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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1996.
REGISTRATION NO. 333-2214
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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WYNDHAM HOTEL CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 7011 75-263-6072
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
2001 BRYAN STREET, SUITE 2300
DALLAS, TEXAS 75201
(214) 863-1000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
JAMES D. CARREKER
CHIEF EXECUTIVE OFFICER
WYNDHAM HOTEL CORPORATION
2001 BRYAN STREET, SUITE 2300
DALLAS, TEXAS 75201
(214) 863-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
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M. CHARLES JENNINGS RICHARD D. TRUESDELL, JR.
LOCKE PURNELL RAIN HARRELL DAVIS POLK & WARDWELL
(A PROFESSIONAL CORPORATION) 450 LEXINGTON AVENUE
2200 ROSS AVENUE, SUITE 2200 NEW YORK, NEW YORK 10017
DALLAS, TEXAS 75201
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 426(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be
used in an offering in the United States of America and Canada (the "U.S.
Prospectus") and one to be used in a concurrent international offering outside
the United States of America and Canada (the "International Prospectus"). The
U.S. Prospectus and the International Prospectus are identical except that they
contain different front and back cover pages. The form of U.S. Prospectus is
included in this registration statement and is followed by those pages to be
used in the International Prospectus that differ from those in the U.S.
Prospectus. Each of the pages for the International Prospectus included in this
registration statement is labeled "Alternate Page for International Prospectus."
<PAGE> 3
WYNDHAM HOTEL CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING
LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
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ITEM
NUMBER CAPTION LOCATION IN PROSPECTUS
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1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................. Facing Page; Cross Reference Sheet;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.......................... Inside Front and Outside Back Cover Pages
of Prospectus; Available Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges..... Prospectus Summary; Risk Factors
4. Use of Proceeds.......................... Prospectus Summary; The Formation and the
Financing Plan; Use of Proceeds;
Capitalization
5. Determination of Offering Price.......... Cover Page; Underwriting
6. Dilution................................. Dilution
7. Selling Security Holders................. Not Applicable
8. Plan of Distribution..................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be
Registered............................. Prospectus Summary; Description of
Capital Stock
10. Interests of Named Experts and Counsel... Not Applicable
11. Information with Respect to Registrant... Prospectus Summary; Risk Factors; The
Formation and the Financing Plan; Use
of Proceeds; Dilution; Dividend Policy;
Capitalization; Pro Forma Combined
Financial Data; Selected Combined
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Relationships and
Transactions; Principal Stockholders;
Shares Eligible for Future Sale;
Description of Indebtedness;
Description of Capital Stock;
Underwriting; Index to Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ Not Applicable
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<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 14, 1996
PROSPECTUS
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[LOGO] 3,350,000 SHARES
WYNDHAM HOTEL CORPORATION
COMMON STOCK
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All of the shares of Common Stock offered hereby are being sold by Wyndham
Hotel Corporation (the "Company"). Of the 3,350,000 shares of Common Stock
offered hereby, 2,680,000 shares are being offered in the United States and
Canada by the U.S. Underwriters (as defined herein), and 670,000 shares are
being offered in a concurrent international offering outside the United States
and Canada by the Managers (as defined herein) (collectively, the "Offering").
Prior to the Offering, there has not been a public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $14.00 and $16.00 per share. See "Underwriting" for
information relating to the factors considered in determining the initial public
offering price.
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "WYN" subject to official notice of issuance.
Concurrently with the Offering and as part of its Financing Plan (as
defined herein), the Company is offering $100,000,000 aggregate principal amount
of % Senior Subordinated Notes due 2006 by a separate prospectus (the "Debt
Offering," and together with the Offering, the "Offerings"). The consummation of
each of the Offerings is conditioned upon the consummation of the other, and
will occur simultaneously. See "The Formation and the Financing Plan."
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SEE "RISK FACTORS" BEGINNING ON PAGE 13 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS TO BE CONSIDERED BY INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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Per Share $ $ $
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Total(3) $ $ $
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(1) For information regarding indemnification of the U.S. Underwriters and
the Managers, see "Underwriting."
(2) Before deducting expenses estimated at $ , which are payable by
the Company.
(3) The Company has granted the several U.S. Underwriters a 30-day option to
purchase up to 502,500 additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised
in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively.
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These shares of Common Stock are being offered by the several U.S.
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that certificates for the
shares of Common Stock offered hereby will be available for delivery on or about
, 1996 at the offices of Smith Barney Inc., 333 West 34th Street,
New York, New York 10001.
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SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MONTGOMERY SECURITIES
BT SECURITIES CORPORATION
, 1996.
<PAGE> 5
[PHOTOS]
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 6
ONE BRAND. THREE UPSCALE PRODUCTS.
Wyndham Hotel Corporation offers three distinct full service hotel products
under a single brand name: Wyndham Hotels, Wyndham Garden Hotels and Wyndham
Resorts. Each is tailored to serve the needs of Wyndham's core upscale
customers in one of three specific markets: urban, suburban and resorts.
[Three multicolored rings in concentric format with
overlap identifying Wyndham's core customer.]
Wyndham has focused on developing a high quality brand name. In 1995,
ninety-four percent of Wyndham guests surveyed indicated that they would return
to that Wyndham hotel on their next trip to the same city.
WYNDHAM HOTELS
Wyndham Harbour Island Hotel
[PHOTO OF WYNDHAM HARBOUR ISLAND HOTEL]
Wyndham Hotels are large hotels with an average of 400 rooms, extensive meeting
space for group customers, and a full range of guest services and amenities.
WYNDHAM RESORTS
Wyndham Rose Hall Resort
[PHOTO OF WYNDHAM ROSE HALL HOTEL]
Wyndham Resorts, located domestically and on four Caribbean islands, are full
service destination resorts targeted at upscale leisure and incentive
travelers.
WYNDHAM GARDEN HOTELS
Wyndham Garden Hotel-North Phoenix Wyndham Garden Hotel-Waltham
[PHOTO OF WYNDHAM GARDEN [PHOTO OF WYNDHAM
HOTEL-NORTH PHOENIX] GARDEN HOTEL-WALTHAM]
With guest services, hotel finishings and landscaping comparable to Wyndham
Hotels, Wyndham Garden Hotels are designed to provide a guest experience
similar to that enjoyed at Wyndham Hotels, but at a price that is competitive
in suburban markets.
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
<PAGE> 7
SUPERIOR PERFORMANCE
AND GROWTH
NUMBER OF HOTEL ROOMS In 1994 and 1995, Wyndham grew its brand
at a faster rate than any other upscale
hotel company, as measured by the number
[GRAPH showing number of Wyndham brand of Wyndham brand rooms added in
hotel rooms in 1993, 1994 and 1995 as comparison with those added by other
10,660, 11,462 and 16,391, upscale hotel companies (according to
respectively.] data compiled by Smith Travel Research).
In 1993, 1994 and 1995, Wyndham's REVPAR*
revenue per available room has outpaced
the upscale segment of the lodging
industry. [GRAPH showing REVPAR for all Company
hotels in 1993, 1994 and 1995 of $52.45,
$58.84 and $60.96, respectively,
compared to REVPAR of $49.71, $52.48 and
$54.97, respectively, for the upscale
segment of the lodging industry during
such periods.]
F & B MARGINS* In 1993, 1994 and 1995, Wyndham's food
and beverage profit margin outpaced the
upscale full service segment of the
[GRAPH showing food and beverage lodging industry.
profit margin for all Company hotels
in 1993, 1994 and 1995 of 25%, 25% and
26%, respectively, compared to food and
beverage profit margin of 17%, