against Borrowers or
any Loan Party.
(h) Full and Accurate Disclosure. No statement of fact made
by Borrowers or any Loan Party in this Agreement or in any of the other Loan
Documents, nor any written materials relating to the business, operations or
condition (financial or otherwise) of Borrowers, any Loan Party, the Property
or any other Collateral that was supplied to Lenders in connection with the
transactions contemplated by the Loan Documents (other than financial
projections in respect of which no representation is made) contains or will
contain (or, in the case of such written material, at the time supplied
contained) any untrue statement of a material fact or omits
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or will omit (or omitted, as the case may be) to state any material fact
necessary to make the statements contained herein or therein not misleading.
There is no material fact presently known to either of the Borrowers which has
not been disclosed to Administrative Agent and Lenders in writing in connection
with such due diligence investigation which adversely affects, nor as far as
either Borrower can foresee, might cause a Material Adverse Change.
(i) No Plan Assets. Neither of the Borrowers nor any other
Loan Party is an "employee benefit plan" (as defined in Section 3(3) of ERISA),
subject to Title I of ERISA, and none of the assets of Borrowers or any other
Loan Party constitutes or will constitute "plan assets" of one or more such
plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition, (i)
neither of the Borrowers nor any other Loan Party is a "governmental plan"
within the meaning of Section 3(32) of ERISA and (ii) transactions by or with
Borrowers or any other Loan Party are not subject to state statutes regulating
investments of, and fiduciary obligations with respect to, governmental plans.
(j) Compliance. Borrowers, each other Loan Party, the
Property, the other Collateral and the use thereof comply with all applicable
Legal Requirements, including, without limitation, building and zoning
ordinances and codes and subdivision laws and regulations, except where failure
to so comply will not then have caused and could not reasonably be expected to
cause, either individually or in the aggregate, a Material Adverse Change.
Neither of the Borrowers nor any Loan Party is in default or violation of any
order, writ, injunction, decree or demand of any Governmental Authority, except
where failure to so comply will not then have caused and could not reasonably
be expected to cause, either individually or in the aggregate, a Material
Adverse Change. There has not been and shall never be committed by either of
the Borrowers, any other Loan Party or any other person in occupancy of or
involved with the operation or use of any Asset or any other Collateral any act
or omission affording the federal government or any state, provincial or local
government the right of forfeiture as against any Asset, any other Collateral
or any part thereof or any monies paid in performance of Borrowers' obligations
under any of the Loan Documents. Borrowers hereby covenant and agree not to
commit, permit or suffer to exist any act or omission affording such right of
forfeiture.
(k) Financial Information.
(i) To each of the Borrowers' best knowledge, all
financial data, including, without limitation, the statements of cash
flow and income and operating expense, that have been delivered to
Administrative Agent and Lenders in respect of the Property, including
those required under Section 3.1 hereof (A) are true, complete and
correct in all material respects, (B) accurately represent the
financial condition of the Property as of the date of such reports,
and (C) have been prepared in accordance with GAAP consistently
applied throughout the periods covered, except as disclosed therein.
Neither of the Borrowers nor any other Loan Party has any material
contingent liabilities,
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liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments that
are known to Borrowers and reasonably likely to cause a Material
Adverse Change except as referred to or reflected in said financial
statements. Since the date of such financial statements, there has
been no Material Adverse Change in the financial condition, operations
or business of Borrowers or any other Loan Party from that set forth
in said financial statements.
(ii) All federal, state, provincial and local income
tax returns have been filed by Borrowers and the other Loan Parties
and there are no income taxes due and owing by Borrowers or the other
Loan Parties.
(l) Condemnation/Casualty. No Condemnation or other
proceeding has been commenced or, to either of the Borrowers' best knowledge,
is contemplated with respect to all or any portion of any Asset or for the
relocation of roadways providing access to any Asset. Except as set forth on
Schedule XXIV no Casualty (which has not already been repaired) has occurred at
any Asset except for Casualties which would cost less than $100,000 to repair.
(m) Federal Reserve Regulations. No part of the proceeds of
the Loans will be used for the purpose of purchasing or acquiring any "margin
stock" within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or for any other purpose which would be inconsistent
with such Regulation U or any other Regulations of such Board of Governors, or
for any purposes prohibited by Legal Requirements or by the terms and
conditions of this Agreement or the other Loan Documents.
(n) Utilities and Public Access. Each of the Assets has
rights of access to public ways and is served by water, sewer, sanitary sewer
and storm drain facilities adequate to service each of the Assets for its
intended use. All public utilities necessary or convenient to the full use and
enjoyment of each of the Assets are located either in the public rights-of-way
abutting such Asset (which are connected so as to serve each of the Assets
without passing over other property) or in recorded easements serving each of
the Assets and such easements are set forth in the Title Insurance Policy for
such Asset. All roads necessary for the use of the Property for its current
purpose have been completed and dedicated to public use and accepted by all
Governmental Authorities.
(o) Not a Foreign Person. Neither Domestic Borrower nor any
other Loan Party (other than Canadian Borrower and Canadian Management Co.) is
a "foreign person" within the meaning of Section 1445(f)(3) of the Code.
(p) Separate Lot. Each of the Assets is comprised of one (1)
or more parcels which constitute a separate tax lot and does not constitute a
portion of any other tax lot not a part of such Asset.
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(q) Assessments. Except as set forth on Schedule XX, there
are no pending or proposed special or other assessments for public improvements
or otherwise affecting any of the Assets, nor are there any contemplated
improvements to any of the Assets that may result in such special or other
assessments, and Borrowers have no knowledge of any other facts or
circumstances (other than facts or circumstances which generally affect other
properties located in the area where the Asset is located, such as a general
increase in Taxes for properties in such area) which would cause the Taxes for
Fiscal Year 1997 to be significantly higher than the Taxes assessed and imposed
for Fiscal Year 1996 except as set forth on Schedule XX.
(r) Enforceability. The Loan Documents are not subject to
any right of rescission, set-off, counterclaim or defense by Borrowers or any
other Loan Party, including the defense of usury, nor would the operation of
any of the terms of the Loan Documents, or the exercise of any right
thereunder, render the Loan Documents unenforceable except to the extent such
unenforceability may be the result of bankruptcy, insolvency, reorganization or
similar laws affecting rights of creditors generally or general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity
or at law), and neither of the Borrowers nor any other Loan Party has asserted
any right of rescission, set-off, counterclaim or defense with respect thereto.
(s) No Prior Assignment. There are no prior assignments of
(i) the Tenant Leases, (ii) any portion of the Rents due and payable or to
become due and payable or (iii) any other Collateral (except the assignments of
Collateral, set forth on Schedule XXI, which secure Permitted Trade Payables
and FF&E Financings which in the aggregate do not exceed the Maximum Permitted
Trade Payables and FF&E Financings and other Permitted Encumbrances), which
will be outstanding following the Closing Date.
(t) Insurance. Borrowers have and have caused each other
Loan Party to have obtained and delivered to Administrative Agent certified
copies of all Policies reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement and there have been no acts or
omissions that would impair the coverage of any such Policies or the benefits
of the mortgagee endorsement and all such insurance policies are in full force
and effect and all premiums with respect to each such insurance policy have
been paid in accordance with the requirements of Section 7.1 hereof.
(u) Use of Property. Each of the Assets is used exclusively
for hotel purposes and other appurtenant and related uses (including retail
stores and restaurants).
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(v) Certificate of Occupancy; Licenses. All certifications,
permits, licenses and approvals, including, without limitation, certificates of
completion and occupancy permits required for the legal use, occupancy and
operation of each of the Assets as a hotel (collectively, the "LICENSES"), have
been obtained and are in full force and effect, except where any failure to do
so, in the aggregate, will not result in a Material Adverse Change. Borrowers
shall and shall cause each other Loan Party to keep and maintain all Licenses
necessary for the operation of each of the Assets as a hotel. The use being
made of each of the Assets is in conformity with the certificates of occupancy
issued for the Property, except where failure to so comply will not then have
caused and could not reasonably be expected to cause, either individually or in
the aggregate, a Material Adverse Change.
(w) Flood Zone. Except as set forth on Schedule XXII, none
of the Improvements on each of the Assets are located in an area as identified
by the Federal Emergency Management Agency as an area having special flood
hazards. Flood insurance policies (meeting the requirements of Section 7) are
in effect for all Assets listed on Schedule XXII. None of the Improvements on
any Asset are constructed on land designated by any Governmental Authority as
wetlands.
(x) Physical Condition. Except as shown on the reports
delivered pursuant to Section 3.1(l), each of the Assets and material
components thereof, including, without limitation, all buildings, improvements,
parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems,
HVAC systems, fire protection systems, electrical systems, equipment,
elevators, exterior sidings and doors, landscaping, irrigation systems and all
structural components, is in good condition, order and repair in all material
respects, ordinary wear and tear excepted. There exists no structural or other
material defects or damages in any Asset, whether latent or otherwise, and
neither of the Borrowers nor any other Loan Party has received notice from any
insurance company or bonding company of any defects or inadequacies in any
Asset, or any part thereof, which would adversely affect the insurability of
the same or cause the imposition of extraordinary premiums or charges thereon
or of any termination or threatened termination of any policy of insurance or
bond.
(y) Boundaries. All of the improvements which were included
in determining the appraised value of each Asset lie wholly within the
boundaries and building restriction lines of such Asset (other than immaterial
encroachments upon any building line, setback line, sideyard line or recorded
or visible easements, which in each case are described in the Title Insurance
Policy and survey for such Asset and provided (i) the same do not restrict the
maintenance and current use of the improvements included in the Asset and (ii)
within thirty (30) days of the request of Administrative Agent, Borrowers will
request and use reasonable efforts (including but not limited to the payment of
fees and escrows) to cause the title company issuing the Title Insurance Policy
with respect to such Asset to provide affirmative insurance acceptable to
Administrative Agent with respect thereto), and no improvements on adjoining
properties encroach upon such Asset, and no easements or other encumbrances
upon such Asset encroach
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upon any of the improvements, so as to affect the value or marketability of
such Asset except those which are insured against by title insurance or which
are not likely to result in a Material Adverse Change.
(z) Leases. No Asset is subject to any Tenant Leases other
than the Tenant Leases described in the Rent Roll delivered to Administrative
Agent in connection with this Agreement and set forth as Schedule III attached
hereto. Other than hotel guests in the ordinary course of business, no person
has any possessory interest in any Asset or right to occupy the same except
under and pursuant to the provisions of the Tenant Leases. The current
Material Leases are in full force and effect and there are no defaults
thereunder by either party and there are no conditions that, with the passage
of time or the giving of notice, or both, would constitute defaults thereunder.
(aa) Survey. The Survey for each Asset delivered to
Administrative Agent in connection with this Agreement has been prepared in
accordance with the provisions of Section 3.1(c)(iii) hereof, and does not fail
to reflect any matter affecting such Asset or the title thereto which would
likely result in a Material Adverse Change.
(bb) Loans to Value. The Loans as of the Closing Date are
equal to no more than 75% of the fair market value of the Property based on the
appraisals, delivered in connection with the origination of the Loans.
(cc) Filing and Recording Taxes. All transfer taxes, deed
stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements currently
in effect in connection with the transfer of the Property to Borrowers or such
other Loan Party have been paid. All mortgage, mortgage recording, stamp,
intangible or other similar taxes required to be paid by any Person under
applicable Legal Requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration, perfection or
enforcement of any of the Loan Documents, including, without limitation, each
Mortgage, have been paid, and, under current Legal Requirements, each Mortgage
(or in the case of the Special Assets, each Negative Pledge) is enforceable in
accordance with its terms by the Secured Parties (or any subsequent holder
thereof).
(dd) Borrowers' Existence. Borrowers hereby represent and
warrant to, and covenant with, Administrative Agent and Lenders that as of the
Closing Date (or, other than with respect to Domestic Borrower, as of thirty
(30) days after the Closing Date with respect to clauses (xiv) and (xv) below)
and until such time as the Debt shall be paid in full:
(i) Each of the Borrowers and the Subsidiaries do
not own and will not own any asset or property other than (A) the
Property, (B) incidental personal property necessary for the ownership
or operation of the Property and (C) the other Collateral.
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(ii) Each of the Borrowers will not and will not
permit any other Loan Party to engage in any business other than the
ownership, management and operation of the (i) Property and (ii) the
Collateral in connection with the Property; each of the Borrowers will
and will cause each other Loan Party to conduct and operate its
business as presently conducted and operated.
(iii) Each of the Borrowers will not and will not
permit any other Loan Party to enter into any contract or agreement
with any Affiliate of either Borrower (or any other Loan Party), any
constituent party of either Borrower (or any other Loan Party) or any
Affiliate of any constituent party, except upon terms and conditions
that are intrinsically fair and substantially similar to those that
would be available on an arms-length basis with third parties other
than any such party.
(iv) Each of the Borrowers and the Subsidiaries have
not incurred and each of the Borrowers will not and will not permit
any of the Subsidiaries to incur any indebtedness (including without
limitation Guaranteed Indebtedness) other than pursuant to a Permitted
Guaranty, secured or unsecured, direct or indirect, absolute or
contingent (including guaranteeing any obligation), other than the
Debt and the FF&E Financings and debt between the Loan Parties. No
indebtedness other than the Debt and FF&E Financings permitted
hereunder may be secured (subordinate or pari passu) by the Property.
(v) Each of the Borrowers and all other Loan Parties
are and will remain solvent and each of the Borrowers will and will
cause all other Loans parties to pay their debts and liabilities
(including, as applicable, shared personnel and overhead expenses)
from its assets as the same shall become due.
(vi) Each of the Borrowers and all other Loan
Parties have done or caused to be done and each of the Borrowers will
and will cause all other Loan Parties to do all things necessary to
observe organizational formalities and preserve its existence, and
each of the Borrowers will not and will not permit any other Loan
Party, nor will either Borrower permit any constituent party of any
Loan Party to, amend, modify or otherwise change the partnership
agreement, partnership certificate, articles of incorporation, bylaws,
articles of organization, operating agreement, trust or other
organizational documents of such Loan Party or such constituent party
without the prior written consent of Administrative Agent.
(vii) Each of the Borrowers will and will cause each
Subsidiary to maintain all of their books, records, financial
statements and bank accounts separate from those of its Affiliates and
any constituent party (other than another Loan Party). Each of the
Borrowers shall and shall cause each of the Subsidiaries to maintain
their books, records, resolutions and agreements as official records.
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(viii) Each of the Borrowers will and will ensure
that each of the Subsidiaries will be, and at all times each will hold
themselves out to the public as, a legal entity separate and distinct
from any other entity (including any Affiliate of either of the
Borrowers or any constituent party of either of the Borrowers), shall
conduct business in its own name, shall correct any known
misunderstanding regarding its status as a separate entity, shall not
identify itself or any of its Affiliates as a division or part of the
others.
(ix) Each of the Borrowers will and will cause all
other Loan Parties to maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations.
(x) Each of the Borrowers will not and will not
permit any Loan Party nor any constituent party of any Loan Party to
seek or effect the liquidation, dissolution, winding up, consolidation
or merger, in whole or in part, of any Loan Party.
(xi) Each of the Borrowers will neither commingle
the funds and other assets of such Borrower with those of any
Affiliate or constituent party of either of the Borrowers or any other
Person nor control the decisions with respect to the daily affairs of
any other Person. Each of the Borrowers will not permit any
Subsidiary to commingle the funds and other assets of such Subsidiary
with those of any Affiliate or constituent party of such Subsidiary or
any other Person nor control the decisions with respect to the daily
affairs of any other Person.
(xii) Each of the Borrowers has and will maintain
its assets in such a manner that it will not be costly or difficult to
segregate, ascertain or identify its individual assets from those of
any Affiliate or constituent party of either of the Borrowers or any
other Person. Each of the Borrowers will ensure that each Subsidiary
has and will maintain its assets in such a manner that it will not be
costly or difficult to segregate, ascertain or identify its individual
assets from those of any Affiliate or constituent party of such
Subsidiary or any other Person.
(xiii) Each of the Borrowers does not and will not
hold itself out to be responsible for the debts or obligations of any
other Person (other than any Loan Party). Each of the Borrowers will
not permit any Subsidiary to hold itself out to be responsible for the
debts or obligations of any other Person (other than any Loan Party).
(xiv) If either Borrower (or any Subsidiary) is a
limited liability company or a limited partnership, at least one
member of such Borrower (or such Subsidiary) and any member owning a
49% or greater membership interest in such Borrower (or such
Subsidiary) (collectively the "SPE MEMBER") and each general partner
of such Borrower (or such Subsidiary), as applicable, shall be a
corporation
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whose sole asset is its interest in such Borrower (or such
Subsidiary); and each general partner, the SPE Member of such Borrower
(or such Subsidiary), or each shareholder of such Borrower (or such
Subsidiary) which owns a 49% or greater interest in such Borrower (or
such Subsidiary), as applicable, will at all times comply, and will
cause such Borrower (or such Subsidiary) to comply, with each of the
representations, warranties and covenants contained in this Section
4.1(dd) as if such representation, warranty or covenant was made
directly by such general partner or SPE Member or shareholder. Only
the SPE Member may be designated as a manager under the law where each
of the Borrowers (or such Subsidiary) is organized.
(xv) Each of the Borrowers shall at all times cause
there to be at least one duly appointed member of the board of
directors (an "INDEPENDENT DIRECTOR") of each such Borrower or of each
general partner of such Borrower if such Borrower is a limited
partnership or of the SPE Member of such Borrower if such Borrower is
a limited liability company reasonably satisfactory to Administrative
Agent who shall not have been at the time of such individual's initial
appointment, and may not have been at any time during the preceding
five years, and shall not be at any time while serving as a director
of either Borrower or the general partner (or Member) either (A) a
shareholder of, or an officer, director, partner or employee of,
either Borrower or any of its shareholders, partners, members,
subsidiaries or Affiliates, (B) a customer of, or supplier to,
Borrowers or any of its shareholders, partners, members, subsidiaries
or Affiliates, (C) a person or other entity controlling or under
common control with any such shareholder, officer, director, partner,
member, employee, supplier or customer, or (D) a member of the
immediate family of any such shareholder, officer, director, partner,
member, employee, supplier or customer. Notwithstanding the
foregoing, Curt Boisfontaine shall not be disapproved as an
Independent Director solely by virtue of the fact that he is acting as
an "independent director" of any of Borrowers' Affiliates. As used
herein, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policy of a person or entity, whether through ownership
of voting securities, by contract or otherwise.
(xvii) Neither of the Borrowers shall cause or
permit the board of directors of such Borrower or the general partner
of such Borrower if such Borrower is a limited partnership or of the
SPE Member of such Borrower if such Borrower is a limited liability
company to take any action which, under the terms of any certificate
of incorporation, bylaws or any voting trust agreement with respect to
any common stock, requires a vote of the board of directors of such
Borrower, the general partner of such Borrower or the SPE Member of
such Borrower unless at the time of such action there shall be at
least one member of the board of directors who is an Independent
Director.
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(ee) Existing Debt. The total aggregate outstanding
principal amount of the existing debt and FF&E Financings, other than the Debt,
encumbering each of the Assets is as set forth on Schedule XV.
(ff) Taxes. The total Taxes (including special or other
assessments) payable with respect to each Asset for the calendar year 1996 is
as set forth in Schedule XVI, and neither of the Borrowers nor any other Loan
Party knows of any reason, other than the renovations and improvements
described on Schedule XVI and general increases in Taxes for properties in the
area where any Asset is located, why the Taxes payable for the calendar year
1997 would be higher.
(gg) Rent Roll and Occupancy/Room Rate Statistics. The Rent
Roll required to be delivered to Administrative Agent pursuant to Section
3.1(o) accurately states the amounts payable under the Tenant Leases and,
except as disclosed to Administrative Agent, all such tenants are occupying the
space and are open for business. Borrowers are not aware of any pending
closings or Tenant Lease cancellations or nonrenewals. To the best of
Borrowers' knowledge, no tenant has any existing set-off rights against rent
currently owed. The Occupancy/Room Rate statistics delivered to Administrative
Agent pursuant to Section 3.1(y) accurately state the average room rates and
occupancy for the period covered.
(hh) Property Management Agreements. Each of the Property
Management Agreements and all amendments thereto that have been or will be
entered into on or before the Closing Date are listed on Schedule VI annexed
hereto. The Property Management Agreements, as so amended, are in full force
and effect and no term or condition thereof has been further amended, modified
or waived after the execution thereof, except in each case in accordance with
this Agreement; and no Person will have failed in any respect to perform any
obligation or covenant or satisfy any condition required by the Property
Management Agreements to be performed or complied with, except where failure to
so comply will not then have caused and could not reasonably be expected to
cause, either individually or in the aggregate, a Material Adverse Change.
(ii) Liquor Agreements. The Liquor Agreements with respect
to each Asset, in each case with all amendments thereto that have been or will
be entered into on or before the Closing Date, are listed on Schedule VI
annexed hereto. The Liquor Agreements, as so amended, are in full force and
effect and no term or condition thereof has been further amended, modified or
waived after the execution thereof, except in each case in accordance with this
Agreement; and no Person will have failed in any respect to perform any
obligation or covenant or satisfy any condition required by the Liquor
Agreements to be performed or complied with, except where failure to so comply
will not then have caused and could not reasonably be expected to cause, either
individually or in the aggregate, a Material Adverse Change. Each Liquor
Agreement provides that at least 45% of the revenue collected by each
Subsidiary which is a party to such Liquor Agreement is required to be paid to
Borrowers and no more than 5% of
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the revenue collected by such Subsidiary with respect to such Liquor Agreement
is required to be paid to the Property Manager. The Cost Evidence delivered to
Administrative Agent accurately sets forth the expenses incurred by each
Subsidiary in connection with each Liquor Agreement. Each Liquor Agreement
with respect to each Asset is subordinate (and will continue to be subordinate)
to the Lien of the Mortgage encumbering each such Asset.
(jj) Franchise Agreements. The Franchise Agreement with
respect to each Asset, if applicable, and all amendments thereto that have been
or will be entered into on or before the Closing Date, are listed on Schedule V
annexed hereto. The Franchise Agreements, as so amended, are in full force and
effect and no term or condition thereof has been further amended, modified or
waived after the execution thereof, except in each case in accordance with this
Agreement; and no Person will have failed in any respect to perform any
obligation or covenant or satisfy any condition required by the Franchise
Agreements to be performed or complied with, except where failure to so comply
will not then have caused and could not reasonably be expected to cause, either
individually or in the aggregate, a Material Adverse Change. Borrowers have
satisfied the requirements of all core modernization plans or other property
improvement plan required by the terms of any Franchise Agreement.
(kk) Liquor Licenses. Each Liquor License issued in
connection with each Asset is set forth on Schedule VI annexed hereto, each
such Liquor License (x) is validly issued and in full force and effect or (ii)
as set forth on Schedule VI, has been applied for in accordance with the
procedures set forth on Schedule VI and the applicant has the legal right to
sell alcoholic beverages at the applicable Asset pending the issuance of the
Liquor License therefor (and Borrowers have no reason to believe that such
license will not be timely issued), and the holder of each such Liquor License
or applicant, as the case may be is a party to the Omnibus Management and
Liquor License Agreement. The appropriate Borrower or one of the Subsidiaries
has the legal right to utilize each Liquor License required in connection with
the operation of any restaurant, bar or other alcoholic beverage service
located at the applicable Asset, except where the failure to have such right
has not caused and could not reasonably be expected to cause, either
individually or in the aggregate, a Material Adverse Change. All cash and
other revenues and receipts from the operation of any owner of a Liquor License
of an alcoholic beverage service at any Asset is collected either by the
licensee thereof or the Loan Party which owns the Asset and are then deposited
directly into the Clearing Account A established for such Asset.
(ll) IP License Agreements.
(i) Each IP License Agreement, if any, and all
amendments thereto that have been or will be entered into on or before
the Closing Date are listed on Schedule XI annexed hereto. Such IP
License Agreements, as so amended, are in full force and effect and no
term or condition thereof has been further amended, modified or waived
after the execution thereof, except in each case in accordance with
this Agreement; and no Person
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will have failed in any respect to perform any obligation or covenant
or satisfy any condition required by such IP License Agreements to be
performed or complied with, except where failure to so comply will not
then have caused and could not reasonably be expected to cause, either
individually or in the aggregate, a Material Adverse Change.
(ii) Each of the Borrowers and the Subsidiaries own,
or are licensed to use or otherwise have the lawful right to use, the
material Intellectual Property. Except as set forth on Schedule XII
annexed hereto, all such material Intellectual Property (other than in
respect of rights under Franchise Agreements) is fully protected and
duly and properly registered, filed or issued in the appropriate
office and jurisdictions for such registrations, filing or issuances,
except where the lack of the lawful right to use such Intellectual
Property could not reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Change, and in each case
the Person holding rights therein, are identified in Schedule XII
annexed hereto.
(iii) No claim has been asserted with respect to the
use of any such Intellectual Property by Borrowers or any other Loan
Party by any other Person challenging or questioning the validity or
effectiveness of any such Intellectual Property, and neither of the
Borrowers nor any other Loan Party knows of any valid basis for any
such claim which, in either case, has caused or could reasonably be
expected to cause, either individually or in the aggregate, a Material
Adverse Change; and the use of such Intellectual Property by Borrowers
does not infringe on the rights of any Person, subject to such claims
and infringements as do not, in the aggregate, give rise to any
liability on the part of Borrowers or any other Loan Party that has
caused or could reasonably be expected to cause, either individually
or in the aggregate, a Material Adverse Change. The consummation of
the transactions contemplated by this Agreement will not in any manner
or to any extent impair the ownership of (or the license to use, as
the case may be) any of such Intellectual Property by Borrowers or any
other Loan Party.
(mm) Ground Leases. Each of the representations and
warranties set forth in Sections 2.12 of the Mortgages which encumber Ground
Leases are herein incorporated by reference.
(nn) Subsidiaries. All of the capital stock or partnership,
limited liability company, joint venture, or other ownership interests (however
designated) of each Subsidiary and Canadian Borrower (including all warrants,
and options to purchase) are directly or indirectly owned by Domestic Borrower.
(oo) Domestic Borrower. All of the capital stock of Domestic
Borrower is owned by BHOC and there are no warrants or options to purchase
Domestic Borrower or any stock of Domestic Borrower. All of the capital stock
of BHOC is owned by Bristol and, other than a
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Permitted Pledge or a transfer pursuant to Section 6.1(j) there are no warrants
or options to purchase BHOC or any stock of BHOC.
(pp) Existing Loan Documents. Domestic Borrower is indebted
under the Existing Notes. There are no offsets, defenses or counterclaims to
any Loan Party's obligations under the Existing Loan Documents and the Existing
Loan Documents have been validly assigned to Lenders.
SECTION 4.2 SURVIVAL OF REPRESENTATIONS.
Borrowers agree that all of the representations and warranties
of Borrowers (and the Loan Parties) set forth in Section 4.1 and elsewhere in
this Agreement and in the other Loan Documents shall survive for so long as any
amount remains owing to any Lender under this Agreement or any of the other
Loan Documents by Borrowers. All representations, warranties, covenants and
agreements made in this Agreement or in the other Loan Documents by Borrowers
or any other Loan Party shall be deemed to have been relied upon by
Administrative Agent and each Lender notwithstanding any investigation
heretofore or hereafter made by Administrative Agent or such Lender.
V. AFFIRMATIVE COVENANTS
SECTION 5.1 BORROWERS' COVENANTS.
From the Closing Date and until payment and performance in
full of all obligations of Borrowers under the Loan Documents or the earlier
release of all the Liens of every Mortgage (and the release of every Negative
Pledge) in accordance with the terms of this Agreement and the other Loan
Documents, Borrowers hereby covenant and agree that unless the Requisite
Lenders otherwise consent in writing:
(a) Existence; Compliance with Legal Requirements; Insurance.
Borrowers shall do or cause to be done all things necessary to preserve, renew
and keep in full force and effect each of the Borrowers' and the other Loan
Parties' existence, rights, licenses, Authorizations, permits and franchises
and Borrowers shall and shall cause each Loan Party to comply with all Legal
Requirements applicable to them, to every Asset and to all other Collateral,
except where failure to so comply will not then have caused and could not
reasonably be expected to cause, either individually or in the aggregate, a
Material Adverse Change. Borrowers shall and shall cause all other Loan
Parties to at all times maintain, preserve and protect all franchises and trade
names and preserve all the remainder of their property used or useful in the
conduct of their business and Borrowers shall and shall cause the other Loan
Parties to keep the Property in good working order and repair (ordinary wear
and tear excepted), and from time to time make, or cause to be made, all
reasonably necessary repairs, renewals, replacements, betterments and
improvements thereto, all as more fully provided in each Mortgage or in this
Agreement.
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Borrowers shall and shall cause each of the other Loan Parties to keep the
Property insured at all times by financially sound and reputable insurers, to
such extent and against such risks, and maintain liability and such other
insurance, as is more fully provided in this Agreement.
(b) Taxes and Other Charges. Borrowers shall and shall cause
each other Loan Party to pay all Taxes, and Other Charges now or hereafter
levied or assessed or imposed against the Property or any part thereof prior to
the date the same become delinquent. Borrowers will and will cause each other
Loan Party to deliver to Administrative Agent receipts for payment or other
evidence satisfactory to Administrative Agent that the Taxes, and Other Charges
have been so paid or are not then delinquent no later than thirty (30) days
prior to the date on which the Taxes and/or Other Charges would otherwise be
delinquent if not paid (provided, however, that Borrowers (or such other Loan
Party) are not required to furnish such receipts for payment of Taxes in the
event that such Taxes have been paid by Administrative Agent pursuant to
Section 7.3 hereof). Borrowers shall not and shall not permit any other Loan
Party to suffer and shall promptly cause to be paid and discharged any lien or
charge whatsoever which may be or become a lien or charge against any Asset,
and shall promptly pay for all utility services provided to each Asset. After
prior written notice to Administrative Agent, the appropriate Borrower or the
appropriate other Loan Party, at its own expense, may contest by appropriate
legal proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any
Taxes or Other Charges, provided that (i) no Event of Default has occurred and
remains uncured, (ii) such Borrower or such other Loan Party is permitted to do
so under the provisions of any mortgage or deed of trust superior in lien to
any Mortgage (or in the case of a Special Asset, a Negative Pledge), (iii) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which such Borrower or such other Loan
Party is subject and shall not constitute a default thereunder, and such
proceeding shall be conducted in accordance with all applicable statutes, laws
and ordinances, (iv) neither any Asset nor any part thereof or interest therein
will be in danger of being sold, forfeited, terminated, cancelled or lost, and
(v) Borrowers shall and shall cause the other Loan Parties to promptly upon
final determination thereof pay the amount of any such Taxes or Other Charges,
together with all costs, interest and penalties which may be payable in
connection therewith. In addition, if the Taxes or Other Charges are not paid
in full when such Borrower or such Loan Party commences such contest, then the
following shall apply: (A) such proceeding shall suspend the collection of
Taxes or Other Charges from such Asset, and (B) such Borrower shall furnish
such security as may be required in the proceeding, or as may be reasonably
requested by Administrative Agent, to insure the payment of any such Taxes or
Other Charges, together with all interest and penalties thereon.
Administrative Agent may pay over any such cash deposit or part thereof held by
Administrative Agent to the claimant entitled thereto at any time when, in the
judgment of Administrative Agent, the entitlement of such claimant is
established.
(c) Litigation. Borrowers shall and shall cause each other
Loan Party to give prompt written notice to Administrative Agent of (i) any
litigation or governmental proceedings
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pending or threatened against either of the Borrowers or any other Loan Party
which might reasonably be expected to cause, either individually or in the
aggregate, a Material Adverse Change and (ii) any material development in any
litigation or proceeding that, in any case either (x) seeks to enjoin or
otherwise prevent the consummation of, or to recover any damages or obtain
relief as a result of, the transactions contemplated hereby or (y) threatens
the validity or priority of the Liens granted pursuant to the Loan Documents.
(d) Access to Premises. Borrowers shall and shall cause each
other Loan Party to permit agents, representatives and employees of
Administrative Agent to inspect each Asset or any part thereof at reasonable
hours upon reasonable advance notice.
(e) Notice of Default. Borrowers shall promptly advise
Administrative Agent of any Material Adverse Change of which either Borrower
has knowledge.
(f) Cooperate in Legal Proceedings. Borrowers shall and
shall cause all Loan Parties to cooperate fully with Administrative Agent with
respect to any proceedings before any court, board or other Governmental
Authority which may in any way affect the rights of Administrative Agent
hereunder or any rights obtained by Administrative Agent under any of the other
Loan Documents and, in connection therewith, permit Administrative Agent, at
its election, to participate in any such proceedings.
(g) Perform Loan Documents. Borrowers shall and shall cause
all other Loan Parties to, observe, perform and satisfy all the terms,
provisions, covenants and conditions of, and shall pay when due all costs, fees
and expenses to the extent required under, the Loan Documents executed and
delivered by, or applicable to, either Borrower or any other Loan Party.
(h) Insurance Benefits. Borrowers shall and shall cause each
other Loan Party to cooperate with Administrative Agent in obtaining for the
Secured Parties the benefits of any Insurance Proceeds lawfully or equitably
payable in connection with any Asset, and Administrative Agent shall be
reimbursed for any reasonable out-of-pocket expenses incurred in connection
therewith (including, without limitation, attorneys' fees and disbursements,
and the payment by Borrowers of the expense of an appraisal on behalf of
Administrative Agent in case of a fire or other casualty affecting such Asset
or any part thereof) out of such Insurance Proceeds.
(i) Further Assurances; Supplemental Mortgage Affidavits.
Borrowers shall and shall cause each other Loan Party to, as applicable, at
Borrowers' or such Loan Party's sole cost and expense:
(i) furnish to Administrative Agent (with sufficient
copies for each of the Lenders) all instruments, documents, boundary
surveys, footing or foundation surveys,
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certificates, plans and specifications, title and other insurance
reports and agreements, and each and every other document,
certificate, agreement and instrument required to be furnished by
either Borrower (or any other Loan Party) pursuant to the terms of the
Loan Documents or reasonably requested by Administrative Agent in
connection therewith;
(ii) furnish to Administrative Agent, with
reasonable promptness, (a) information and other data revised to
correct any material erroneous information and other data previously
delivered by any Loan Party to Administrative Agent pursuant to this
Section 5.1 or included in any statement, report or certificate
previously delivered by such Loan Party to Administrative Agent
pursuant to this Section 5.1, together with such statement, report or
certificate that shall have been revised to reflect such revised
information and data, and (b) such other information and data with
respect to the Loan Parties, the Assets, the Property, the Ground
Leases and Tenant Leases, the Property Management Agreements, the
other Collateral and the other assets and liabilities of the Loan
Parties, all in form consistent with any applicable requirements of
this Agreement and reasonably satisfactory to Administrative Agent, as
from time to time may be reasonably requested by Administrative Agent;
(iii) execute and deliver to Administrative Agent
such documents, instruments, certificates, assignments and other
writings, and do such other acts necessary or desirable, to evidence,
preserve and/or protect the collateral at any time securing or
intended to secure the obligations of Borrowers under the Loan
Documents, as Administrative Agent may reasonably require; and
(iv) do and execute all and such further lawful and
reasonable acts, conveyances and assurances for the better and more
effective carrying out of the intents and purposes of this Agreement
and the other Loan Documents, as Administrative Agent shall reasonably
require from time to time.
(j) Financial Reporting.
(i) Borrowers will and will cause each other Loan
Party to keep and maintain or will cause to be kept and maintained on
a Fiscal Year basis, in accordance with GAAP (or such other accounting
basis reasonably acceptable to Administrative Agent), proper and
accurate books, records and accounts reflecting all of the financial
affairs of Borrowers or such Loan Party and all items of income and
expense in connection with the operation of the Property (on an Asset
by Asset basis). Administrative Agent shall have the right from time
to time at all times during normal business hours upon reasonable
notice to examine such books, records and accounts at the office of
Domestic Borrower or other Person maintaining such books, records and
accounts and to make such copies or extracts thereof as Administrative
Agent shall desire, and Borrowers will authorize its independent
accountants to disclose to
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Administrative Agent or any Lender any and all financial statements
and other information of any kind as Administrative Agent or any
Lender may reasonably request. After the occurrence of an Event of
Default, Borrowers shall pay any reasonable out-of-pocket costs and
expenses incurred by Administrative Agent to examine either Borrower's
or any other Loan Party's accounting records with respect to the
Property, as Administrative Agent shall determine to be necessary or
appropriate in the protection of Lenders' interests.
(ii) Borrowers will furnish to Administrative Agent
annually, within forty-five (45) days following the end of each Fiscal
Year (beginning with Borrowers' 1998 Fiscal Year), a complete copy of
the consolidated annual unaudited operating statements of the Loan
Parties setting forth the income and expenses for each Asset for such
Fiscal Year including without limitation Net Operating Income, Gross
Income from Operations, Operating Expenses and Mortgaged Property
Gross Cash Flow. Borrowers will furnish to Lenders annually, within
ninety (90) days following the end of each Fiscal Year (beginning with
Borrowers' 1998 Fiscal Year), a complete copy of the consolidated
financial statements of the Loan Parties audited by one of the Big Six
Accounting Firms (or by an independent certified public accountant
acceptable to the Requisite Lenders and Administrative Agent in their
sole discretion) in accordance with GAAP, covering the Properties and
other Collateral for such Fiscal Year and containing consolidated
statements of profit and loss and cash flow for the Loan Parties and a
consolidated balance sheet for the Loan Parties together with an
"unqualified opinion" of such certified public accountant. The profit
and loss statements (included in the annual audited financial
statements will be accompanied by a procedures report reasonably
acceptable to Administrative Agent demonstrating how the Asset by
Asset annual unaudited operating statements correlate to the audited
profit and loss statements) and otherwise in a format reasonably
acceptable to Administrative Agent. The consolidated annual financial
statements of the Loan Parties shall be accompanied a Rent Roll for
each Asset in form and content reasonably acceptable to Administrative
Agent and a certificate executed by the chief financial officer,
treasurer or controller of Borrowers or the general partner or manager
of Borrowers, as applicable, stating that to such officer's best
knowledge such annual financial statement presents fairly the
financial condition of each Asset and has been prepared in accordance
with GAAP and that the financial statement, and all information
delivered in connection therewith is true, accurate and complete.
Together with the consolidated annual financial statements of the Loan
Parties, Borrowers shall furnish to Administrative Agent: (i) an
Officer's Certificate certifying as of the date thereof whether there
exists an event or circumstance which constitutes a Default or an
Event of Default under the Loan Documents executed and delivered by,
or applicable to, either Borrower, and if any Default or Event of
Default exists, the nature thereof, the period of time it has existed
and the action then being taken to remedy the same; (ii) a written
statement by the accounting firm which prepared each Borrower's
financial statements, stating (x) in substance that their audit
examination has included a review of
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the terms of this Agreement and the other Loan Documents as they
relate to accounting matters, and (y) whether, in connection with
their audit examination, any condition or event that constitutes a
Default or Event of Default has come to their attention and, if such a
condition or event has come to their attention, specifying the nature
and period of existence thereof; provided, however, that such
accountants shall not be liable by reason of any failure to obtain
knowledge of any such Default or Event of Default that would not be
disclosed in the course of their audit examination; and (iii) (unless
restricted by applicable professional standards), copies of all
reports submitted to any Loan Party by the accounting firm which
prepared each Borrower's financial statements, including any comment
letter submitted by such accountants to management in connection with
their annual audit. If, as a result of any change in accounting
principles and policies the consolidated financial statements of the
Loan Parties delivered pursuant to this section differ in any material
respect from the consolidated financial statements that would have
been delivered pursuant to this section had no such change in
accounting principles and policies been made, Borrowers shall furnish
to Administrative Agent together with (x) the first delivery of
financial statements pursuant to this section following such change,
consolidated financial statements of the Loan Parties for the current
calendar year to the effective date of such change and the two full
calendar years immediately preceding the calendar year in which such
change is made, in each case prepared on a pro forma basis as if such
change had been in effect during such periods, and (y) each delivery
of financial statements pursuant to this section following such
change, a written statement of the chief financial officer, treasurer
or controller of each of the Borrowers setting forth the differences
which would have resulted in the financial statements, if the
financial statements had been prepared without giving effect to such
change;
(iii) Borrowers will and will cause each other Loan
Party to furnish, or cause to be furnished, to Administrative Agent on
or before (x) twenty (20) days after the end of each calendar month,
and (y) forty five (45) days after each calendar quarter, the
following items on an Asset by Asset basis accompanied by a
certificate of the chief financial officer of each of the Borrowers or
the general partner or manager of each of Borrowers, as applicable,
stating that to such officer's best knowledge such items are true,
correct, accurate and complete and fairly present the financial
condition and results of the operations of Borrowers, each other Loan
Party and each Asset (subject to normal year-end adjustments) as
applicable: (A) Occupancy/Room Rate Statistics for the preceding
month or quarter; (B) monthly or quarterly and year to date operating
statements prepared for each calendar month or quarter, noting Net
Operating Income, Gross Income from Operations, Operating Expenses and
other information necessary and sufficient under GAAP to fairly
represent the financial position and results of operation of each
Asset during such calendar month or quarter, all in form reasonably
satisfactory to Administrative Agent; (C) a calculation reflecting the
annual Debt Service Coverage Ratio for each Asset individually (based
upon the Debt Service which would be payable if the Notes were in the
principal amount of the Allocated Loan Amount for such Asset)
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and for the Property collectively for the immediately preceding twelve
(12) month period as of the last day of each such month or quarter;
(D) the actual capital expenditure at each Asset with respect to each
calendar month or quarter; and (E) at the end of each fiscal quarter
only, a list of all Material Security Deposits and to the extent all
such Material Security Deposits were not deposited into the Security
Deposit Subaccount during such quarter, evidence that Borrower has
deposited into the Security Deposit Subaccount an amount equal to all
such Material Security Deposits not previously deposited into such
account. In addition, the above- referenced certificate shall also be
accompanied by an Officer's Certificate stating that the
representations and warranties of each of Borrowers set forth in
Section 4.1(dd)(iv) are true and correct as of the date of such
certificate and that there is no material amount of trade payables
(including but not limited to Permitted Trade Payables) outstanding
for more than thirty (30) days.
(iv) Borrowers shall and shall cause each other Loan
Party to furnish to Administrative Agent, within ten (10) Business
Days after request (or as soon thereafter as may be reasonably
possible), such further detailed information with respect to the
operation of any Asset and the financial affairs of Borrowers as may
be reasonably requested by Administrative Agent or any Lender (through
Administrative Agent), which shall include:
(A) evidence reasonably satisfactory to
Administrative Agent that all premiums (including all
installments payments) then due and payable with respect to
the insurance required to be maintained pursuant to Section 7
have been paid in accordance with the requirements of Section
7.1.1(a); provided that evidence previously delivered pursuant
to this clause (A) with respect to the prior payment of any
installment payments need not be redelivered;
(B) (I) promptly upon becoming aware of the
occurrence of or forthcoming occurrence of any ERISA Event, a
written notice specifying the nature thereof, what action any
Loan Party or any of their respective ERISA Affiliates has
taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with
respect thereto; (II) with reasonable promptness, copies of
all notices received by any Loan Party or any of its ERISA
Affiliates from a Multiemployer Plan sponsor concerning an
ERISA Event; and (III) with reasonable promptness following
Administrative Agent's reasonable request, (x) copies of any
Schedule B (Actuarial Information) filed by any Loan Party or
any of its ERISA Affiliates with the Internal Revenue Service
with respect to any Pension Plan and (y) copies of such other
documents or governmental reports or filings relating to any
Employee Benefit Plan as Administrative Agent shall reasonably
request;
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(C) as soon as practicable following receipt
thereof, copies of all environmental audits and reports,
whether prepared by personnel of any Loan Party or by
independent consultants, with respect to material
environmental matters at any Asset or which relate to an
Environmental Claim which could reasonably be expected to
cause, either individually or in the aggregate, a Material
Adverse Change; and
(D) promptly upon request, copies of (a)
all financial statements, reports, notices and proxy
statements sent or made available generally by Bristol to its
security holders, (b) all regular and periodic reports and all
registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by Bristol or any
subsidiary of Bristol with the New York Stock Exchange, Inc.,
any other securities exchange or with the Securities and
Exchange Commission and all material filings with any
Governmental Authority or private regulatory authority, and
(c) all press releases made available generally by Bristol or
any of its subsidiaries to the public or to the security
holders of Bristol;
(k) Business and Operations. Borrowers shall and shall cause
each Loan Party to continue to engage in the businesses presently conducted by
it as, and to the extent the same, is necessary for the ownership, maintenance,
management and operation of the Property. Borrowers will and will cause each
other Loan Party to qualify to do business and to remain in good standing under
the laws of each jurisdiction as and to the extent the same is required for the
ownership, maintenance, management and operation of the Property or the other
Collateral, except where failure to so qualify will not then have caused and
could not reasonably be expected to cause, either individually or in the
aggregate, a Material Adverse Change.
(l) Title to the Property. Borrowers will and will cause
each other Loan Party at such Loan Party's cost to warrant and defend (i) the
title to each Asset and every part thereof, subject only to Liens permitted
hereunder (including Permitted Encumbrances), and (ii) the validity and
priority of the Liens of the Mortgage and the Assignment of Leases on such
Asset, subject only to Liens permitted hereunder (including Permitted
Encumbrances), in each case against the claims of all Persons whomsoever.
Borrowers shall reimburse Administrative Agent and Lenders for any losses,
damages or reasonable out-of-pocket costs or expenses (including reasonable
attorneys' fees and court costs) incurred by Administrative Agent and Lenders
if an interest in any Asset, other than as permitted hereunder, is claimed by
another Person. If in the reasonable judgment of Administrative Agent,
Borrowers (or such other Loan Party) are not adequately defending title to the
Assets or the validity of the Liens of the Loan Documents then Administrative
Agent may, upon at least five days' prior notice to Borrowers, (i) appear in
and defend any action or proceeding, in the name and on behalf of
Administrative Agent, Lenders or any Loan Party in which Administrative Agent
or any Lender is named or which Administrative Agent in its reasonable
discretion determines is reasonably likely to materially adversely affect
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any Asset, any Property Management Agreement or other Collateral, any Mortgage,
the Lien thereof or any other Loan Document and (ii) institute any action or
proceeding which Administrative Agent reasonably determines should be
instituted to protect the interest or rights of Administrative Agent and
Lenders in any Asset or other Collateral or under this Agreement or any other
Loan Document. Borrowers agree that all reasonable out of pocket costs and
expenses expended or otherwise incurred pursuant to this subsection (including
reasonable attorneys' fees and disbursements) by Administrative Agent shall be
paid, without duplication, by Borrowers or reimbursed to Administrative Agent,
as the case may be, promptly after demand.
(m) Costs of Enforcement. In the event (i) that any Mortgage
or other Security Document is foreclosed in whole or in part or that any
Mortgage or other Security Document is put into the hands of an attorney for
collection, suit, action or foreclosure, (ii) of the foreclosure of any
mortgage prior to or subsequent to any Mortgage in which proceeding any Lender
is made a party, or (iii) of the bankruptcy, insolvency, reorganization,
rehabilitation, liquidation or other similar proceeding in respect of either of
the Borrowers or any other Loan Party or an assignment by either of the
Borrowers or any other Loan Party for the benefit of its creditors, then
Borrowers, their successors or assigns, shall be chargeable with and agree to
pay all costs of collection and defense, including, without limitation,
attorneys' fees, in connection therewith and in connection with any appellate
proceeding or post-judgment action involved therein, which shall be due and
payable together with all required service or use taxes on demand.
(n) Estoppel Statements.
(i) Within ten (10) Business Days after request by
Administrative Agent, Borrowers shall furnish Administrative Agent
with a statement, duly acknowledged and certified, setting forth (A)
the amount of the original principal amount of the Notes, (B) the
unpaid principal amount of the Notes, (C) the Interest Rate of the
Notes, (D) the date installments of interest and principal were last
paid, (E) any offsets or defenses to the payment of the Debt, if any,
and (F) that the Notes, this Agreement, each Mortgage (and Negative
Pledge) and the other Loan Documents are valid, legal and binding
obligations and have not been modified or, if modified, giving
particulars of such modification.
(ii) Borrowers shall and shall cause each other Loan
Party to deliver to Administrative Agent upon request, tenant estoppel
certificates from each Tenant under a Material Lease at any Asset in
form and substance reasonably satisfactory to Administrative Agent.
(o) Loans Proceeds. Borrowers shall use the proceeds of the
Loans received by it on the Closing Date only for the purposes set forth in
Section 2.1.4 hereof.
(p) Performance by Borrowers. Borrowers shall and shall
cause each Loan Party to in a timely manner observe, perform and fulfill each
and every covenant, term and provision
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of each Loan Document executed and delivered by, or applicable to, such
Borrower or such Loan Party, and shall not enter into or otherwise suffer or
permit any amendment, waiver, supplement, termination or other modification of
any Loan Document executed and delivered by, or applicable to, such Borrower or
such Loan Party without the prior written consent of Administrative Agent.
(q) Annual Operating Budget. Borrowers shall prepare and
deliver to Administrative Agent (with sufficient copies for each of the
Lenders), on or before the beginning of each Fiscal Year of Borrowers, an
annual operating budget for each Asset including all planned capital
expenditures for each Asset for such ensuing Fiscal Year (the "ANNUAL OPERATING
BUDGET"). The Annual Operating Budget shall be prepared and submitted in a
form reasonably acceptable to Administrative Agent and shall set forth in
reasonable detail budgeted monthly Gross Income from Operations and monthly
capital and other expenses for the Property. Each Annual Operating Budget
shall contain, among other things, limitations on management fees and third
party service fees, as required hereunder. Administrative Agent shall have the
right to approve each proposed Annual Operating Budget, which approval as long
as no Event of Default is continuing (i) shall not be unreasonably withheld and
(ii) shall be deemed given in the event Administrative Agent fails to respond
to Borrowers' written request to approve a proposed Annual Operating Budget
within thirty (30) days after receipt by Administrative Agent of such request
accompanied by the proposed Annual Operating Budget and all information
required in order to adequately review the same, and Borrowers send an
additional written request for approval and Administrative Agent fails to
respond to Borrowers' second request within ten (10) days thereof. In the
event that Administrative Agent's approval is required and Administrative Agent
objects to the proposed Annual Operating Budget submitted by Borrowers,
Administrative Agent shall advise Borrowers of such objections within fifteen
(15) Business Days after receipt thereof (and deliver to Borrowers a reasonably
detailed description of such objection) and Borrowers shall promptly revise
such Annual Operating Budget and resubmit the same to Administrative Agent.
Administrative Agent shall advise Borrowers of any objections to such revised
Annual Operating Budget within fourteen (14) days after receipt thereof (and
deliver to Borrowers a reasonably detailed description of such objection) and
Borrowers shall promptly revise the same in accordance with the process
described in this sentence until Administrative Agent approves an Annual
Operating Budget. Notwithstanding anything to the contrary contained in this
clause (q), any Annual Operating Budget submitted at any time other than during
a Cash Trap Period shall not require the approval of Administrative Agent;
provided, however, that if Administrative Agent has not approved the Annual
Operating Budget in effect at the time a Cash Trap Event occurs, Administrative
Agent shall have the right to approve such Annual Operating Budget. Each such
Annual Operating Budget approved or not requiring approval by Administrative
Agent in accordance with terms hereof shall hereinafter be referred to as an
"APPROVED ANNUAL OPERATING BUDGET." Until such time that Administrative Agent
approves a proposed Annual Operating Budget, the most recently Approved Annual
Operating Budget shall apply; provided that such Approved Annual Operating
Budget shall be adjusted to reflect actual increases in real estate taxes,
insurance premiums and utilities expenses.
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(r) INTENTIONALLY DELETED
(s) No Joint Assessment. Borrowers shall not and shall not
permit any other Loan Party to suffer, permit or initiate the joint assessment
of any Asset (i) with any other real property constituting a tax lot separate
from such Asset, and (ii) with any portion of such Asset which may be deemed to
constitute personal property, or any other procedure whereby the lien of any
taxes which may be levied against such personal property shall be assessed or
levied or charged to such Asset.
(t) Leasing Matters.
(i) Without the prior written approval of
Administrative Agent and the Requisite Lenders, which approval shall
not be unreasonably withheld, conditioned or delayed, Borrowers shall
not and shall not permit any other Loan Party to (i) enter into, or
amend, restate, supplement or otherwise modify, any Lease, (ii) enter
into any advanced booking of more than 51% of the rooms at any Asset
for a period in excess of 30 days; provided, however, Borrowers shall
have the right without obtaining the prior approval of Administrative
Agent, to enter into, amend, restate, supplement or otherwise modify a
Lease which is not a Material Lease provided or such Tenant Lease
(after giving effect to such modification, amendment, restatement or
supplement, if appropriate) complies with the requirements set forth
on Schedule XXIII. If any Tenant Lease necessary to the operation of
any Asset as a hotel is terminated, Borrowers shall or shall cause the
other Loan Parties to, as appropriate, either replace such Tenant
Lease with a suitable comparable Tenant Lease within a reasonable
period of time following such termination or shall itself provide the
services intended to be obtained under such Tenant Lease. All Tenant
Leases and advanced bookings, entered into after the date hereof,
shall be subordinate to the Mortgage and shall provide that the tenant
under such Tenant Lease or advance booking, as the case may be, agrees
to (x) attorn to each Lender and (y) provide Administrative Agent with
an estoppel certificate in form and substance satisfactory to
Administrative Agent; provided, however, if Administrative Agent shall
have approved a Tenant Lease and the Tenant shall have executed
Administrative Agent's form of subordination, non-disturbance and
attornment agreement and delivered same to Administrative Agent,
Administrative Agent agrees to execute and deliver the same with
respect to such Lease. All renewals of Tenant Leases and all proposed
Tenant Leases (other than the Liquor Leases) shall (AA) be on terms
and conditions which a senior executive, with at least ten (10) years
experience in the management of Assets substantially similar to the
Assets in the region where the Assets are located and that manages or
has managed at least 3 such Assets, would consider to be commercially
reasonable, constitute good and prudent business practice and be at
prevailing market rents and other terms and conditions, (BB) be
arms-length transactions, and (CC) not contain any terms which would
adversely affect Administrative Agent and Lenders respective rights
under the Loan Documents. None of the Tenant Leases shall contain
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any option to purchase, any right of first refusal to lease or
purchase, any non-disturbance or similar recognition agreement or any
other similar provisions which adversely affect the Property or which
might adversely affect the rights of any holder of the Loans, without
the prior written consent of Administrative Agent which consent shall
not be unreasonably withheld or delayed. Each Tenant shall conduct
business only in that portion of the Asset covered by its Tenant
Lease. Borrowers shall and shall cause the other Loan Parties to
furnish Administrative Agent with executed copies of all Tenant Leases
executed after the date hereof (regardless of whether or not
Administrative Agent's approval is required with respect to any such
Tenant Lease) and shall also deliver to Administrative Agent, within
45 days of the end of each Fiscal Year, a rent roll for each Asset
certified to Administrative Agent as being true and correct by the
appropriate Borrower or such other Loan Party and containing the name
of each Tenant, the term of each Tenant's Lease, the space occupied by
each tenant, the rentals or fees payable thereunder, the expiration
date of each Tenant Lease, occupancy statistics and such other
information with respect to the Tenant Leases as Administrative Agent
shall reasonably require (the "RENT ROLL"). To the extent
Administrative Agent's approval of any Tenant Lease or Material Lease,
any tenant or an alteration or modification of a Material Lease or
Tenant Lease is required under this Section 5.1(t), in the event
Administrative Agent fails to respond to Borrowers' written request
for such approval within thirty (30) days after Administrative Agent
has received from Borrowers such written request and all information
reasonably required in order to adequately review such request,
Borrowers may send an additional written request for approval and if
Administrative Agent fails to respond to Borrowers' second request
within fourteen (14) days thereof, Administrative Agent shall be
deemed to have approved such Lease or such tenant, as the case may be.
(ii) Borrowers shall and shall cause each other Loan
Party to: (A) duly and punctually observe and perform all the
obligations imposed upon the landlord under each of the Tenant Leases
and shall not do or permit to be done anything to impair the value of
the Tenant Leases as security for the Debt; (B) shall promptly send
copies to Administrative Agent (with sufficient copies for each
Lender) of all notices of default which either Borrower or such other
Loan Party shall send or receive under any of the Material Leases; (C)
shall enforce all the terms, covenants and conditions contained in
each of the Tenant Leases on the part of the tenant thereunder to be
observed or performed; (D) exclusive of Security Deposits, shall not
collect any of the Rents more than one (1) month in advance; (E) shall
not execute any other assignment of, or further mortgage or encumber,
the landlord's interest in the Tenant Leases or the Rents; (F) shall
use reasonable efforts to deliver to Administrative Agent, upon
request, Tenant estoppel certificates from each Tenant under a
Material Lease at the Property addressed to such party or parties as
directed by Administrative Agent and in form and substance reasonably
satisfactory to Administrative Agent; and (G) shall execute and
deliver at the request of Administrative Agent all such further
assurances, confirmations and
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assignments in connection with the Tenant Leases as Administrative
Agent shall from time to time reasonably require. Borrowers shall and
shall cause each other Loan Party to: (AA) not convey or transfer or
suffer or permit a conveyance or transfer of any Asset or of any
interest therein so as to effect a merger of the estates and rights
of, or a termination or diminution of the obligations of, Tenants
under the Tenant Leases; (BB) shall not consent to any assignment of
or subletting under the Material Leases not in accordance with their
terms, without the prior written consent of Administrative Agent not
to be unreasonably withheld or delayed; (CC) shall not permit any
Tenant Lease to become subordinate to any lien other than the lien of
the Mortgage without the prior written consent of Administrative
Agent. Lenders (through Administrative Agent) shall have the right,
at Borrowers' expense, but shall not be obligated, to cure any default
by either Borrower or any other Loan Party under any of the Material
Leases which, (x) if such default remains uncured, would give the
Tenant the right to terminate such Material Lease or exercise a right
of offset against Rents and (y) Borrowers or such Loan Party have not
cured itself within five (5) days after having received notice
thereof. Such curing by Lenders of a default by Borrowers or such
Loan Party under any of the Tenant Leases shall not release Borrowers
in any way from liability to Lenders for Borrowers' or such Loan
Party's failure to discharge its duty to so cure that default itself.
Any and all sums expended by Lenders with respect to any such cure,
together with interest thereon at the Default Rate from the date paid
by Administrative Agent on behalf of Lenders until repaid by
Borrowers, shall immediately be due and payable to Administrative
Agent by Borrowers on demand and shall be secured by the Mortgage and
by all of the other Loan Documents securing all or any part of the
Debt.
(u) Principal Place of Business. Borrowers shall not change
their principal place of business as set forth on the first page of this
Agreement without first giving Administrative Agent thirty (30) days prior
written notice. Borrowers shall not permit any Subsidiary to change its
principal place of business without first giving Administrative Agent thirty
(30) days prior written notice.
(v) Property Manager. Borrowers shall and shall cause each
other Loan Party to cause the Property to be managed in a manner that is
consistent with the Approved Property Manager Standard. Borrowers covenant and
agree with Administrative Agent that (i) each Asset will be managed at all
times by the Property Manager pursuant to a Property Management Agreement which
shall provide for a Management Fee of no more than the Maximum Management Fee,
that the payment of such Management Fee shall be subordinate to the Lien of the
Mortgage, that the Property Manager shall not be permitted to receive any
Management Fee or other payments at any time that a monetary Default or an
Event of Default is continuing (or after giving effect to such payment would
occur), that the payment of such Management Fee shall be subordinate to all of
the obligations of Borrowers in connection with the Property, including,
without limitation, Debt Service, (ii) the Management Fee shall be paid from
the Mortgaged Property Gross Cash Flow, (iii) after either Borrower or any
other Loan Party has
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knowledge of a Change in Control (other than a hypothecation, mortgage, pledge
or encumbrance of the capital stock of the Property Manager) of the Property
Manager, Borrowers will promptly give Administrative Agent written notice
thereof (a "PROPERTY MANAGER CONTROL NOTICE"), and (iv) the Property Management
Agreement may be terminated by Administrative Agent at any time for the
Property Manager's gross negligence, willful misconduct or fraud or at any time
following either (A) the occurrence and during the continuance of a monetary
Event of Default, (B) the receipt of a Property Manager Control Notice (or if
Administrative Agent otherwise becomes aware of a Change in Control (other than
a hypothecation, mortgage, pledge or encumbrance of the capital stock of the
Property Manager) of the Property Manager) if the Property Manager no longer
meets the Approved Property Manager Standard or is not otherwise approved by
Lenders and Administrative Agent in their sole discretion, (C) if any event
shall have occurred which would allow Borrowers or any other Loan Party to
terminate the Property Management Agreement, Borrowers shall and shall cause
each other Loan Party to replace the terminated Property Manager with a
property manager selected by Borrowers and approved by the Requisite Lenders,
Administrative Agent in their respective sole discretion or selected by the
Requisite Lenders and Administrative Agent in their sole discretion on terms
and conditions satisfactory to Administrative Agent and Lenders, except that
the Management Fee payable to the replacement property manager shall be at
market rates not to exceed the Maximum Management Fee. Borrowers further
covenant and agree that Borrowers shall and shall cause the other Loan Parties
to require the Property Manager to maintain, at all times that all or any
portion of the Debt remains outstanding, worker's compensation insurance (as
and to the extent required by this Agreement) in compliance with Legal
Requirements. If, pursuant to this clause (v) or otherwise in this Agreement,
a substitute property manager is appointed, then such substitute property
manager shall be Independent (unless such Property Manager is the entity listed
in the definition of Property Manager), shall be approved by Administrative
Agent and shall execute and deliver to Administrative Agent a Consent and
Subordination of Property Manager.
(w) Control of Borrowers/Subsidiaries. Except in the event
of a Transfer permitted under Section 6.1(j)(vi) or (vii), the sole shareholder
of Domestic Borrower will continue to be BHOC. The sole shareholder of each
Subsidiary and Canadian Borrower will continue to be either Domestic Borrower
or a Subsidiary.
(x) Appraisals. Upon the written request of Administrative
Agent with respect to each Asset, Borrowers shall and shall cause each other
Loan Party to promptly thereafter at Lenders' sole expense (or at Borrowers'
sole expense if (x) an Event of Default shall have occurred and be continuing
or (y) Borrowers are required to deliver an appraisal pursuant to Section 2.4)
(i) cooperate with Administrative Agent so that Administrative Agent may
obtain, or, at the request of Administrative Agent, cause the preparation and
delivery to Administrative Agent of, an appraisal (satisfying the conditions
for delivery of an appraisal in connection with the funding of the Loans on the
Closing Date) dated not more than 60 days prior to the date of such delivery
and (ii) deliver to Administrative Agent (with sufficient copies for each
Lender),
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promptly after the receipt thereof, a copy of each appraisal, if any, obtained
by Borrowers or such other Loan Party.
(y) O&M Requirements. Borrowers shall comply with all the
terms and conditions contained in each O&M Plan. If any Assets at any time are
known to contain (or for which there is a reasonable basis to believe that such
Assets may contain) ABM, Borrowers shall promptly implement an O&M Plan.
(z) Ground Leases. Borrowers promptly shall pay all Ground
Rent and all other sums and charges mentioned in, and payable under, any Ground
Lease; Borrowers promptly shall perform and observe all of the terms, covenants
and conditions required to be performed and observed by the lessee under all
Ground Leases, the breach of which could permit any party to any Ground Lease
to validly terminate such Ground Lease (including, but without limiting the
generality of the foregoing, any payment obligations), shall do all things
necessary to preserve and to keep unimpaired its rights under every Ground
Lease, shall not waive, excuse or discharge any of the obligations of the
landlord under any Ground Lease without Administrative Agent's prior written
consent in each instance (not to be unreasonably withheld) and shall diligently
and continuously enforce the obligations of such landlord to the extent
commercially reasonable.
(aa) Maintenance of the Property. Borrowers shall cause the
Property to be maintained in a good and safe condition and repair, ordinary
wear and tear excepted. The Improvements and the Equipment shall not be
removed, demolished or materially altered (except for normal replacement of the
Equipment) without the consent of Administrative Agent not to be unreasonably
withheld. Borrowers shall and shall cause each other Loan Party to promptly
comply with all laws, orders and ordinances affecting the Property, or the use
thereof, including, without limitation, building and zoning ordinances and
codes. If under applicable zoning provisions the use of all or any portion of
any Asset is or shall become a nonconforming use, Borrowers will not and will
not permit any other Loan Party to cause or permit such nonconforming use to be
discontinued or abandoned without the express written consent of Administrative
Agent. Borrowers shall not and shall not permit any other Loan Party to permit
or suffer to occur any waste on or to any Asset or to any portion thereof, or
take any steps whatsoever to convert any Asset, or any portion thereof, to a
condominium or cooperative form of management. Borrowers will not and will not
permit any other Loan Party to install or permit to be installed on any Asset
any underground storage tank.
(bb) Special Assets. On or before December 31, 1997 Domestic
Borrower agrees to (i) obtain all consents necessary for a transfer of at least
one of the two Special Assets which are owned by Domestic Borrower (such
transfer (x) to occur in accordance with the terms of the Ground Lease (and
with the consent of the lessor under such Ground Lease) with respect to such
Special Asset and (y) shall not have a negative impact on the value of such
Special Asset), (ii) transfer such Special Asset to Special Subsidiary, (iii)
execute and cause Special Subsidiary to
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execute, to the extent required by Administrative Agent, a reaffirmation of the
Affiliate Guaranty, an amendment to the Domestic Collateral Security Agreement,
UCC-1 financing statements and other documents requested by Administrative
Agent to ensure that Secured Parties have a first priority lien on the stock of
Special Subsidiary and (iv) cause such UCC searches to be performed and provide
Administrative Agent such other evidence demonstrating that Special Subsidiary
is not indebted to any Person (including Guaranteed Indebtedness), in each case
as Administrative Agent shall request; provided, however, if Domestic Borrower
is unable to cause all of the foregoing to occur on or before December 31,
1997, Domestic Borrower shall on or prior to December 31, 1997 prepay the
Domestic Loan, pursuant to Section 2.3, in an amount equal the sum of the
Allocated Loan Amounts for at least one of such Special Assets selected by
Domestic Borrower in its sole discretion (a "SPECIAL ASSET EARLY REPAYMENT"),
and obtain a Partial Release, pursuant to the provisions of Section 2.4.1, for
such Special Asset.
(cc) Agreements. For as long as the Obligations are
outstanding, other than the Loan Documents, the Acquisition Documents and the
Subordinate Note Documents no Loan Party will be a party to any agreement,
instrument or other restriction which limits the ability or right of any Loan
Party to (w) amend, restate or satisfy the terms and conditions of this
Agreement or the other Loan Documents, (x) refinance, prepay or repay the Debt,
(y) acquire, loan or dispose of any property or other asset, or any interest
therein, or acquire or enter into, or provide any services under any Property
Management Agreement or other management agreement or (z) otherwise conduct
such Loan Party's business, except in the case where the consequences, direct
or indirect, of any violation thereof could not reasonably be expected to,
either individually or in the aggregate, cause a Material Adverse Change.
(dd) Organizational Documents. Within thirty (30) days of
the Closing Date, Borrowers shall cause the organizational documents of each of
the Loan Parties (other than Domestic Borrower) to provide for an Independent
Director and to contain special purpose covenants sufficient, in the sole
discretion of Administrative Agent and the requisite Lenders, to ensure that
such Loan Party will be in conformance with the requirements of Section 4.1(dd)
hereof. Borrower represents that as of the Closing Date Domestic Borrower's
organizational documents contain special purpose covenants sufficient to ensure
that Domestic Borrower will be in conformance with the requirements of Section
4.1(dd) hereof.
VI. NEGATIVE COVENANTS
SECTION 6.1 BORROWERS' NEGATIVE COVENANTS.
From the Closing Date until payment and performance in full of
all obligations of Borrowers under the Loan Documents or the earlier release of
the Lien of every Mortgage (and the release of every Negative Pledge) in
accordance with the terms of this Agreement and the other Loan Documents,
Borrowers covenant and agree with Administrative Agent that they will
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not do and they will not permit any Loan Party to do, directly or indirectly,
any of the following unless (x) the Requisite Lenders otherwise consent in
writing:
(a) Operation of Property. Borrowers shall not and shall not
permit any other Loan Party to, without the prior consent of Administrative
Agent: (i) terminate any Property Management Agreement relating to the
Property or otherwise replace any Property Manager of any Asset or enter into
any other management agreements with respect to any Asset; provided, however,
that either of the Borrowers or such Loan Party may terminate or cancel any
Property Management Agreement in accordance with the terms thereof so long as,
prior to such termination or cancellation, Borrowers have selected a
replacement property manager and such replacement property manager is a direct
or indirect wholly-owned subsidiary of Bristol and satisfies the Approved
Property Manager Standard or has been approved by Administrative Agent in its
reasonable discretion; (ii) engage in any business other than (a) the
ownership, renovation, restoration, management and operation of the Assets as
hotels located in the United States of America and Canada, excluding, without
limitation, the Development of real property, and (b) any business that is
ancillary, in purpose and extent, to any business referred to in the preceding
clauses (a) (including, without limitation, operating and leasing retail stores
on the Assets owned or leased by Borrowers or any other Loan Party); and (iii)
enter into any Material Lease or other agreement, or take any other action, if
such Material Lease or such other action which would materially change the
business conducted at any Property or which could reasonably be expected to
cause, either individually or in the aggregate, a Material Adverse Change or
would convert or reposition any Asset into any thing other than a full service
hotel without the prior written consent of Administrative Agent and the
Requisite Lenders, such consent not to be unreasonably withheld. Borrowers
shall not and shall not permit any Loan Party to initiate or consent to any
change in any laws, requirements of Governmental Authorities or obligations
created by private contracts and Tenant Leases which now or hereafter could
reasonably be expected to cause, either individually or in the aggregate a
Material Adverse Change without the prior written consent of the Requisite
Lenders.
(b) Liens. Borrowers shall not and shall not Permit any
other Loan Party to, without the prior written consent of Administrative Agent,
create, incur, assume or suffer to exist any Lien on any portion of the
Property or permit any such action to be taken, except: (i) Permitted
Encumbrances; and (ii) Liens for Taxes or Other Charges not yet due; provided,
however, the appropriate Borrower or the appropriate other Loan Party, upon
prior notice to Administrative Agent, shall have the right to contest in good
faith and at no cost or expense to the Secured Parties any such Lien so long as
it does so diligently, by appropriate proceedings and without prejudice to the
Secured Parties rights under the Loan Documents and provided that, (i) in
Administrative Agents's sole judgment, neither any Asset nor any interest
therein would be in any danger of sale, loss or forfeiture as a result of such
proceeding or contest, (ii) no such contest or proceeding shall subject
Administrative Agent to any civil or criminal penalty or prosecution, (iii)
such Borrower or such other Loan Party shall keep Administrative Agent advised
as to the status of any such contest or proceeding on a regular basis, and (iv)
no such
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contest or proceeding shall (A) subject the Property or any part thereof to a
Lien for which the enforcement thereof is not suspended, or (B) otherwise
affect the priority of the lien of the Mortgage.
(c) Dissolution. Borrowers shall not and shall not permit
any other Loan Party to dissolve, terminate, liquidate, merge with, consolidate
into or acquire another Person.
(d) Change in Business. Borrowers shall not and shall not
permit any other Loan Party to enter into any line of business other than the
ownership, renovation, restoration, management and operation of the Property or
other hotels or (ii) the ownership of the Subsidiaries and the Collateral, or
make any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in activities other than
the continuance of its present business. Notwithstanding anything to the
contrary contained in this Section 6.1(d), Borrowers may, without
Administrative Agent's or Lenders' consent, convert any Asset to a "Holiday
Inn", "Holiday Inn Select", "Crowne Plaza" or other flag licensed by Holiday
Inns Franchising.
(e) Debt Cancellation. Borrowers shall not and shall not
permit any Loan Party to cancel or otherwise forgive or release any claim or
debt (other than termination of Tenant Leases in accordance herewith) owed to
such Borrower or such Loan Party by any Person, except for adequate
consideration and in the ordinary course of such Borrower's or such Loan
Party's business.
(f) Affiliate Transactions. Borrowers shall not and shall
not permit any Loan Party to enter into, or be a party to, any transaction with
an Affiliate of either of the Borrowers or such other Loan Party or any of the
partners or members of either of the Borrowers or such other Loan Party except
in the ordinary course of business and on terms which are fully disclosed to
and approved by Administrative Agent in advance and (other than the Property
Management Agreements, Liquor Leases and Liquor Operation Servicing Agreements
approved by Lenders on or prior to the Closing Date or a Substitution Date, as
applicable) are no less favorable to Borrowers or such Affiliate than would be
obtained in a comparable arm's-length transaction with an unrelated third
party.
(g) Zoning. Borrowers shall not and shall not permit any
other Loan Party to initiate or consent to any zoning reclassification of any
portion of any Asset or seek any variance under any existing zoning ordinance
or use or permit the use of any portion of any Asset in any manner that could
result in such use becoming a non-conforming use under any zoning ordinance or
any other applicable land use law, rule or regulation, without the prior
written consent of the Requisite Lenders.
(h) Assets. Borrowers shall not and shall not permit any
Subsidiary to purchase or own any properties other than the Property or any
other Collateral.
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(i) Debt. Other than the Debt, the Loan Parties obligations
under the Subordinate Notes, and a Permitted Guaranty, Borrowers shall not and
shall not permit any other Loan Party to create, incur, guaranty or assume any
debt (including without limitation Guaranteed Indebtedness) other than (i)
Permitted Trade Payables or (ii) FF&E Financings, in an aggregate amount not to
exceed the Maximum Permitted Trade Payables/FF&E Financings. Borrowers shall
not and shall not allow any Loan Party to permit any trade payables (including
but not limited to Permitted Trade Payables) to be outstanding for more than
sixty (60) days. BHOC, BHAC and Bristol shall not modify the terms of the
Acquisition Facility in any way which limits the ability or right of any Loan
Party to (w) amend, restate or satisfy the terms and conditions of this
Agreement or the other Loan Documents, (x) refinance, prepay or repay the Debt,
(y) acquire, loan or dispose of any property or other asset, or any interest
therein, or acquire or enter into, or provide any services under any Property
Management Agreement or other management agreement or (z) otherwise conduct
such Loan Party's business, except in the case where the consequences, direct
or indirect, of any violation of this covenant could not reasonably be expected
to, either individually or in the aggregate, cause a Material Adverse Change.
Notwithstanding the foregoing, without the consent of the Administrative Agent
and the Requisite Lenders, which consent may be withheld in their sole
discretion, no Permitted Pledge or Permitted Guaranty may be amended, restated,
supplemented or otherwise modified except that Administrative Agent and the
Requisite Lenders will not unreasonably withhold their consent to the
modification of a Permitted Pledge or a Permitted Guaranty if the purpose of
such modification is to cure any ambiguity or to correct any provisions thereof
which may be defective; provided, that such modification shall not adversely
affect in any material respect the interest of any Lender. Borrowers shall and
shall cause all other Loan Parties to make all payments due pursuant to any
FF&E Financings when same are due and payable.
(j) Transfer or Encumbrance of the Property.
(i) Borrowers acknowledge that each Lender, in
agreeing to make the Loans, has examined and relied on the
creditworthiness and experience of Borrowers and the other Loan
Parties in owning and operating properties such as the Property, and
that such Lender will continue to rely on Borrowers' or such Loan
Parties' ownership and operation of the Property as a means of
maintaining the value of the Property as security for repayment of the
Debt. Borrowers acknowledge that each Lender has a valid interest in
maintaining the value of the Property so as to ensure that, should
Borrowers default in the repayment of the Debt, each Lender can
recover all or a portion of the Debt by a sale of the Property.
Accordingly, subject to the terms of Sections 6.1(i) and 6.1(j)(vi)
and (vii) hereof, Borrowers shall not and shall not permit any Loan
Party to, without the prior written consent of each Lender and
Administrative Agent, Transfer the Property, any other Collateral or
any part thereof or any interest therein, or permit the Property, or
any part thereof or any interest therein, to be Transferred other than
pursuant to a Permitted Pledge or Permitted Encumbrance.
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(ii) As used herein, a "TRANSFER" shall mean any
sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Property or the other Collateral or any part thereof
or interest therein including: (A) an installment sales agreement
wherein any Loan Party agrees to sell any Asset, any other Collateral
or any part thereof or any interest therein for a price to be paid in
installments; (B) an agreement by Borrowers or any other Loan Party
leasing all or a substantial part of any Asset for other than actual
occupancy by a space tenant thereunder, or a sale, assignment or other
transfer of, or the grant of a security interest in, Borrowers' or
such Loan Party's right, title and interest in and to any Tenant
Leases or any Rents; (C) if any Loan Party or any general partner or
member of any Loan Party is a corporation, the voluntary or
involuntary sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of such corporation's stock (or the stock of any
corporation directly or indirectly controlling such corporation by
operation of law or otherwise) or the creation or issuance of new
stock to a party or parties who are not now stockholders or any Change
in Control of such corporation; (D) if any Loan Party or any general
partner or member of any Loan Party is a limited or general
partnership, joint venture or limited liability company, the change,
removal, resignation or addition of a partner, joint venturer or
member or the sale, conveyance, alienation, mortgage, encumbrance,
pledge or transfer of the partnership interest of any partner or the
sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the interest of any joint venturer or member; (E) if any
Loan Party is a limited or general partnership, joint venture, limited
liability company, trust, nominee trust, tenancy in common or other
unincorporated form of business association or form of ownership
interest, the voluntary or involuntary sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of any interest of Person
having a direct legal or beneficial ownership interest in any Loan
Party, including any legal or beneficial interest in any constituent
partner or member of any Loan Party; (F) any instrument subjecting any
Asset to a condominium regime or transferring ownership to a
cooperative corporation; and (G) the dissolution or termination of any
Loan Party or any general partner or member of any Loan Party or the
merger or consolidation of any Loan Party or any general partner or
member of any Loan Party with any other Person.
(iii) Administrative Agent shall not be required to
demonstrate any actual impairment of the Secured Parties' security or
any increased risk of default hereunder in order to declare the Debt
immediately due and payable upon any Loan Party's Transfer of any
Asset or other Collateral Lenders' consent (if such consent is
required under this Section 6.1(j)). This provision shall apply to
every Transfer of any Asset or other Collateral regardless of whether
voluntary or not, or whether or not Lenders' have consented to any
previous Transfer of any Asset or other Collateral.
(iv) Lenders consent to one Transfer of any Asset or
other Collateral shall not be deemed to be a waiver of Lenders' right
to require such consent to any future
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occurrence of the same. Any Transfer of any Asset or other Collateral
made in contravention of this Section shall be null and void and of no
force and effect.
(v) Borrowers agree to bear and shall pay or
reimburse Administrative Agent and Lenders on demand for all
reasonable out-of-pocket costs and expenses (including, without
limitation, title search costs, title insurance endorsement premiums
and reasonable attorneys' fees and disbursements) incurred by
Administrative Agent and Lenders in connection with the review,
approval and documentation of any Transfer of any Asset.
(vi) Notwithstanding anything to the contrary
contained in this Section 6.1(j), the following transfers shall be
permitted without Lenders' consent:
(A) a sale or other disposition of FF&E in
the ordinary course of business provided, (x) such FF&E is
obsolete or not useful for the operation of the Asset where
such FF&E is located or such FF&E is replaced with FF&E of
substantially similar value and utility and (y) the FF&E
Financing with respect to such FF&E has been paid off or
otherwise satisfied;
(B) a sale, conveyance, alienation,
hypothecation, encumbrance or transfer of the stock of
Bristol;
(C) a sale, conveyance, alienation,
hypothecation, encumbrance or transfer of the equity interest
of any shareholder of Bristol;
(D) a sale, conveyance, alienation,
hypothecation, encumbrance or transfer of the stock of BHOC;
(E) a transfer of the stock of BHAC pursuant
to the terms of the Permitted Pledge executed in connection
with the Subordinate Notes or the Acquisition Facility,
including, without limitation, a sale or other transfer of
such stock to any Person in connection with the foreclosure of
such Permitted Pledge or transfer in lieu of such foreclosure;
provided that in the case of clause (A) above no monetary Default or
Event of Default shall have occurred and remain uncured and in the
case of clauses (B), (C), (D) and (E) above which results in a Change
in Control of Bristol, BHOC or BHAC: (w) Borrowers shall give
Administrative Agent written notice of such transfer together with
copies of all instruments effecting such transfer not less than five
(5) Business Days prior to the date of such transfer; (x) such
transfer does not and will not result in the termination or
dissolution of either Borrower, by operation of law or otherwise; and
(y) Borrowers shall have delivered to Administrative Agent such
opinions and title insurance endorsements as
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may be reasonably requested by Administrative Agent and evidence
reasonably satisfactory to Administrative Agent that the single
purpose nature and bankruptcy remoteness of each of the Borrowers and
each of its general partners or members following such transfer is in
accordance with the standards of Section 4.1(dd); and (z) in the case
of (E) above (1) the transferee of the BHAC stock (or a controlling
Person thereof) is a reputable entity or person of good character with
financial means and experience appropriate for an investment of the
type contemplated by the acquisition of such stock (without thereby
implying that such transferee or controlling Person shall have any
experience in the hospitality business or shall have any obligation to
make any investment or provide any other financial support to BHAC,
any of its subsidiaries or any other Person), (2) Borrowers or such
transferee shall pay all reasonable out-of-pocket costs and expenses
incurred by Administrative Agent and each Lender in connection with
such transfer (including reasonable attorney's fees and costs) and (3)
Borrowers and the transferee of the BHAC stock shall use commercially
reasonable efforts to ensure that the transfer of the BHAC stock does
not result in the termination of any Franchise Agreements, IP License
Agreements, Liquor Licenses, or Liquor Agreements to the extent any
such termination would constitute or give rise to a Default;
(vii) Notwithstanding the prohibition contained in
Section 6.1(j)(i) above, Lenders' consent to the sale or transfer of
the Property in their entirety will not be unreasonably withheld after
consideration of all relevant factors, provided that the following
conditions are satisfied:
(A) no Event of Default or event which, with
the giving of notice or the passage of time or both, would
constitute an Event of Default shall have occurred and remain
uncured;
(B) the proposed transferee ("TRANSFEREE")
shall be a reputable entity or person of good character,
creditworthy, with sufficient financial worth considering the
obligations assumed and undertaken, as evidenced by financial
statements and other information reasonably requested by
Lenders;
(C) the property manager selected by the
Transferee shall have sufficient experience in the ownership
and management of properties similar to the Property, and
Administrative Agent shall be provided with evidence thereof
satisfactory to Lenders in their reasonable discretion;
(D) any matters required by Administrative
Agent and the Requisite Lenders in their reasonable discretion
by reason of the Canadian Assets, shall be satisfied,
including but not limited to a requirement that there be two
Transferees (each of which must satisfy the requirements of
this Section), one of which will be organized under the laws
of Canada and own the Canadian Assets
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and the other will be organized under the laws of the United
States and own the Domestic Assets;
(E) Administrative Agent shall have received
evidence reasonably satisfactory to Administrative Agent that
the Transferee will be in compliance with the requirements of
Section 4.1(dd);
(F) In the case of a Transfer of the
Property by way of a sale or transfer of all of the Assets
only, Borrowers, all appropriate Loan Parties and the
Transferee shall have executed and delivered to Administrative
Agent an assumption agreement and such other documents as
Administrative Agent may request (collectively, the
"ASSUMPTION AGREEMENTS") under which the Transferee shall
assume and be obligated to each Lender for the Debt and all
obligations of each of Borrowers under the Notes, this
Agreement, the Mortgage and the other Loan Documents, and of
the other Loan Parties under the Affiliate Guaranty and any
documents securing the Affiliate Guaranty, which Assumption
Agreements shall be in form and substance acceptable to
Lenders and shall state the Transferee's agreement to abide by
and be bound by the terms in the Notes, this Agreement, the
Mortgage and the other Loan Documents;
(G) Administrative Agent shall have received
such opinions and title insurance endorsements as may be
reasonably requested by Administrative Agent or any Lender;
(H) Borrowers shall have submitted to
Administrative Agent, not less than thirty (30) days prior to
the date of such assumption, the Assumption Agreements. Such
documents shall be in a form appropriate in the jurisdiction
in which each Asset is located and satisfactory to Lenders in
their sole discretion. In addition, Borrowers shall have
provided all other documentation Administrative Agent
reasonably requires to be delivered by Borrowers or any other
Loan Party in connection with such assumption, together with
an Officer's Certificate certifying that such documentation
(X) is in compliance with all Legal Requirements, (Y) will
effect such assumption in accordance with the terms of this
Agreement, and (Z) will not impair or otherwise adversely
affect the Liens and other rights of each Lender under the
Loan Documents;
(I) Borrowers shall have paid all reasonable
out-of-pocket costs and expenses incurred by Administrative
Agent and each Lender in connection with such assumption
(including reasonable attorney's fees and costs);
(J) All Franchise Agreements, IP License
Agreements, Liquor Licenses, and Liquor Agreements will remain
in effect and be validly transferred
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to the Transferee or a subsidiary of the Transferee (or
alternative provisions shall have been made that are
reasonably satisfactory to Administrative Agent and the
Requisite Lenders);
(K) Administrative Agent shall have
received a Non-Consolidation Opinion reasonably satisfactory
to Lenders in form and substance and from counsel reasonably
satisfactory to Administrative Agent and containing
assumptions, limitations and qualifications customary for
opinions of such type;
(viii) Borrowers hereby agree to indemnify and
defend and hold Administrative Agent and each Lender harmless against
all taxes, filing fees and other amounts of the type set forth in
Section 4.1(cc) hereof, if any, imposed on Administrative Agent or any
Lender by virtue of its execution of the Assumption Agreements or by
reason of an assumption pursuant to this Section 6.1(l), including,
without limitation, any penalties, interest and attorneys' fees
incurred by Administrative Agent in connection therewith, and all such
charges shall be secured by the Lien of each Mortgage and bear
interest at the Default Rate until paid.
(k) Intellectual Property; Franchise Agreements.
(i) Intellectual Property. Borrowers shall not and
shall not permit any Loan Party to transfer (by way of sale,
conveyance, alienation, mortgage, encumbrance, pledge or otherwise),
in whole or in part, (other than transfers to each Lender pursuant to
the Loan Documents and non-exclusive licenses entered into in the
ordinary course of business of Borrowers or such Loan Party) any
Intellectual Property unless Borrowers or such Loan Party shall have
reasonably determined that the Intellectual Property so transferred is
no longer material to the business, operations, condition (financial
or otherwise) or prospects of Borrowers or such Loan Party.
(ii) License Agreements. Except under the Property
Management Agreements, Borrowers shall not and shall not permit any
other Loan Party to, enter into or otherwise become obligated with
respect to, any franchise agreement (as franchisor), license agreement
(as licensor) or similar agreement (in a similar capacity) with
respect to any Intellectual Property of Borrowers or any other Loan
Party.
(iii) Franchise Agreements. Without the prior
written approval of the Requisite Lenders, which approval shall not be
unreasonably withheld, conditioned or delayed, Borrowers shall not and
shall not permit any Loan Party to, (i) take any action or fail to
take any action, in either case as may be required or permitted by the
terms of any Franchise Agreement with respect to any Asset, with
respect to the termination (by such Borrower or such Loan Party, the
franchisor or any other Person, and for any reason), renewal or
extension thereof, (ii) amend, restate, supplement or otherwise
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change, or waive or fail to enforce any provision of, any Franchise
Agreement with respect to any Asset in any material respect, or (iii)
enter into any new or replacement Franchise Agreement with respect to
any Asset (with the same franchisor or a different franchisor);
provided that (v) without the approval of the Requisite Lenders, each
Franchise Agreement in effect as of the date of this Agreement or
entered into, renewed, extended, amended, restated, supplemented or
otherwise changed pursuant to this subsection may be renewed or
extended on substantially the same or better terms as in effect at the
time of such renewal or extension, (w) with the approval of the
Requisite Lenders, if a Franchise Agreement with respect to any Asset
shall have expired, such Borrower or such other Loan Party which owns
such Asset may operate such Asset without a Franchise Agreement under
the "Harvey Hotels", "Harvey Suites", "Bristol Hotels" or
"Bristol Suites" flag, (x) without the approval of the Requisite
Lenders, Borrowers may execute Franchise Agreements to convert any
Asset to a "Holiday Inn", "Holiday Inn Select", "Crowne Plaza" or
other flag licensed by Holiday Inns Franchising, (y) with respect to a
replacement Franchise Agreement referred to in the preceding clause
(iii), any Lender's approval may be granted, withheld, conditioned or
delayed in the sole discretion of such Lender if, in its opinion, the
franchisor under such replacement Franchise Agreement shall have a
national standing and reputation less favorable than the general
standing and reputation of the franchisors under Franchise Agreements
then covering the Asset and (z) with respect to each action referred
to in the preceding clauses (i) or (iii) for which any Lender may
reasonably require a franchisor's estoppel and consent agreement, in
accordance of the effectiveness of such action, Borrowers shall or
shall cause the appropriate Loan Party to deliver to Administrative
Agent a franchisor's estoppel and consent agreement in substantially
the form of the estoppel and consent agreement delivered to
Administrative Agent pursuant to this Agreement or otherwise in form
and substance satisfactory to the Requisite Lenders.
(l) Accounts Receivable. Borrowers shall not and shall not
permit any Loan Party to, directly or indirectly, sell with recourse or, except
in the ordinary course of business and consistent with past practices, discount
or otherwise sell for less than the face value thereof, any of its notes or
accounts receivable.
(m) Management of Assets. Borrowers shall not and shall not
permit any Loan Party to enter into any management agreement or similar
agreement (other than a Franchise Agreement) delegating to any Person other
than Management Co. or another wholly owned Subsidiary of Bristol substantial
authority over the management, maintenance or operation of any Asset.
(n) Special Harvey Entities. No Special Harvey Entity shall
(i) own any assets other than assets it owned on the Closing Date, (ii) be
indebted to any Person (including but not limited to Guaranteed Indebtedness)
other than debt owed on the Closing Date or (iii) conduct any business other
than business conducted on the Closing Date.
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VII. CASUALTY; CONDEMNATION; ESCROWS
SECTION 7.1 INSURANCE; CASUALTY AND CONDEMNATION.
7.1.1 INSURANCE. (a) Borrowers shall and shall cause each
other Loan Party to, at their sole cost and expense, for the mutual benefit of
Borrowers (or such other Loan Party) and Lenders, shall keep each Asset insured
and obtain and maintain during all times that any sum is outstanding under the
Notes or the other Loan Documents (the "TERM") policies of insurance insuring
against loss or damage by fire and lightning and against loss or damage by all
other risks and hazards covered by a standard extended coverage insurance
policy, including, without limitation, riot and civil commotion, vandalism,
malicious mischief, burglary and theft. Such insurance shall be in an amount
equal to the greatest of (i) the then full replacement cost of such Asset
(except in the case of earthquake insurance), without deduction for physical
depreciation, including but not limited to the replacement cost of FF&E on site
at such Asset (ii) the outstanding principal balance of the Loans, and (iii)
such amount that the insurer would not deem Borrowers or such Loan Party a
co-insurer under said policies. The policies of insurance carried in
accordance with this paragraph shall (i) be paid annually in advance unless the
insurance provider permits monthly payments in which case such payments shall
be made on or prior to the date on which such payments are due and payable and
(ii) contain a "Replacement Cost Endorsement" with a waiver of depreciation.
(b) Borrowers shall and shall cause each other Loan Party to,
at their sole cost and expense, for the mutual benefit of Borrowers (or such
other Loan Party) and Lenders, shall also obtain and maintain during the Term
the following policies of insurance:
(i) Flood insurance if any part of any Asset is
located in an area identified by the Federal Emergency Management
Agency as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance
Program in an amount at least equal to the Allocated Loan Amount for
such Asset or the maximum limit of coverage available with respect to
the Property under said program, whichever is less;
(ii) Comprehensive public liability insurance,
including broad form property damage, blanket contractual and personal
injuries (including death resulting therefrom) coverages and
containing minimum limits per Asset per occurrence of $1,000,000 and
$3,000,000 in the aggregate for any policy year. In addition, at
least $100,000,000 excess and/or umbrella liability insurance in the
aggregate for any policy year shall be obtained and maintained during
the Term for any and all claims, including all legal liability imposed
upon Borrowers or any other Loan Party and all court costs and
attorneys' fees incurred in connection with the ownership, operation
and maintenance of each Asset;
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(iii) Rental loss and/or business interruption
insurance in an amount equal to the greater of (A) the estimated Net
Operating Income for each Asset for the next succeeding eighteen (18)
month period or (B) the projected Operating Expenses (plus Debt
Service) for the maintenance and operation of such Asset for the next
succeeding eighteen (18) month period. The amount of such insurance
shall be increased from time to time during the Term as and when the
estimate of Net Operating Income or projected Operating Expenses, as
may be applicable, increases;
(iv) Insurance against loss or damage from (A)
leakage of sprinkler systems and (B) explosion of steam boilers, air
conditioning equipment, high pressure piping, machinery and equipment,
pressure vessels or similar apparatus now or hereafter installed in
any of the Improvements (without exclusion for explosions), in an
amount at least equal to $3,000,000 per Asset;
(v) Workers' compensation insurance with respect to
any employees of Borrowers or any Loan Party, as required by any
Governmental Authority or Legal Requirement except for Texas if
Borrowers elect not to subscribe to the workers' compensation statute,
in which case Borrowers shall have a benefit program and employers'
legal liability coverage reasonably acceptable to Administrative Agent
to respond to claims that would otherwise be covered by a standard
policy of employers' liability insurance;
(vi) During any period of repair or restoration,
builder's "all risk" insurance in an amount equal to not less than the
full insurable value of each Asset against such risks (including,
without limitation, fire and extended coverage and collapse of the
Improvements to agreed limits) as Administrative Agent may reasonably
request, in form and substance acceptable to Administrative Agent;
(vii) If any Asset is or becomes a "non-conforming
use" under applicable zoning and building ordinances, ordinance or law
coverage to compensate for the cost of demolition and the increased
cost of construction for such Asset;
(viii) Earthquake insurance, as reasonably
determined by Administrative Agent with respect to each Asset located
in California, or another area at high risk of earthquake, in an
amount equal to the probable maximum loss which could be sustained by
such Asset on account of an earthquake;
(ix) Liquor liability and dram shop insurance on
such basis and in such amounts as shall be reasonably required by
Administrative Agent in a minimum amount of $1,000,000 per occurrence
and $3,000,000 in the aggregate; and
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(x) Such other insurance as may from time to time be
reasonably required by any Lender in order to protect its interests,
including, without limitation, earthquake and hurricane insurance.
(c) All policies of insurance (the "POLICIES") required
pursuant to this Section 7.1.1 shall (i) be issued by companies approved by
Administrative Agent and licensed to do business in each state or province
where an Asset is located and with a claims paying ability rating of "AA" or
better by Standard & Poor's Ratings Services, unless Administrative Agent in
its reasonable discretion agrees to approve companies with a claims paying
ability rating of lower than "AA"; (ii) name Administrative Agent, as agent for
Lenders, and its successors and/or assigns as their interest may appear as the
mortgagee; (iii) contain a non-contributory standard mortgagee clause and a
mortgagee's loss payable endorsement, or their equivalents, naming
Administrative Agent, as agent for Lenders, as the person to which all payments
made by such insurance company shall be paid; (iv) contain a waiver of
subrogation against Administrative Agent and Lenders; (v) be maintained
throughout the Term without cost to Administrative Agent or Lenders; (vi) be
assigned (subject to the requirements of any Ground Lease) and certified copies
thereof delivered to Administrative Agent; (vii) not contain a deductible
clause in excess of $250,000 (except in the case of earthquake insurance which
may contain a deductible clause no greater than five percent (5%) of the fair
market value of such Asset); (viii) contain such provisions as Administrative
Agent deems reasonably necessary or desirable to protect the interest of
Lenders, including, without limitation, endorsements providing that neither of
the Borrowers, Administrative Agent nor any other Person shall be a co-insurer
under said Policies and that Administrative Agent shall receive at least thirty
(30) days prior written notice of any modification, reduction or cancellation
of any of the Policies; and (ix) otherwise be approved by Administrative Agent
in the exercise of its reasonable judgment as to amounts, form, risk coverage,
deductibles, loss payees and insurers. Borrowers shall and shall cause each
other Loan Party to pay the premiums for such Policies (the "INSURANCE
PREMIUMS") as the same become due and payable and shall furnish to
Administrative Agent evidence of the renewal of each of the Policies with
receipts for the payment of the Insurance Premiums or other evidence of such
payment reasonably satisfactory to Administrative Agent (provided, however,
that Borrowers (or such other Loan Party) are not required to furnish such
evidence of payment to Administrative Agent in the event that such Insurance
Premiums have been paid by Lenders pursuant to Section 7.3 hereof). If
Borrowers do not furnish such evidence and receipts at least thirty (30) days
prior to the expiration of any expiring Policy, then Administrative Agent may
procure, but shall not be obligated to procure, such insurance and pay the
Insurance Premiums therefor, and Borrowers agree to reimburse Lenders (through
Administrative Agent) for the cost of such Insurance Premiums promptly on
demand. Within thirty (30) days after request by Administrative Agent,
Borrowers shall and shall cause each other Loan Party to obtain such increases
in the amounts of coverage required hereunder as may be reasonably requested by
Administrative Agent, taking into consideration changes in the value of money
over time, changes in liability laws, changes in prudent customs and practices,
and the like. In the event that any Loan Party satisfies the requirements
under this Section 7.1.1 through the use of a
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Policy covering more than one Asset, Borrowers shall and shall cause each other
Loan Party to provide evidence satisfactory to Administrative Agent that the
Insurance Premiums for each Asset covered by such Policy are separately
allocated under such Policy and payment of such allocation shall continue such
Policy as to such Asset notwithstanding any other payment of premiums, or, if
no such allocation is available at any time during the Term, Administrative
Agent shall have the right to increase the Tax and Insurance Escrow in an
amount sufficient to purchase a non-blanket Policy covering the Property from
insurance companies which qualify under this Agreement. Notwithstanding
anything contained in this Section 7.1 to the contrary, Administrative Agent
acknowledges that (i) Schedule XXV sets forth the manner in which the insurance
maintained by Borrowers (or such other Loan Party which owns any Assets)
deviates from the standards set forth in this Section 7.1. and (ii) that so
long as Borrowers (or such Loan Party) maintain insurance meeting the
requirements of this Section, as amended by Schedule XXV, same shall not
constitute a Default hereunder, provided however, that prior to March 31, 1998
Borrowers must give notice to Administrative Agent of its (or such Loan
Party's) election to continue to maintain insurance meeting the requirements of
this Section 7.1, as amended by Schedule XXV, if Borrowers fail to give such
notice by March 31, 1998 thereafter Borrowers will be required to and will
cause each other Loan Party to maintain insurance which meets the requirements
of this Section 7.1 without giving effect to Schedule XXV.
(d) If any Asset is damaged or destroyed, in whole or in
part, by fire or other casualty (a "CASUALTY"), Borrowers shall give prompt
written notice thereof to Administrative Agent. Following the occurrence of a
Casualty, Borrowers shall or shall cause another Loan Party to, regardless of
whether insurance proceeds are available, shall, except as provided in Section
7.1.2(b), promptly proceed to restore, repair, replace or rebuild the same to
be of at least equal value and of substantially the same character as prior to
such damage or destruction, all to be effected in accordance with applicable
law. The reasonable out-of-pocket expenses incurred by Administrative Agent in
the adjustment and collection of insurance proceeds shall become part of the
Debt and be secured by the Mortgage and shall be reimbursed by Borrowers to
Administrative Agent upon demand.
7.1.2 CASUALTY AND APPLICATION OF PROCEEDS. (a) In case of
loss or damages covered by any of the Policies, the following provisions shall
apply:
(i) In the event of a Casualty that is less than
$250,000 (not including any deductible permitted to be maintained
hereunder which is paid by Borrowers), the appropriate Borrower or
such Loan Party which owns the Asset subject to such Casualty may
settle and adjust any claim without the consent of Administrative
Agent, provided that such adjustment is carried out in a competent and
timely manner and the proceeds of any such policy shall be due and
payable solely to Administrative Agent and held in escrow by
Administrative Agent in the Loss Proceeds Subaccount.
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(ii) In the event a Casualty shall equal or exceed
$250,000 (not including any deductible permitted to be maintained
hereunder which is paid by Borrowers), then and in that event,
Administrative Agent will consult with Borrowers as to the settlement
and adjustment of the claim but may thereafter settle and adjust any
claim without the consent of Borrowers if Borrowers and Administrative
Agent are unable to agree as to such matters or any other Loan Party
and agree with the insurance company or companies on the amount to be
paid on the loss and the proceeds of any such policy shall be due and
payable solely to Administrative Agent, as agent for Lenders, and held
in escrow by Administrative Agent, as agent for Lenders, in the Loss
Proceeds Subaccount provided however, that this provision shall not
restrict the rights of the lessor under any Ground Lease to (x)
settle, adjust or compromise any claim for Insurance Proceeds or to
(y) approve any settlement, adjustment or compromise of any claim for
Insurance Proceeds to the extent the approval of such lessor is
required under such Ground Lease. Administrative Agent shall not be
required to consult with Borrowers if an Event of Default is then
continuing.
(b) In the event of a Casualty with respect to an Asset where
the loss is in an aggregate amount less than thirty percent (30%) of the
Allocated Loan Amount for such Asset and if, in the reasonable judgment of
Administrative Agent, the Asset can be restored within twelve (12) months after
the occurrence of the Casualty and prior to maturity of the Notes to an
economic unit not less valuable (including an assessment of the impact of the
termination of any Tenant Leases due to such Casualty) and not less useful than
the same was prior to the Casualty, and after such restoration will adequately
secure the Allocated Loan Amount for such Asset, then, if no Default or Event
of Default shall have occurred and be then continuing, the proceeds of
insurance shall be deposited directly into the appropriate Deposit Account,
whereupon such insurance proceeds shall be transferred to the Loss Proceeds
Subaccount where, after reimbursement of any reasonable out-of-pocket expenses
incurred by Administrative Agent, such proceeds shall be maintained and applied
to pay for the cost of restoring, repairing, replacing or rebuilding the Asset
or part thereof subject to the Casualty (the "RESTORATION"), in the manner set
forth herein. Borrowers hereby covenant and agree to (and cause the other Loan
Parties to with respect to Assets owned by such Loan Parties) commence and
diligently to prosecute such Restoration; provided that: (i) Borrowers shall
pay all costs (and if required by Administrative Agent, in the event
Administrative Agent determines in its reasonable discretion that Borrowers are
likely not to have sufficient Mortgaged Property Gross Cash Flow in excess of
Operating Expenses therefore Borrowers shall deposit the total thereof with
Administrative Agent, in advance) of such Restoration in excess of the net
proceeds of insurance made available pursuant to the terms hereof; (ii) the
Restoration shall be done in compliance with all applicable laws, rules and
regulations; and (iii) Administrative Agent shall have received evidence
reasonably satisfactory to it that, during the period of the Restoration, the
sum of (A) income derived from the Property, as reasonably determined by
Administrative Agent, plus (B) proceeds of rent loss insurance or business
interruption insurance, if any, to be paid, will equal or exceed the sum of (1)
expenses in connection with the operation of the Property, (2) the Debt Service
under the
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Loans, and (3) the other payments required pursuant to Section 10.9.1(a) hereof
or Section 10.9.2(a) hereof, as applicable. Notwithstanding anything to the
contrary contained in this Section 7.1.2, Borrowers may, in their sole
discretion, elect not to undertake the Restoration of an Asset and to instead
prepay a portion of the Domestic Notes, if such Asset was a Domestic Asset or
the Canadian Notes, if such Asset was a Canadian Asset (each in accordance with
the terms of Section 2.3.3) and cause the Asset which suffered the Casualty to
be Partially Released in accordance with and subject to Section 2.4. provided
at least ten (10) Securitizable Assets remain.
(c) Except as provided above, the proceeds of insurance
collected upon any Casualty and any other funds contributed by Borrowers under
Section 7.1.2(b) shall be deposited directly into the appropriate Deposit
Account and at the option of the Requisite Lenders and Administrative Agent in
their sole discretion, be applied to the payment of the Debt (in the case of a
Casualty involving a Domestic Asset) or the Canadian Loan (in the case of a
Casualty involving a Canadian Asset) (in each case after reimbursement of any
expenses incurred by Administrative Agent) or transferred into the Loss
Proceeds Subaccount where (after reimbursement of any expenses incurred by
Administrative Agent) such proceeds and other funds shall be maintained and
applied to pay for the cost of any Restoration (whether such costs are incurred
by Borrowers or any other Loan Party) in the manner set forth herein. If the
proceeds of insurance collected upon a Casualty are applied by Lenders to
payment of the Debt pursuant to this Section 7.1.2, Borrowers may elect to
prepay a portion of the Loans sufficient to obtain a Partial Release of the
Asset which is the subject of the Casualty pursuant to Section 2.4.1 hereof
provided Borrowers shall have satisfied or caused to be satisfied the following
conditions (the "CASUALTY RELEASE EVENT"):
(i) such prepayment shall be made on the first
scheduled payment date occurring after the appropriate Borrower shall
have provided Administrative Agent with thirty (30) days irrevocable
prior written notice of its intent to make such repayment, which
notice shall have been delivered to Administrative Agent no later than
thirty (30) days after such proceeds of insurance are applied to
payment of the Debt (in the case of a Casualty involving a Domestic
Asset) or the Canadian Loan (in the case of a Casualty involving a
Canadian Asset); and
(ii) all of the requirements of Section 2.4.1
shall have been satisfied.
Any such application to the Debt (or the Canadian Loan, as applicable) or
repayment of the Debt (or the Canadian Loan, as applicable) pursuant to this
clause (c) shall be without any prepayment consideration or premium (other than
Losses and Gains) except that if a Default or an Event of Default has occurred
and is continuing, then Borrowers shall pay to Administrative Agent, an
additional amount equal to the Repayment Premium applicable to such prepayment.
Any such application to the Debt or repayment of the Debt pursuant to this
clause (c) shall (x) be applied to those payments of principal and interest
last due under the Notes but shall not postpone or reduce
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any payments otherwise required pursuant to the Notes other than such last due
payments and (y) if the Asset subject to the Casualty was a Canadian Asset, be
applied to the Canadian Notes or if the Asset subject to the Casualty was a
Domestic Asset, be applied to the Domestic Notes.
(d) In the event Borrowers are entitled to reimbursement out
of insurance proceeds held by Administrative Agent (whether for costs incurred
by Borrowers or any other Loan Party), such proceeds shall be disbursed from
the Loss Proceeds Subaccount from time to time upon Administrative Agent being
furnished with: (i) evidence satisfactory to Administrative Agent of the
estimated cost of completion of the Restoration; (ii) funds, or at
Administrative Agent's option, assurances satisfactory to Administrative Agent
that such funds are or will become available, sufficient in addition to the
proceeds of insurance to complete the proposed Restoration; (iii) evidence
reasonably acceptable to Administrative Agent that all work in connection with
which the reimbursement is being requested has been performed and paid for
which shall include, if the estimated cost of the Restoration exceeds the
lesser of $250,000 and ten percent (10%) of the Allocated Loan Amount with
respect to such Asset, such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of cost, payment and performance as
Administrative Agent may reasonably require and approve; and (iv) all plans and
specifications for such Restoration, such plans and specifications to be
delivered and approved by Administrative Agent (such approval not to be
unreasonably withheld) prior to commencement of any work if the estimated cost
of the Restoration exceeds the lesser of $250,000 and ten percent (10%) of the
Allocated Loan Amount with respect to such Asset. In addition, no payment made
prior to the final completion of the Restoration shall exceed ninety percent
(90%) of the value of the work performed from time to time nor be made in
contravention of the holdback provisions of any applicable construction,
mechanic's or similar lien legislation; funds other than proceeds of insurance
shall be disbursed prior to disbursement of such proceeds; and at all times,
the undisbursed balance of such proceeds remaining in the hands of
Administrative Agent, together with funds deposited for that purpose or
irrevocably committed to the satisfaction of Administrative Agent by or on
behalf of Borrowers for that purpose, shall be at least sufficient in the
reasonable judgment of Administrative Agent to pay for the cost of completion
of the Restoration, free and clear of all Liens or claims for Lien. Any
surplus which may remain out of insurance proceeds held by Administrative Agent
after payment of such costs of Restoration shall be paid to Borrowers.
7.1.3 CONDEMNATION. (a) Borrowers shall promptly give
Administrative Agent written notice of the actual or threatened commencement of
any condemnation or eminent domain proceeding against any of the Premises or
the Improvements or any part thereof (a "CONDEMNATION") and shall deliver to
Administrative Agent copies of any and all papers served in connection with
such Condemnation. Following the occurrence of a Condemnation, Borrowers shall
or shall cause the other Loan Parties (as appropriate), regardless of whether
an Award (as hereinafter defined) is available, shall promptly proceed to
restore, repair, replace or rebuild the Property to the extent practicable to
be of at least equal value and of substantially the
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same character as prior to such Condemnation, all to be effected in accordance
with applicable law.
(b) Administrative Agent, is hereby irrevocably appointed as
Borrowers' and each other Loan Party's attorney-in-fact, coupled with an
interest, with exclusive power to collect, receive and retain any award or
payment ("AWARD") for any taking accomplished through a Condemnation and (after
consultation with Borrowers as to the compromise or settlement of a claim, if
no Event of Default is then continuing) to make any compromise or settlement in
connection with such Condemnation, subject to the provisions of this Section.
Notwithstanding any taking in connection with a Condemnation by any public or
quasi-public authority (including, without limitation, any transfer made in
lieu of or in anticipation of such a Condemnation), Borrowers shall continue to
pay the Debt (in the case of a Condemnation involving a Domestic Asset) or the
Canadian Loan (in the case of a Condemnation involving a Canadian Asset) at the
time and in the manner provided for in the Notes, this Agreement, the Mortgages
and the other Loan Documents and the Debt (or the Canadian Loan, as applicable)
shall not be reduced unless and until any Award shall have been actually
received and applied by Administrative Agent to expenses of collecting the
Award and to discharge of the Debt (or the Canadian Loan, as applicable).
Lenders shall not be limited to the interest paid on the Award by the
condemning authority but shall be entitled to receive out of the Award interest
at the rate or rates provided in the Notes. Borrowers shall cause any Award
that is payable to any Loan Party to be paid directly to Administrative Agent,
as agent for Lenders.
(c) In the event of any Condemnation with respect to an Asset
where the Award is in an aggregate amount less than twenty percent (20%) of the
Allocated Loan Amount for such Asset, and if, in the reasonable judgment of
Administrative Agent, the Asset can be restored within twelve (12) months after
the occurrence of the Condemnation and prior to maturity of the Notes to an
economic unit not less valuable (including an assessment of the impact of the
termination of any Tenant Leases due to such Condemnation) and not less useful
than the same was prior to the Condemnation, and after such restoration will
adequately secure the outstanding balance of the Notes, then, if no Default or
Event of Default shall have occurred and be then continuing, the proceeds of
the Award shall be deposited directly into the appropriate Deposit Account,
whereupon such proceeds shall be transferred to the Loss Proceeds Subaccount
where, after reimbursement of any reasonable out-of-pocket expenses incurred by
Administrative Agent, such proceeds shall be maintained and applied to
reimburse Borrowers (or the appropriate Loan Party) for the cost of restoring,
repairing, replacing or rebuilding the Asset or part thereof subject to
Condemnation (the "CONDEMNATION RESTORATION"), in the manner set forth herein.
Borrowers hereby covenant and agree to (and to cause each other Loan Party to)
commence and diligently to prosecute such Condemnation Restoration; provided
that: (i) Borrowers shall pay all costs (and if required by Administrative
Agent, in the event Administrative Agent determines in its sole reasonable
discretion that Borrowers are likely not to have sufficient Mortgaged Property
Gross Cash Flow in excess of Operating Expenses therefore, Borrowers shall
deposit the total thereof with Administrative Agent in advance) of such
Condemnation Restoration in
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excess of the Award made available pursuant to the terms hereof; (ii) the
Condemnation Restoration shall be done in compliance with all applicable laws,
rules and regulations; and (iii) Administrative Agent shall have received
evidence reasonably satisfactory to it that, during the period of the
Condemnation Restoration, the sum of (A) income derived from the Property, as
reasonably determined by Administrative Agent, plus (B) proceeds of rent loss
insurance or business interruption insurance, if any, to be paid, will equal or
exceed the sum of (1) expenses in connection with the operation of the
Property, (2) the Debt Service under the Loans, and (3) any other payments
required pursuant to Section 10.9.1(a) hereof or Section 10.9.2(a) hereof, as
applicable. Notwithstanding anything to the contrary contained in this Section
7.1.3, Borrowers may, in their sole discretion, elect not to undertake the
Condemnation Restoration of an Asset and to instead prepay a portion of the
Domestic Notes, if such Asset was a Domestic Asset or the Canadian Notes, if
such Asset was a Canadian Asset (each in accordance with the terms of Section
2.3.3) and cause the Asset which has suffered the Condemnation to be Partially
Released in accordance with and subject to Section 2.4 hereof provided at least
ten (10) Securitizable Assets remain.
(d) Except as provided above, the proceeds of the Award
collected upon any Condemnation and any other funds contributed by Borrowers
under Section 7.1.3(c) shall be deposited directly into the appropriate Deposit
Account and, at the option of the Requisite Lenders and Administrative Agent,
in their sole discretion, be applied to the payment of the Debt (in the case of
a Condemnation involving a Domestic Asset) or the Canadian Loan (in the case of
a Condemnation involving a Canadian Asset), after reimbursement of any expenses
incurred by Administrative Agent, or transferred into the Loss Proceeds
Subaccount where, after reimbursement of any expenses incurred by
Administrative Agent, such proceeds and other funds shall be maintained and
applied to reimburse Borrowers for the cost of the Condemnation Restoration
(whether such costs are incurred by Borrowers or any other Loan Party) in the
manner set forth herein. If the Award collected upon a Condemnation is applied
by Lenders to payment of the Debt (or the Canadian Loan, as appropriate)
pursuant to this Section 7.1.3 Borrowers may elect to prepay a portion of the
Loans sufficient to obtain a Partial Release of the Asset which is the subject
of the Condemnation pursuant to Section 2.4.1 hereof provided Borrowers shall
have satisfied or caused to be satisfied the following conditions (the
"CONDEMNATION RELEASE EVENT"):
(i) such prepayment shall be made on the first
scheduled payment date occurring after the appropriate Borrower shall
have provided Administrative Agent with thirty (30) days irrevocable
prior written notice of its intent to make such repayment, which
notice shall have been delivered to Administrative Agent no later than
thirty (30) days after such proceeds of Award collected upon such
Condemnation are applied to payment of the Debt (or the Canadian Loan,
as applicable); and
(ii) all of the requirements of Section 2.4.1 shall
have been satisfied.
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Any such application to the Debt (or the Canadian Loan, as applicable) or
repayment of the Debt (or the Canadian Loan, as applicable) pursuant to this
clause (d) shall be without any prepayment consideration or premium (other than
Losses and Gains) except that if a Default or an Event of Default has occurred
and is continuing, then Borrowers shall pay to Administrative Agent, an
additional amount equal to the Repayment Premium applicable to such prepayment.
Any such application to the Debt (or the Canadian Loan, as applicable) or
repayment of the Debt (or the Canadian Loan, as applicable) pursuant to this
clause (d) shall (x) be applied to those payments of principal and interest
last due under the Notes but shall not postpone or reduce any payments
otherwise required pursuant to the Notes other than such last due payments and
(y) if the Asset subject to the Condemnation was a Canadian Asset, be applied
to the Canadian Notes or if the Asset subject to the Condemnation was a
Domestic Asset, be applied to the Domestic Notes.
(e) In the event Borrowers are entitled to reimbursement out
of the Award received by Administrative Agent (whether for costs incurred by
Borrowers or any other Loan Party), such proceeds shall be disbursed from the
Loss Proceeds Subaccount from time to time upon Administrative Agent being
furnished with: (i) evidence satisfactory to Administrative Agent of the
estimated cost of completion of the Condemnation Restoration; (ii) funds, or at
Administrative Agent's option, assurances satisfactory to Administrative Agent
that such funds are or will become available, sufficient in addition to the
proceeds of the Award to complete the Condemnation Restoration; (iii) evidence
reasonably acceptable to Administrative Agent that all work in connection with
which the reimbursement is being requested has been performed and paid for
which shall include, if the estimated cost of the Condemnation Restoration
exceeds the lesser of $250,000 and ten percent (10%) of the Allocated Loan
Amount with respect to such Asset, such architect's certificates, waivers of
lien, contractor's sworn statements, title insurance endorsements, bonds, plats
of survey and such other evidences of costs, payment and performance as
Administrative Agent may reasonably require and approve; if the estimated cost
of the Restoration is less than the lesser of $250,000 and ten percent (10%) of
the Allocated Loan Amount with respect to such Asset, an Officer's Certificate
certifying that the appropriate Borrower has obtained the foregoing; and (iv)
all plans and specifications for such Condemnation Restoration, such plans and
specifications to be delivered and approved by Administrative Agent (such
approval not to be unreasonably withheld) prior to commencement of work if the
estimated cost of the Condemnation Restoration exceeds the lessor of $250,000
and ten percent (10%) of the Allocated Loan Amount with respect to such Asset.
In addition, no payment made prior to the final completion of the Condemnation
Restoration shall exceed ninety percent (90%) of the value of the work
performed from time to time nor be made in contravention of the holdback
provisions of any applicable construction, mechanic's or similar lien
legislation; funds other than proceeds of the Award shall be disbursed prior to
disbursement of such proceeds; and at all times, the undisbursed balance of
such proceeds remaining in the hands of Administrative Agent, together with
funds deposited for that purpose or irrevocably committed to the satisfaction
of Administrative Agent by or on behalf of Borrowers for that purpose, shall be
at least sufficient in the reasonable judgment of Administrative Agent to pay
for the costs of completion of the Condemnation Restoration, free and clear of
all Liens or claims for Lien. Any surplus which
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may remain out of the Award received by Administrative Agent, after payment of
such costs of Condemnation Restoration shall, in the sole and absolute
discretion of Administrative Agent, be retained by Lenders and applied pro-rata
to payment of the Debt (or the Canadian Loan, as applicable).
SECTION 7.2 INTENTIONALLY DELETED
SECTION 7.3 TAX AND INSURANCE ESCROW FUND.
Upon the occurrence of a Cash Trap Event, each of the
Borrowers shall pay to Administrative Agent, as agent for Lenders, an amount
which, when added to the monthly Tax Payments and Insurance Premiums payable by
such Borrower pursuant to this Section 7.3, will be sufficient to pay, at least
30 days prior to their respective due dates, all Taxes and Insurance Premiums
payable in connection with the Property which are due and payable in the twelve
(12) months following the Cash Trap Event. From and after the occurrence of a
Cash Trap Event, each of the Borrowers shall pay to Administrative Agent, as
agent for Lenders, on the eleventh day of each calendar month (a) one-twelfth
of the Taxes that Administrative Agent estimates will be payable during the
next ensuing twelve (12) months in order to accumulate with Administrative
Agent sufficient funds to pay all such Taxes at least thirty (30) days prior to
the date such Taxes will become delinquent (it being agreed that Taxes will be
deemed delinquent on or before the date on which penalties or interest begin to
accrue thereon) and (b) one-twelfth of the Insurance Premiums that
Administrative Agent estimates will be payable for the renewal of the coverage
afforded by the Policies for the succeeding annual period upon the expiration
thereof in order to accumulate with Administrative Agent sufficient funds to
pay all such Insurance Premiums at least thirty (30) days prior to the
expiration of the Policies (said amounts payable separately by each of the
Borrowers in clauses (a) and (b) above shall each hereinafter be called a "TAX
AND INSURANCE ESCROW FUND"). After the occurrence of a Cash Trap Event, the
Tax and Insurance Escrow Fund and the payments of interest or principal or
both, payable pursuant to the Notes shall be added together and shall be paid
as an aggregate sum by each of the Borrowers to Administrative Agent.
Administrative Agent will apply the Tax and Insurance Escrow Fund established
by each of the Borrowers to payments of Taxes and Insurance Premiums required
to be made by such Borrower pursuant to Section 5.1 hereof and under each
Mortgage, subject to such Borrower's right to protest such taxes under Section
5.1(b) hereof. In making any payment relating to the Tax and Insurance Escrow
Fund, Administrative Agent may do so according to any bill, statement or
estimate procured from the appropriate public office (with respect to Taxes) or
insurer or agent (with respect to Insurance Premiums), without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax,
assessment, sale, forfeiture, tax lien or title or claim thereof. If the
amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for
Taxes and Insurance Premiums pursuant to Section 5.1 hereof, Administrative
Agent shall, at the sole discretion of the Requisite Lenders, return any excess
to the appropriate Borrower or credit such excess against future payments to be
made to the Tax and Insurance Escrow Fund. On the Maturity Date any amount
remaining in the Tax
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and Insurance Escrow Fund established by each of the Borrowers shall be applied
first to the portion of the Debt payable by such Borrower, and second, any
amount remaining shall be returned to the such Borrower; provided, however, if
an Event of Default shall have occurred and be continuing any amount remaining
in the Tax and Insurance Escrow Fund shall be applied in accordance with
Section 10.9.3 hereof. If at any time after the occurrence of a Cash Trap
Event Administrative Agent reasonably determines that the Tax and Insurance
Escrow Fund is not or will not be sufficient to pay the items set forth in
clauses (a) and (b) above, Administrative Agent shall notify the appropriate
Borrower of such determination and such Borrower shall increase its monthly
payments to Administrative Agent by the amount that Administrative Agent
estimates is sufficient to make up the deficiency at least thirty (30) days
prior to delinquency of the Taxes and/or thirty (30) days prior to expiration
of the Policies, as the case may be.
SECTION 7.4 REPLACEMENTS AND REPLACEMENT RESERVE.
7.4.1 REPLACEMENT RESERVE FUND. From and after the
occurrence of a Cash Trap Event, on each date that a regularly scheduled
payment of principal or interest is due under the Notes, each of the Borrowers
shall deposit with Administrative Agent a monthly deposit in the amount equal
to one-twelfth of an amount equal to four percent (4%) of annual Gross Income
from Operations, until the third anniversary of the Closing Date and thereafter
five percent (5%) of annual Gross Income from Operations. Amounts so deposited
by each of the Borrowers shall hereinafter be referred to as the ("REPLACEMENT
RESERVE FUND"). Administrative Agent may reassess its estimate of the amount
necessary for the Replacement Reserve Fund from time to time after the
occurrence of a Cash Trap Event and may increase the monthly amounts required
to be deposited into the Replacement Reserve Fund upon thirty (30) days written
notice to the appropriate Borrower if Administrative Agent determines in its
reasonable discretion after reviewing Borrowers' capital expenditure plans that
an increase is necessary to maintain the proper maintenance and operation of
the Property in accordance with past practices.
7.4.2 DISBURSEMENTS FROM REPLACEMENT RESERVE SUBACCOUNT. (a)
Administrative Agent shall make disbursements from the Replacement Reserve
Subaccount established by each of the Borrowers to pay such Borrower only for
the cost of replacements to and maintenance of the Property (whether such costs
are incurred by such Borrower or any other Loan Party) to the extent the same
constitute capital expenditures in accordance with GAAP (collectively, the
"REPLACEMENTS") in the manner provided in this Section 7.4.2.
(b) Administrative Agent shall, upon written request from the
appropriate Borrower and satisfaction of the requirements set forth in this
Section 7.4.2 and Section 7.4.3 of this Agreement, disburse to such Borrower
(within twenty (20) days of such Borrower's satisfaction of the requirements of
Section 7.4.2 and Section 7.4.3 with respect thereto) amounts from the
Replacement Reserve Subaccount necessary to pay for the actual approved costs
of Replacements or to reimburse Borrowers therefor (whether such costs are
incurred by Borrowers or any other Loan Party), upon completion of such
Replacements (or, upon partial completion in
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the case of Replacements made pursuant to Section 7.4.2(e)) as determined by
Administrative Agent. In no event shall Administrative Agent be obligated to
disburse funds from the Replacement Reserve Subaccount if a monetary Default or
an Event of Default exists and will not be cured as a result of such
disbursement.
(c) Each request for disbursement from the Replacement
Reserve Subaccount shall be in a form reasonably specified or approved by
Administrative Agent and shall specify (i) the specific Replacements for which
the disbursement is requested, (ii) the quantity and price of each item
purchased, if the Replacement includes the purchase or replacement of specific
items, (iii) the price of all materials (grouped by type or category) used in
any Replacement other than the purchase or Replacement of specific items, and
(iv) the cost of all contracted labor or other services applicable to each
Replacement for which such request for disbursement is made. With each
request, the requesting Borrower shall certify that all Replacements have been
made in accordance with all Legal Requirements of any Governmental Authority
having jurisdiction over the Property. Each request for disbursement shall
include copies of invoices for all items or materials purchased and all
contracted labor or services provided and each request shall include evidence
satisfactory to Administrative Agent of payment of all such amounts. Except as
provided in Section 7.4.2(e), each request for disbursement from the
Replacement Reserve Subaccount shall be made only after completion of the
Replacement for which disbursement is requested. Borrowers shall and shall
cause each other Loan Party to provide Administrative Agent evidence of
completion satisfactory to Administrative Agent in its reasonable judgment.
(d) Borrowers shall and shall cause each other Loan Party to
pay all invoices in connection with the Replacements with respect to which a
disbursement is requested prior to submitting such request for disbursement
from the Replacement Reserve Subaccount unless all such invoices do not exceed
$25,000, in which case Administrative Agent shall disburse the amount for such
invoices directly to Borrowers and Borrowers covenant and agree to promptly pay
(or cause to be paid) such invoices. In addition, as a condition to any
disbursement, Administrative Agent may require Borrowers to (or cause another
Loan Party to) obtain lien waivers from each contractor, supplier, materialman,
mechanic or subcontractor who receives payment in an amount equal to or greater
than $25,000 for completion of its work or delivery of its materials. Any lien
waiver delivered hereunder shall conform to the requirements of applicable law
and shall cover all work performed and materials supplied (including equipment
and fixtures) for any Asset by that contractor, supplier, subcontractor,
mechanic or materialman through the date covered by the current reimbursement
request.
(e) If (i) the cost of a Replacement exceeds $25,000 and (ii)
the contractor performing such Replacement requires periodic payments pursuant
to the terms of a written contract, a request for reimbursement from the
Replacement Reserve Subaccount may be made after completion of a portion of the
work under such contract, provided (A) such contract requires payment upon
completion of such portion of the work, (B) the materials for which the request
is made are on site at appropriate Asset and are properly secured or have been
installed
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in such Asset, (C) all other conditions in this Agreement for disbursement have
been satisfied, (D) funds remaining in the Replacement Reserve Subaccount,
together with deposits to be made into such account under Section 7.4.1 are or
will be, in Administrative Agent's judgment, sufficient to complete such
Replacement and other Replacements when required, and (E) if required by
Administrative Agent, each contractor or subcontractor receiving payments under
any contract exceeding $10,000, shall provide to Administrative Agent a waiver
of lien with respect to amounts which have been paid to that contractor or
subcontractor.
(f) Each of the Borrowers shall not make a request for
disbursement from their respective Replacement Reserve Subaccount more
frequently than once in any calendar month and (except in connection with the
final disbursement) the total cost of all Replacements in any request shall not
be less than $10,000. On the Maturity Date any amount remaining in the
Replacement Reserve Fund established by each of the Borrowers shall be applied
first to the portion of the Debt payable by such Borrower, and second any
amount remaining shall be returned to such Borrower; provided, however, if an
Event of Default shall have occurred and be continuing any amount remaining in
the Replacement Reserve Fund shall be applied in accordance with Section 10.9.3
hereof.
7.4.3 PERFORMANCE OF REPLACEMENTS. (a) Borrowers shall and
shall cause each other Loan Party to make Replacements when required in order
to keep each Asset in condition and repair consistent with other hotels of
similar quality, in the same market segment and in the metropolitan area in
which such Asset is located, and to keep each Asset or any portion thereof from
deteriorating. Borrowers shall and shall cause each other Loan Party to
complete all Replacements in a good and workmanlike manner as soon as
practicable following the commencement of making each such Replacement.
(b) Administrative Agent, as agent for Lenders, reserves the
right, at its option, to approve all contracts or work orders, providing for a
contract sum of $250,000 or more, with materialmen, mechanics, suppliers,
subcontractors, contractors or other parties providing labor or materials in
connection with the Replacements, which approval will not be unreasonably
withheld. Upon Administrative Agent's request, Borrowers shall and shall cause
each other Loan Party to assign any contract or subcontract to the Secured
Parties.
(c) In the event Administrative Agent determines in its
reasonable discretion that any Replacement is not being performed in a
workmanlike or timely manner or that any Replacement has not been completed in
a workmanlike or timely manner, Borrowers shall be in Default hereunder and
Administrative Agent shall have the option to withhold disbursement for such
unsatisfactory Replacement and if an Event of Default shall occur,
Administrative Agent may, to proceed under existing contracts or to contract
with third parties to complete such Replacement and to apply the Replacement
Reserve Fund toward the labor and materials necessary to complete such
Replacement, without providing any prior notice to Borrowers (or
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any other Loan Party), and to exercise any and all other remedies available to
Administrative Agent and Lenders upon an Event of Default hereunder.
(d) In order to facilitate Administrative Agent's completion
or making of the Replacements pursuant to Section 7.4.3(c) above, Borrowers
grant (and hereby agree to cause each other Loan Party to grant) Administrative
Agent the right to enter onto the Property and perform any and all work and
labor necessary to complete or make the Replacements and/or employ watchmen to
protect the Property from damage. All sums so expended by Administrative Agent
shall be deemed to have been advanced under the appropriate Loan to such
Borrower and secured by each Mortgage. For this purpose, each of the Borrowers
constitutes and appoints Administrative Agent its true and lawful
attorney-in-fact with full power of substitution to complete or undertake the
Replacements in the name of such Borrower or such other Loan Party, if and to
the extent Administrative Agent is entitled to do so under this Section 7.4.
Such power of attorney shall be deemed to be a power coupled with an interest
and cannot be revoked. Each of the Borrowers empowers said attorney-in-fact as
follows: (i) to use any funds in the Replacement Reserve Subaccount for the
purpose of making or completing the Replacements; (ii) to make such additions,
changes and corrections to the Replacements as shall be necessary or desirable
to complete the Replacements; (iii) to employ such contractors, subcontractors,
agents, architects and inspectors as shall be required for such purposes; (iv)
to pay, settle or compromise all existing bills and claims which are or may
become Liens against such Asset, or as may be necessary or desirable for the
completion of the Replacements, or for clearance of title; (v) to execute all
applications and certificates in the name of such Borrower or the appropriate
Loan Party which may be required by any of the contract documents; (vi) in its
reasonable discretion, to prosecute and defend all actions or proceedings in
connection with such Asset or the rehabilitation and repair of such Asset; and
(vii) to do any and every act which such Borrower or any other Loans party
might do in its own behalf to fulfill the terms of this Agreement.
(e) Nothing in this Section 7.4.3 shall: (i) make
Administrative Agent responsible for making or completing the Replacements;
(ii) require Administrative Agent to expend funds in addition to the
Replacement Reserve Fund to make or complete any Replacement; (iii) obligate
Administrative Agent to proceed with the Replacements; or (iv) obligate
Administrative Agent to demand from either Borrower additional sums to make or
complete any Replacement.
(f) Borrowers shall and shall cause each other Loan Party to
permit Administrative Agent and Administrative Agent's agents and
representatives (including, without limitation, Administrative Agent's
engineer, architect or inspector) or third parties making Replacements pursuant
to this Section 7.4.3 to enter onto such Asset, after reasonable advance
notice, during normal business hours (subject to the rights of guests of the
hotel and tenants under their Tenant Leases) to inspect the progress of any
Replacements and all materials being used in connection therewith, to examine
all plans and shop drawings relating to such
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Replacements which are or may be kept at such Asset, and to complete any
Replacements made pursuant to this Section 7.4.3. Borrowers shall and shall
cause all of the other Loan Parties to cause all contractors and subcontractors
to cooperate with Administrative Agent or Administrative Agent's
representatives or such other persons described above in connection with
inspections described in this Section 7.4.3(f) or the completion of
Replacements pursuant to this Section 7.4.3.
(g) Administrative Agent may require an inspection of such
Asset (at Lenders, sole cost, except if (i) a Default or Event of Default shall
have occurred and be continuing or (ii) either (x) the amount of the requested
disbursement with respect to such Asset is greater than $100,000, (y) the
aggregate amount of all disbursements made with respect to such Asset in any
one year period exceeds $250,000 or (z) the total cost of the Replacement (as
determined by Administrative Agent in its reasonable discretion) in connection
with which such Borrower is requesting a disbursement exceeds $250,000, then in
any such case such inspection shall be at such Borrower's sole cost and
expense) prior to making a monthly disbursement from the Replacement Reserve
Subaccount in order to verify completion of the Replacements for which
reimbursement is sought. Administrative Agent may require that such inspection
be conducted by an appropriate independent qualified professional selected by
Administrative Agent and/or may require a copy of a certificate of completion
by an independent qualified professional acceptable to Administrative Agent
prior to the disbursement of any amounts from the Replacement Reserve
Subaccount. If either Borrower is required to pay the expense of the
inspection as required hereunder, such Borrower shall pay such expense whether
such inspection is conducted by Administrative Agent or by an independent
qualified professional.
(h) The Replacements and all materials, equipment, fixtures,
or any other item comprising a part of any Replacement shall be constructed,
installed or completed, as applicable, free and clear of all mechanic's,
materialman's or other liens (except for those Liens existing on the date of
this Agreement which have been approved in writing by Administrative Agent and
Permitted Encumbrances).
(i) Before each disbursement from either Replacement Reserve
Subaccount, Administrative Agent may require the appropriate Borrower to
provide Administrative Agent with a search of title to such Asset effective to
the date of the disbursement, which search shows that no mechanic's or
materialmen's liens or other Liens of any nature (other than Permitted
Encumbrances) have been placed against such Asset since the date of recordation
of the Mortgage (or in the case of a Special Asset, the Negative Pledge) and
that title to such Asset is free and clear of all Liens (other than the Lien of
the Mortgage, Permitted Encumbrances and any other Liens previously approved in
writing by Lenders, if any); provided, however, such title search shall not be
required with respect to any disbursement unless (x) the amount of the
requested disbursement with respect to such Asset is greater than $100,000, (y)
the aggregate amount of all disbursements made with respect to such Asset in
any one year period exceeds $250,000 or (z) the total cost of the Replacement
(as determined by Administrative Agent in its
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reasonable discretion) in connection with which such Borrower is requesting a
disbursement exceeds $250,000.
(j) All Replacements shall comply with all applicable Legal
Requirements of all Governmental Authorities having jurisdiction over such
Asset and applicable insurance requirements, including, without limitation,
applicable building codes, special use permits, environmental regulations and
requirements of insurance underwriters.
(k) In addition to any insurance required under the Loan
Documents, Borrowers shall provide or cause to be provided workmen's
compensation insurance (or alternative coverage permitted hereunder), builder's
risk, and public liability insurance and other insurance to the extent required
under applicable law in connection with a particular Replacement. All such
policies shall be in form and amount reasonably satisfactory to Administrative
Agent. All such policies which can be endorsed with standard mortgagee clauses
making loss payable to Administrative Agent or its assigns shall be so
endorsed. Certified copies of such policies shall be delivered to
Administrative Agent and Lenders.
7.4.4 FAILURE TO MAKE REPLACEMENTS. (a) Upon the occurrence
of an Event of Default, Administrative Agent may use the Replacement Reserve
Fund, established by each of the Borrowers, (or any portion thereof) for any
purpose, including, but not limited to, completion of the Replacements as
provided in Section 7.4.3, or for any other repair or Replacement to the
Property or toward payment of the portion of the Debt payable by such Borrower
as provided in Section 10.9.3. Administrative Agent's right to withdraw and
apply the Replacement Reserve Fund shall be in addition to all other rights and
remedies provided to Administrative Agent and Lenders under this Agreement and
the other Loan Documents.
(b) Except as set forth in Section 10.9.3, nothing in this
Agreement shall obligate Administrative Agent to apply all or any portion of
the Replacement Reserve Fund on account of an Event of Default to payment of
the Debt or in any specific order or priority.
7.4.5 BALANCE IN THE REPLACEMENT RESERVE SUBACCOUNT. The
insufficiency of any balance in either Replacement Reserve Subaccount shall not
relieve either Borrower or the appropriate other Loan Party from its obligation
to fulfill all preservation and maintenance covenants in the Loan Documents.
On the Maturity Date any amount remaining in the Replacement Reserve Subaccount
established by each of the Borrowers shall be applied first to the portion of
the Debt payable by such Borrower, and second, any amount remaining shall be
returned to such Borrower; provided, however, if an Event of Default shall have
occurred and be continuing any amount remaining in the Replacement Reserve
Subaccount shall be applied in accordance with Section 10.9.3 hereof.
7.4.6 INDEMNIFICATION. Borrowers shall indemnify
Administrative Agent and each Lender and hold Administrative Agent and each
Lender harmless from and against any and
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all actions, suits, claims, demands, liabilities, losses, damages, obligations,
costs and expenses (including, without limitation, litigation costs and
reasonable attorneys fees and expenses) arising from or in any way connected
with the performance of the Replacements unless due to Administrative Agent's
(or any Lenders') wilful misconduct or gross negligence. Borrowers shall and
shall cause each other Loan Party to assign to Administrative Agent all rights
and claims Borrowers or any other Loan Party may have against all Persons
supplying labor or materials in connection with the Replacements; provided,
however, that Administrative Agent may not pursue any such right or claim
unless an Event of Default has occurred and remains uncured.
SECTION 7.5 INTENTIONALLY DELETED
SECTION 7.6 GROUND RENT ESCROW FUND.
Upon the occurrence of a Cash Trap Event, each of the
Borrowers shall pay to Administrative Agent, as agent for Lenders, an amount
which, when added to the monthly payments payable by such Borrower to the
Ground Rent Escrow Fund pursuant to this Section 7.6, will be sufficient to
pay, at least 30 days prior to their respective due dates, all Ground Rent
payable in connection with the Property which are due and payable in the twelve
(12) months following the Cash Trap Event. From and after the occurrence of a
Cash Trap Event, each of the Borrowers shall pay to Administrative Agent on the
eleventh day of each calendar month (a) one-twelfth of the Ground Rent that
Administrative Agent estimates will be payable during the next ensuing twelve
(12) months in order to accumulate with Administrative Agent sufficient funds
to pay all such Ground Rent at least thirty (30) days prior to their respective
due dates (said amounts payable separately by each of the Borrowers shall each
hereinafter be called a GROUND RENT ESCROW FUND"). Administrative Agent will
apply the Ground Rent Escrow Fund to payments of Ground Rent when due as
required to be made by each of the Borrowers or any other Loan Party pursuant
to Section 5.1 hereof. In making any payment relating to the Ground Rent Fund,
Administrative Agent may do so according to any bill, statement or estimate
procured from the Ground Lessor, without inquiry into the accuracy of such
bill, statement or estimate. If the amount of either Ground Rent Escrow Fund
shall exceed the amounts due for Ground Rent pursuant to Section 5.1 hereof,
Administrative Agent shall, at the sole discretion of the Requisite Lenders,
return any excess to the appropriate Borrower or credit such excess against
future payments to be made to such Ground Rent Escrow Fund. If at any time
Administrative Agent reasonably determines that the Ground Rent Escrow Fund is
not or will not be sufficient to pay the Ground Rent, Administrative Agent
shall notify Borrowers of such determination and Borrowers shall increase its
monthly payments to Administrative Agent by the amount that Administrative
Agent estimates is sufficient to make up the deficiency at least thirty (30)
days prior to its due date. On the Maturity Date any amount remaining in the
Ground Rent Escrow Fund established by each of the Borrowers shall be applied
first to the portion of the Debt payable by such Borrower, and second, any
amount remaining shall be returned to the such Borrower; provided, however, if
an Event of Default shall have occurred and be continuing any
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amount remaining in the Ground Rent Escrow Fund shall be applied in accordance
with Section 10.9.3 hereof.
VIII. DEFAULTS
SECTION 8.1 EVENT OF DEFAULT.
(a) Each of the following events shall constitute an event of
default hereunder (an "EVENT OF DEFAULT"):
(i) any portion of the Debt is not paid when due;
(ii) subject to Borrowers' right to contest Taxes
and Other Charges pursuant to Section 5.1, any of the Taxes or Other
Charges prior to date same become delinquent;
(iii) the Policies are not kept in full force and
effect, or certified copies of the Policies are not delivered to
Administrative Agent within ten (10) Business Days of request;
(iv) except as permitted in Section 6.1(j) hereof,
either Borrower or any Loan Party transfers or encumbers any portion
of any Asset or other Collateral without Administrative Agent's and
the Requisite Lenders' prior written consent;
(v) any representation or warranty made by Borrowers
or any other Loan Party herein or in any other Loan Document, or in
any report, certificate, financial statement or other instrument,
agreement or document furnished hereunder or thereunder, shall have
been false or misleading in any material respect as of the date the
representation or warranty was made; provided, however, if such false
or misleading representation or warranty is susceptible of being cured
within thirty (30) Business days, the same shall be an Event of
Default hereunder only if the same is not cured within a reasonable
time not to exceed sixty (60) Business Days after notice from
Administrative Agent;
(vi) either of the Borrowers or any other Loan Party
shall make an assignment for the benefit of creditors;
(vii) a receiver, liquidator or trustee shall be
appointed for either of the Borrowers (or any other Loan Party) or
Borrowers (or any other Loan Party) shall be adjudicated bankrupt or
insolvent, or any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal
or state law, shall be filed by or against, consented to or acquiesced
in by either of the Borrowers (or such
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Loan Party), or any proceeding for the dissolution or liquidation of
either of the Borrowers or any other Loan Party shall be instituted;
provided, however, that if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by either of the
Borrowers or such Loan Party, then the same shall be an Event of
Default hereunder only if the same is not discharged, stayed or
dismissed within sixty (60) days after the date of such appointment or
adjudication, the date such petition is first filed or the date such
proceeding is instituted, as the case may be;
(viii) either of the Borrowers or any other Loan
Party attempts to assign its rights under this Agreement or any of the
other Loan Documents or any interest herein or therein in
contravention of the Loan Documents;
(ix) either of the Borrowers breach any of their
negative covenants contained in Section 6.1 (except with respect to
(x) Sections 6.1(a), 6.1(b), 6.1(d), 6.1(f), 6.1(g) and 6.1(k), only
if such Borrower fails to cure any default thereunder within 10 days
after any Loan Party becomes aware of or receives notice of such
default and (y) Section 6.1(i), only if such Borrower fails to cure
any default thereunder within 10 days after any Loan Party becomes
aware of or receives notice of such default or if the indebtedness
created, incurred, assumed or guaranteed by any Loan Party in
violation of Section 6.1(i) exceeds $5,000,000 in the aggregate) or
any covenant contained in Section 4.1(dd) hereof; any other Loan Party
fails to include in their certificate of incorporation or other
organizational documents the covenants, representations or warranties
set forth in Section 4.1(dd) hereof as if directly made by it, or
breaches or alters any of such covenants, representations or
warranties;
(x) with respect to any term, covenant or provision
set forth herein which specifically contains a notice requirement or
grace period, either of the Borrowers or any other Loan Party shall be
in default under such term, covenant or condition after the giving of
such notice or the expiration of such grace period;
(xi) if on the Resized Closing Date (x) Borrowers
own any Asset which Administrative Agent and Lenders deem in their
sole discretion not to be Securitizable (y) Borrowers have not
satisfied all of the Resized Closing Conditions (it being understood
that the Resized Loans Collateral shall not be required to consist of
more than 10 Securitizable Assets) (z) if the Resized Borrowers shall
not have, on or prior to the Resizing Closing Date, assumed the Loans
as and if required pursuant to Section 2.2 hereof; or if on the
Resizing Closing Date the Resized Loans Collateral does not consist of
at least ten Securitizable Assets;
(xii) either of the Borrowers shall continue to be
in Default under any of the other terms, covenants or conditions of
this Agreement not specified in subsections (i) to (xi) above, or
(xiv), (xv), (xvi), (xvii), (xviii), (xix) or (xx) below, for ten (10)
days
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after notice to such Borrower from Administrative Agent, in the case
of any Default which can be cured by the payment of a sum of money, or
for thirty (30) days after notice to such Borrower from Administrative
Agent in the case of any other Default; provided, however, that if
such non-monetary Default is susceptible of cure but cannot reasonably
be cured within such 30-day period and provided further that such
Borrower shall have commenced to cure such Default within such 30-day
period and thereafter diligently and expeditiously proceeds to cure
the same, such 30-day period shall be extended for such time as is
reasonably necessary for such Borrower in the exercise of due
diligence to cure such Default, such additional period not to exceed
sixty (60) days;
(xiii) there shall be default under any Mortgage or
any of the other Loan Documents beyond any applicable cure periods
contained in such documents, whether as to Borrowers, any other Loan
Party, any Asset or any other Collateral, or any other such event
shall occur or condition shall exist, if the effect of such event or
condition is to accelerate the maturity of any portion of the Debt or
to permit Administrative Agent to accelerate the maturity of all or
any portion of the Debt;
(xiv) except as may be permitted otherwise by this
Agreement, (x) any Franchise Agreement with respect to any Asset or
any consent or comfort letter delivered by any franchisor under any
such Franchise Agreement shall cease to be in full force and effect or
(y) any party thereto shall deny or disaffirm its obligations
thereunder or shall default in the due performance or observance of
any material term, covenant or agreement on its part to be performed
or observed pursuant thereto and any applicable cure period shall have
expired, and in any such event, Borrowers shall have failed or
Borrowers shall have failed to cause the appropriate Loan Party to
either (a) replace such Franchise Agreement within 60 days of such
default (after the expiration of any such applicable cure period) or
disaffirmation, as the case may be, with a franchise agreement
approved in writing by Administrative Agent or (b) operate the
applicable Asset under a tradename owned by Borrowers and referred to
in clause (x) of subsection 6.1(k)(iii);
(xv) if any representation contained in Section
4.1(mm), (nn) and (oo) shall become untrue;
(xvi) (a) failure of any Loan Party to pay when due
any monetary obligation contained in any Ground Lease, in each case
beyond the end of any grace or cure period provided therefor (but in
no event longer than five days, without extension); (b) occurrence of
any other event or condition which, with the giving of notice or lapse
of time or both, would cause, or would permit any lessor under any
Ground Lease to cause, an acceleration, a cancellation or a
termination, as against any Loan Party thereto, of such Ground Lease,
in each case after giving effect to any grace or cure period therefor
(but in no event longer than five days without any extension); or (c)
failure by any Loan Party to permit Administrative Agent and/or its
representatives at all
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reasonable times upon reasonable prior written notice to make
investigation or examination concerning such Loan Party's performance
and observance of the terms, covenants and conditions of a Ground
Lease;
(xvii) at any time after the execution and delivery
thereof, (x) any Loan Document or any material provision thereof shall
cease to be in full force and effect (other than in accordance with
its terms) or shall be declared null and void or the Secured Parties
shall not have or shall cease to have a valid and perfected first
priority Lien or security interest in any Collateral or Asset
purported to be covered, in each case other than with respect to
Permitted Encumbrances and other than as a result of the failure of
Administrative Agent to take any action within its control, or (y) any
Loan Party shall contest in writing the validity or enforceability of
any Loan Document in writing or deny in writing that it has any
further liability under any Loan Document to which it is a party; or
(xviii) any money judgment, writ or warrant of
attachment or similar process involving individually or in the
aggregate at any time an amount in excess of $7,500,000 (in either
case to the extent not adequately covered by insurance as to which a
solvent and unaffiliated insurance company has acknowledged coverage)
shall be entered or filed against either of the Borrowers or any other
Loan Party or any of their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of 60 days
(or in any event later than five days prior to the date of any
proposed sale thereunder);
(xix) any Loan Party shall fail to pay any principal
of or premium or interest on any indebtedness of such Person having a
principal amount of $250,000 or more (excluding indebtedness evidenced
by the Notes or the Permitted Guaranty) when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise); or any other event shall occur or
condition shall exist under any agreement or instrument relating to
any such indebtedness, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such
indebtedness; or any such indebtedness shall become or be declared to
be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), or any Loan Party shall be
required to repurchase or offer to repurchase such indebtedness, prior
to the stated maturity thereof; or
(xx) a default has occurred and continues beyond
any applicable cure period under any Property Management Agreement (or
any successor property management agreement) if such default permits
the property manager to terminate or cancel such Property Management
Agreement (or any successor property management agreement) unless a
replacement property Manager is appointed pursuant to Section 6.1(v)
hereof.
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(b) Upon the occurrence of an Event of Default (other than an
Event of Default described in clauses (vi), (vii) or (viii) above) and at any
time thereafter, Administrative Agent may (or at the request of the Requisite
Lenders, shall) in addition to any other rights or remedies available to it
pursuant to this Agreement and the other Loan Documents or at law or in equity,
take such action, without notice or demand, that Administrative Agent (or such
Requisite Lenders) deems advisable to protect and enforce its rights against
Borrowers or any other Loan Party and in and to the Property or any other
Collateral, including, without limitation, declaring the Debt to be immediately
due and payable, and Administrative Agent and Lenders may enforce or avail
itself of any or all rights or remedies provided in the Loan Documents against
Borrowers or any other Loan Party and the Property or any other Collateral,
including, without limitation, all rights or remedies available at law or in
equity; and upon any Event of Default described in clauses (vi), (vii) or
(viii) above, the Debt owed by each Borrower and all other obligations of
Borrowers or any other Loan Party hereunder and under the other Loan Documents
shall immediately and automatically become due and payable, without notice or
demand, and, to the extent allowed by applicable law, Borrowers hereby
expressly waive any such notice or demand, anything contained herein or in any
other Loan Document to the contrary notwithstanding.
SECTION 8.2 REMEDIES.
(a) Upon the occurrence of an Event of Default, all or any
one or more of the rights, powers, privileges and other remedies available to
Administrative Agent against Borrowers (or any other Loan Party) under this
Agreement or any of the other Loan Documents executed and delivered by, or
applicable to, Borrowers (or any other Loan Party) or at law or in equity may
(or at the request of the Requisite Lenders, shall) be exercised by
Administrative Agent at any time and from time to time, whether or not all or
any of the Debt owed by each Borrower shall be declared due and payable, and
whether or not Administrative Agent shall have commenced any foreclosure
proceeding or other action for the enforcement of its rights and remedies under
any of the Loan Documents with respect to the Property or any other Collateral.
Any such actions taken by Administrative Agent shall be cumulative and
concurrent and may be pursued independently, singly, successively, together or
otherwise, at such time and in such order as the Requisite Lenders and
Administrative Agent may determine in their sole discretion, to the fullest
extent permitted by law, without impairing or otherwise affecting the other
rights and remedies of Administrative Agent and Lenders permitted by law,
equity or contract or as set forth herein or in the other Loan Documents.
Without limiting the generality of the foregoing, Borrowers agree that, to the
extent permitted by applicable law, if an Event of Default is continuing (i)
Administrative Agent is not subject to any "one action" or "election of
remedies" law or rule, and (ii) all Liens and other rights, remedies or
privileges provided to the Secured Parties shall remain in full force and
effect until Administrative Agent has exhausted all of its remedies against
each (x) Domestic Asset and the Mortgages encumbering the Domestic Assets have
been foreclosed, sold and/or otherwise realized upon in satisfaction of the
Debt or the Debt has been paid in full and (y) Canadian Asset and the Mortgages
encumbering the Canadian
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Assets have been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Canadian Loan or the Canadian Loan has been paid in full.
(b) Administrative Agent shall have the right from time to
time to partially foreclose any Mortgage or combination of Mortgages in any
manner and for any amounts secured by such Mortgages then due and payable as
determined by the Requisite Lenders and Administrative Agent in their sole
discretion, including, without limitation, in the event: (i) Borrowers default
beyond any applicable grace period in the payment of one or more scheduled
payments of principal and interest, Administrative Agent may (or at the request
of the Requisite Lenders, shall) foreclose any Mortgage or combination of
Mortgages to recover such delinquent payments or (ii) Administrative Agent
elects, or is directed by the Requisite Lenders, to accelerate less than the
entire outstanding principal balance of the Loans, Administrative Agent may
foreclose any Mortgage or combination of Mortgages to recover so much of the
principal balance of the Loans as Administrative Agent may accelerate and such
other sums secured by such Mortgage or Mortgages as Administrative Agent or the
Requisite Lenders may elect; provided, however, the proceeds of the Canadian
Assets shall not be used to satisfy the Domestic Loan. Notwithstanding one or
more partial foreclosures, each Asset shall remain subject to the applicable
Mortgage to secure payment of sums secured by such Mortgage and not previously
recovered.
(c) Administrative Agent shall have the right from time to
time to sever the Notes and the other Loan Documents into more separate notes,
mortgages and other security documents (the "SEVERED LOAN DOCUMENTS"), in such
denominations as the Requisite Lenders and Administrative Agent shall determine
in their sole discretion for purposes of evidencing and enforcing the rights
and remedies of Lenders provided hereunder (provided Administrative Agent may
not increase the principal balance of the Debt or otherwise adversely affect
(except to a de-minimis extent) the rights or interest of Borrowers or any
other Loan Party under this Agreement or any other Loan Document). Borrowers
shall and shall cause each other Loan Party to execute and deliver to
Administrative Agent from time to time, promptly after its request, a severance
agreement and such other documents as Administrative Agent shall request in
order to effect the severance described in the preceding sentence, all in form
and substance reasonably satisfactory to Administrative Agent and the Requisite
Lenders. Borrowers hereby absolutely and irrevocably appoint Administrative
Agent as its true and lawful attorney, coupled with an interest, in their name
and stead to make and execute all documents necessary or desirable to effect
the aforesaid severance, Borrowers ratifying all that its said attorney shall
do by virtue thereof; provided, however, that Administrative Agent shall not
make or execute any such documents under such power until three (3) days after
notice has been given to Borrowers by Administrative Agent of its intent to
exercise its rights under such power.
(d) In addition to all or any one or more of the rights,
powers, privileges and other remedies available to Administrative Agent against
Borrowers (or any other Loan Party) under this Agreement or any of the other
Loan Documents executed and delivered by, or
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applicable to, Borrowers (or any other Loan Party) or at law or in equity, if
an Event of Default shall occur under Section 8.1(xi), Lenders shall be
entitled to damages resulting from Lenders inability to include the Resized
Loans (secured by at least 10 Assets) in a Secondary Market Transaction; it
being expressly understood that Borrowers covenant to fulfil the Resized
Closing Conditions are a material inducement to Lenders making the Loans.
SECTION 8.3 REMEDIES CUMULATIVE.
The rights, powers and remedies of Administrative Agent and
Lenders under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lenders may have against either of the Borrowers
or any other Loan Party pursuant to this Agreement or the other Loan Documents,
or existing at law or in equity or otherwise. Such rights, powers and remedies
may be pursued singly, concurrently or otherwise, at such time and in such
order as Lenders and Administrative Agent, may determine in their sole
discretion. No delay or omission to exercise any remedy, right or power
accruing upon an Event of Default shall impair any such remedy, right or power
or shall be construed as a waiver thereof, but any such remedy, right or power
may be exercised from time to time and as often as may be deemed expedient. A
waiver of one Default or Event of Default with respect to either of the
Borrowers or any other Loan Party shall not be construed to be a waiver of any
subsequent Default or Event of Default by such Borrower or such Loan Party or
to impair any remedy, right or power consequent thereon. Any and all amounts
collected or retained by Lenders or Administrative Agent after an Event of
Default has occurred, including, but not limited to, interest at the Default
Rate, late charges or any escrowed amount, may be applied by Lenders or
Administrative Agent to payment of the Debt as set forth in Section 10.9.3.
IX. SPECIAL PROVISIONS
SECTION 9.1 INTENTIONALLY DELETED.
SECTION 9.2 INTENTIONALLY DELETED.
SECTION 9.3 INTENTIONALLY DELETED.
SECTION 9.4 INTENTIONALLY DELETED.
SECTION 9.5 INTENTIONALLY DELETED.
SECTION 9.6 INDEMNIFICATION AGAINST TAX.
9.6.1 Borrowers indemnify and agree to defend and hold
Administrative Agent and each Lender harmless against all real estate transfer,
mortgage recording, documentary stamp and intangible taxes and other amounts
imposed on Administrative Agent or such Lender
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by virtue of such party's execution of any of the Loan Documents or by reason
of the Loans, including any penalties, interest and attorneys' fees incurred by
Lenders in connection therewith, and all such charges shall be secured by the
Lien of each Mortgage and bear interest at the Default Rate until paid.
9.6.2 (a) All payments to Lenders by either Borrower under
any of the Loan Documents shall be made free and clear of and without deduction
or withholding for any and all taxes, levies, imposts, deductions, charges or
withholdings and all related liabilities (all such taxes, levies, imposts,
deductions, charges, withholdings and liabilities being referred to for
purposes of this section 9.6.2 only, as "Taxes") imposed by Canada (or any
political subdivision or taxing authority of it due to the location of any
Asset or the status of any Loan Party as a non-resident of Canada), unless such
Taxes are required by applicable law to be deducted or withheld. If either
Borrower shall be required by applicable law to deduct or withhold any such
Taxes from or in respect of any amount payable under any of the Loan Documents
except, as provided in the next sentence, (i) the amount payable shall be
increased (and for greater certainty, in the case of interest, the amount of
interest shall be increased) as may be necessary so that after making all
required deductions or withholdings (including deductions or withholdings
applicable to any additional amounts paid under this Section 9.6.2), Lenders
receive an amount equal to the amount they would have received if no such
deduction or withholding had been made, (ii) Borrowers shall make such
deductions or withholdings, and (iii) Borrowers shall immediately pay the full
amount deducted or withheld to the relevant Governmental Authority in
accordance with applicable Legal Requirements. Borrowers will not be required
to pay any such additional amounts to any Lender by reason of that Lender being
connected with Canada otherwise than merely by lending money to Borrowers
pursuant to this Agreement. Notwithstanding the foregoing if any Taxes are
imposed by reason of any Lender being organized under the laws of a country
other than the United States, such Lender shall be severally liable for such
Taxes and no Lender which is not organized under such foreign jurisdiction's
laws shall be liable for any part of such Taxes.
(b) Both Borrowers agree to immediately pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges, financial institutions duties, debits taxes or similar levies (all
such taxes, charges, duties and levies being referred to for purposes of this
section 9.6.2 only, as "OTHER TAXES") which arise from any payment made by
Borrowers under any of the Loan Documents or from the execution, delivery or
registration of, or otherwise with respect to, any of the Loan Documents.
(c) Borrowers shall indemnify Lenders and Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable by Borrowers under this Section 9.6.2) paid by Lenders or
Administrative Agent and any liability (including penalties, interest and
expenses) arising from or with respect to such Taxes or Other Taxes, whether or
not they were correctly or legally asserted, excluding, in the case of any
Lenders, taxes imposed on its net income or
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capital taxes or receipts and franchise taxes. Borrowers will not be required
to indemnify any Lender for any Taxes or Other Taxes imposed by reason of that
Lender being connected with Canada otherwise than merely by lending money to
Borrowers pursuant to this Agreement. Payment under this indemnification shall
be made within 30 days from the date Administrative Agent or the relevant
Lender, as the case may be, makes written demand for it. A certificate as to
the amount of such Taxes or Other Taxes submitted to Borrowers by
Administrative Agent or the relevant Lender shall be conclusive evidence,
absent manifest error, of the amount due from Borrowers to Administrative Agent
or Lenders, as the case may be.
(d) Borrowers shall furnish to Administrative Agent and
Lenders the original or a certified copy of a receipt evidencing payment of
Taxes or Other Taxes made by Borrowers within 30 days after the date of any
payment of Taxes or Other Taxes.
(e) The provisions of this Section 9.6.2 shall survive the
termination of the Agreement and the repayment of all Debt.
SECTION 9.7 SPLITTING THE LOANS.
Administrative Agent shall have the right from time to time to
sever the Notes and the other Loan Documents into one or more separate notes,
mortgages and other security documents (the "SEVERED LOAN DOCUMENTS") in such
denominations as the requisite Lenders and Administrative Agent shall determine
in their sole discretion for purposes of evidencing and enforcing its rights
and remedies provided hereunder; provided, however, that the terms, provisions
and clauses of the Severed Loan Documents shall be no more adverse to Borrowers
than those contained in the Notes, this Agreement, the Security Deed and the
other Loan Documents. Borrowers shall and shall cause each other Loan Party to
execute and deliver to Administrative Agent from time to time, promptly after
the request of Administrative Agent, a severance agreement and such other
documents as Administrative Agent shall reasonably request in order to effect
the severance described in the preceding sentence, all in form and substance
reasonably satisfactory to Administrative Agent. Borrowers hereby absolutely
and irrevocably appoint Administrative Agent as their true and lawful attorney,
coupled with an interest, in its name and stead to make and execute all
documents necessary or desirable to effect the aforesaid severance, Borrowers
ratifying all that their said attorney shall do by virtue thereof; provided,
however, that Administrative Agent shall not make or execute any such documents
under such power until three (3) days after notice has been given to Borrowers
by Administrative Agent of Lenders' intent to exercise its rights under such
power.
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X. CENTRAL CASH MANAGEMENT
SECTION 10.1 SERVICER.
At the option of Administrative Agent, as agent for Lenders,
the Loans may be serviced by a servicer/trustee (the "SERVICER") selected by
Administrative Agent and Administrative Agent may delegate all or any portion
of its responsibilities under this Agreement and the other Loan Documents to
the Servicer. The cost of the Servicer (the "SERVICING FEES") shall not exceed
0% of the original principal amount of the Notes per annum and shall be due and
payable monthly by Borrowers at the same time that the monthly scheduled
payments on Debt are due and payable.
SECTION 10.2 ESTABLISHMENT OF ACCOUNTS.
10.2.1 ESTABLISHMENT OF CLEARING ACCOUNT. In order to
further secure the performance by Borrowers of the Obligations and as a
material inducement for Lenders to make the Loans in accordance with terms of
this Agreement, the Notes and the Mortgages, Borrowers hereby acknowledge,
confirm and covenant that: (i) Borrowers have established separate accounts
(each individually a "CLEARING ACCOUNT A") in the name of Administrative Agent,
Lenders or Lenders' designee; (ii) each of the Borrowers has established a
separate account (each individually a "CLEARING ACCOUNT B") in the name of such
Borrower or such Borrower's designee in a bank to be designated by such
Borrower; (iii) each Clearing Account A will be subject to the sole dominion,
control and discretion of Administrative Agent, as agent for Lenders or its
designee, subject to the terms, covenants and conditions of this Agreement;
(iv) Clearing Account B will be subject to the sole dominion, control and
discretion of the appropriate Borrower or its designee, subject to the terms,
covenants and conditions of this Agreement; (v) Administrative Agent, as agent
for Lenders or its designee shall have the sole right to make withdrawals from
each Clearing Account A; (vi) the appropriate Borrower or its designee shall
have the sole right to make withdrawals from its Clearing Account B; and (vii)
neither of the Borrowers nor any other Person claiming on behalf of or through
Borrowers shall have any right or authority, whether express or implied, to
close or to make use of, or withdraw any Account Proceeds from any Clearing
Account A. Each Clearing Account A and Clearing Account B of Domestic Borrower
shall be assigned the federal tax identification number of Domestic Borrower,
which number is 75-2621624.
10.2.2 ESTABLISHMENT OF DEPOSIT ACCOUNTS AND SUBACCOUNTS.
(a) Administrative Agent has established a separate account
for each Loan, in the name of Administrative Agent, as agent for Lenders,
entitled, in the case of the Domestic Loan, the "Deposit Account for Nomura
Asset Capital Corporation as Mortgagee of "Bristol Hotel Asset Company" and, in
the case of the Canadian Loan, the "Deposit Account for Nomura Asset Capital
Corporation as Mortgagee of "BHAC Canada Inc." (collectively the "DEPOSIT
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ACCOUNTS"). With respect to each Deposit Account Administrative Agent shall or
shall cause the Deposit Bank to maintain on a ledger entry basis the following
subaccounts (the "SUBACCOUNTS") entitled:
(i) Tax and Insurance Escrow Subaccount (the "TAX
AND INSURANCE ESCROW SUBACCOUNT");
(ii) Monthly Debt Service Subaccount (the "MONTHLY
DEBT SERVICE SUBACCOUNT");
(iii) Replacement Reserve Subaccount (the
"REPLACEMENT RESERVE SUBACCOUNT");
(iv) INTENTIONALLY DELETED
(v) Loss Proceeds Subaccount (the "LOSS PROCEEDS
SUBACCOUNT");
(vi) Security Deposit Subaccount (the "SECURITY
DEPOSIT SUBACCOUNT");
(viii) Borrower's Remainder Subaccount (the
"BORROWER'S REMAINDER SUBACCOUNT");
(ix) Ground Rent Subaccount (the "GROUND RENT
SUBACCOUNT");
(b) In order to further secure the performance by each of the
Borrowers of the Obligations and as a material inducement for Lenders to make
the Loans in accordance with terms of this Agreement, the Notes and each
Mortgage, each of the Borrowers hereby acknowledges and confirms that: (i)
Administrative Agent as its designee has established each Deposit Account in
the name of Administrative Agent, as agent for Lenders; (ii) each Deposit
Account will be subject to the sole dominion, control and discretion of
Administrative Agent as its designee, subject to the terms, covenants and
conditions of this Agreement; (iii) Administrative Agent or its designee shall
have the sole right to make withdrawals from the Deposit Accounts; and (d)
neither of the Borrowers nor any other Person claiming on behalf of or through
Borrowers shall have any right or authority, whether express or implied, to
close or to make use of, or withdraw any Account Proceeds from, either Deposit
Account. Each Deposit Account shall be assigned the federal tax identification
number of Domestic Borrower, which number is 75-2621624.
SECTION 10.3 DEPOSITS INTO CLEARING ACCOUNT.
(a) Within one (1) Business Day after receipt of the same by
Borrowers or any agent or Person acting on behalf of Borrowers, including,
without limitation, any Property
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Manager engaged by Borrowers in connection with any Asset or any other Loan
Party, Borrowers shall and shall cause each other Loan Party to directly deposit
(or cause to be deposited) all Rent and other Mortgaged Property Gross Cash Flow
and all Security Deposits into the Clearing Account A for such Asset. Without
limiting the generality of the foregoing:
(i) Borrowers shall and shall cause each other Loan
Party to cause all Rent, payable on account of any Tenant Lease, and
Security Deposits, payable on account of any Tenant Lease, to be
transmitted directly to the Clearing Account A for the Asset in
connection with which the Rent is being paid, by each Person granted a
possessory interest or right to use or occupy all or any portion of
such Asset pursuant to a Tenant Lease (collectively, the "TENANTS"),
without such Rent or Security Deposits at any time being under the
control of either of the Borrowers, any other Loan Party or any of its
agents or employees, by executing and delivering to each Tenant under
a Tenant Lease, whether such Tenant Lease is presently effective or
executed after the date hereof, an irrevocable letter of direction
(the "PAYMENT DIRECTION LETTER") in the form attached hereto as
Exhibit A, advising each Tenant to directly deposit into such Clearing
Account A at the address set forth in the Payment Direction Letter,
promptly when due, all Rent and Security Deposits payable to either of
the Borrowers or such other Loan Party as landlord under the Tenant
Leases. Borrowers represent, warrant and covenant that they shall and
shall cause each other Loan Party to deliver the Payment Direction
Letter (i) on or prior to the date hereof with respect to Tenant
Leases executed on or prior to the date hereof and (ii)
contemporaneously with the execution and delivery of all other Tenant
Leases after the date hereof. The Property Manager shall not and
Borrowers shall not and shall not permit any other Loan Party to (i)
terminate, amend, revoke or alter any Payment Direction Letter by
amending any Tenant Lease or otherwise or (ii) direct or cause any
Tenant to pay Rent in any manner other than as specifically provided
in the Payment Direction Letter.
(ii) Borrowers shall and shall cause each other Loan
Party to cause all Credit Card Receivables to be transmitted directly
to the Clearing Account A for the Asset in connection with which the
Rent is being paid, by the Credit Card Payor without such Credit Card
Receivables at any time being under the control of either of the
Borrowers, any other Loan Party or any of its agents or employees, by
executing and delivering to each Credit Card Payor, an irrevocable
letter of direction (the "CREDIT CARD PAYOR PAYMENT DIRECTION LETTER")
in the form attached hereto as Exhibit B, advising each Credit Card
Payor to directly deposit into such Clearing Account A at the address
set forth in the Credit Card Payor Payment Direction Letter, promptly
when due, all Credit Card Receivables payable to either of the
Borrowers or any other Loan Party. Borrowers represent, warrant and
covenant that they shall and shall cause each other Loan Party to
deliver the Credit Card Payor Payment Direction Letter (i) on or prior
to the date hereof with respect to each person who is a Credit Card
Payor on the date hereof and (ii) on or prior to accepting any other
credit card for payment, to each additional
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Credit Card Payor. The Property Manager shall not and Borrowers shall
not and shall not permit any other Loan Party to (i) terminate, amend,
revoke or alter any Credit Card Payor Payment Direction Letter or (ii)
direct or cause any Credit Card Payor to pay Credit Card Receivables
in any manner other than as specifically provided in the Credit Card
Payor Payment Direction Letter.
(b) Each of the Borrowers agrees (i) not to commingle, or
permit any other Loan Party to commingle, any such Mortgaged Property Gross
Cash Flow or Security Deposits which it receives with other funds of such
Borrower or any other Loan Party, (ii) that such Borrower or any other Loan
Party, as the case may be, is holding Mortgaged Property Gross Cash Flow and
Security Deposits which it receives in an express trust for the benefit of
Lenders until all Mortgaged Property Gross Cash Flow and Security Deposits
which it receives are deposited into the Clearing Account A for the appropriate
Asset and (iii) to transmit or cause any other Loan Party to transmit such
Mortgaged Property Gross Cash Flow or Security Deposits which it receives into
the Clearing Account A for the Asset in connection with which such Mortgaged
Property Gross Cash Flow or Security Deposit was generated within one (1)
Business Day after receipt thereof.
(c) Borrowers shall notify Administrative Agent (or cause
each Clearing Bank to notify Administrative Agent) contemporaneously with the
making of each deposit into any Clearing Account A under this Section which is
made by Borrowers, any other Loan Party or any agent or Person on behalf of
Borrowers (other than deposits made by Tenants or Credit Card Payors directly
into Clearing Account A) of the amount and date of such payment, which
notification shall contain a breakdown of the amount of Rent, Loss Proceeds and
other Mortgaged Property Gross Cash Flow and Security Deposits included in the
deposit. Said notification shall be accompanied by such supporting
documentation as Administrative Agent may reasonably require. Any deposit made
by or on behalf of either of the Borrowers or any other Loan Party into any
Clearing Account A shall be deemed deposited into such Clearing Account A when
the funds in respect of such deposit shall become available funds.
SECTION 10.4 TRANSFERS TO DEPOSIT ACCOUNTS AND CLEARING
ACCOUNT B.
10.4.1 TRANSFERS FROM CLEARING ACCOUNT. (a) Subject to
clauses (b) and (c) below, each of the Borrowers shall cause the Clearing Bank
to transfer, on a daily basis by wire transfer or via the automated clearing
house ("ACH") system, amounts constituting available funds on deposit in each
Clearing Account A in excess of $1,000 to the Deposit Account established in
connection with the Loan made to such Borrower (the "MINIMUM BALANCE").
Simultaneously with any transfer to the Deposit Bank pursuant to this Section
10.4.1, the Clearing Bank shall send to the Deposit Bank, Administrative Agent
or its designee, and Borrowers, via telecopy, a wire transfer or ACH system
advice setting forth the amount transferred.
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(b) If no Cash Trap Event shall have occurred or if (i) a
Cash Trap Event shall have occurred and (ii) the Cash Trap Period shall have
expired or been terminated or waived by Lenders and Administrative Agent in
their sole discretion, then Administrative Agent shall (subject to
Administrative Agent again being permitted to cause transfers from Clearing
Account A to the Deposit Accounts pursuant to Section 10.4.1, if a Cash Trap
Event shall have occurred) cause each Clearing Bank to distribute on a daily
basis by wire transfer or via the ACH system, any amounts constituting
available funds on deposit in each Clearing Account A (which do not constitute
Loss Proceeds, Material Security Deposits or Rent paid more than one month in
advance) to Clearing Account B.
(c) If a Cash Trap Event shall have occurred and the Cash
Trap Period shall not have expired or been terminated by Lenders and
Administrative Agent in their sole discretion, then provided no Event of
Default has occurred and is continuing and sufficient funds (which do not
constitute Loss Proceeds, Material Security Deposits or Rent paid more than one
month in advance) have been transferred to each Deposit Account during the
applicable Collection Period to distribute and pay the amounts set forth in
Section 10.9.1(a)(i)-(vi) on the next occurring Distribution Date,
Administrative Agent shall, subject to Section 10.9.3 and 10.12 hereof cause
each Clearing Bank to distribute on a daily basis by wire transfer or via the
ACH system any additional amounts constituting available funds on deposit in
each Clearing Account A during the remainder of the applicable Collection
Period (which do not constitute Loss Proceeds, Material Security Deposits, or
Rent paid more than one month in advance) to Clearing Account B.
(d) Borrowers shall notify the Clearing Bank if any funds
deposited in Clearing Account A constitute Loss Proceeds, Material Security
Deposits or Rent paid more than one month in advance, in sufficient time for
the Clearing Bank to transfer such funds to the appropriate Deposit Account.
If any funds constituting Loss Proceeds, Material Security Deposits or Rent
paid more than one month in advance are transferred to Clearing Account B,
Borrowers shall immediately transfer such funds to the appropriate Deposit
Account.
10.4.2 INSUFFICIENT FUNDS IN THE DEPOSIT ACCOUNTS. Except as
otherwise expressly provided in this Agreement, all payments from time to time
in respect of the Loans (to the extent not independently funded by Mortgaged
Property Gross Cash Flow deposited into a Clearing Account A) and all
prepayments and other amounts paid by Borrowers hereunder (other than fees and
expenses paid on the Closing Date) shall be remitted by Borrowers to
Administrative Agent for deposit into the appropriate Deposit Account. The
obligations of Borrowers under this Agreement and the other Loan Documents to
pay principal and interest and the other costs, expenses, charges, fees and
payments payable under this Agreement and the other Loan Documents, including,
without limitation, funding of the Tax and Insurance Escrow Subaccount and the
Replacement Reserve Subaccount and the Ground Rent Subaccount as required in
Sections 7.3, 7.4 and 7.6 is not limited to the amount of Mortgaged Property
Gross Cash Flow deposited into the Deposit Accounts, if any, and available for
the purpose of paying such amounts. In the event that the amounts available in
the Deposit Accounts for the payment
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of principal and interest or such other costs, expenses, charges, fees or
payments to be paid therefrom, or the amounts allocated to the Subaccounts for
the payment of costs, expenses, charges, fees or payments to be paid therefrom,
are not sufficient to permit the same to be paid as and when due, then prior to
the Disbursement Date immediately preceding such due date (or in the case of
Debt Service, on or prior to such due date), Borrowers shall deposit into the
appropriate Deposit Account such additional funds as may be required in order
to permit the timely payment of all such items (such deposits being herein
called "BORROWERS CONTRIBUTION DEPOSITS"). Borrowers' ignorance of the amounts
in any Clearing Account A, any Deposit Account or any Subaccount available for
the purpose of making the required payments therefrom shall not be a defense to
the failure of Borrowers to timely make Borrowers Contribution Deposits as
required pursuant to the preceding sentence.
SECTION 10.5 INTENTIONALLY DELETED.
SECTION 10.6 PLEDGE OF ACCOUNTS; EVENT OF DEFAULT.
As additional security for the payment of all sums due under
the Loans and the performance of all other terms, conditions and covenants of
this Agreement and the other Loan Documents on Borrowers' part to be paid and
performed, Borrowers hereby pledge, assign and grant to the Secured Parties a
continuing perfected security interest in and to and a first lien upon: (a)
each Deposit Account (including each Subaccount) and each Clearing Account A
and all of Borrowers' right, title and interest in and to all cash, property or
rights transferred to or deposited into each Deposit Account and each Clearing
Account A from time to time by or on behalf of Borrowers in accordance with the
provisions of this Agreement, (b) all earnings, investments and securities held
in the Deposit Accounts, and (c) any and all proceeds of the foregoing (subject
to the rights of Tenants whose Security Deposits were allocated to the Security
Deposit Subaccount). Borrowers further agree to execute, acknowledge, deliver,
file or do, at its sole cost and expense, all other acts, assignments, notices,
agreements and other instruments as Administrative Agent may reasonably require
in order to effectuate, assure, convey, secure, assign and transfer unto
Administrative Agent any of the rights granted by this Section. Borrowers
shall not further pledge, assign or grant a security interest in either Deposit
Account, any Subaccount or any Clearing Account A or permit any other Lien to
attach thereto or any levy to be made thereon, or any UCC-1 Financing
Statement, or Canadian equivalent (except those naming Administrative Agent as
secured party) to be filed with respect thereto.
SECTION 10.7 INVESTMENT OF ACCOUNT FUNDS.
(a) So long as no Event of Default has occurred, all or a
portion of the funds deposited in either Deposit Account shall be invested and
reinvested by Administrative Agent pursuant to written instructions from the
appropriate Borrower in one or more Eligible Investments; provided, however,
that such funds shall be invested in Eligible Investments in a manner that will
permit Administrative Agent to meet the payment obligations hereunder and any
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such direction from such Borrower shall contain a certification from such
Borrower (which may be conclusively relied upon by Administrative Agent) that
any such investments constitute Eligible Investments. In the absence of any
instructions from Borrowers or after the occurrence of an Event of Default, the
funds deposited in each Deposit Account shall be invested and reinvested by
Administrative Agent in securities or obligations described in clause (a) under
the definition of Eligible Investments and, in the case of an Event of Default,
Borrowers shall have no authority to direct the investment of such funds.
Funds deposited in any Clearing Account A shall not be invested, without
Administrative Agent's consent, which consent shall not be unreasonably
withheld provided such investment (x) is an Eligible Investment and (ii) shall
mature on or prior to the Business Day immediately following the investment of
such funds.
(b) All interest, income, earnings or other gain from
investment of the funds deposited in the Deposit Accounts shall be credited to
such Deposit Account, net of any service charges to such Deposit Account, and
any loss resulting from such investments shall be charged to such Deposit
Account. Borrowers shall include and report such interest, income, earnings
and other gain in its income for Federal, state and local income and franchise
tax purposes. Administrative Agent shall not be responsible for any losses
with respect to any investment in Eligible Investments of the funds deposited
in the Deposit Accounts or for any losses resulting from early withdrawal
thereof under Section 10.7(c) even if such investments in Eligible Investments
were made at the direction of Administrative Agent, and Borrowers shall bear
the risk of all losses with respect to any such investments in Eligible
Investments (including any loss resulting from early withdrawal thereof under
Section 10.7(c)).
(c) Administrative Agent is hereby authorized and empowered
at any time and from time to time, without notice to Borrowers or any other
Person, to cause any such investments to be sold or converted to cash in order
to make the disbursements required to be made from the Deposit Accounts (and
each Subaccount) in accordance with the terms of this Agreement, whether or not
at the time of such sale or conversion, such investments shall have matured.
SECTION 10.8 REQUISITIONS.
10.8.1 SUBMISSION OF REQUISITIONS. If a Cash Trap Event
shall have occurred and the Cash Trap Period shall not have expired or been
terminated by Lenders and Administrative Agent in their sole discretion, no
later than five (5) Business Days prior to the first day of each Collection
Period occurring after such Cash Trap Event, Borrowers will submit to
Administrative Agent a Requisition for all Operating Expenses (each, a
"REQUISITION") that Borrowers reasonably anticipate will be payable in respect
of each Asset during the following Collection Period.
10.8.2 CONTENT OF REQUISITIONS. No Requisition shall request
payment of amounts which were requested and paid in a previous Collection
Period (or otherwise previously
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paid by Borrowers). Each Requisition shall be accompanied by such supporting
documentation as Administrative Agent may reasonably require. Each Requisition
shall also contain a certification executed by the appropriate Borrower
confirming that such Borrower has expended all amounts released to it under the
previous month's Requisition in the manner contemplated by such Requisition (or
listing any variances), and such certification shall specify that portion, if
any, of the aggregate amount of the prior month's Requisition that was not
expended by such Borrower or any other Loan Party (the "UNUSED REQUISITION
AMOUNT"). In addition, each Requisition shall contain a certification
confirming which amounts requested are, or are not, budgeted in the current
Approved Annual Operating Budget. Each Requisition must be approved by
Administrative Agent. To the extent that the amount requested in a Requisition
is budgeted in the current Approved Annual Operating Budget for an Asset, or is
not in excess of one hundred and five percent (105%) of the budgeted amount,
such amount shall be deemed to be approved by Administrative Agent.
SECTION 10.9 DISBURSEMENTS FROM THE DEPOSIT ACCOUNTS.
10.9.1 DISBURSEMENTS. (a) From time to time during each
Collection Period (but not less than once during any two week period)
Administrative Agent shall, subject to Sections 10.9.3 and 10.12, cause the
Deposit Bank to distribute the amounts, if any, then held as collected funds in
each Deposit Account (other than (A) Loss Proceeds which shall be allocated to
the Loss Proceeds Subaccount, (B) Security Deposits which shall be allocated to
the Security Deposit Subaccount and (C) any Rent which is paid for more than
one month in advance, which shall be retained in either Deposit Account until
payment thereof is due under the applicable Tenant Lease) in the following
order of priority satisfying in full, to the extent required and possible, each
priority before making any distribution with respect to any succeeding
priority:
(i) First, with respect to any Asset which is a
Leasehold Estate, to the funding of the Ground Rent Subaccount, in an
amount required to be paid to Administrative Agent pursuant to Section
7.6 hereof with respect to Ground Rent;
(ii) Second, to the funding of the Tax and Insurance
Escrow Subaccount, in the amount required to be paid to Administrative
Agent pursuant to Section 7.3 hereof with respect to Taxes and
Insurance Premiums;
(iii) Third, to the funding of the Monthly Debt
Service Subaccount, in payment of the monthly installment due under
the Notes in an amount equal to the interest for the applicable
Interest Accrual Period on the unpaid principal balance of the
Domestic Loan and the Canadian Loan, as applicable, computed at the
Interest Rate);
(iv) Fourth, to the Monthly Debt Service Subaccount,
in payment of all other amounts then due and owing to Lenders under
the terms of this Agreement or any of the other Loan Documents;
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(v) Fifth, to the funding of the Replacement Reserve
Subaccount, in the amount required to be paid to Administrative Agent
pursuant to Section 7.4 hereof;
(vi) Sixth [INTENTIONALLY DELETED]
(vii) Seventh, if a Cash Trap Event shall have
occurred and the Cash Trap Period shall not have expired (or been
terminated by Administrative Agent in the sole discretion of
Administrative Agent and Lenders), to the applicable Borrower's
Remainder Subaccount, in the amount equal to the Operating Expenses
(including any Management Fee) set forth in the Requisition submitted
during the immediately preceding Collection Period (but excluding any
amounts in the Requisition which are to be paid pursuant to any other
clause in this Section 9.9.1(a)); provided, however, that if there is
an outstanding Unused Requisition Amount with respect to prior
Requisitions, then the amount to be released to the Borrower's
Remainder Subaccount under this clause (vii) shall be reduced by an
amount equal to such Unused Requisition Amount; and
(viii) Eighth, the balance, if any, to the Borrower's
Remainder Subaccount.
(b) Borrowers will and will cause each other Loan Party to
apply all amounts paid to Borrowers pursuant to Section 10.9.1(a)(vii) only for
the purposes set forth in the Requisition applicable thereto.
10.9.2 INTENTIONALLY DELETED.
10.9.3 UPON EVENT OF DEFAULT. Upon the occurrence of any
Event of Default, Administrative Agent may (or if directed by the Requisite
Lenders, shall) apply sums then present in the Deposit Account established by
each of the Borrowers or any Subaccount thereof and all sums thereafter
deposited into the Deposit Accounts (other than Security Deposits to the extent
any Tenant may have a right to the return of such Security Deposit) to the
payment of the portion of the Debt payable by each such Borrower, Taxes and
Other Charges, Insurance Premiums and all other sums payable pursuant to this
Agreement and the other Loan Documents in such order, proportion and priority
as the Requisite Lenders and Administrative Agent may determine in their sole
discretion, except that Administrative Agent shall apply funds (if any) on
deposit in the Ground Rent Subaccount for payment of due and unpaid Ground Rent
prior to application for any other purpose. Administrative Agent's right to
withdraw and apply amounts in the Deposit Accounts shall be in addition to all
other rights and remedies provided under this Agreement, the other Loan
Documents, and at law or in equity.
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SECTION 10.10 DISBURSEMENTS FROM CERTAIN SUBACCOUNTS.
10.10.1 DISBURSEMENTS FROM THE TAX AND INSURANCE ESCROW
SUBACCOUNT. Except as otherwise provided herein, Administrative Agent shall
cause the funds in the Tax and Insurance Escrow Subaccount to be disbursed by
the Deposit Bank in accordance with the terms of Section 7.3.
10.10.2 DISBURSEMENTS FROM THE REPLACEMENT RESERVE
SUBACCOUNT. Except as otherwise provided herein, Administrative Agent shall
cause funds in the Replacement Reserve Subaccount to be disbursed by the
Deposit Bank in accordance with the terms of Section 7.4.
10.10.3 DISBURSEMENTS FROM THE SECURITY DEPOSIT SUBACCOUNT.
In the event that either Borrower receives a request from any Tenant (or the
holder of a reservation of Function Space) for a disbursement from the Security
Deposit Subaccount of all or any portion of such Tenant's (or such holder of a
reservation of Function Space) Security Deposit, such Borrower shall
immediately give Administrative Agent written notice of such request. Upon
receipt of such notice by Administrative Agent, Administrative Agent shall
review the same and shall approve or disapprove such request in its reasonable
discretion within ten (10) Business Days after receipt of such notice from such
Borrower. In the event that Administrative Agent approves a disbursement of
all or any portion of the funds in the Security Deposit Subaccount,
Administrative Agent shall cause the Deposit Bank to disburse such funds: (x)
if payable to such Borrower, into Clearing Account B (provided, if a Cash Trap
Period exists such funds shall be retained in such Deposit Account but released
from the Security Deposit Subaccount and allocated in the same manner as Rent
in accordance with Section 10.9.1); or (y) if payable to any Person other than
either of the Borrowers, at the time and in the manner specified by such
Borrower. Notwithstanding the foregoing, nothing contained in this Section
10.10.3 shall be deemed to impose upon Administrative Agent any obligation to
perform or discharge any obligation of Borrowers or any other Loan Party as
landlord under any of the Tenant Leases or in connection with any Function
Space. In the event the funds in the Security Deposit Subaccount are
insufficient at any time to permit disbursement of the full amount requested by
a Tenant (or the holder of a reservation of Function Space) and approved by
Administrative Agent, Administrative Agent shall cause the disbursement of such
funds as are available in the Security Deposit Subaccount or may, in its sole
discretion and subject to applicable law, refuse to cause the disbursement of
any funds from the Security Deposit Subaccount until there exist sufficient
funds to pay the full amount requested. Under no circumstances shall
Administrative Agent be obligated under this Section 10.10.3 to disburse or
cause the disbursement of any funds with respect to Security Deposits other
than those on deposit in the Security Deposit Subaccount.
10.10.4 DISBURSEMENTS FROM THE LOSS PROCEEDS SUBACCOUNT.
Except as otherwise provided herein, Administrative Agent shall cause funds in
the Loss Proceeds Subaccount to be disbursed by the Deposit Bank in accordance
with the terms of Section 7.1.
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10.10.5 INTENTIONALLY DELETED.
10.10.6 DISBURSEMENTS FROM THE BORROWER'S REMAINDER
SUBACCOUNT. Except as otherwise provided herein, Administrative Agent shall
cause the funds in the Borrower's Remainder Subaccount to be disbursed at least
once each week by wire transfer or via the ACH System to the Clearing Bank for
deposit into Clearing Account B.
10.10.7 DISBURSEMENTS FROM THE MONTHLY DEBT SERVICE
SUBACCOUNT. Administrative Agent shall cause the funds in the Monthly Debt
Service Subaccount to be disbursed to Lenders or their designee on the
Disbursement Date occurring immediately following the relevant Collection
Period.
10.10.8 INTENTIONALLY DELETED.
10.10.9 DISBURSEMENTS FROM THE GROUND RENT SUBACCOUNT.
Except as otherwise provided herein, Administrative Agent shall cause funds in
the Ground Rent Subaccount to be disbursed by the Deposit Bank in accordance
with the terms of Section 7.6.
10.10.10 INTENTIONALLY DELETED.
SECTION 10.11 LOCK-BOX AGREEMENTS.
Borrowers represent, warrant and covenant that it shall
execute and comply and shall cause each other Loan Party to execute and comply
with those certain Clearing Account Agreements (the "CLEARING AGREEMENTS"),
each dated on or about the Closing Date and those certain Deposit Account
Agreements (collectively the "DEPOSIT AGREEMENTS"), dated as of the date hereof
among either of the Borrowers, Administrative Agent and Lenders and various
financial institutions (the Clearing Agreements and the Deposit Agreements and
any modifications, amendments, replacements or substitutions thereof are
hereinafter collectively referred to as the "LOCK-BOX AGREEMENTS"). Borrowers
shall pay all costs and expenses required under the Lock-Box Agreements.
SECTION 10.12 REQUIRED RATIO.
From and after the date of the Notes through but not including
the Maturity Date, Borrowers shall achieve, and within forty-five (45) days of
the end of each calendar quarter (the "DSCR DETERMINATION DATE") provide
evidence to Administrative Agent of the achievement for the (x) Canadian Assets
of, a Canadian Debt Service Coverage Ratio of not less than 1.15 to 1.0 for the
twelve (12) full calendar months immediately preceding the end of such calendar
quarter and (y) Domestic Assets of, a Domestic Debt Service Coverage Ratio of
not less than 1.15 to 1.0 for the twelve (12) full calendar months immediately
preceding the end of such calendar quarter. If at any time such ratio (the
"REQUIRED RATIO") is not maintained and a Cash Trap Period exists
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(or occurs at any time prior to the next DSCR Determination Date), the
Requisite Lenders and Administrative Agent, in their sole discretion, shall
have the right to retain all Mortgaged Property Gross Cash Flow which would
otherwise be payable to the Borrower's Remainder Subaccount pursuant to Section
10.9.1(a)(viii) (or Section 10.9.2(a)(xi), if applicable) in that month and
each succeeding calendar month in the Deposit Accounts (for payment of the
amounts described in Sections 10.9.1(a)(i), (ii), (iii), (iv), (v), (vi) and
(vii) until the Required Ratio is achieved as of any subsequent DSCR
Determination Date for the twelve (12) full calendar months preceding the end
of such subsequent calendar quarter. If the Required Ratio is achieved as of
any one DSCR Determination Date, then subject to Administration Agent being
again permitted to retain such Mortgaged Property Gross Cash Flow in the
Deposit Accounts in accordance with the immediately preceding sentence, any
Mortgaged Property Gross Cash Flow retained in the Deposit Accounts pursuant to
the immediately preceding sentence and not theretofore used to satisfy
Borrowers' obligations set forth in Sections 10.9.1(a)(i), (ii), (iii), (iv),
(v), (vi) or (vii) shall be applied to items set forth in Section 10.9.1(a) (or
Section 10.9.2(a), if applicable) in the order of priority therein set forth.
All calculations of the Debt Service Coverage Ratio, Canadian Debt Service
Coverage Ratio and Domestic Debt Service Coverage Ratio shall be subject to
verification by Administrative Agent.
XI. MISCELLANEOUS
SECTION 11.1 SURVIVAL.
This Agreement and all covenants, agreements, representations
and warranties made herein and in the certificates delivered pursuant hereto
shall survive the making by Lenders of the Loans and the execution and delivery
to Lenders of the Notes, and shall continue in full force and effect so long as
all or any of the Debt is outstanding and unpaid unless a longer period is
expressly set forth herein or in the other Loan Documents. Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the legal representatives, successors and assigns of such
party. All covenants, promises and agreements in this Agreement, by or on
behalf of Borrowers or any other Loan Party, shall inure to the benefit of the
legal representatives, successors and assigns of Lenders.
SECTION 11.2 INTENTIONALLY DELETED
SECTION 11.3 GOVERNING LAW.
(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK,
AND MADE BY ADMINISTRATIVE AGENT AND EACH LENDER AND ACCEPTED BY BORROWERS IN
THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTES DELIVERED PURSUANT HERETO
WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A
SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING
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TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD
TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF
AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION
AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND
PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE OR JURISDICTION IN WHICH THE APPLICABLE ASSET
IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE
LAW OF SUCH STATE OR JURISDICTION, THE LAW OF THE STATE OF NEW YORK SHALL
GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND
ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT
PERMITTED BY LAW, BORROWERS HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY
CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT
AND THE NOTES, AND THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST
ADMINISTRATIVE AGENT, LENDERS, BORROWERS OR ANY OTHER LOAN PARTY ARISING OUT OF
OR RELATING TO THIS AGREEMENT MAY AT ADMINISTRATIVE AGENT'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW
YORK, AND BORROWERS WAIVE ANY OBJECTIONS WHICH IT, INDIVIDUALLY OR
COLLECTIVELY, MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON
CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWERS HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR
PROCEEDING. BORROWERS DO HEREBY DESIGNATE AND APPOINT THE CORPORATION SERVICE
COMPANY AT 375 HUDSON STREET, NEW YORK, NEW YORK 10014, AS EACH OF THEIR
AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL
PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY
FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE
MAILED OR DELIVERED TO BORROWERS, IN THE MANNER PROVIDED HEREIN SHALL
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BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWERS, IN ANY
SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWERS (I) SHALL
GIVE PROMPT NOTICE TO ADMINISTRATIVE AGENT OF ANY CHANGED ADDRESS OF THEIR
AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK
(WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND
ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A
SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW
YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
SECTION 11.4 AMENDMENTS; WAIVERS.
11.4.1 No amendment, modification, termination or waiver of
any provision of this Agreement or of the Notes, and no consent to any
departure by Borrowers or any other Loan Party therefrom, shall in any event be
effective without the written concurrence of Requisite Lenders; provided that
(i) no such amendment, modification, termination, waiver or consent shall be
effective without the written concurrence of all Lenders if such amendment,
modification, termination, waiver or consent (1) increases the amount of any of
the Commitments or reduces the principal amount of the Loans; (2) changes in
any manner the definition of "Pro Rata Share" or the definition of "Requisite
Lenders"; (3) changes in any manner any provision of this Agreement which, by
its terms, expressly requires the approval or concurrence of a specified
percentage of Lenders; (4) postpones the scheduled final maturity date of the
Loans; (5) postpones the date on which any interest or any fees are payable;
decreases the interest rate borne by the Loans or the amount of any fees
payable hereunder; (6) releases any Lien granted in favor of Administrative
Agent with respect to a material portion of the Collateral, except as
specifically provided herein; (7) releases any Loan Party from its obligations
under the Affiliate Guaranty, other than in accordance with the terms of the
Loan Documents; or (8) changes in any manner the provisions contained in this
Section 11.4, 11.13 or 11.18(c), (ii) no amendment, modification, termination
or waiver of any provision of any Note shall be effective without the written
concurrence of Lender which is the holder of that Note; and (iii) no amendment,
modification, termination or waiver of any provision of Article 12 or of any
other provision of this Agreement which, by its terms, expressly requires the
approval or concurrence of Administrative Agent shall be effective without the
written concurrence of Administrative Agent. Administrative Agent may, but
shall have no obligation to, with the concurrence of any Lender, execute
amendments, modifications, waivers or consents on behalf of that Lender. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given. No notice to or demand on Borrowers
shall entitle Borrowers to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, termination, waiver or
consent effected in accordance with this
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Section 11.4 shall be binding upon each Lender at the time outstanding, each
future Lender and, if signed by Borrowers, on Borrowers.
11.4.2 If Administrative Agent notifies any Lender that one
or more requirements set forth in Section 3.1 hereof will not be satisfied, or
that performance of all or any part of such requirement will be deferred, and,
subsequent to such notification, such Lender delivers (or continues to
authorize delivery of) its signature page hereto, then such Lender shall be
deemed to have waived (subject to any conditions set forth in the applicable
notice) such requirement as a condition precedent to the effectiveness of the
Commitments.
SECTION 11.5 DELAY NOT A WAIVER.
Neither any failure nor any delay on the part of
Administrative Agent and Lenders in insisting upon strict performance of any
term, condition, covenant or agreement, or exercising any right, power, remedy
or privilege hereunder, or under the Notes or under any other Loan Document, or
any other instrument given as security therefor, shall operate as or constitute
a waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under this Agreement, the Notes or any
other Loan Document, Administrative Agent and Lenders shall not be deemed to
have waived any right either to require prompt payment when due of all other
amounts due under this Agreement, the Notes or the other Loan Documents, or to
declare a default for failure to effect prompt payment of any such other
amount.
SECTION 11.6 NOTICES.
All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing
(including by facsimile) and shall be effective for all purposes if hand
delivered or sent by (a) certified or registered United States mail, postage
prepaid, or (b) expedited prepaid delivery service, either commercial or United
States Postal Service, with proof of attempted delivery, or by facsimile (with
answer back acknowledged), addressed as follows:
If to Domestic Bristol Hotel Asset Company
Borrower: 14295 Midway Road
Dallas, Texas 75244
Attention: General Counsel
Telephone: (972) 391-3050
Facsimile: (972) 391-3497
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with a copy to:
Munsch Hardt Kopf Harr & Dinan, P.C.
1445 Ross Avenue
Suite 4000
Dallas, Texas 75202
Attention: William T. Cavanaugh, Jr., Esq.
Telephone: (214) 855-7500
Facsimile: (214) 855-7584
If to Canadian BHAC Canada Inc.
Borrower: c/o Fogler, Rubinoff,
P.O. Box 95, Suite 4400,
Royal Trust Tower,
Toronto-Dominion Centre,
Toronto, Ontario M5K1G8
Attn: Norman May, Esq.
Telephone: (416) 941-8830
Facsimile: (416) 941-8852
with a copy to:
Bristol Hotel Management Corporation
14295 Midway Road
Dallas, Texas 75244
Attention: General Counsel
Telephone: (972) 391-3050
Facsimile: (972) 391-3497
and
Holiday Inn, Toronto Yorkdale
340 Dufferin Street
Toronto, Ontario, MGA2V1
Canada
Attention: Armand Abitol
Telephone: (416) 789-5156
Facsimile: (416) 785-6843
and
Munsch Hardt Kopf Harr & Dinan, P.C.
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1445 Ross Avenue
Suite 4000
Dallas, Texas 75202
Attention: William T. Cavanaugh, Jr., Esq.
Telephone: (214) 855-7500
Facsimile: (214) 855-7584
If to Administrative Agent Nomura Asset Capital Corporation
or Nomura Asset Capital Two World Financial Center, Building B
Corporation, as lender: New York, New York 10281
Attention: Sheryl McAfee
Telephone: (212) 667-9300
Facsimile: (212) 667-1260
with a copy to:
Nomura Asset Capital Corporation
Two World Financial Center,
New York, New York 10281
Attention: Barry Funt, Esq., General Counsel
Telephone: (212) 667-1845
Facsimile: (212) 667-1567
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: J. Philip Rosen, Esq.
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
If to Co-Agent or
Bankers Trust Company, Bankers Trust Company
as lender: 130 Liberty Street
New York, New York 10006
Attention: Jacques Brand
Telephone: (212) 250-8123
Facsimile: (212) 669-0764
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with a copy to:
O'Melveny & Myers LLP
Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Drake S. Tempest, Esq.
Telephone: (212) 326-2000
Facsimile: (212) 326-2061
or at such other address and person as shall be designated from time to time by
any party hereto, as the case may be, in a written notice to the other parties
hereto in the manner provided for in this Section. A notice shall be deemed to
have been given: in the case of hand delivery, at the time of delivery; in the
case of registered or certified mail, when delivered or the first attempted
delivery on a Business Day; or in the case of expedited prepaid delivery and
facsimile, upon the first attempted delivery on a Business Day.
SECTION 11.7 TRIAL BY JURY.
BORROWERS HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO
THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE
LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY
AND VOLUNTARILY BY BORROWERS AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. ADMINISTRATIVE AGENT AND EACH LENDER IS HEREBY AUTHORIZED TO
FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS
WAIVER BY BORROWERS.
SECTION 11.8 HEADINGS.
The Article and/or Section headings and the Table of Contents
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
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SECTION 11.9 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
SECTION 11.10 PREFERENCES/MARSHALLING.
Administrative Agent and Lenders shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments by
Borrowers to any portion of the obligations of Borrowers hereunder. To the
extent Borrowers make a payment or payments to Administrative Agent or any
Lender, which payment or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, receiver or any other party under any bankruptcy
law, state or federal law, common law or equitable cause, then, to the extent
of such payment or proceeds received, the obligations hereunder or part thereof
intended to be satisfied shall be revived and continue in full force and
effect, as if such payment or proceeds had not been received by Administrative
Agent or such Lender, as the case may be. Neither Administrative Agent nor any
Lenders shall be under any obligation to marshal any assets in favor of
Borrowers, any other Loan Party or any other party or against or in payment of
any or all of the Obligations.
SECTION 11.11 WAIVER OF NOTICE.
Borrowers shall not be entitled to any notices of any nature
whatsoever from Administrative Agent except with respect to matters for which
this Agreement or the other Loan Documents specifically and expressly provide
for the giving of notice by Administrative Agent to Borrowers and except with
respect to matters for which Borrowers are not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice. Borrowers hereby
expressly waive the right to receive any notice from Administrative Agent with
respect to any matter for which this Agreement or the other Loan Documents do
not specifically and expressly provide for the giving of notice by
Administrative Agent to Borrowers.
SECTION 11.12 REMEDIES OF BORROWERS.
In the event that a claim or adjudication is made that
Administrative Agent or its agents have acted unreasonably or unreasonably
delayed acting in any case where, by law or under this Agreement or the other
Loan Documents, Administrative Agent or such agent, as the case may be, has an
obligation to act reasonably or promptly, Borrowers agree that neither
Administrative Agent nor its agents shall be liable for any monetary damages
(including without limitation consequential or punitive damages), and
Borrowers' sole remedy shall be limited to
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commencing an action seeking injunctive relief or declaratory judgment. The
parties hereto agree that any action or proceeding to determine whether
Administrative Agent has acted reasonably shall be determined by an action
seeking declaratory judgment.
SECTION 11.13 EXPENSES; INDEMNIFICATION.
(a) Borrowers covenant and agree to pay, or if Borrowers fail
to pay to reimburse, Administrative Agent upon receipt of written notice from
Administrative Agent for all reasonable out-of-pocket costs and expenses
(including reasonable attorneys' fees and disbursements) incurred by
Administrative Agent and Lenders in connection with (i) the preparation,
negotiation, execution and delivery of this Agreement and the other Loan
Documents and the consummation of the transactions contemplated hereby and
thereby and all the costs of furnishing all opinions by counsel for Borrowers
or any other Loan Party (including, without limitation, any opinions requested
by Administrative Agent and Lenders as to any legal matters arising under this
Agreement or the other Loan Documents with respect to the Property or any other
Collateral); (ii) Borrowers' or any other Loan Party's ongoing performance of
and compliance with Borrowers' or such Loan Party's respective agreements and
covenants contained in this Agreement and the other Loan Documents on its part
to be performed or complied with after the Closing Date, including, without
limitation, confirming compliance with environmental and insurance
requirements; (iii) Administrative Agent's ongoing performance and compliance
with all agreements and conditions contained in this Agreement and the other
Loan Documents on its part to be performed or complied with after the Closing
Date; (iv) the negotiation, preparation, execution, delivery and administration
of any consents, amendments, waivers or other modifications to this Agreement
and the other Loan Documents and any other documents or matters requested by
Administrative Agent; (v) securing Borrowers' or any other Loan Party's
compliance with any requests made pursuant to Section 9.1 hereof (subject to
the limitations contained in such Section); (vi) the filing and recording of
the Loan Documents, title insurance and reasonable fees and expenses of counsel
for providing to Lenders all required legal opinions, and other similar
expenses incurred in creating and perfecting the Liens in favor of
Administrative Agent's pursuant to this Agreement and the other Loan Documents;
(vii) enforcing or preserving any rights, in response to third party claims or
the prosecuting or defending of any action or proceeding or other litigation,
in each case against, under or affecting Borrowers, any other Loan Party, this
Agreement, the other Loan Documents, the Property, any other Collateral, or any
other security given for the Loans; and (viii) enforcing any obligations of or
collecting any payments due from Borrowers or any other Loan Party under this
Agreement, the other Loan Documents or with respect to any Asset or other
Collateral or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or of
any insolvency or bankruptcy proceedings; provided, however, that Borrowers
shall not be liable for the payment of any such costs and expenses to the
extent the same arise by reason of the bad faith, recklessness or willful
violations of law of Administrative Agent as determined by a court of competent
jurisdiction in a final non-
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appealable judgment or order. Any cost and expenses due and payable to Lenders
or Administrative Agent may be paid from any amounts in the Deposit Accounts.
(b) Borrowers agree to indemnify and hold harmless
Administrative Agent and Lenders and their respective Affiliates, and the
directors, officers, employees, agents, attorneys, consultants and advisors of
or to any of the foregoing (including, without limitation, those retained in
connection with the satisfaction or attempted satisfaction of any of the
conditions set forth in Section 3) (each of the foregoing being an
"INDEMNITEE") from and against any and all claims, damages, liabilities,
obligations, losses, penalties, actions, judgments, suits, costs, disbursements
and expenses of any kind or nature (including, without limitation, fees and
disbursements of counsel to any such Indemnitee and experts, engineers and
consultants and the costs of investigation and feasibility studies) which may
be imposed on, incurred by or asserted against any such Indemnitee in
connection with or arising out of any investigation, litigation or proceeding,
whether or not any such Indemnitee is a party thereto, whether direct,
indirect, or consequential and whether based on any federal, state or local law
or other statutory regulation, securities or commercial law or regulation, or
under common law or in equity, or on contract, tort or otherwise, in any manner
relating to or arising out of or based upon or attributable to this Agreement,
any other Loan Document, any document delivered hereunder or thereunder, any
Obligation, or any act, event or transaction related or attendant to any
thereof, including, without limitation, (i) arising from any breach of
Borrowers' covenants under Section 2.1.4 or any Environmental Claim or any
remedial action arising out of or based upon anything relating to real property
owned or leased by the either of the Borrowers or any other Loan Party
(collectively, the "INDEMNIFIED MATTERS"); provided, however, that Borrowers
shall not have any obligation under this Section 11.13(b) to an Indemnitee with
respect to any Indemnified Matter caused by or resulting from the bad faith,
recklessness or willful violations of law of Indemnitee as determined by a
court of competent jurisdiction in a final non-appealable judgment or order.
(c) Borrowers agree that any indemnification or other
protection provided to any Indemnitee pursuant to this Agreement (including,
without limitation, pursuant to this Section 11.13) or any other Loan Document
shall (i) survive payment of the Obligations and (ii) inure to the benefit of
any Person who was at any time an Indemnitee under this Agreement or any other
Loan Document.
SECTION 11.14 EXHIBITS AND SCHEDULES INCORPORATED.
The exhibits and schedules annexed hereto are hereby
incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.
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SECTION 11.15 SETOFF.
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default Administrative
Agent and each Lender (provided that no Lender shall exercise any right under
this Section 11.15 without the prior written consent of Administrative Agent)
is hereby authorized by Borrowers at any time or from time to time, without
notice to Borrowers or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including indebtedness evidenced by certificates
of deposit, whether matured or unmatured, but not including trust accounts) and
any other indebtedness at any time held or owing by Administrative Agent to or
for the credit or the account of any Loan Party against and on account of the
obligations and liabilities of Borrowers to Administrative Agent under this
Agreement and the Notes, including all claims of any nature or description
arising out of or connected with this Agreement or any other Loan Document,
irrespective of whether or not (i) Administrative Agent shall have made any
demand hereunder or (ii) the principal of or the interest on the Loans or any
other amounts due hereunder shall have become due and payable pursuant to this
Agreement and although said obligations and liabilities, or any of them, may be
contingent or unmatured.
SECTION 11.16 RATABLE SHARING.
Lenders hereby agree among themselves that if any of them
shall, whether by voluntary payment (other than a voluntary prepayment of Loans
made and applied in accordance with this Agreement), by realization upon
security, through the exercise of any right under the Loan Documents or
otherwise, or as adequate protection of a deposit treated as cash collateral
under the Bankruptcy Code, receive payment or reduction of a proportion of the
aggregate amount of principal, interest, fees and other amounts then due and
owing to that Lender hereunder or under the other Loan Documents (collectively,
the "AGGREGATE AMOUNTS DUE" to such Lender) which is greater than the
proportion received by any other Lender in respect of the Aggregate Amounts Due
to such other Lender, then Lender receiving such proportionately greater
payment shall (i) notify Administrative Agent and each other Lender of the
receipt of such payment and (ii) apply a portion of such payment to purchase
participations (which it shall be deemed to have purchased from each seller of
a participation simultaneously upon the receipt by such seller of its portion
of such payment) in the Aggregate Amounts Due to the other Lender so that all
such recoveries of Aggregate Amounts Due shall be shared by all Lenders in
proportion to the Aggregate Amounts Due to them; provided, however, that if all
or part of such proportionately greater payment received by such purchasing
Lender is thereafter recovered from such Lender upon the bankruptcy or
reorganization of Borrowers or otherwise, those purchases shall be rescinded
and the purchase prices paid for such participations shall be returned to such
purchasing Lender ratably to the extent of such recovery, but without interest.
Borrowers and each Loan Party expressly consent to the foregoing arrangement
and agree that any holder of a participation so purchased may exercise any and
all rights of banker's lien, set-
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off or counterclaim with respect to any and all monies owing by either of the
Borrowers to that holder with respect thereto as fully as if that holder were
owed the amount of the participation held by that holder.
SECTION 11.17 OFFSETS, COUNTERCLAIMS AND DEFENSES.
Any assignee of Lenders' interest in and to this Agreement,
the Notes and the other Loan Documents shall take the same free and clear of
all offsets, counterclaims or defenses which are unrelated to such documents
which Borrowers or any other Loan Party may otherwise have against any assignor
of such documents, and Borrowers shall not and shall not permit any Loan Party,
to interpose or assert any such unrelated counterclaim or defense in any action
or proceeding brought by any such assignee upon such documents and any such
right to interpose or assert any such unrelated offset, counterclaim or defense
in any such action or proceeding is hereby expressly waived by Borrowers and
each other Loan Party.
SECTION 11.18 NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY
BENEFICIARIES; INDEPENDENT NATURE OF LENDERS' RIGHTS.
(a) Borrowers, Administrative Agent and Lenders intend that
the relationships created hereunder and under the other Loan Documents be
solely that of borrower, agent and lenders. Nothing herein or therein is
intended to create a joint venture, partnership, tenancy-in-common or joint
tenancy relationship between Borrowers, Administrative Agent and Lenders nor to
grant Lenders any interest in the Property other than that of mortgagee or
lender.
(b) This Agreement and the other Loan Documents are solely
for the benefit of Lenders, Administrative Agent, as agent for Lenders, and
Borrowers and nothing contained in this Agreement or the other Loan Documents
shall be deemed to confer upon anyone other than Lenders, Administrative Agent,
as agent for Lenders, and Borrowers (including without limitation any other
Loan Party) any right to insist upon or to enforce the performance or
observance of any of the obligations contained herein or therein. All
conditions to the obligations of Lenders to make the Loans hereunder are
imposed solely and exclusively for the benefit of Lenders and no other Person
shall have standing to require satisfaction of such conditions in accordance
with their terms or be entitled to assume that Lenders will refuse to make the
Loans in the absence of strict compliance with any or all thereof and no other
Person shall under any circumstances be deemed to be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by
Lenders if, in Lenders' sole discretion, Lenders deem it advisable or desirable
to do so.
(c) The obligations of Lenders hereunder are several and no
Lender shall be responsible for the obligations or Commitment of any other
Lender hereunder. Nothing contained herein or in any other Loan Document, and
no action taken by Lenders pursuant hereto or thereto, shall be deemed to
constitute Lenders as a partnership, an association, a joint
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venture or any other kind of entity. The amounts payable at any time hereunder
to each Lender shall be a separate and independent debt, and each Lender shall
be entitled to protect and enforce its rights arising out of this Agreement and
it shall not be necessary for any other Lender to be joined as an additional
party in any proceeding for such purpose.
SECTION 11.19 PUBLICITY.
All news releases, publicity or advertising by Borrowers or
its Affiliates (including any other Loan Party) through any media intended to
reach the general public which refers to the Loan Documents or the financing
evidenced by the Loan Documents or to Lenders, Nomura Securities International,
Inc. or any of their Affiliates shall be subject to the prior written approval
of the Requisite Lenders not to be unreasonably withheld.
SECTION 11.20 WAIVER OF COUNTERCLAIM.
Borrowers hereby waive the right to assert a counterclaim,
other than a compulsory counterclaim, in any action or proceeding brought
against it by Administrative Agent or its agents.
SECTION 11.21 CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE.
In the event of any conflict between the provisions of this
Loan Agreement and any of the other Loan Documents, the provisions of this Loan
Agreement shall control. The parties hereto acknowledge that they were
represented by competent counsel in connection with the negotiation, drafting
and execution of the Loan Documents and that such Loan Documents shall not be
subject to the principle of construing their meaning against the party which
drafted same. Borrowers acknowledge that, with respect to the Loans, Borrowers
shall rely solely on their own judgment and advisors in entering into the Loans
without relying in any manner on any statements, representations or
recommendations of Lenders or any parent, subsidiary or Affiliate of Lenders.
Lenders shall not be subject to any limitation whatsoever in the exercise of
any rights or remedies available to it under any of the Loan Documents or any
other agreements or instruments which govern the Loans by virtue of the
ownership by it or any parent, subsidiary or Affiliate of Lenders of any equity
interest any of them may acquire in either of the Borrowers or any other Loan
Party, and Borrowers hereby irrevocably waive the right to raise any defense or
take any action on the basis of the foregoing with respect to Lenders' exercise
of any such rights or remedies. Borrowers acknowledge that Lenders engage in
the business of real estate financings and other real estate transactions and
investments which may be viewed as adverse to or competitive with the business
of Borrowers or their Affiliates.
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SECTION 11.22 BROKERS AND FINANCIAL ADVISORS.
(a) Borrowers hereby represent that no Loan Party has dealt
with any financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this Agreement.
Borrowers hereby agree to indemnify and hold Administrative Agent harmless from
and against any and all claims, liabilities, costs and expenses of any kind in
any way relating to or arising from a claim by any Person that such Person
acted on behalf of any Loan Party in connection with the transactions
contemplated herein. The provisions of this Section 11.22 shall survive the
expiration and termination of this Agreement and the payment of the Debt.
(b) Lenders hereby represent that Lenders have not dealt with
any financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this Agreement.
Lenders hereby agree to indemnify and hold Borrowers harmless from and against
any and all claims, liabilities, costs and expenses of any kind in any way
relating to or arising from a claim by any Person that such Person acted on
behalf of Lenders in connection with the transactions contemplated herein. The
provisions of this Section 11.22 shall survive the expiration and termination
of this Agreement and the payment of the Debt.
SECTION 11.23 PRIOR AGREEMENTS.
This Agreement and the other Loan Documents contain the entire
agreement of the parties hereto and thereto in respect of the transactions
contemplated hereby and thereby, and all prior agreements among or between such
parties, whether oral or written, including, without limitation, the Commitment
Letter dated August 12, 1997 (as same may be amended) between Borrowers and
Lenders, are superseded by the terms of this Agreement and the other Loan
Documents, except that the terms of such Commitment Letter as they relate to
the Mezzanine Financing (as defined therein) and the Resized Loans shall remain
in full force and effect until the Resizing Closing Date and if the Mezzanine
Financing is advanced, the Resizing Borrowers shall be limited partnerships.
Notwithstanding the foregoing, Bankers Trust Company shall have no obligation
to provide the Mezzanine Financing to Borrowers or Resized Borrowers.
SECTION 11.24 APPROVALS.
If in any Loan Document Lenders have agreed to not
unreasonably withhold its consent, then promptly after Lenders' denial of any
such consent, Lenders agree to provide Borrowers a reasonably detailed
statement of the reasons for such denial.
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SECTION 11.25 RELIANCE.
Borrowers acknowledge that their representations, warranties,
covenants and agreements contained in this Agreement and the other Loan
Documents (including without limitation covenants and agreements to pay Release
Prices), are material inducements to Lenders to enter into this Agreement and
to make the Loans, that Lenders have already relied on such representations,
warranties, covenants and agreements in entering into this Agreement and
agreeing to make the Loans (notwithstanding any investigation heretofore or
hereafter made by or on behalf of Lenders), and that Lenders will continue to
rely on such representations, warranties, covenants and agreements in their
future dealings with the Loan Parties. Borrowers agree that their
representations, warranties, covenants and agreements contained in this
Agreement and the other Loan Documents, are reasonable in purpose and scope.
Borrowers represent and warrant that they have reviewed this Agreement and the
other Loan Documents with its legal counsel and that they knowingly and
voluntarily are entering into this Agreement and the other Loan Documents
following consultation with legal counsel.
SECTION 11.26 COUNTERPARTS.
This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and
attached to a single counterpart so that all signature pages are physically
attached to the same document. Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as delivery of
a manually executed counterpart of this Agreement.
SECTION 11.27 ADMINISTRATIVE AGENT'S DISCRETION; SUCCESSOR AGENTS.
Whenever pursuant to this Agreement or any other Loan Document
Administrative Agent exercises any right given to it to approve or disapprove,
or any arrangement or term is to be satisfactory to Administrative Agent, the
decision of Administrative Agent to approve or disapprove or to decide whether
arrangements or terms are satisfactory or not satisfactory shall (except as is
otherwise specifically herein provided) be in the sole discretion of
Administrative Agent. Borrowers acknowledge and agree that, notwithstanding
anything in this Agreement to the contrary, certain decisions to be made by
Administrative Agent under, or under amendments, supplements or other
modification to, this Agreement may be subject to or determined by the further
decision by Lenders or a percentage of Lenders. Borrowers acknowledge that, in
the event of the resignation or removal of Administrative Agent or a successor
Administrative Agent hereunder, a successor Administrative Agent may be
appointed by Lenders and agree that such successor Administrative Agent shall
succeed to all of the rights and duties of Administrative Agent and collateral
agent under the Loan Documents but
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shall not be liable for any breach of any Loan Document by any predecessor
Administrative Agent.
SECTION 11.28 MAXIMUM AMOUNT.
11.28.1 It is expressly stipulated and agreed to be the
intent of Borrowers and Lenders at all times to comply with applicable state
law or applicable United States federal law (to the extent that it permits
Lenders to contract for, charge, take, reserve or receive a greater amount of
interest than under state law) and that this paragraph shall control every
other covenant and agreement in this Agreement, each Mortgage and the other
Loan Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under this
Agreement, each Mortgage or any of the other Loan Documents or contracted for,
charged, taken, reserved or received with respect to the Debt, or if Lenders'
exercise of the option to accelerate the Maturity Date or any prepayment by
Borrowers results in Borrowers having paid any interest in excess of that
permitted by applicable law, then it is Borrowers' and Lenders' express intent
that all excess amounts theretofore collected by Lenders, shall be credited on
the principal balance of the Notes and all other Debt and the provisions of
this Agreement, each Mortgage and the other Loan Documents immediately be
deemed reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new documents, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for hereunder or thereunder. All sums paid or agreed
to be paid to Lenders, for the use, forbearance or detention of the Debt shall,
to the extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full stated term of the Debt until payment in full so
that the rate or amount of interest on account of the Debt does not exceed the
maximum lawful rate from time to time in effect and applicable to the Debt for
so long as the Debt is outstanding.
11.28.2 Notwithstanding any provision to the contrary
contained in this Agreement, in no event shall the aggregate "interest" (as
defined in Section 347 of the Criminal Code, R.S.C.,1985, c.46 as the same may
be amended, replaced or re-enacted from time to time) payable by either
Borrower under this Agreement in respect of the Canadian Loan exceed the
effective annual rate of interest on the "credit advanced" (as defined in that
section) under this Agreement in respect of the Canadian Loan lawfully
permitted under that section and, if any payment, collection or demand pursuant
to this Agreement in respect of "interest" (as defined in that section) in
respect of the Canadian Loan is determined to be contrary to the provisions of
that section, such payment, collection or demand shall be deemed to have been
made by mutual mistake of Borrowers and Administrative Agent which received,
collected or demanded such "interest" and the amount of such payment or
collection shall be refunded to the appropriate Borrower. For purposes of this
paragraph, the effective annual rate of interest shall be determined in
accordance with generally accepted actuarial practices and principles over the
term the Canadian Loan is outstanding on the basis of annual compounding of the
lawfully permitted rate of interest and, in the event of dispute, a certificate
of a Fellow of the Canadian Institute of
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Actuaries appointed by Administrative Agent will be conclusive for the purposes
of such determination.
SECTION 11.29 ASSIGNMENTS. Notwithstanding anything to the
contrary contained herein, as long as no Event of Default shall have occurred
and until this Agreement is amended and restated pursuant to the terms of the
Resized Loan Agreement, Lenders shall not, assign, sell, participate or
otherwise dispose of their respective interests in and to the Loans except that
Bankers Trust Company may grant to Bank One, Texas, N.A. and/or Wells Fargo
Bank, National Association, a participation in its interest in the Loans
provided, (x) Bankers Trust may only participate an aggregate amount of up to
$25,000,000 of its interest in and to the Loans and (y) neither Bank One,
Texas, N.A. nor Wells Fargo Bank, National Association shall be deemed a Lender
under this Agreement by virtue of such participation by Bankers Trust Company
or otherwise.
SECTION 11.30 EFFECTIVE DATE. Notwithstanding the date of
this Agreement on the first page hereof, this Agreement and all other Loan
Documents executed by Canadian Borrower shall not be deemed effective as to
Canadian Borrower until October 28, 1997, such that this Agreement is made
subsequent to the amalgamation of BHAC Canada Inc., and 1255905 Ontario Limited
on October 27, 1997.
XII. AGENTS
SECTION 12.1 APPOINTMENT OF ADMINISTRATIVE AGENT AND
COLLATERAL AGENT.
Nomura Asset Capital Corporation is hereby appointed as
Administrative Agent and collateral agent hereunder and under the other Loan
Documents and each Lender hereby authorizes Administrative Agent to act as its
agent in accordance with the terms of this Agreement and the other Loan
Documents. Administrative Agent agrees to act upon the express conditions
contained in this Agreement and the other Loan Documents, as applicable. The
provisions of this Section 12.1 are solely for the benefit of Administrative
Agent and Lenders and no Loan Party shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, Administrative Agent shall act solely as an agent
of Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Borrowers or
any Loan Party.
SECTION 12.2 APPOINTMENT OF SUPPLEMENTAL COLLATERAL AGENTS.
12.2.1 It is the purpose of this Agreement and the other Loan
Documents that there shall be no violation of any law of any jurisdiction
denying or restricting the right of banking corporations or associations to
transact business as agent or trustee in such jurisdiction. It is recognized
that in case of litigation under this Agreement or any of the other Loan
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Documents, and in particular in case of the enforcement of any of the Loan
Documents, or in case Administrative Agent deems that by reason of any present
or future law of any jurisdiction it may not exercise any of the rights, powers
or remedies granted herein or in any of the other Loan Documents or take any
other action which may be desirable or necessary in connection therewith, it
may be necessary that Administrative Agent appoint an additional individual or
institution as a separate trustee, co-trustee, collateral agent or collateral
co-agent (any such additional individual or institution being referred to
herein individually as a "SUPPLEMENTAL COLLATERAL AGENT" and collectively as
"SUPPLEMENTAL COLLATERAL AGENTS").
12.2.2 In the event that Administrative Agent appoints a
Supplemental Collateral Agent with respect to any Collateral, (i) each and
every right, power, privilege or duty expressed or intended by this Agreement
or any of the other Loan Documents to be exercised by or vested in or conveyed
to Administrative Agent with respect to such Collateral shall be exercisable by
and vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to the exercise or performance
thereof by such Supplemental Collateral Agent shall run to and be enforceable
by either Administrative Agent or such Supplemental Collateral Agent, and (ii)
the provisions of this Section 12 and of Sections 11.13 that refer to
Administrative Agent shall inure to the benefit of such Supplemental Collateral
Agent and all references therein to Administrative Agent shall be deemed to be
references to Administrative Agent and/or such Supplemental Collateral Agent,
as the context may require.
12.2.3 Should any instrument in writing from Borrowers or any
other Loan Party be required by any Supplemental Collateral Agent so appointed
by Administrative Agent for more fully and certainly vesting in and confirming
to him or it such rights, powers, privileges and duties, Borrowers shall, or
shall cause such other Loan Party to, execute, acknowledge and deliver any and
all such instruments promptly upon request by Administrative Agent. In case
any Supplemental Collateral Agent, or a successor thereto, shall die, become
incapable of acting, resign or be removed, all the rights, powers, privileges
and duties of such Supplemental Collateral Agent, to the extent permitted by
law, shall vest in and be exercised by Administrative Agent until the
appointment of a new Supplemental Collateral Agent.
SECTION 12.3 POWERS; DUTIES SPECIFIED.
Each Lender irrevocably authorizes Administrative Agent to
take such action on such Lender's behalf and to exercise such powers, rights
and remedies hereunder and under the other Loan Documents as are specifically
delegated or granted to Administrative Agent by the terms hereof and thereof,
together with such powers, rights and remedies as are reasonably incidental
thereto. Administrative Agent shall have only those duties and
responsibilities that are expressly specified in this Agreement and the other
Loan Documents. Administrative Agent may
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exercise such powers, rights and remedies and perform such duties by or through
its agents or employees. Administrative Agent shall not have, by reason of
this Agreement or any of the other Loan Documents, a fiduciary relationship in
respect of any Lender; and nothing in this Agreement or any of the other Loan
Documents, expressed or implied, is intended to or shall be so construed as to
impose upon Administrative Agent any obligations in respect of this Agreement
or any of the other Loan Documents except as expressly set forth herein or
therein.
SECTION 12.4 NO RESPONSIBILITY FOR CERTAIN MATTERS.
Administrative Agent shall not be responsible to any Lender
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any other Loan Document or
for any representations, warranties, recitals or statements made herein or
therein or made in any written or oral statements or in any financial or other
statements, instruments, reports or certificates or any other documents
furnished or made by Administrative Agent to Lenders or by or on behalf of
Borrowers or any Loan Party to Administrative Agent or any Lender in connection
with the Loan Documents and the transactions contemplated thereby or for the
financial condition or business affairs of Borrowers, any Loan Party or any
other Person liable for the payment of any Obligations, nor shall
Administrative Agent be required to ascertain or inquire as to the performance
or observance of any of the terms, conditions, provisions, covenants or
agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or as to the existence or possible existence of any Event
of Default or Default. Anything contained in this Agreement to the contrary
notwithstanding, Administrative Agent shall not have any liability arising from
confirmations of the amount of outstanding Loans or the component amounts
thereof.
SECTION 12.5 EXCULPATORY PROVISIONS.
Neither Administrative Agent nor any of its officers,
directors, employees or agents shall be liable to Lenders for any action taken
or omitted by Administrative Agent under or in connection with any of the Loan
Documents except to the extent caused by Administrative Agent's gross
negligence or willful misconduct. Administrative Agent shall be entitled to
refrain from any act or the taking of any action (including the failure to take
an action) in connection with this Agreement or any of the other Loan Documents
or from the exercise of any power, discretion or authority vested in it
hereunder or thereunder unless and until Administrative Agent shall have
received instructions in respect thereof from Requisite Lenders (or such other
Lenders as may be required to give such instructions under Section 11.4) and,
upon receipt of such instructions from Requisite Lenders (or such other
Lenders, as the case may be), Administrative Agent shall be entitled to act or
(where so instructed) refrain from acting, or to exercise such power,
discretion or authority, in accordance with such instructions. Without
prejudice to the generality of the foregoing, (i) Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall
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be entitled to rely and shall be protected in relying on opinions and judgments
of attorneys (who may be attorneys for Borrowers and its Subsidiaries),
accountants, experts and other professional advisors selected by it; and (ii)
no Lender shall have any right of action whatsoever against Administrative
Agent as a result of Administrative Agent acting or (where so instructed)
refraining from acting under this Agreement or any of the other Loan Documents
in accordance with the instructions of Requisite Lenders (or such other Lenders
as may be required to give such instructions under Section 11.4).
SECTION 12.6 ADMINISTRATIVE AGENT ENTITLED TO ACT AS LENDER.
The agency hereby created shall in no way impair or affect any
of the rights and powers of, or impose any duties or obligations upon,
Administrative Agent in its individual capacity as a Lender hereunder. With
respect to its participation in the Loans, Administrative Agent shall have the
same rights and powers hereunder as any other Lender and may exercise the same
as though it were not performing the duties and functions delegated to it
hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless
the context clearly otherwise indicates, include Administrative Agent in its
individual capacity. Administrative Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of banking,
trust, financial advisory or other business with Borrowers or any of its
Affiliates as if it were not performing the duties specified herein, and may
accept fees and other consideration from Borrowers and its Subsidiaries for
services in connection with this Agreement and otherwise without having to
account for the same to Lenders.
SECTION 12.7 INDEPENDENT CREDIT ANALYSIS.
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of each of the
Borrowers and each Loan Party in connection with the making of the Loans
hereunder and that it has made and shall continue to make its own appraisal of
the creditworthiness of Borrowers and each Loan Party. Administrative Agent
shall not have any duty or responsibility, either initially or on a continuing
basis, (i) to make any such investigation or any such appraisal on behalf of
Lenders or (ii) except as provided in Section 12.8 below, to provide any Lender
with any credit or other information with respect thereto, whether coming into
its possession before the making of the Loans or at any time or times
thereafter, and Administrative Agent shall not have any responsibility with
respect to the accuracy of or the completeness of any information provided to
any Lender.
SECTION 12.8 DELIVERY OF CERTAIN DOCUMENTS.
Administrative Agent shall deliver to Lenders, reasonably
promptly after receipt from Borrowers the financial statements, certificates
and other items delivered pursuant to subsections 5.1(j). In addition,
reasonably promptly after the effectiveness of any written amendment, waiver or
consent in accordance with the provisions of Section 11.4, Administrative
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Agent shall deliver a copy of such amendment, waiver or consent to each Lender.
Upon the request of any Lender, Administrative Agent shall deliver, reasonably
promptly after receipt from Borrowers, any item required to be delivered to
Administrative Agent pursuant to this Agreement.
SECTION 12.9 INDEMNITY.
Each Lender, in proportion to its Pro Rata Share, severally
agrees to indemnify Administrative Agent, to the extent that Administrative
Agent shall not have been reimbursed by Borrowers, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including reasonable counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against Administrative Agent in exercising its powers,
rights and remedies or performing its duties hereunder or under the other Loan
Documents or otherwise in its capacity as Administrative Agent in any way
relating to or arising out of this Agreement or the other Loan Documents. If
any indemnity furnished to Administrative Agent for any purpose shall, in the
opinion of Administrative Agent, be insufficient or become impaired,
Administrative Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished.
SECTION 12.10 SUCCESSOR ADMINISTRATIVE AGENT.
Administrative Agent may resign at any time by giving 30 days'
prior written notice thereof to Lenders and may be removed by Requisite Lenders
for Administrative Agent's bad faith, recklessness or willful misconduct. Upon
any such notice of resignation or removal Requisite Lenders shall have the
right, upon five Business Days' notice to Borrowers, to appoint a successor
Administrative Agent. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Administrative
Agent and the retiring or removed Administrative Agent shall be discharged from
its duties and obligations under this Agreement. After any retiring or removed
Administrative Agent's resignation or removal hereunder as Administrative
Agent, the provisions of this Section 12.10 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative
Agent under this Agreement.
SECTION 12.11 SECURITY DOCUMENTS.
Each Lender hereby further authorizes Administrative Agent, on
behalf of and for the benefit of Lenders, to enter into each Security Document
as secured party, and each Lender agrees to be bound by the terms of each
Security Document; provided that Administrative Agent shall not (i) enter into
or consent to any written amendment, modification, termination or waiver of any
provision contained in any Security Document, or (ii) release any Collateral
(except as
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otherwise expressly permitted or required pursuant to the terms of this
Agreement or the applicable Security Document), in each case without the prior
consent of Requisite Lenders (or, if required pursuant to Section 11.4, all
Lenders); provided further, however, that, without further written consent or
authorization from Lenders, Administrative Agent may execute any documents or
instruments necessary to (a) release any Lien encumbering any item of
Collateral that is the subject of a sale or other disposition of assets
permitted by this Agreement or that is otherwise required to be released
pursuant to this Agreement or to which Requisite Lenders have otherwise
consented. Anything contained in any of the Loan Documents to the contrary
notwithstanding, Administrative Agent and each Lender hereby agree that (1) no
Lender shall have any right individually to realize upon any of the Collateral
under any Security Document, it being understood and agreed that all rights and
remedies under the Security Documents may be exercised solely by Administrative
Agent for the benefit of Lenders in accordance with the terms thereof, and (2)
in the event of a foreclosure by Administrative Agent on any of the Collateral
pursuant to a public or private sale, Administrative Agent or any Lender may be
the purchaser of any or all of such Collateral at any such sale and
Administrative Agent, as agent for and representative of Lenders (but not any
Lender or Lenders in its or their respective individual capacities unless
Requisite Lenders shall otherwise agree in writing) shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral sold at any such public sale, to use and
apply any of the Obligations as a credit on account of the purchase price for
any collateral payable by Administrative Agent at such sale.
SECTION 12.12 PAYEE OF NOTES TREATED AS OWNER.
Administrative Agent may deem and treat the payee of any Note
as the owner thereof for all purposes hereof unless and until a written notice
of the assignment or transfer thereof shall have been filed with Administrative
Agent. Any request, authority or consent of any person or entity who, at the
time of making such request or giving such authority or consent, is the holder
of any Note shall be conclusive and binding on any subsequent holder,
transferee or assignee of that Note or of any Note or Notes issued in exchange
therefor.
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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed by their duly authorized representatives, all as of the day
and year first above written.
Borrowers: BRISTOL HOTEL ASSET COMPANY, a
Delaware corporation
By:
----------------------------------
Name: Joel M. Eastman
Title: Vice President
BHAC CANADA INC., an Ontario corporation
By:
----------------------------------
Name: Joel M. Eastman
Title: Vice President
<PAGE> 177
ADMINISTRATIVE AGENT: NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
By:
-------------------------------------
Name: Christopher M. Tierney
Title: Vice President
CO-AGENT: BANKERS TRUST COMPANY, a New York banking
corporation
By:
-------------------------------------
Name: Garrett Thelander
Title: Vice President
<PAGE> 178
CO-LENDER: NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation
By:
------------------------------------
Name: Christopher M. Tierney
Title: Vice President
CO-LENDER: BANKERS TRUST COMPANY, a New York
banking corporation
By:
------------------------------------
Name: Garrett Thelander
Title: Vice President
<PAGE> 179
SCHEDULE I
INTENTIONALLY DELETED
<PAGE> 180
SCHEDULE II
INTENTIONALLY DELETED
<PAGE> 181
SCHEDULE III
RENT ROLL
(See Attached)
<PAGE> 182
SCHEDULE IV
ALLOCATED LOAN AMOUNT
<PAGE> 183
SCHEDULE V
FRANCHISE AGREEMENTS
(See Attached)
<PAGE> 184
SCHEDULE VI
LIQUOR LICENSES
(See Attached)
<PAGE> 185
SCHEDULE VII
ASSETS
(See Attached)
<PAGE> 186
SCHEDULE VIII
Intentionally Deleted
<PAGE> 187
SCHEDULE IX
Intentionally Deleted
<PAGE> 188
SCHEDULE X
INTENTIONALLY DELETED
<PAGE> 189
SCHEDULE XI
IP LICENSE AGREEMENTS
(See Attached)
<PAGE> 190
SCHEDULE XII
INTELLECTUAL PROPERTY
(See Attached)
<PAGE> 191
SCHEDULE XIII
SUBSIDIARIES
(See Attached)
<PAGE> 192
SCHEDULE XIV
TENANT LEASES
(See Attached)
<PAGE> 193
SCHEDULE XV
EXISTING DEBT
(See Attached)
<PAGE> 194
SCHEDULE XVI
TAXES
(See Attached)
<PAGE> 195
SCHEDULE XVII
MORTGAGE CAPS
(See Attached)
<PAGE> 196
SCHEDULE XVIII
LENDER'S SHARE
<TABLE>
<CAPTION>
LENDER DOMESTIC CANADIAN MAXIMUM COMMITMENT
<S> <C> <C> <C> <C>
1. Nomura Asset
Capital Corporation
$326,725,615.40 $28,274,384.60 $355,000,000.00
2. Bankers Trust Company
$92,035,384.60 $7,964,615.40 $100,000,000.00
</TABLE>
Notwithstanding the above, with respect to (x) the first $455,000,000 of the
principal balance outstanding under the Resized Loans, Lenders Commitments
shall be the same as above and (y) all amounts in excess of $455,000,000
outstanding under the Resized Loans, Bankers Trust Company's Commitment shall
be the same as above and Nomura Asset Capital Corporation's Commitment shall be
unlimited.
<PAGE> 197
SCHEDULE XIX
PRINCIPAL PLACES OF BUSINESS
(See Attached)
<PAGE> 198
SCHEDULE XX
Intentionally Deleted
<PAGE> 199
SCHEDULE XXI
PRIOR ASSIGNMENTS OF COLLATERAL
(See Attached)
<PAGE> 200
SCHEDULE XXII
ASSETS LOCATED IN FLOOD ZONES
(See Attached)
<PAGE> 201
SCHEDULE XXIII
LEASING REQUIREMENTS
To be agreed upon by Administrative Agent and Borrowers subsequent to the
Closing Date.
<PAGE> 202
SCHEDULE XXIV
CASUALTIES
(See Attached)
<PAGE> 203
SCHEDULE XXV
INSURANCE VARIATIONS
(See Attached)
<PAGE> 204
SCHEDULE XXVI
SPECIAL ASSETS
(See Attached)
<PAGE> 205
SCHEDULE XXVII
TAX AND INSURANCE AMOUNTS
(To be delivered post-closing)
<PAGE> 206
EXHIBIT A
PAYMENT DIRECTION LETTER
[BORROWERS]
VIA CERTIFIED MAIL - RETURN RECEIPT REQUESTED
[TENANT]
[ADDRESS 1]
[ADDRESS 2]
[ADDRESS 3]
re:
Ladies and Gentlemen:
This is to advise you that the hotel has been refinanced with Nomura
Asset Capital Corporation. In order to implement Lender's Cash Management
System:
1. From and after the date hereof, all rent and other sums and
charges due by you to us or otherwise payable to the landlord under your lease
(including, without limitation, any security deposit) or as a result of your
occupancy at ___________________ _________________ (whether due in the past,
present or future) should be made payable to Clearing Account A for Nomura
Asset Capital Corporation as Mortgagee of _______________________________ and
sent to the clearing bank, _______________________________, at . You
should continue to send all rent and other sums and charges as directed by this
letter until you receive other written instructions from our lender, Nomura
Asset Capital Corporation.
2. _________________________________, the managing agent for your
leased space, will continue to manage your leased space.
Should you have any questions concerning this letter, please do not
hesitate to contact the managing agent.
Very truly yours,
Bristol Lodging Company
By:
--------------------------------
Name: Joel M. Eastman
Title: Vice President
NOMURA ASSET CAPITAL CORPORATION
By:
-----------------------------
Name:
Title:
<PAGE> 207
EXHIBIT B
CREDIT CARD PAYOR PAYMENT DIRECTION LETTER
BRISTOL HOTEL ASSET COMPANY
VIA CERTIFIED MAIL
RETURN RECEIPT REQUESTED
[CREDIT CARD PAYOR]
[ADDRESS 1]
Dear sir:
This is to advise you that from and after the date hereof, all sums,
charges and receivables payable by you to us, on account of that certain
[INSERT DESCRIPTION OF AGREEMENT BY WHICH PAYMENTS ARE MADE] should be payable
to "Nomura Asset Capital Corporation, as Administrative Agent" at the following
account:
Name: Nomura Asset Capital Corporation as
Administrative Agent for the lenders to
Bristol Hotel Asset Company
Account #: __________________________________
ABA #: __________________________________
By countersigning below you agree to continue to send all sums and other sums
and charges as directed by this letter until you receive other written
instructions from Nomura Asset Capital Corporation.
Should you have any questions concerning this letter, please do not
hesitate to contact [________].
Very truly yours,
BRISTOL HOTEL ASSET COMPANY, a Delaware
corporation
By:
-----------------------------------
Name:
Title:
[CREDIT CARD PAYOR]
By:
-----------------
Name:
Title:
<PAGE> 208
EXHIBIT C
RESIZED LOAN AGREEMENT
The Resized Loan Agreement shall be in a form and substance substantially
similar to the Loan Agreement executed in connection with the $145,000,000
Loan, with such modifications required to account for the terms of the Resized
Loan as provided in the Commitment Letter referred to in Section 11.23 of the
Loan Agreement and as otherwise provided in the Loan Agreement and the
circumstances under which the Resized Loan will be made (including but not
limited to the fact that (i) the Resized Loan Agreement will be amended and
restated and, if required, assumed by Resized Borrowers and (ii) the Resized
Loans Collateral may consist of Canadian Assets and that such Canadian Assets
will not serve as collateral for the Domestic Resized Loan).
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") by and between Bristol
Hotel Company, a Delaware corporation (the "Company"), and J. Peter Kline (the
"Executive") is entered into on April ___, 1997 but effective as of the
effective time of the merger (the "Merger") contemplated under that certain
Agreement and Plan of Merger dated as of December 15, 1996 among Holiday
Corporation, Holiday Inns, Inc. and the Company (the "Commencement Date").
In consideration of the promises and mutual covenants herein contained,
the parties hereto agree as follows:
1. Employment. The Company will continue to employ the Executive, and
the Executive hereby accepts such continued employment, on the terms and
conditions set forth herein.
2. Term. The term of this Agreement (the "Term") will commence as of
the Commencement Date and, subject to Section 9, will expire on the day before
the fourth anniversary of the Commencement Date; provided, however, that
commencing on the fourth anniversary of the Commencement Date and each
anniversary thereafter the Term will automatically be extended for successive
one-year periods unless either party gives written notice to the other, not less
than 90 calendar days prior to the otherwise scheduled expiration of the Term,
that it or he does not want the Term to so extend.
3. Title, Duties, Responsibilities and Authority of the Executive.
During the Term, and in accordance with the Company's Bylaws, the Executive will
be the President and Chief Executive Officer of the Company and will have such
duties and responsibilities as may from time to time be assigned to him by the
Board of Directors of the Company (the "Board") consistent with such position.
In addition, during the Term, the Executive will have the authority to recruit,
hire or terminate any employee of the Company, and no other employee of the
Company shall have such authority other than John A. Beckert while the Executive
and Mr. Beckert are both employees of the Company. Subject to Section 9, the
Board may not reduce the Executive's title or the scope of the Executive's
duties, responsibilities or authority at any time during the Term. The Executive
also will serve, without additional compensation, as an officer or director, or
both, of any subsidiary or affiliate of the Company or any other entity in which
the Company has an equity interest if elected to any such position in accordance
with the constituent documents of and laws applicable to such entity,
<PAGE> 2
provided, however, that the Company will indemnify the Executive from
liabilities in connection with serving in any such capacity to the same extent
as the Executive is indemnified in the performance of his duties with the
Company. The Executive will devote substantially all of his time during normal
business hours and his best efforts, full attention and energies to the business
and affairs of the Company (excluding reasonable amounts of time devoted to
charitable purposes, passive investments and directorships and periods in which
he is physically or mentally ill, injured or otherwise disabled).
4. Cash Compensation. (a) Salary. The Executive's base salary will be
$450,000 per year during the Term, payable monthly or otherwise as in effect for
other executive officers of the Company from time to time. As of January 1 of
each calendar year during the Term, such base salary will be reviewed and may be
increased (but not decreased), as determined by the Compensation Committee of
the Board (the "Compensation Committee") in its sole discretion.
(b) Bonus. For each fiscal year of the Company during the
Term, the Executive will be eligible to receive an annual performance bonus in
an amount not less than 50% of the Executive's base salary in effect on the last
day of such year. The actual amount of such bonus, if any, will be determined
based upon the Executive's achievement of performance objectives established by
the Compensation Committee pursuant to this Agreement or pursuant to any bonus
plan in effect for other executive officers of the Company from time to time.
Such bonus, if any, will be payable in cash at such time as bonuses are payable
to other executive officers of the Company.
(c) Special Merger Payment. As of the Commencement Date, the
Executive will receive a one-time special payment in connection with the Merger.
The amount of such payment will equal the amount of additional base salary that
the Executive would have received during the calendar year including the
Commencement Date if the base salary specified in Section 4(a) had become
effective on January 1 of such year. Such payment will be paid in cash as soon
as practicable following the Commencement Date.
5. Options. The Company has previously granted the Executive
non-qualified options to purchase shares of Common Stock of the Company pursuant
to the Company's 1995 Equity Incentive Plan (the "Equity Incentive Plan"). The
Executive will not be eligible to participate in any awards of options that are
made under the Equity Incentive Plan in connection with the Merger, but will be
eligible to participate in any subsequent awards of options or other equity
rights that are made under the Equity Incentive Plan during the Term, at such
levels and on such terms as may be determined by the Compensation Committee.
- 2-
<PAGE> 3
6. Benefits. (a) Participation in Plans. During the Term, the Executive
will be entitled to participate in all retirement and welfare plans and programs
of the Company in which executive officers of the Company participate. The
Executive's rights under such plans and programs will be governed by the terms
thereof and will not be enlarged hereunder or otherwise affected hereby.
(b) Amendment or Termination. The Executive acknowledges that
the Company, in its sole discretion, may amend or terminate any such plan at any
time.
7. Expenses. The Company will pay or reimburse the Executive for
reasonable and necessary expenses incurred by the Executive in connection with
his duties on behalf of the Company in accordance with the general policies of
the Company in effect from time to time for other executive officers of the
Company.
8. Place of Performance. During the Term, the principal executive
offices of the Company will be located in Dallas, Texas, and the Executive will
be based at such offices except for travel required for Company business.
9. Termination. (a) Termination of Employment. The Executive's
employment hereunder may be terminated by the Company for any reason, or without
reason, by written notice as provided in Section 14. Subject to the following
provisions of this Section 9 and any benefit continuation requirements of
applicable law, in the event that the Executive's employment hereunder is
terminated during the Term by the Company or the Executive, the compensation and
benefit obligations of the Company under this Agreement will cease as of the
effective date of such termination, except (i) for any compensation and benefits
earned or accrued but unpaid through such date and (ii) as otherwise provided in
this Section 9.
(b) Termination by the Company Without Cause. If the
Executive's employment hereunder is terminated during the Term by the Company
other than for Cause or as a result of the Executive's death or Disability, the
Company will pay the amount and make available the benefits specified below:
(i) Cash Payment. The Executive will receive two times the
average of his total cash compensation for the preceding two
calendar years. Such payment will be made in a single lump sum within
15 calendar days after the effective date of the Executive's
termination of employment with the Company (the "Termination Date").
(ii) Welfare Benefits. During the two-year period beginning
on the Termination Date (the "Two-Year Severance Period"),
the Company will continue to provide the Executive with any welfare
benefits that he was receiving from the Company immediately prior to
the Termination Date
- 3 -
<PAGE> 4
("Welfare Benefits"). Such Welfare Benefits will be provided to the
Executive on the same terms and conditions (including employee
contributions toward the cost of benefits or coverage) under which the
Executive was entitled to participate immediately prior to the
Termination Date. Such Welfare Benefits may be modified or terminated
at any time by the Company following the Termination Date, provided
that such change is applicable to senior executives of the Company
generally. Notwithstanding the foregoing, the Company's obligation to
provide Welfare Benefits pursuant to this Section 9(b)(ii) will
terminate when the Executive commences any other employment with any
third party during the Two-Year Severance Period.
(iii) Options and Other Equity Rights. On the
Termination Date, all options and other equity rights granted to the
Executive pursuant to Section 5 hereof which have not vested or become
exercisable, as applicable, will vest and become exercisable.
(c) Termination for Cause. If the Executive's employment
hereunder is terminated during the Term by the Company for Cause, the Executive
will be entitled to no salary or Welfare Benefits (other than as required by
law) which might otherwise accrue after the Termination Date.
(d) Release. Acceptance by the Executive of any amounts
pursuant to this Section 9 will constitute a full and complete release by the
Executive of any and all claims the Executive has or may have against the
Company, its officers, directors and affiliates, including without limitation
claims he might have relating to the Executive's cessation of employment with
the Company; provided, however, that there will be excluded from the scope of
such release claims that the Executive has or may have against the Company for
reimbursement of ordinary and necessary business expenses incurred by him during
his course of employment consistent with this Agreement.
(e) Internal Revenue Code Limitations. Notwithstanding
anything contained in this Agreement to the contrary, if the "present value" (as
determined under Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor provision thereto) of amounts and benefits
otherwise payable to the Executive pursuant to this Agreement, when added to the
"present value" (as determined under Section 280G of the Code or any successor
provision thereto) of any other "parachute payments" (as that term is defined in
section 280G of the Code or any successor provision thereto) from the Company,
would exceed an amount (the "299% Amount") equal to 299% of the Executive's
"base amount" (as that term is defined in Section 280G of the Code (without
regard to Section 280G(b)(2)(A)(ii) thereof) or any successor provision
thereto), the amounts and benefits payable under this Agreement will be reduced
to the minimum extent necessary so that the aggregate
- 4 -
<PAGE> 5
present value determined in the previous clause does not exceed the 299% Amount;
provided, however, that the foregoing reduction will be made only if and to the
extent that such reduction would result in an increase in the aggregate amounts
and benefits to be provided, determined on an after-tax basis (taking into
account the excise tax imposed pursuant to Section 4999 of the Code, or any
successor provision thereto, any tax imposed by any comparable provision of
state law, and any applicable federal, state and local income taxes). The
determination of whether any reduction in the amounts or benefits payable under
this Agreement or otherwise is required pursuant to the preceding sentence will
be made, if requested by the Executive or the Company, by such tax counsel as
may be selected by the Company's independent accountants and reasonably
acceptable to the Executive. The fact that the Executive has his right to
payments under this Agreement reduced as a result of the existence of the
limitations contained in this Section 9(e) will not of itself limit or otherwise
affect any rights of the Executive arising other than pursuant to this
Agreement.
(f) Definition of "Cause". For purposes of this Agreement, the
term "Cause" means:
(i) the willful and continued failure by the
Executive substantially to perform his duties hereunder (other than any
such failure resulting from the Executive's incapacity due to physical
or mental illness), after written notice requesting substantial
performance is delivered to the Executive by the Board, which notice
identifies in reasonable detail the manner in which the Board believes
the Executive has not substantially performed his duties;
(ii) an act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with the
Company; or
(iii) a material breach of Section 10.
(g) Definition of "Disability". For the purposes of this
Agreement, the term "Disability" means the Executive's incapacity due to
physical or mental illness substantially to perform his duties on a full-time
basis for six consecutive months and within 30 calendar days after a notice of
termination is thereafter given by the Company the Executive shall not have
returned to the full-time performance of the Executive's duties.
10. Confidentiality and No Hire Agreement. (a) Confidentiality. The
Executive acknowledges that, in the course of his employment by the Company, he
has access to and has become aware of and informed of, and will continue to have
access to and become aware of and informed of, confidential and/or proprietary
information which is a competitive asset of the Company, including without
limitation (i) the terms of any agreements between the Company and third
parties, (ii) marketing strategies
- 5 -
<PAGE> 6
and marketing methods, (iii) development ideas and strategies, (iv) personnel
training and development programs, (v) financial results, (vi) strategic plans
and demographic analyses, (vii) proprietary computer and systems software, and
(viii) any non-public information concerning the Company, its employees,
suppliers or customers (collectively, "Confidential Information"). The Executive
will keep all Confidential Information in strict confidence during the Term and
thereafter and will never directly or indirectly make known, divulge, reveal,
furnish, make available or use any Confidential Information (except in the
course of his regular authorized duties on behalf of the Company). The
Executive's obligations of confidentiality hereunder will survive termination of
his employment at the Company regardless of any actual or alleged breach by the
Company of this Agreement, until and unless any such Confidential Information
becomes, through no fault of the Executive, generally known to the public or the
Executive is required by law to make disclosure (after giving the Company notice
and an opportunity to contest such requirement). The Executive's obligations
under this Section 10 are in addition to, and not in limitation or preemption
of, all other obligations of confidentiality which the Executive may have to the
Company under general legal or equitable principles.
(b) No Hire Agreement. For a period of two years from the
Termination Date, the Executive will not directly or indirectly induce or
attempt to induce any employee of the Company to leave the employment of the
Company or to accept any other employment or position unless (in each case prior
to such inducement or attempted inducement) such employee has been terminated as
an employee of the Company by the Company.
(c) Specific Performance. The Executive acknowledges that a
violation of any of the provisions of this Section 10 could cause irreparable
harm to the Company, and that the Company's remedy at law for any such violation
could be inadequate. Accordingly, in addition to any other relief afforded by
law or this Agreement, including damages sustained by a breach of this
Agreement, and without any necessity or proof of actual damages, the Company
will have the right to enforce this Agreement by specific remedies, which will
include, among other things, temporary and permanent injunctions, it being the
understanding of the parties hereto that damages, the forfeitures described
above and injunctions are proper modes of relief and are not to be considered as
alternative remedies.
11. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the subject matter hereof and contains all of the covenants and agreements
between the parties with respect to such subject matter. Each party to this
Agreement acknowledges that, except as aforesaid, no representations,
inducements, promises or other agreements, orally or otherwise, have been made
by any party, or anyone
- 6 -
<PAGE> 7
acting on behalf of any party, pertaining to the subject matter hereof, which
are not embodied herein, and that no other agreement, statement, or promise
pertaining to the subject matter hereof that is not contained in this Agreement
will be valid or binding on either party.
12. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state or other taxes as the Company is
required to withhold pursuant to any law or government regulation or ruling.
13. Successors and Binding Agreement. This Agreement will be binding
upon and inure to the benefit of and be enforceable by (i) the Company and any
successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation, reorganization or otherwise
(and such successor will thereafter be deemed the "Company" for the purposes of
this Agreement), but will not otherwise be assignable, transferable or delegable
by the Company and (ii) the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees and legatees. This
Agreement is personal in nature and neither of the parties hereto may, without
the consent of the other, assign, transfer or delegate this Agreement or any
rights or obligations hereunder except as expressly provided herein. Without
limiting the generality or effect of the foregoing, the Executive's right to
receive payments hereunder will not be assignable, transferable or delegable,
whether by pledge, creation of a security interest, or otherwise, other than by
a transfer by Executive's will or by the laws of descent and distribution and,
in the event of any attempted assignment or transfer contrary to this Section
13, the Company will have no liability to pay any amount so attempted to be
assigned, transferred or delegated.
14. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express or UPS,
addressed to the Company (to the attention of the Chairman of the Board of the
Company) at its principal executive office and to the Executive at his principal
residence, or to such other address as any party may have furnished to the other
in writing and in accordance herewith, except that notices of changes of address
shall be effective only upon receipt.
15. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed
- 7 -
<PAGE> 8
by and construed in accordance with the substantive laws of the State of Texas,
without giving effect to the principles of conflict of laws of such State.
16. Validity. If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
17. Survival of Provisions. Notwithstanding any other provision of this
Agreement, the parties' respective rights and obligations under Sections 9 and
10 will survive any termination or expiration of this Agreement or the
termination of the Executive's employment for any reason whatsoever.
18. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. Unless otherwise noted, references to
"Sections" are to sections of this Agreement. The captions used in this
Agreement are designed for convenient reference only and are not to be used for
the purpose of interpreting any provision of this Agreement.
19. Additional Considerations. In connection with the annual review of
the Executive's base salary, bonus and other compensation under this Agreement,
the Compensation Committee may consider without limitation the compensation of
executive officers at similarly situated companies performing comparable
functions as the Executive. In addition, so long as Mr. Beckert is Chief
Operating Officer of the Company, the Compensation Committee may consider
without limitation the aggregate compensation of executives at similarly
situated companies performing comparable functions as the Executive and Mr.
Beckert as compared to the aggregate compensation of the Executive and Mr.
Beckert.
20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, the parties hereof have executed this Agreement as
of the day and year first written above.
BRISTOL HOTEL COMPANY
By: /s/ Donald J.McNamara
--------------------------------
Donald J. McNamara,
Chairman of the Board
EXECUTIVE
/s/ J. Peter Kline
-----------------------------------
J. Peter Kline
- 9 -
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") by and between Bristol
Hotel Company, a Delaware corporation (the "Company"), and John A. Beckert (the
"Executive") is entered into on April ___, 1997 but effective as of the
effective time of the merger (the "Merger") contemplated under that certain
Agreement and Plan of Merger dated as of December 15, 1996 among Holiday
Corporation, Holiday Inns, Inc. and the Company (the "Commencement Date").
In consideration of the promises and mutual covenants herein contained,
the parties hereto agree as follows:
1. Employment. The Company will continue to employ the Executive,
and the Executive hereby accepts such continued employment, on the terms and
conditions set forth herein.
2. Term. The term of this Agreement (the "Term") will commence as
of the Commencement Date and, subject to Section 9, will expire on the day
before the fourth anniversary of the Commencement Date; provided, however, that
commencing on the fourth anniversary of the Commencement Date and each
anniversary thereafter the Term will automatically be extended for successive
one-year periods unless either party gives written notice to the other, not
less than 90 calendar days prior to the otherwise scheduled expiration of the
Term, that it or he does not want the Term to so extend.
3. Title, Duties, Responsibilities and Authority of the Executive.
During the Term, and in accordance with the Company's Bylaws, the Executive
will be the Chief Operating Officer and Executive Vice President of the Company
and will have such duties and responsibilities as may from time to time be
assigned to him by the Board of Directors of the Company (the "Board")
consistent with such position. In addition, during the Term, the Executive
will have the authority to recruit, hire or terminate any employee of the
Company, and no other employee of the Company shall have such authority other
than John A. Beckert while the Executive and Mr. Beckert are both employees of
the Company. Subject to Section 9, the Board may not reduce the Executive's
title or the scope of the Executive's duties, responsibilities or authority at
any time during the Term. The Executive also will serve, without additional
compensation, as an officer or director, or both, of any subsidiary or
affiliate of the Company or any other entity in which the Company has an equity
interest if elected to any such position in accordance with the constituent
documents of and laws applicable to such entity, provided, however, that the
Company will indemnify the Executive
<PAGE> 2
from liabilities in connection with serving in any such capacity to the same
extent as the Executive is indemnified in the performance of his duties with
the Company. The Executive will devote substantially all of his time during
normal business hours and his best efforts, full attention and energies to the
business and affairs of the Company (excluding reasonable amounts of time
devoted to charitable purposes, passive investments and directorships and
periods in which he is physically or mentally ill, injured or otherwise
disabled).
4. Cash Compensation. (a) Salary. The Executive's base salary will
be $450,000 per year during the Term, payable monthly or otherwise as in effect
for other executive officers of the Company from time to time. As of January 1
of each calendar year during the Term, such base salary will be reviewed and
may be increased (but not decreased), as determined by the Compensation
Committee of the Board (the "Compensation Committee") in its sole discretion.
(b) Bonus. For each fiscal year of the Company during the
Term, the Executive will be eligible to receive an annual performance bonus in
an amount not less than 50% of the Executive's base salary in effect on the
last day of such year. The actual amount of such bonus, if any, will be
determined based upon the Executive's achievement of performance objectives
established by the Compensation Committee pursuant to this Agreement or
pursuant to any bonus plan in effect for other executive officers of the
Company from time to time. Such bonus, if any, will be payable in cash at such
time as bonuses are payable to other executive officers of the Company.
(c) Special Merger Payment. As of the Commencement Date, the
Executive will receive a one-time special payment in connection with the
Merger. The amount of such payment will equal the amount of additional base
salary that the Executive would have received during the calendar year
including the Commencement Date if the base salary specified in Section 4(a)
had become effective on January 1 of such year. Such payment will be paid in
cash as soon as practicable following the Commencement Date.
5. Options. The Company has previously granted the Executive non-
qualified options to purchase shares of Common Stock of the Company pursuant to
the Company's 1995 Equity Incentive Plan (the "Equity Incentive Plan"). The
Executive will not be eligible to participate in any awards of options that are
made under the Equity Incentive Plan in connection with the Merger, but will be
eligible to participate in any subsequent awards of options or other equity
rights that are made under the Equity Incentive Plan during the Term, at such
levels and on such terms as may be determined by the Compensation Committee.
6. Benefits. (a) Participation in Plans. During the Term, the
Executive will be entitled to participate in all
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retirement and welfare plans and programs of the Company in which executive
officers of the Company participate. The Executive's rights under such plans
and programs will be governed by the terms thereof and will not be enlarged
hereunder or otherwise affected hereby.
(b) Amendment or Termination. The Executive acknowledges that
the Company, in its sole discretion, may amend or terminate any such plan at
any time.
7. Expenses. The Company will pay or reimburse the Executive for
reasonable and necessary expenses incurred by the Executive in connection with
his duties on behalf of the Company in accordance with the general policies of
the Company in effect from time to time for other executive officers of the
Company.
8. Place of Performance. During the Term, the principal executive
offices of the Company will be located in Dallas, Texas, and the Executive will
be based at such offices except for travel required for Company business.
9. Termination. (a) Termination of Employment. The Executive's
employment hereunder may be terminated by the Company for any reason, or
without reason, by written notice as provided in Section 14. Subject to the
following provisions of this Section 9 and any benefit continuation
requirements of applicable law, in the event that the Executive's employment
hereunder is terminated during the Term by the Company or the Executive, the
compensation and benefit obligations of the Company under this Agreement will
cease as of the effective date of such termination, except (i) for any
compensation and benefits earned or accrued but unpaid through such date and
(ii) as otherwise provided in this Section 9.
(b) Termination by the Company Without Cause. If the
Executive's employment hereunder is terminated during the Term by the Company
other than for Cause or as a result of the Executive's death or Disability, the
Company will pay the amount and make available the benefits specified below:
(i) Cash Payment. The Executive will receive two times
the average of his total cash compensation for the preceding two
calendar years. Such payment will be made in a single lump sum within
15 calendar days after the effective date of the Executive's termination
of employment with the Company (the "Termination Date").
(ii) Welfare Benefits. During the two-year period
beginning on the Termination Date (the "Two-Year Severance Period"), the
Company will continue to provide the Executive with any welfare benefits
that he was receiving from the Company immediately prior to the
Termination Date ("Welfare Benefits"). Such Welfare Benefits will be
provided to the Executive on the same terms and conditions
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<PAGE> 4
(including employee contributions toward the cost of benefits or
coverage) under which the Executive was entitled to participate
immediately prior to the Termination Date. Such Welfare Benefits may be
modified or terminated at any time by the Company following the
Termination Date, provided that such change is applicable to senior
executives of the Company generally. Notwithstanding the foregoing, the
Company's obligation to provide Welfare Benefits pursuant to this
Section 9(b)(ii) will terminate when the Executive commences any other
employment with any third party during the Two-Year Severance Period.
(iii) Options and Other Equity Rights. On the
Termination Date, all options and other equity rights granted to the
Executive pursuant to Section 5 hereof which have not vested or become
exercisable, as applicable, will vest and become exercisable.
(c) Termination for Cause. If the Executive's employment
hereunder is terminated during the Term by the Company for Cause, the Executive
will be entitled to no salary or Welfare Benefits (other than as required by
law) which might otherwise accrue after the Termination Date.
(d) Release. Acceptance by the Executive of any amounts
pursuant to this Section 9 will constitute a full and complete release by the
Executive of any and all claims the Executive has or may have against the
Company, its officers, directors and affiliates, including without limitation
claims he might have relating to the Executive's cessation of employment with
the Company; provided, however, that there will be excluded from the scope of
such release claims that the Executive has or may have against the Company for
reimbursement of ordinary and necessary business expenses incurred by him
during his course of employment consistent with this Agreement.
(e) Internal Revenue Code Limitations. Notwithstanding
anything contained in this Agreement to the contrary, if the "present value"
(as determined under Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), or any successor provision thereto) of amounts and
benefits otherwise payable to the Executive pursuant to this Agreement, when
added to the "present value" (as determined under Section 280G of the Code or
any successor provision thereto) of any other "parachute payments" (as that
term is defined in section 280G of the Code or any successor provision thereto)
from the Company, would exceed an amount (the "299% Amount") equal to 299% of
the Executive's "base amount" (as that term is defined in Section 280G of the
Code (without regard to Section 280G(b)(2)(A)(ii) thereof) or any successor
provision thereto), the amounts and benefits payable under this Agreement will
be reduced to the minimum extent necessary so that the aggregate present value
determined in the previous clause does not exceed the 299% Amount; provided,
however, that the foregoing reduction
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<PAGE> 5
will be made only if and to the extent that such reduction would result in an
increase in the aggregate amounts and benefits to be provided, determined on an
after-tax basis (taking into account the excise tax imposed pursuant to Section
4999 of the Code, or any successor provision thereto, any tax imposed by any
comparable provision of state law, and any applicable federal, state and local
income taxes). The determination of whether any reduction in the amounts or
benefits payable under this Agreement or otherwise is required pursuant to the
preceding sentence will be made, if requested by the Executive or the Company,
by such tax counsel as may be selected by the Company's independent accountants
and reasonably acceptable to the Executive. The fact that the Executive has
his right to payments under this Agreement reduced as a result of the existence
of the limitations contained in this Section 9(e) will not of itself limit or
otherwise affect any rights of the Executive arising other than pursuant to
this Agreement.
(f) Definition of "Cause". For purposes of this Agreement,
the term "Cause" means:
(i) the willful and continued failure by the Executive
substantially to perform his duties hereunder (other than any such
failure resulting from the Executive's incapacity due to physical or
mental illness), after written notice requesting substantial performance
is delivered to the Executive by the Board, which notice identifies in
reasonable detail the manner in which the Board believes the Executive
has not substantially performed his duties;
(ii) an act of fraud, embezzlement or theft in connection
with his duties or in the course of his employment with the Company; or
(iii) a material breach of Section 10.
(g) Definition of "Disability". For the purposes of this
Agreement, the term "Disability" means the Executive's incapacity due to
physical or mental illness substantially to perform his duties on a full-time
basis for six consecutive months and within 30 calendar days after a notice of
termination is thereafter given by the Company the Executive shall not have
returned to the full-time performance of the Executive's duties.
10. Confidentiality and No Hire Agreement. (a) Confidentiality. The
Executive acknowledges that, in the course of his employment by the Company, he
has access to and has become aware of and informed of, and will continue to
have access to and become aware of and informed of, confidential and/or
proprietary information which is a competitive asset of the Company, including
without limitation (i) the terms of any agreements between the Company and
third parties, (ii) marketing strategies and marketing methods, (iii)
development ideas and strategies, (iv) personnel training and development
programs, (v) financial
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<PAGE> 6
results, (vi) strategic plans and demographic analyses, (vii) proprietary
computer and systems software, and (viii) any non-public information concerning
the Company, its employees, suppliers or customers (collectively, "Confidential
Information"). The Executive will keep all Confidential Information in strict
confidence during the Term and thereafter and will never directly or indirectly
make known, divulge, reveal, furnish, make available or use any Confidential
Information (except in the course of his regular authorized duties on behalf of
the Company). The Executive's obligations of confidentiality hereunder will
survive termination of his employment at the Company regardless of any actual
or alleged breach by the Company of this Agreement, until and unless any such
Confidential Information becomes, through no fault of the Executive, generally
known to the public or the Executive is required by law to make disclosure
(after giving the Company notice and an opportunity to contest such
requirement). The Executive's obligations under this Section 10 are in
addition to, and not in limitation or preemption of, all other obligations of
confidentiality which the Executive may have to the Company under general legal
or equitable principles.
(b) No Hire Agreement. For a period of two years from the
Termination Date, the Executive will not directly or indirectly induce or
attempt to induce any employee of the Company to leave the employment of the
Company or to accept any other employment or position unless (in each case
prior to such inducement or attempted inducement) such employee has been
terminated as an employee of the Company by the Company.
(c) Specific Performance. The Executive acknowledges that a
violation of any of the provisions of this Section 10 could cause irreparable
harm to the Company, and that the Company's remedy at law for any such
violation could be inadequate. Accordingly, in addition to any other relief
afforded by law or this Agreement, including damages sustained by a breach of
this Agreement, and without any necessity or proof of actual damages, the
Company will have the right to enforce this Agreement by specific remedies,
which will include, among other things, temporary and permanent injunctions, it
being the understanding of the parties hereto that damages, the forfeitures
described above and injunctions are proper modes of relief and are not to be
considered as alternative remedies.
11. Entire Agreement. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to the subject matter hereof and contains all of the covenants and agreements
between the parties with respect to such subject matter. Each party to this
Agreement acknowledges that, except as aforesaid, no representations,
inducements, promises or other agreements, orally or otherwise, have been made
by any party, or anyone acting on behalf of any party, pertaining to the
subject matter hereof, which are not embodied herein, and that no other
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<PAGE> 7
agreement, statement, or promise pertaining to the subject matter hereof that
is not contained in this Agreement will be valid or binding on either party.
12. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state or other taxes as the Company
is required to withhold pursuant to any law or government regulation or ruling.
13. Successors and Binding Agreement. This Agreement will be binding
upon and inure to the benefit of and be enforceable by (i) the Company and any
successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business or assets of
the Company whether by purchase, merger, consolidation, reorganization or
otherwise (and such successor will thereafter be deemed the "Company" for the
purposes of this Agreement), but will not otherwise be assignable, transferable
or delegable by the Company and (ii) the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees and
legatees. This Agreement is personal in nature and neither of the parties
hereto may, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided
herein. Without limiting the generality or effect of the foregoing, the
Executive's right to receive payments hereunder will not be assignable,
transferable or delegable, whether by pledge, creation of a security interest,
or otherwise, other than by a transfer by Executive's will or by the laws of
descent and distribution and, in the event of any attempted assignment or
transfer contrary to this Section 13, the Company will have no liability to pay
any amount so attempted to be assigned, transferred or delegated.
14. Notices. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to
have been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express or UPS, addressed to the Company (to the attention of the Chairman of
the Board of the Company) at its principal executive office and to the
Executive at his principal residence, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except that
notices of changes of address shall be effective only upon receipt.
15. Governing Law. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the
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<PAGE> 8
State of Texas, without giving effect to the principles of conflict of laws of
such State.
16. Validity. If any provision of this Agreement or the application
of any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
17. Survival of Provisions. Notwithstanding any other provision of
this Agreement, the parties' respective rights and obligations under Sections 9
and 10 will survive any termination or expiration of this Agreement or the
termination of the Executive's employment for any reason whatsoever.
18. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other
party will be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. Unless otherwise noted,
references to "Sections" are to sections of this Agreement. The captions used
in this Agreement are designed for convenient reference only and are not to be
used for the purpose of interpreting any provision of this Agreement.
19. Additional Considerations. In connection with the annual review of
the Executive's base salary, bonus and other compensation under this Agreement,
the Compensation Committee may consider without limitation the compensation of
executive officers at similarly situated companies performing comparable
functions as the Executive. In addition, so long as Mr. Kline is Chief
Executive Officer of the Company, the Compensation Committee may consider
without limitation the aggregate compensation of executives at similarly
situated companies performing comparable functions as the Executive and Mr.
Kline as compared to the aggregate compensation of the Executive and Mr. Kline.
20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereof have executed this Agreement as
of the day and year first written above.
BRISTOL HOTEL COMPANY
By: /s/ Donald J.McNamara
-------------------------------
Donald J. McNamara,
Chairman of the Board
EXECUTIVE
/s/ John A. Beckert
----------------------------------
John A. Beckert
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<PAGE> 1
EXHIBIT 10.14
EARNEST MONEY CONTRACT
BY AND BETWEEN
HIGHLAND MANOR, INC.
("SELLER")
AND
BRISTOL OMAHA HOTEL COMPANY
("PURCHASER")
HOLIDAY INN AND CONVENTION CENTER
GREAT BEND,
KANSAS
JANUARY _____, 1998
<PAGE> 2
EARNEST MONEY CONTRACT
STATE OF KANSAS Section
Section KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF BARTON Section
THIS EARNEST MONEY CONTRACT ("Contract") is executed by and between
HIGHLAND MANOR, INC., a Kansas corporation ("Seller") and BRISTOL OMAHA HOTEL
COMPANY, a Delaware corporation ("Purchaser").
RECITALS
A. By that certain Agreement and Plan of Merger ("Merger
Agreement"), of even date herewith, Bristol Hotel Company,
Purchaser and Omaha Hotel, Inc. ("Omaha") have agreed to
combine into a single company though the statutory merger of
Omaha with and into Purchaser ("Merger") with Purchaser
surviving the Merger.
B. Conditioned upon the Merger, Seller has entered into this
Contract to sell the Property ("defined below") to Purchaser,
subject to the terms and provisions of this Contract.
ARTICLE 1
SALE AND PURCHASE
Section 1.1 Property. Subject to the terms and provisions hereof,
the Seller agrees to sell to the Purchaser, and the Purchaser agrees to
purchase from the Seller the following (collectively, the "Property"):
(a) Real Property. The land situated in Barton County,
Kansas, more particularly described in Exhibit "A" to this Contract
(the "Land"), together with (i) the improvements situated on the Land
commonly known as "Holiday Inn - Great Bend" and all other structures,
fixtures, buildings, and improvements situated on the Land (such
buildings, structures, fixtures and improvements being herein called
the "Improvements"), (ii) any and all rights, titles, powers,
privileges, easements, licenses, rights-of-way and interests
appurtenant to the Land and the Improvements, (iii) all rights,
titles, powers, privileges, licenses, easements, rights-of- way and
interests, if any, of Seller, either at law or in equity, in
possession or in expectancy, in and to any real estate lying in the
streets, highways, roads, alleys, rights-of-way or sidewalks, open or
proposed, in front of, above, over, under, through or adjoining the
Land and in and to any strips or gores of real estate adjoining the
Land, and (iv) all rights, titles, power, privileges, interest,
licenses, easements and rights- of-way
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<PAGE> 3
appurtenant or incident to any of the foregoing (collectively, the
Land, Improvements and interests set forth in (ii) through (iv) above,
herein called the "Real Property"), excluding however that certain
adjacent office building known as 3007 10th Street, Great Bend,
Kansas, 67530;
(b) Personal Property. All furniture, fixtures,
inventory, equipment, appliances and other personal property of
whatever kind or character now or hereafter owned by Seller and
attached to, installed, located or used in, on or about, or in
connection with the operation use or enjoyment of, the Real Property,
including but not limited to furnishings, drapes, floor coverings,
televisions, clock-radios, saleable food and beverage inventory, food
service equipment and supplies, flatware, china, glassware, cooking
utensils and equipment, linens, cleaning equipment and supplies,
computers and software used in the operation of the Improvements,
heating, lighting, refrigeration, plumbing, ventilating, incinerating,
communication, electrical, dish washing, laundry, and air conditioning
equipment, window screens, storm windows, pylon and other signs,
recreational equipment, shuttle buses and other vehicles, service
vehicles, disposals, sprinklers, hoses, tools and lawn equipment (the
"Personal Property"), excluding however the personal property owned by
tenants, including Harper Construction, located on the Real Property
but not used in the operation of the Property;
(c) Miscellaneous Contracts. All of Seller's right,
title and interest in and to the Miscellaneous Contracts (hereinafter
defined); and
ARTICLE 2
CONSIDERATION FOR CONVEYANCE
Section 2.1 Purchase Price. The Purchase Price (herein so called)
for the Property is and shall be the sum of THREE MILLION FIVE HUNDRED THOUSAND
AND NO/100 DOLLARS ($3,500,000.00), which shall be due and payable at the
Closing (hereinafter defined).
Section 2.2 Allocation. Prior to Closing, Purchaser and Seller, if
requested by Purchaser, shall enter into an agreement mutually acceptable to
Seller and Purchaser allocating that portion of the Purchase Price which is
attributable to or paid for the various component parts of the Property.
Section 2.3 Independent Consideration. Contemporaneously with the
execution of this Contract, Purchaser shall deliver to Seller cash in the
amount of ONE HUNDRED AND NO/100 DOLLARS ($100.00) (the "Independent Contract
Consideration"), which amount the parties bargain for and agree to as
consideration for Seller's execution and delivery of this Contract. This
Independent Contract Consideration is in addition to and independent of any
other consideration or payment retained by Seller notwithstanding any other
provision of this Contract. This Independent Contract Consideration is
non-refundable and shall not be applied to the Purchase Price at Closing.
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<PAGE> 4
ARTICLE 3
EARNEST MONEY
As a part of the Earnest Money delivered in connection with the Merger
Agreement, the Purchaser hereby allocates the amount of TEN THOUSAND AND NO/100
DOLLARS ($10,000.00) ("Earnest Money") to be held by Stewart Title North Texas,
1700 Pacific Avenue, Suite 2900, Dallas, Texas 75201 (Phone: 214/220-2060; Fax
214/871-2855) (attention: Joyce Beal) (the "Title Company"). The Title Company
shall deposit the Earnest Money in an insured, interest bearing account. In
the event this Contract is closed, the Earnest Money shall be applied to the
Purchase Price at Closing. In the event this Contract is not closed, then the
Title Company shall disburse the Earnest Money in the manner provided for
elsewhere herein. The Title Company shall invest the Earnest Money in an
interest bearing account pursuant to the written direction of Purchaser. All
interest accruing on the Earnest Money shall not constitute additional Earnest
Money but rather shall be for the sole account of, and payable to Purchaser in
all events, free and clear of any and all claims by Seller.
ARTICLE 4
SURVEY AND TITLE POLICY
Section 4.1 Survey. Purchaser shall obtain a survey ("Survey")
to be made of the Real Property, dated subsequent to the date hereof, by a
licensed surveyor or Registered Professional Engineer acceptable to the Title
Company. A copy of such field notes and survey plat shall be furnished to the
Title Company and the Seller. The Survey shall be sufficient to permit the
Title Company to modify the standard printed exception in the Owner's Policy of
Title Insurance pertaining to discrepancies in area or boundary lines,
encroachments, overlapping of improvements or similar matters ("Survey
Exception"). The survey plats furnished to the Purchaser shall indicate and
the surveyor shall certify to Purchaser and Title Company the following, as
well as such other things as Purchaser shall reasonably request: (a) that the
corners of the Real Property have been properly monumented; (b) the perimeter
boundaries of the Real Property and any encroachments or protrusions thereon;
(c) the location of all improvements upon or bounding the Real Property and all
set-back lines, fences, evidence of abandoned fences, ponds, creeks, streams
and rivers; (d) the number of parking spaces in all parking areas on the
Property, including a designation of handicapped parking spaces; (e) the
location of all easements within or traversing the Real Property, if any; (f)
the location of all roadways, traversing, adjoining or bounding the Real
Property; (g) the number of square feet of the Land; and (h) that portion of
the Real Property, if any, situated within a flood hazardous or flood prone
area as designated by applicable governing authority.
Section 4.2 Title Commitment. Purchaser shall obtain a current
commitment (hereinafter called the "Title Commitment") for the issuance of an
ALTA Owner's Policy of Title Insurance (the "Title Policy") from the Title
Company, together with good legible copies of all documents constituting
conditions or exceptions to Seller's title as reflected in the Title Commitment
(the "Exception Documents").
Section 4.3 Title Policy. At Closing, the Seller shall furnish the
Purchaser, at the Seller's sole cost and expense, with an ALTA Owner's Policy
of Title Insurance issued by the Title Company
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<PAGE> 5
on the standard form in use in the State of State of Kansas, on the policy of a
title insurance company satisfactory to Purchaser, insuring good and
indefeasible marketable title to the Property in the Purchaser, subject only to
the such exceptions as are reasonably acceptable to Purchaser ("Permitted
Exceptions") and the standard printed exceptions, except: (a) the exception
relating to restrictions against the Property shall be deleted or endorsed by
the Title Company to specify such restrictions as may be included in the
Permitted Exceptions; (b) the exception relating to discrepancies, conflicts
or shortages in area or boundary lines, or any encroachment or any overlapping
of improvements which a survey might show shall be modified to delete such
exception, except as to shortages in area; (c) the exception relating to ad
valorem taxes shall except only to standby fees and taxes owing for the current
and subsequent years; (d) there shall be no general exception for visible and
apparent easements or roads and highways or similar items (with any specific
exception to be specifically referenced to and shown on the Survey and
identified by any applicable recording data); and (e) there shall be no
exception for parties in possession except for recorded leases and/or rights of
tenants in possession as tenants only under the terms of any unrecorded leases
or rental agreements (in which case, at Purchaser's option, the Title
Commitment shall list each such unrecorded lease).
ARTICLE 5
ADDITIONAL ITEMS TO BE FURNISHED TO PURCHASER BY SELLER
Section 5.1 Items. Within five (5) days after the effective date
hereof, Seller shall use its best efforts to furnish or make available to
Purchaser the items set forth on Schedule 4.2 (b) of the Merger Agreement,
which is incorporated herein by reference.
ARTICLE 6
INSPECTION AND AUDIT
Section 6.1 Access. The Seller agrees that prior to Closing, the
Purchaser and/or its authorized agents, representatives, accountants or
attorneys, shall be entitled to enter upon the Real Property and the
Improvements at all reasonable times, so long as such activities do not
unreasonably interfere with the Seller' use of the Property, for the purpose of
making such tests and inspections as Purchaser may, in its sole discretion,
require including but not limited to engineering, structural and environmental
studies. Purchaser agrees to use reasonable efforts to notify Seller by
telephone prior to entering upon the Property; provided, however, failure to
provide such notice shall not be a default hereunder. Furthermore, Seller
agrees to make available for inspection or copying to the Purchaser, or to its
duly authorized agents, representatives, accountants or attorneys, all
applicable books and records relating to the Property and the operation and
maintenance thereof for audit by Purchaser. Such books and records may be
examined at all reasonable times. In connection with such tests, inspections
and audit taking place at the Property, Seller agrees to provide at no cost
rooms to Purchaser and its duly authorized agents, representatives, accountants
and attorneys, to the extent the same are available. Purchaser agrees to
indemnify and hold Seller harmless of and from any costs, expenses or damages
arising from Purchaser's inspection of the Property; provided, however,
Purchaser shall not be responsible for any economic damage resulting from the
discovery of structural or environmental conditions existing on the Property.
4
<PAGE> 6
Section 6.2 Inspection Period. The Purchaser shall have until the
expiration of the Due Diligence Period, as defined in the Merger Agreement and
incorporated herein by reference (the "Inspection Period") within which to make
all audits, inspections or investigations desired by the Purchaser. If, within
the Inspection Period, the Purchaser determines in its sole discretion that it
does not desire to close this Contract, Purchaser may give notice of such fact
to the Seller. In that event, this Contract shall immediately terminate
without further liability on the part of the Purchaser or the Seller, and the
Earnest Money shall be immediately returned to the Purchaser by the Title
Company.
ARTICLE 7
DAMAGE, DESTRUCTION OR CONDEMNATION PRIOR TO CLOSING
Section 7.1 Damage or Destruction. If, at any time after the date
hereof and on or before the Closing Date, all or any portion of the Property is
damaged, destroyed or rendered inoperative (collectively, the "Damage"), by
fire, flood, natural elements or other causes beyond Seller's control, then the
following shall apply:
(a) If the Damage is not Material (as hereinafter
defined), Purchaser shall proceed to close and purchase the Property
as diminished by such Damage, subject to a reduction in the Purchase
Price equal to the full estimated cost of repairing and/or replacing
the Damage, as determined by Purchaser in its reasonable business
judgement.
(b) If the Damage is Material, then Purchaser, at its
sole option, may elect either (a) to terminate this Contract by
written notice to Seller given at or prior to the Closing, whereupon
the Title Company shall immediately return the Earnest Money to
Purchaser and, upon Purchaser's receipt thereof, neither party hereto
shall have any further rights against or obligations to the other
under this Contract; or (b) to agree to close and deduct from the
Purchase Price the full estimated cost of repairing and/or replacing
the Damage, as determined by Purchaser in its reasonable business
judgement.
(c) If the Damage is covered by insurance, the Purchaser
shall have the right to elect to close the purchase of the Property in
its condition (with respect to the Damage covered by insurance) on the
Closing Date and to take an assignment of the insurance proceeds, in
which event Seller shall assign such insurance proceeds to the
Purchaser, shall permit Purchaser to conduct any remaining settlement
or other negotiations with the insurer as to the amount of proceeds
payable on account of the Damage and shall give Purchaser a credit
against the Purchase Price equal to the deductible amount, if any,
under Seller's insurance policy, in lieu of any other deduction for
the Purchase Price provided in this SECTION 7.1.
(d) For the purposes of this SECTION 7.1, Damage shall be
deemed to be "Material" if (a) the cost of repairing such Damage
equals or exceeds ONE HUNDRED THOUSAND AND NO/100 DOLLARS
($100,000.00), or (b) the operation of the Property is adversely
affected thereby.
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<PAGE> 7
Section 7.2 Condemnation If, prior to the Closing Date, all or any
portion of the Property is taken by, or made subject to, condemnation, eminent
domain or other governmental acquisition proceedings, or in the event of any
change in the zoning designation of the Land to the effect that the Property
could not be operated as a 175 room full service hotel, with bar, restaurant
and meeting space, without a variance, then Purchaser, at its sole option, may
elect either:
(a) to terminate this Contract by written notice to
Seller given at or prior to the Closing, whereupon the Title Company
shall immediately return the Earnest Money to Purchaser and, upon
Purchaser's receipt thereof, neither party hereto shall have any
further rights against or obligations to the other under this
Contract; or
(b) to agree to close and deduct from the Purchase Price
an amount equal to any sum paid to Seller for such governmental
acquisition, in which event Seller shall assign, transfer and set over
to Purchaser all of Seller's right, title and interest in and to any
awards which may in the future be made on account of such governmental
acquisition.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 8.1 Representation and Warranties. Seller represents and
warrants to the Purchaser, as of the date hereof and on the Closing Date, all
applicable matters as set forth in the representations and warranties contained
in Article 2 of the Merger Agreement, which are incorporated herein by
reference.
Section 8.2 Purchaser's Reliance. Seller acknowledges that the
execution of this Contract by Purchaser has been made, and the purchase of the
Property by Purchaser will have been made, in material reliance by Purchaser on
Seller's representations and warranties contained in SECTION 8.1. The
representations and warranties contained in SECTION 8.1 shall be true and
correct on the date of Closing and shall survive the Closing and continue in
full force and effect notwithstanding the Closing and consummation of the sale
contracted for herein, and the obligation of the Purchaser to close this
transaction is expressly conditioned upon said representations and warranties
being true and correct on the date of Closing.
ARTICLE 9
OPERATIONS PENDING CLOSING
Section 9.1 Seller's Obligations. From the date hereof through the
Closing Date:
(a) Operations, Reservations, Renewals, Insurance and
Operational Licenses. Seller will comply with the covenants set forth
in Section 4.3 of the Merger Agreement, which are incorporated herein
by reference.
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(b) Liquor Licenses. The terms and provisions of
Section 5.9 of the Merger Agreement, which are incorporated herein by
reference, shall apply to the application for or transfer of any
liquor license or alcoholic beverage permit at the Property.
(c) Access. Purchaser or representatives of Purchaser
shall have access to the Property during normal business hours. The
Seller shall make all books and records relating to the ownership and
operation of the Property available to the Purchaser its agents,
representatives, accountants and attorneys, upon request, during
normal business hours and shall permit the Purchaser and the
Purchaser's agents, representatives, accountants and attorneys to
examine and audit the same, at the Purchaser's sole cost and expense.
The Seller shall cooperate with the Purchaser and the Purchaser's
agents, representatives, accountants and attorneys, shall allow such
persons to make extracts from the aforesaid books and records and
shall respond fully and candidly to inquiries made by Purchaser or
Purchaser's agents, representatives, accountants and attorneys.
(d) Other Agreements. Seller shall not enter into or
record any easement, covenant, license, permit, agreement or other
instrument against the Property or any portion thereof except as may
be required to enable Seller to perform its obligations under this
Contract.
(e) Employment/WARN Act. On the Closing Date, the
employment of all employees of Seller, or of Seller's management
company, employed at the Property shall terminate without liability to
Purchaser or with respect to the Property. Payment of all costs and
expenses associated with accrued but unpaid salary, earned but unpaid
vacation pay, accrued but unearned vacation pay, pension and welfare
benefits, the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended ("COBRA") benefits, employee fringe benefits, employee
termination payments or any other employee benefits due to Seller's,
or Seller's management company's employees up to the Closing Date
shall be the sole responsibility and obligation of and shall be paid
promptly by Seller or Seller's management company. Purchaser's
management company or lessee shall have the right, but not the
obligation, to extend offers of employment to some or all such
terminated employees on such terms and conditions as are determined
solely in Purchaser's management company's or lessee's discretion and
Seller shall use its best efforts to assist Purchaser's management
company or lessee in its efforts to secure satisfactory employment
arrangements with such employees. Seller or Seller's management
company shall provide any notices, coverages or other rights as shall
be required to comply with the medical coverage continuation
requirements of COBRA to any persons who are as of the Closing Date,
or thereafter become, entitled to such rights by virtue of the
maintenance of any group health plan by Seller, Seller's management
company or any Affiliated Company and shall maintain, or cause an
Affiliated Company to maintain a group health plan that such persons
shall be entitled to participate in for the maximum period required by
COBRA. The provisions of this Subsection 9.1(j) shall survive the
Closing. With respect to the termination of any employees of Seller
or the management company at the Property arising from the sale of the
Property under this Contract, Seller and/or the management company
will comply with all provisions of the Worker Adjustment and
Retraining Notification Act, as set forth in Section 29
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U.S.C. 2101, et seq, as well as the rules and regulations thereto, set
forth in 20 CFR 639, et seq.
(f) Miscellaneous Contracts. . Seller agrees to take
such actions as may be required to assign all agreements, contracts,
leases, permits, licenses, guaranties and warranties which relate to
or affect the Property or the operation or use thereof (collectively
the "Miscellaneous Contracts") to Purchaser on the Closing Date.
Seller shall pay all fees and expenses in regard to such assignments
or transfers, including any customary transfer charges necessary to
obtain the consent of any party. Seller shall cooperate and promptly
execute all applications and instruments required by governmental
entities in connection with the transfer to Purchaser of any of the
Miscellaneous Contracts. Purchaser agrees to submit all applications,
documentation and information reasonably required to assist Seller in
obtaining such consents and transfers.
(g) Notice. Seller will not cause any action to be taken
which would cause any of the representations or warranties made by
Seller in this Contract to be false on or as of the Closing Date.
Seller shall promptly notify Purchaser in writing of the occurrence of
any event or condition which occurs prior to the Closing Date which
causes a change in the facts related to the truth of any of the
representations or warranties made in ARTICLE 8 of this Contract.
Section 9.2 Purchaser's Obligation. From the date hereof through the
Closing Date:
(a) Application for Liquor License. If required by
Section 9.1(f) above, Purchaser shall make diligent efforts to procure
a license to dispense alcoholic beverages for on-premises consumption
at the Property from the appropriate state liquor authority prior to
the Closing Date.
ARTICLE 10
CONDITIONS TO OBLIGATIONS
Section 10.1 Purchaser's Obligations. Purchaser's obligations to
consummate the acquisition of the Property pursuant to the terms of this
Contract are subject to and conditioned upon the following:
(a) Each of the representations and warranties made by
Seller herein shall be true and complete on the Closing Date as if
made on and as of such date.
(b) Seller shall have performed all obligations which it
is required to perform on or before the Closing Date pursuant to the
provisions of this Contract and the Merger Agreement.
(c) The Closing of the Merger shall have occurred.
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(d) The management agreement shall have been terminated
by Seller at Seller's sole cost and expense with respect to the
Property. Furthermore, prior to Closing, Purchaser will attempt to
obtain the approval of Holiday Inn, the franchisor on the Property, to
allow the Franchise Agreement for the Property to be transferred to
Purchaser, in a manner such that Seller would not incur any
termination fee. If, prior to Closing, Purchaser is unable to so
obtain the agreement of franchisor to allow the transfer of the
Franchise Agreement to Purchaser as set forth in above, Purchaser may
elect to terminate the Contract and receive a refund of the Earnest
Money.
(e) Purchaser's Application for a license to dispense
alcoholic beverages for on-premises consumption at the Property shall
have been approved by the applicable State liquor authority.
Section 10.2 Seller's Obligations. Seller's obligations to
consummate the sale of the Property pursuant to the terms of this Contract are
subject to and conditioned upon the following:
(a) Purchaser shall have performed all obligations which
it is required to perform on or before the Closing Date pursuant to
provisions of this Contract and the Merger Agreement and the Closing
of the Merger shall have occurred.
Section 10.3 Failure to Satisfy. If a condition to a party's
obligations under this Contract is not either satisfied or waived by such party
in writing, then such party may, in addition to any other remedies which such
party may have with respect thereto, terminate this Contract by written notice
given to the other on or before the Closing Date, whereupon the Title Company
shall immediately return the Earnest Money to Purchaser without requiring any
consent or notice from the other party hereto, and upon such return of the
Earnest Money, this Contract shall be null and void and neither party hereto
shall have any further rights against, or obligations to, the other under this
Contract except as expressly provided herein.
ARTICLE 11
CLOSING
Section 11.1 Closing Date. The closing hereunder ("Closing") shall
take place at the offices of the Title Company on the later of (a) thirty
(30) days after the expiration of the Inspection Period, or (b) April 30, 1998,
or on such earlier date as mutually agreed upon by the parties ("Closing
Date").
Section 11.2 Conditions to Closing. If on the Closing Date: (a) the
Title Company has advised that it is not able to issue the Title Policy in
accordance with SECTION 4.3 hereof on the Closing Date; (b) the repairs
required by SECTION 7.1(A) have not been made; or (c) all conditions to closing
set forth in SECTIONS 8.2 OR 10.1 hereof have not been satisfied; then
Purchaser may, at its sole option (i) waive any defect or requirement and close
the transaction contemplated for herein; (ii) extend (without prejudice to any
of Purchaser's other rights hereunder) the Closing for such reasonable time
(not to exceed thirty (30) days) as may be required for Seller to cure any of
the
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foregoing matters, such postponed date shall then become the Closing Date; or
(iii) Purchaser may terminate this Contract.
Section 11.3 Seller's Obligations. At the Closing, Seller shall
deliver or cause to be delivered to Purchaser, at Seller's sole cost and
expense, each of the following items:
(a) Deed. A Special Warranty Deed in a form attached
hereto as Exhibit "C", duly executed and acknowledged by Seller, and
in form for recording, conveying good, marketable fee simple title in
the Real Property and Improvements to Purchaser, subject only to the
Permitted Exceptions.
(b) Bill of Sale. A Blanket Conveyance, Bill of Sale and
Assignment ("Bill of Sale") in a form attached hereto as Exhibit "D"
duly executed and acknowledged by Seller, conveying to Purchaser the
Personal Property with covenants of general warranty, subject only to
the Permitted Exceptions, assigning all Seller's rights under the
Miscellaneous Contracts (but excluding the Rejected Contracts), and
assigning all warranties, guaranties, and bonds applicable to the
Property, or any part thereof, such assignment to provide that Seller
will cooperate with Purchaser to secure performance by any warrantor
for any work which Purchaser believes should be performed by any
warrantor pursuant to such guaranties or warranties. In connection
with the Bill of Sale referenced above, Seller and Purchaser shall
have jointly updated the Personal Property Inventory not more than
twenty-four (24) hours prior to the Closing Date ("Final Inventory").
The Final Inventory, as approved by both Seller and Purchaser, shall
be attached to the Bill of Sale. In the event the Final Inventory
reflects a reduction from the prior Personal Property Inventory,
Purchaser shall receive a credit equal to the value of such reduction.
To the extent required under the provisions of the Uniform Commercial
Code, Seller agrees to comply with the Bulk Transfer Provisions of the
UCC and shall provide any notices required thereunder.
(c) Reservations. A current listing of all reservations
and bookings relating to the Property.
(d) Assignment of Trade Name. An assignment and release
of assumed name, duly executed and acknowledged by Seller, assigning
all of Seller's right, title and interest in the Trade Name.
(e) Assignment of Insurance. An assignment of all
insurance policies acceptable to Purchaser affecting the Property.
(f) Title Policy. The Title Policy in the form specified
in SECTION 4.3 hereof or, at Purchaser's option, the title policy
premium as provided for in SECTION 4.5 hereof.
(g) UCC Search. An updated UCC Search dated within three
(3) days of the date of Closing, reflecting no financing statements or
other filings pursuant to the Uniform Commercial Code.
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(h) Authority. Such evidence or documents as may be
reasonably required by the Purchaser or the Title Company evidencing
the status and capacity of Seller and the authority of the person or
persons who are executing the various documents on behalf of the
Seller in connection with the sale of the Property.
(i) Keys, etc. All keys to all locks on the Property,
including but not limited to all keys to any safe deposit boxes at the
Property which are not in use by guests at the Property, key to all
door locks and keys of any vehicles or equipment being conveyed as
Personal Property (and an accounting for keys in possession of
others), which keys shall be marked and identified; all books and
records pertaining to the Property; and all documents in the
possession of the Seller, pertaining to occupants of the Property,
including, but not by way of limitation, all registrations,
correspondence and credit reports relating to each such occupant.
(j) Permits. To the extent available, the original
counterparts of the necessary permits issued by the appropriate
governmental authorities and utility companies when the Improvements
were completed and a complete set of all architectural, mechanical and
electrical plans and specifications used in the construction of the
Improvements.
(k) Non-Foreign Status Certificate. A Certification in a
form to be provided or approved by the Purchaser, signed by the Seller
under penalties of perjury, containing the following:
(i) The Seller's U.S. Taxpayer Identification
Number;
(ii) The home address of the Seller (or the
business address of the Seller if the Seller is not an
individual); and
(iii) A statement that the Seller is not a
foreign person within the meaning of Sections 1445 and 7701 of
the IRC (i.e., the Seller is not a nonresident alien, foreign
corporation, foreign partnership, foreign trust or foreign
estate (as those terms are defined in the IRC and Income Tax
Regulations)).
In the event that the Seller fails to deliver such Certification at
Closing or the Seller delivers such Certification but the Purchaser
has actual knowledge that such Certification is false or the Purchaser
receives notice that the Certification is false from any agent of the
Purchaser or the Seller, the Purchaser shall be entitled to withhold
from the Purchase Price a sum equal to ten percent (10%) of the total
amount which otherwise would have been realized by the Seller from
such sale, which sum will be paid by the Purchaser to the United
States Treasury pursuant to the requirements of Section 1445 of the
IRC and the regulations promulgated thereunder.
(l) Safe Deposit Boxes. Seller shall deliver to
Purchaser any receipts and/or agreements relating to safe deposit
boxes at the Property being used by guests, together with a list
containing the name, address and room number of each such depositor.
At the time of
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Closing, Seller shall give written notice to each guest at the
Property who is a depositor requesting verification of the contents of
each depositor's safe deposit box within 24 hours. All such
verifications shall be under the supervision of Seller or its agent in
the presence of Purchaser or its agent. Should such guest desire to
continue the use of safe deposit boxes, arrangements satisfactory to
Purchaser will be made for such continued use with a representative of
Purchaser. Seller shall continue to be responsible to any guests
which are using safe deposit boxes but do not respond to the written
notice for verification or who so respond, but fail to enter into a
written agreement with Purchaser. Upon guest verification of the
contents of that guest's safe deposit box and either removal of the
contents or entry into a written agreement for continued use under the
supervision of Purchaser, Seller shall be relieved of any and all
responsibility in connection with such safe deposit box.
(m) Baggage. All baggage, parcels, laundry or valet
packages checked or left by guests of the Property with Seller prior
to the consummation of the Closing shall be sealed and listed in an
inventory to be prepared jointly by Seller and Purchaser or the
respective agents at the Closing. Seller agrees to indemnify and hold
Purchaser harmless from any and all loss, cost, liability or expense,
including reasonable attorney's fees, incurred in connection with any
damage to, theft or other loss of any such baggage, parcels, laundry
or valet packages prior to the Closing and any claim for missing
contents in the baggage inventory for so long as the same remain in
Seller's possession. Purchaser shall indemnify and hold Seller
harmless from any loss, costs, liability or expense, including
reasonable attorney's fees incurred in connection with any damage to,
theft or other loss of baggage, parcels, laundry or valet packages
after the Closing.
(n) Additional Documents. All additional documents and
instruments as in the opinion of Purchaser's counsel and Seller's
counsel as are necessary or desirable for the proper consummation of
this transaction.
Section 11.4 Purchaser's Obligations. At the Closing, Purchaser
shall deliver to Seller the following items:
(a) Purchase Price. The Purchase Price, as reduced by
the Earnest Money, in immediately available funds;
(b) Authority. Such evidence or documents as may
reasonably be required by the Seller or the Title Company evidencing
the status and capacity of Purchaser and the authority of the person
or persons who are executing the various documents on behalf of the
Purchaser in connection with the sale of the Property.
Section 11.5 Adjustments and Prorations. The following items shall
be adjusted or prorated between Seller and Purchaser pursuant to and as a part
of the Closing Working Capital, as calculated under Section 1.11 of the Merger
Agreement:
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(a) Revenues. Current revenues including, but not
limited to, room and function deposits and food and beverage revenues
generated by the Property ("Revenues"), shall be prorated as follows:
(i) Revenues attributable to room use for the
night prior to the Closing Date will be evenly split between
Seller and Purchaser.
(ii) Revenues attributable to room use prior to
the night prior to the Closing Date or functions having
occurred prior to 12:00 a.m. on the Closing Date will belong
to and be retained by Seller.
(iii) Revenues attributable to room use for the
night of the Closing Date, and thereafter, and functions
occurring at or after 12:00 a.m. on the Closing Date and any
subsequent date will belong and be paid to Purchaser.
(iv) Revenues attributable to the operation of
any other facilities operated on the Property and relating to
any activity taking place prior to 12:00 a.m. of the Closing
Date will belong to and be retained by Seller.
(v) Revenues attributable to the operation of
any other facilities operated on the Property relating to any
activity taking place after 12:00 a.m. on the Closing Date
will belong and be paid to Purchaser.
(vi) Revenues representing advance payments or
deposits which are allocable in part to the period prior to
and in part following 12:00 a.m. on the Closing Date will be
prorated between the parties on per diem basis or on such
other equitable basis as agreed by the parties.
To the extent Revenues are in the possession of Seller which are owing
to Purchaser, then the same will be credited to Purchaser at the
Closing.
(b) Accounts. Seller will furnish to Purchaser a
schedule of all room charges which are then due and payable, but which
have not been paid. Seller will retain all receivables owing by
guests for periods prior to Closing; provided, however, with respect
to any receivables to which both Seller and Purchaser will be entitled
to a portion of the proceeds, Seller will, at Closing, assign the same
to Purchaser without change to the Purchase Price. Payments received
on Seller's share of these and any other accounts receivable
outstanding as of 12:00 a.m. on the Closing Date ("Accounts") will be
paid to Seller within thirty (30) days after receipt by Purchaser;
provided Purchaser will be under no obligation to pursue the
collection of such Accounts. Seller will be entitled to retain
Seller's share of any payments on the Accounts made directly to it,
whenever the same may be collected.
(c) Cash on Hand. Seller will deliver to Purchaser at
the Closing, a schedule showing all cash on hand as of the Closing,
and Purchaser agrees to pay Seller at the Closing
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an amount equal to all cash on hand as of the Closing and, in
consideration of such payment, Seller will transfer such cash on hand
to Purchaser.
(d) Insurance Premiums. The Purchaser will pay to the
Seller, in cash at Closing the unexpired premium of any insurance
policies assigned by the Seller to the Purchaser; provided, however,
Purchaser will have the option to decline to have the insurance
assigned, in which event no adjustment will be made for insurance
hereunder.
(e) Taxes. Ad valorem taxes and personal property taxes
(if any) for the Property for the current calendar year will be
prorated to date of Closing, and the Seller will pay to the Purchaser
in cash at Closing, the Seller's pro-rata portion of such taxes. The
Seller's pro rata portion of such taxes will be based upon taxes
actually assessed for the current calendar year. If, for any reason,
ad valorem taxes and personal property taxes (if any) for the current
calendar year have not been assessed on the Property, such proration
will be estimated based upon ad valorem taxes and personal property
taxes (if any) for the immediately preceding calendar year, and
adjusted when actual amounts are available. Seller will pay all
sales, transfer and conveyance taxes arising from the sale of the
Property. Seller will provide to Purchaser at Closing tax statements
verifying that all taxes due and owing with respect to the Property
have been paid.
(f) Expenses. Expenses for housekeeping services for the
Closing Date will be evenly split between Seller and Purchaser. All
other income and ordinary operating expenses for or pertaining to the
Property, including, but not limited to, public utility charges,
maintenance, service charges, and all other normal operating charges
of the Property will be prorated at the Closing effective as of 12:00
a.m. on the Closing Date. Seller will cause all utility meters to be
read on the Closing Date and Seller will pay to Purchaser (or furnish
evidence of prior payment) an amount equal to utility charges incurred
or accrued up to the reading of such utility meters. In the event the
meter readings are not available at Closing, utility costs will be
prorated based on the best information available.
(g) Reproration. In the event any adjustments pursuant
to this SECTION 11.5 are, subsequent to Closing, found to be
erroneous, then the party who is entitled to additional monies will
invoice the other party for such additional amounts as may be owing,
and such amount will be paid within ten (10) days from receipt of the
invoice. The obligations of Seller and Purchaser under this Paragraph
11.5 will survive the Closing hereof.
Section 11.6 Possession. Possession of the Property shall be
delivered to Purchaser by Seller at the Closing, subject only to such rights of
others as have been expressly disclosed herein.
Section 11.7 Closing Costs. Seller shall pay one-half ( 1/2) the
cost of obtaining the Survey, each UCC Search, and tax certificates, its
proportionate share of the prorations set forth in SECTION 11.5, one-half (
1/2) the cost of obtaining the Owner Policy of Title Insurance (including all
endorsements thereto required hereby), any transfer fees or other impositions
charged by reason of the transfer of any of the Miscellaneous Contracts,
one-half ( 1/2) of any transfer, sales, deed or documentary taxes, and one-half
( 1/2) of any escrow fee charged by the Title Company. Purchaser
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shall pay one-half ( 1/2) the cost of obtaining the Survey, each UCC Search,
and tax certificates, its proportionate share of the prorations set forth in
SECTION 11.5, one-half ( 1/2) the cost of obtaining the Owner Policy of Title
Insurance (including all endorsements thereto required hereby), one-half ( 1/2)
of any transfer, sales, deed or documentary taxes and one-half ( 1/2) of any
escrow fee charged by the Title Company. All other costs and expenses in
connection with the transaction contemplated by this Contract shall be borne by
Seller and Purchaser in the manner in which such costs and expenses are
customarily allocated between the parties at closings of real property similar
to the Property in Kansas.
Section 11.8 Seller's Indemnity. The Seller agrees to indemnify and
hold the Purchaser harmless of and from any and all liabilities, claims,
demands and expenses, of any kind or nature (except those items which by this
Contract specifically become the obligation of the Purchaser) arising or
accruing prior to the date of Closing and which are in any way related to the
ownership, maintenance or operation of the Property, and all expenses related
thereto, including, without limitation, court costs and attorneys' fees;
provided, however Purchaser may not make a claim for indemnification hereunder
unless the aggregate amount of such claims hereunder and "losses" under the
Merger Agreement exceeds $100,000.00, in which event Seller shall be
responsible for the full amount of such claims.
Section 11.9 Purchaser's Indemnity. The Purchaser agrees to
indemnify and hold the Seller harmless of and from any and all liabilities,
claims, demands and expenses, of any kind or nature (except those items which
by this Contract specifically remain the obligation of the Seller) arising or
accruing subsequent to the date of Closing and which are in any way related to
the ownership, maintenance or operation of the Property, and all expenses
related thereto, including, without limitation, court costs and attorneys'
fees.
Section 11.10 Notice of Claim. In the event either party hereto
receives notice of a claim or demand which results or may result in
indemnification pursuant to SECTION 11.8 or 11.9, such party shall immediately
give notice thereof to the other party to this contract. The party receiving
such notice shall immediately take such measures as may be reasonably required
to properly and effectively defend such claim, and may defend same with counsel
of his own choosing. In the event the party receiving such notice fails to
properly and effectively defend such claim, and in the event such party is
liable therefor, then the party so giving such notice may defend such claim at
the expense of the party receiving such notice.
ARTICLE 12
REAL ESTATE COMMISSION
Section 12.1 Brokers. Seller and Purchaser covenant and agree one
with the other that no real estate commissions, finders fees or brokers' fees
have been or will be incurred in connection with this Contract or the sale
contemplated hereby, except a commission to Property Specialists, Inc. (herein
the "Agent"), which said commission shall be due and payable pursuant to a
separate agreement by Purchaser if, as and when the sale contemplated hereby is
consummated.
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Section 12.2 Indemnity. Each party indemnifies and agrees to hold
the other party harmless from any loss, liability, damage, cost or expense
(including reasonable attorneys' fees) resulting to the other party because of
a breach of the representation contained in SECTION 12.1 made by that party.
ARTICLE 13
REMEDIES OF DEFAULT
Section 13.1 Termination. If this Contract is terminated by
Purchaser pursuant to any one or more Sections hereof which entitle Purchaser
to terminate this Contract, or if the sale contracted for herein is not
consummated due to a default on the part of the Seller, then the Earnest Money
shall be returned immediately to the Purchaser by the Title Company. The
return of such Earnest Money, and acceptance thereof by the Purchaser, shall
not in any manner be construed as a waiver of the Purchaser's right of
specific performance or damages, and Purchaser may seek either.
Section 13.2 Purchaser's Default. In the event all conditions of
this Contract are satisfied and in the event all covenants and agreements to
be performed by Seller prior to Closing are fully performed, and in the event
that performance of this Contract is tendered by the Seller and the sale is
not consummated through default on the part of the Purchaser on the Closing
Date, then the Earnest Money shall be paid to the Seller by the Title Company
as liquidated damages for the Purchaser's default. Such amount is agreed upon
by and between the Seller and the Purchaser as liquidated damages, due to the
difficulty and inconvenience of ascertaining and measuring actual damages, and
the uncertainty thereof; and no other damages, rights or remedies shall in any
case be collectible, enforceable or available to the Seller other than in this
ARTICLE 13 defined, but the Seller shall accept said cash payment as the
Seller's total damages and relief.
Section 13.3 Seller's Default. In the event that any of the Seller's
representations or warranties contained herein are untrue or if Seller shall
have failed to have performed any of the covenants or agreements contained
herein which are to be performed by Seller for any reason, Purchaser may, at
its option: (a) terminate this Contract by giving written notice of
termination to Seller and receive a full and immediate refund of the Earnest
Money; (b) seek to enforce specific performance of this Contract and recover
all attorneys fees, court costs and other costs and expenses incurred by
Purchaser in connection with the pursuit of such specific performance action;
or (c) terminate this Contract by giving written notice of termination to
Seller, receive a full and immediate refund of the Earnest Money, and seek
damages for breach of this Contract by Seller.
ARTICLE 14
MISCELLANEOUS
Section 14.1 Notices. All notices, demands, or other communications
of any type (herein collectively referred to as "Notices") given by the Seller
to the Purchaser or by the Purchaser to the Seller, whether required by this
Contract or in any way related to the transaction contracted for herein, shall
be void and of no effect unless given in accordance with the provisions of
this SECTION
16
<PAGE> 18
14.1. All notices and other communications hereunder will be in writing and
will be deemed given and received if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via telecopy to the parties at the following addresses (or
at such other address for a party as will be specified by like notice):, to the
Purchaser, as follows:
BRISTOL OMAHA HOTEL COMPANY
14295 Midway Road
Dallas, Texas 75244
Attention: Joel M. Eastman
Telephone: 972.391.3050
Facsimile: 972.391.1515
With copy to:
Munsch, Hardt, Kopf, Harr, & Dinan, P.C.
4000 Fountain Place
1445 Ross Avenue
Dallas, Texas 75202-2711
Attn: Glenn B. Callison
Telephone: 214.855.7500
Facsimile: 214.855.7584
and addressed, if to the Seller, as follows:
Highland Manor, Inc.
c/o Omaha Hotel, Inc.
3111 10th Street
Great Bend, KS 67530
Attention: Leonard F. Harper, II
Telephone: (402) 331-5531
Facsimile: (402) 331-4010
With copy to:
Hugh D. Mauch, Esq.
Attorney at Law
3111 10th Street
Great Bend, Kansas 67530-1444
Telephone: (316) 792-2472
Facsimile: (316) 793-3354
Either party hereto may change the address for notice specified above by
giving the other party ten (10) days advance written notice of such change of
address. The attorney for each party to this Contract identified in this
SECTION 14.1 may give notices on behalf of his or her client with the same
force and effect as if such notice were given directly by such party.
17
<PAGE> 19
Section 14.2 Timing. For purposes of determining the time for
performance of various obligations under this Contract, the effective date of
this Contract shall be the date the Title Company acknowledges hereon the
receipt of Purchaser's Earnest Money. If the date for the performance of any
obligation or the expiration of any time period hereunder falls on a Saturday,
Sunday or legal holiday under the laws of the United States and/or the State of
Texas, such date shall be extended until the next day which is not a Saturday,
Sunday or legal holiday.
Section 14.3 ERISA. Purchaser has advised Seller that this
transaction may be subject to the prohibited transaction restrictions of
Section 406 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which prohibits certain transactions with a "party in interest", as
defined under Section 3(14) of ERISA. To enable Purchaser to comply with
ERISA, Seller hereby represents and warrants and shall deliver at closing a
written ERISA Certification that neither Seller, the entities comprising
Seller, nor any of their respective partners or joint venturers is a "party in
interest" to such employee benefit plans ("Plans") that Purchaser may identify
to Seller. Seller agrees to keep the identity of such Plans confidential,
except as may be required as a result of legal process, compliance with ERISA
or other laws applicable to Seller.
Section 14.4 Survival. Any representation, warranty, covenant or
agreement herein of either party to this Contract, whether to be performed
before or after the time of Closing, shall not be deemed to be merged into or
waived by the instruments of Closing, but shall expressly survive Closing and
shall be binding upon the party obligated thereby.
Section 14.5 Assignment. This Contract may be assigned by the
Purchaser to any person, firm, corporation or other entity which the Purchaser
may, at his sole discretion, choose, and shall be binding upon and inure to the
benefit of the parties hereto, their heirs, executors, administrators and
assigns.
Section 14.6 Construction. This Contract shall be construed and
interpreted in accordance with the laws of the State of Kansas and the
obligations of the parties hereto are and shall be performable in the County
wherein the Property is located. Where required for proper interpretation,
words in the singular shall include the plural; the masculine gender shall
include the neuter and the feminine, and vice versa. The terms "heirs,
executors, administrators and assigns" shall include "successors, legal
representatives and assigns". The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
Section 14.7 Amendment. This Contract may not be modified or
amended, except by an agreement in writing signed by the Seller and the
Purchaser. The parties may waive any of the conditions contained herein or any
of the obligations of the other party hereunder, but any such waiver shall be
effective only if in writing and signed by the party waiving such conditions or
obligations.
18
<PAGE> 20
Section 14.8 Confidentiality. The parties agree to be bound by the
same terms and provisions of the Confidentiality Agreement, as set forth in
Section 5.2 of the Merger Agreement, which is incorporated herein by reference.
Section 14.9 Authority. Each person executing this Contract warrants
and represents that he is fully authorized to do so.
Section 14.10 Attorneys' Fees. In the event it becomes necessary for
either party hereto to file a suit to enforce this Contract or any provisions
contained herein, the party prevailing in such action shall be entitled to
recover, in addition to all other remedies or damages, reasonable attorneys
fees incurred in such suit.
Section 14.11 Headings. The descriptive headings of the several
Articles, Sections and Paragraphs contained in this Contract are inserted for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.
Section 14.12 Entire Agreement. This Contract, including the
Exhibits hereto, the items to be furnished in accordance with ARTICLE 5 hereof
and all provisions of the Merger Agreement referenced in this Contract, which
are hereby incorporated by reference, (a) constitute the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
and contemporaneous agreements and understandings of the parties with respect
to the subject matter hereof, including the parties' letter of intent with
respect to this transaction; (b) are not intended to confer upon any other
person any rights or remedies hereunder; and (c) will not be assigned by
operation of law or otherwise except as otherwise specifically provided.
Section 14.13 Copies and Multiple Counterparts. Numerous copies
and/or multiple counterparts of this Contract have been executed by the
parties hereto. Each such executed copy and/or all counterparts shall have the
full force and effect of an original executed instrument.
EXECUTED effective as of the 30th day of January, 1998 by Purchaser.
BRISTOL OMAHA HOTEL COMPANY,
A DELAWARE CORPORATION
By:
-------------------------
Name:
-----------------------
(Print)
Its:
-----------------------
19
<PAGE> 21
EXECUTED effective as of the 30th day of January, 1998 by Seller.
HIGHLAND MANOR, INC.,
A KANSAS CORPORATION
By:
-------------------------
Name:
-----------------------
(Print)
Its:
------------------------
20
<PAGE> 22
JOINDER OF TITLE COMPANY
The undersigned Title Company joins in the execution of this Contract for the
following sole and limited purposes: (i) to acknowledge receipt of the Earnest
Money and 3 original counterparts of this Contract on _______________, 1998;
(ii) to evidence its agreement to hold the Earnest Money in trust for the
parties hereto in accordance with the terms of this Contract; (iii) to
acknowledge that upon compliance by the parties with the terms of the Title
Commitment and payment of the applicable policy premium, the undersigned is
prepared to issue the Owner's Policy Title Insurance called for herein on
Stewart Title Guaranty Company; and (iv) to acknowledge its agreement to (a)
timely file a return with the Internal Revenue Service on Form 1099-B or such
other form as instructed by the Internal Revenue Service showing the gross
proceeds of this transaction, the recipient thereof and such other information
as the Internal Revenue Service may by form or regulation require from time to
time, and (b) furnish both Seller and Purchaser with a written statement
showing the name and address of the Title Company and the information shown on
such return with respect to the transaction. This return shall be filed to
ensure that the parties to this transaction will be in compliance with Section
6045(e) of the Internal Revenue Code, as amended from time to time and as
further set forth in any regulations promulgated thereunder.
STEWART TITLE NORTH TEXAS
By:
----------------------
Its:
---------------------
21
<PAGE> 23
EXHIBIT "A"
Property Description
[TO BE ATTACHED BY SELLER]
<PAGE> 24
EXHIBIT "B"
Non-Transferable Licenses and Permits
[TO BE ATTACHED BY SELLER]
<PAGE> 25
EXHIBIT "C"
Special Warranty Deed
STATE OF ____________ Section
Section KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF _______ Section
THAT _______________________ ("Grantor") for and in consideration of
the sum of Ten and no/100 Dollars cash and other good and valuable
consideration paid in hand by
_________________________________________________, a Delaware corporation
("Grantee"), whose address is
________________________________________________________________________, the
receipt and sufficiency of which is hereby acknowledged, HAS GRANTED,
BARGAINED, SOLD AND CONVEYED and by these presents DOES GRANT, BARGAIN, SELL
and CONVEY unto Grantee all that certain land situated in _______ County,
_______ and described on Exhibit "A" attached hereto and incorporated herein by
reference for all purposes, together with all of Grantor's right, title and
interest in and to all appurtenances thereon or in anyway appertaining thereto
and all of Grantor's right, title and interest in and to all buildings,
structures, fixtures and improvements located thereon (said land, real
property, rights, improvements and appurtenances being herein collectively
referred to as the "Property").
This conveyance and the warranties of title herein are expressly made
subject to only the liens, encumbrances, easements and other exceptions set
forth on Exhibit "B" attached hereto and incorporated herein by this reference
for all purposes, to the extent the same are valid and subsisting and affect
the Property.
TO HAVE AND TO HOLD the Property unto Grantee, and Grantee's
successors and assigns, forever, and Grantor does hereby bind Grantor, and
Grantor's successors and assigns, to WARRANT and FOREVER DEFEND, all and
singular the Property unto Grantee, and Grantee's successors and assigns,
against every person whomsoever lawfully claiming or to claim the same or any
part thereof, by, through or under Grantor, but not otherwise.
EXECUTED on ______ ,199___, to be effective upon delivery of this
Special Warranty Deed by or on behalf of Grantor to Grantee.
GRANTOR:
a
---------------------------
By:
-------------------------
Its:
------------------------
<PAGE> 26
[Acknowledgment of Grantor]
STATE OF Section
Section
COUNTY OF Section
Personally appeared before me, a Notary Public in and for the above
County and State, ____________________________________________________, known
personally by me and acknowledged by me to be the same person(s) who executed
the foregoing for the uses and purposes therein stated.
Witnessed by hand and this notarial seal, this ____ day of
______________, 19_____.
[SEAL]
---------------------------------
Notary Public in and for the
State and County aforesaid
<PAGE> 27
EXHIBIT "D"
BLANKET CONVEYANCE, BILL OF SALE AND ASSIGNMENT
STATE OF Section
Section KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF Section
By_______________________________ Warranty Deed (the "Deed") of even
date herewith,________________________________________________________, a
__________________________________ ("Seller"), conveyed to
_________________________________________, a Delaware corporation
("Purchaser"), the property and business known as
___________________________________ County, (the "Property") described on
Exhibit "A" attached hereto and made a part hereof for all purposes, together
with all improvements located thereon.
As consideration for (a) the conveyance of the Property, (b) the
conveyance of the personal property described herein, and (c) the assignments
contained herein, the Purchaser paid the sum of TEN AND NO/100 DOLLARS ($10.00)
and other good and valuable consideration to the Seller.
NOW, THEREFORE, for the consideration above specified, the receipt and
sufficiency of which are expressly confessed and acknowledged:
1. The Seller has GRANTED, CONVEYED, SOLD, TRANSFERRED, SET-OVER and
DELIVERED, and by these presents does hereby GRANT, CONVEY, SELL, TRANSFER,
SET-OVER and DELIVER unto the Purchaser, all furniture, fixtures, inventory,
equipment, appliances and other personal property of whatever kind or character
now or hereafter owned by Seller and attached to, installed, located or used
in, on or about, or in connection with the operation use or enjoyment of, the
Property, including but not limited to furnishings, drapes, floor coverings,
televisions, clock-radios, saleable food and non- alcoholic beverage inventory,
food service equipment and supplies, flatware, china, glassware, cooking
utensils and equipment, linens, cleaning equipment and supplies, computers and
software used in the operation of the Property, heating, lighting,
refrigeration, plumbing, ventilating, incinerating, communication, electrical,
dish washing, laundry, and air conditioning equipment, window screens, storm
windows, pylon and other signs, recreational equipment, shuttle buses and other
vehicles, service vehicles, disposals, sprinklers, hoses, tools and lawn
equipment (the "Personal Property"), including without limiting the generality
of the foregoing, all items of personal property described on Exhibit "B"
attached hereto and made a part hereof, to have and to hold, all and singular,
the Personal Property unto the Purchaser forever. Seller certifies that the
list of Personal Property attached hereto as Exhibit "B" is true, correct and
complete.
2. The Seller has ASSIGNED, TRANSFERRED and SET-OVER and by these
presents does ASSIGN, TRANSFER and SET-OVER unto the Purchaser all of its
right, title and interest in and to those certain maintenance agreements,
service agreements, supply contracts, leases, warranties, guarantees, permits,
rights of use and licenses and contracts held by the Seller, which pertain to
the buildings, improvements, fixtures, personalty and/or other properties
comprising the Property and/or
<PAGE> 28
Personal Property ("Miscellaneous Contracts"), contracts and leases, and to the
extent the permits and licenses are transferable, including, without limiting
the generality of the foregoing, all items and matters described in Exhibit "C"
attached hereto and made a part hereof. Seller certifies that the matters set
forth on Exhibit "C" are true, correct and complete. Purchaser hereby assumes
all obligations arising from and after the date hereof under those
Miscellaneous Contracts set forth on Exhibit "C".
3. The Seller has ASSIGNED, TRANSFERRED and SET-OVER, and by these
presents does ASSIGN, TRANSFER and SET-OVER unto the Purchaser, all right,
title and interest of the Seller, if any, in the telephone number or telephone
numbers used in connection with the operation of the Property, together with
all telephone directory advertising in connection therewith.
The Seller covenants and agrees that:
(a) The Seller does hereby bind itself to WARRANT and FOREVER DEFEND title
to the Personal Property unto the Purchaser, against the lawful claims and
demands of all persons whomsoever.
(b) The Seller does hereby indemnify the Purchaser from and against all
liability, loss, damage, cost and expense, including reasonable attorneys'
fees, which the Purchaser may suffer or incur by reason of any act of Seller or
cause of action occurring or accruing prior to the execution hereof and arising
out of the ownership and/or operation of the Personal Property and/or the
Miscellaneous Contracts prior to the date hereof.
(c) The Seller will execute and deliver to Purchaser such documents or
instruments as may be required or requested by parties to the Miscellaneous
Contracts in connection with the transfer or agreement of the same to the
extent the same does not require Seller to incur additional liability.
(d) The Seller will execute and deliver to the Purchaser such documents or
instruments as may be required or requested by the telephone company providing
service to the Property in connection with the transfer of the telephone number
or telephone numbers, together with all telephone directory advertising, used
by the Seller or the agents of the Seller in connection with the operation of
the Property.
This Blanket Conveyance, Bill of Sale and Assignment constitutes the
entire agreement between the Seller and the Purchaser pertaining to the
Personal Property and other properties or rights assigned herein and supersedes
all prior and contemporaneous agreements and understandings of the Seller and
the Purchaser in connection therewith.
This Blanket Conveyance, Bill of Sale and Assignment and the
provisions herein contained shall be binding upon and inure to the benefit of
the Purchaser and the Seller and their respective successors and assigns.
<PAGE> 29
EXECUTED effective as of the ____ day of _____________________, 1997.
SELLER:
,
---------------------------------------
a
-------------------------------------
By:
-----------------------------------
Its:
----------------------------------
PURCHASER:
,
---------------------------------------
a Delaware Corporation
By:
-----------------------------------
Its:
----------------------------------
<PAGE> 1
EXHIBIT 11.1
BRISTOL HOTEL COMPANY
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
PER SHARE
NET EARNINGS SHARES AMOUNT
------------ ---------- ---------
($ in thousands)
<S> <C> <C> <C>
For the year ended December 31, 1997:
Income before extraordinary item
per share .............................. $ 33,214 37,359,364 $ 0.89
Effect of options ......................... -- 972,938
---------- ----------
Income before extraordinary item per
share, assuming dilution ............... $ 33,214 38,332,302 $ 0.87
========== ==========
Net income per share ...................... $ 20,473 37,359,364 $ 0.55
Effect of options ......................... -- 972,938
---------- ----------
Net income per share, assuming dilution ... $ 20,473 38,332,302 $ 0.53
========== ==========
For the year ended December 31, 1996:
Income before extraordinary item
per share .............................. $ 17,749 24,848,760 $ 0.71
Effect of options ......................... -- 677,653
---------- ----------
Income before extraordinary item per
share, assuming dilution ............... $ 17,749 25,526,413 $ 0.70
========== ==========
Net income per share ...................... $ 17,749 24,848,760 $ 0.71
Effect of options ......................... -- 677,653
---------- ----------
Net income per share, assuming dilution ... $ 17,749 25,526,413 $ 0.70
========== ==========
For the 11 months ended December 31, 1995:
Income before extraordinary item
per share .............................. $ 4,969 17,857,936 $ 0.28
Effect of options ......................... -- 51,019
---------- ----------
Income before extraordinary item per
share, assuming dilution ............... $ 4,969 17,908,955 $ 0.28
========== ==========
Net income per share ...................... $ 3,061 17,857,936 $ 0.17
Effect of options ......................... -- 51,019
---------- ----------
Net income per share, assuming dilution ... $ 3,061 17,908,955 $ 0.17
========== ==========
</TABLE>
Earnings per share have been retroactively adjusted for the effect of stock
splits.
E-1
<PAGE> 1
COMPANY SUBSIDIARIES
AS OF
12/31/97
- --------------------------------------------------------------------------------
ACTIVE ENTITIES:
- --------------------------------------------------------------------------------
AIRPORT UTILITIES, INC.
- --------------------------------------------------------------------------------
BHAC CANADA INC.
- --------------------------------------------------------------------------------
BHMC CANADA INC.
- --------------------------------------------------------------------------------
BRISTOL ACQUISITION BEVERAGE COMPANY
- --------------------------------------------------------------------------------
BRISTOL CALIFORNIA COMPANY
- --------------------------------------------------------------------------------
BRISTOL CHAT-LEM, INC.
- --------------------------------------------------------------------------------
BRISTOL BOSTON GOVERNMENT CENTER, INC.
- --------------------------------------------------------------------------------
BRISTOL HHCL COMPANY
- --------------------------------------------------------------------------------
BRISTOL HOSPITALITY BEVERAGE COMPANY
- --------------------------------------------------------------------------------
BRISTOL HOSPITALITY COMPANY
- --------------------------------------------------------------------------------
BRISTOL HOSPITALITY HOLDING COMPANY
- --------------------------------------------------------------------------------
BRISTOL HOTEL ASSET COMPANY
- --------------------------------------------------------------------------------
BRISTOL HOTEL BEVERAGE COMPANY
- --------------------------------------------------------------------------------
BRISTOL HOTEL COMPANY
- --------------------------------------------------------------------------------
BRISTOL HOTEL MANAGEMENT CORPORATION
- --------------------------------------------------------------------------------
BRISTOL HOTEL OPERATING COMPANY
- --------------------------------------------------------------------------------
BRISTOL HOUSE CLUB
- --------------------------------------------------------------------------------
BRISTOL HTS COMPANY
- --------------------------------------------------------------------------------
BRISTOL IP COMPANY
- --------------------------------------------------------------------------------
BRISTOL LODGING BEVERAGE COMPANY
- --------------------------------------------------------------------------------
BRISTOL LODGING COMPANY
- --------------------------------------------------------------------------------
BRISTOL LODGING HOLDING COMPANY
- --------------------------------------------------------------------------------
BRISTOL MILPITAS, INC.
- --------------------------------------------------------------------------------
BRISTOL PENNSYLVANIA COMPANY
- --------------------------------------------------------------------------------
BRISTOL PHILADELPHIA, INC.
- --------------------------------------------------------------------------------
BRISTOL PLANO CLUB
- --------------------------------------------------------------------------------
BRISTOL SALT LAKE, INC.
- --------------------------------------------------------------------------------
BRISTOL SLC MANAGEMENT COMPANY
- --------------------------------------------------------------------------------
BRISTOL ST. LOUIS COMPANY
- --------------------------------------------------------------------------------
BRISTOL THOMAS CIRCLE, INC.
- --------------------------------------------------------------------------------
CAFE BARRITZ
- --------------------------------------------------------------------------------
DOWNTOWN TRENTON CORPORATION
- --------------------------------------------------------------------------------
ENDLEASE, INC.
- --------------------------------------------------------------------------------
GLENJON, INC.
- --------------------------------------------------------------------------------
HARVEY HOTEL DFW, INC.
- --------------------------------------------------------------------------------
HARVEY HOTEL MANAGEMENT CORPORATION
- --------------------------------------------------------------------------------
HARVEY HOTEL PURCHASING COMPANY
- --------------------------------------------------------------------------------
HARVEY HOTELS FINANCING I, INC.
- --------------------------------------------------------------------------------
HARVEY HOTELS FINANCING II, INC.
- --------------------------------------------------------------------------------
HARVEY HOTELS GENPAR, INC.
- --------------------------------------------------------------------------------
HARVEY HOTELS LIMPAR, INC.
- --------------------------------------------------------------------------------
HARVEY'S BAR/REMINGTON'S
- --------------------------------------------------------------------------------
HH LAND COMPANY GENPAR, INC.
- --------------------------------------------------------------------------------
<PAGE> 2
COMPANY SUBSIDIARIES
AS OF
12/31/97
- --------------------------------------------------------------------------------
HOUSTON INNS SERVICE CO.
- --------------------------------------------------------------------------------
HOWLETT ENTERPRISES, INC.
- --------------------------------------------------------------------------------
LIMITED SERVICE INNS, INC. OF MISSISSIPPI
- --------------------------------------------------------------------------------
MARSHALL MOTELS, INC.
- --------------------------------------------------------------------------------
NATIONAL INNS, INC.
- --------------------------------------------------------------------------------
PENROD CLUB
- --------------------------------------------------------------------------------
PHILADELPHIA CENTER, INC.
- --------------------------------------------------------------------------------
REDNOR, INC.
- --------------------------------------------------------------------------------
SOLO'S
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INACTIVE COMPANIES:
- --------------------------------------------------------------------------------
AUSTIN INNKEEPERS, INC.
- --------------------------------------------------------------------------------
UNITED INNS, INC. OF TENNESSEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACTIVE PARTNERSHIPS AND JOINT VENTURES:
- --------------------------------------------------------------------------------
CENTER CITY HOTEL ASSOCIATES
- --------------------------------------------------------------------------------
HARVEY HOTEL COMPANY, LTD.
- --------------------------------------------------------------------------------
HARVEY HOTELS INVESTMENTS I, LTD.
- --------------------------------------------------------------------------------
HARVEY HOTELS INVESTMENTS II, LTD.
- --------------------------------------------------------------------------------
HHHC GENPAR, L.P.
- --------------------------------------------------------------------------------
HI CHAT-LEM/IOWA-NEW ORLEANS JOINT VENTURE
- --------------------------------------------------------------------------------
HI/THOMAS CIRCLE VENTURE
- --------------------------------------------------------------------------------
MILPITAS JOINT VENTURE
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 86,167
<SECURITIES> 103
<RECEIVABLES> 33,564
<ALLOWANCES> (2,259)
<INVENTORY> 8,286
<CURRENT-ASSETS> 135,056
<PP&E> 1,515,339
<DEPRECIATION> (76,172)
<TOTAL-ASSETS> 1,666,638
<CURRENT-LIABILITIES> 63,748
<BONDS> 708,864
0
0
<COMMON> 436
<OTHER-SE> 606,935
<TOTAL-LIABILITY-AND-EQUITY> 1,666,638
<SALES> 0
<TOTAL-REVENUES> 504,518
<CGS> 0
<TOTAL-COSTS> 342,482
<OTHER-EXPENSES> 64,140
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,591
<INCOME-PRETAX> 55,221
<INCOME-TAX> 22,007
<INCOME-CONTINUING> 33,214
<DISCONTINUED> 0
<EXTRAORDINARY> (12,741)
<CHANGES> 0
<NET-INCOME> 20,473
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.53
</TABLE>
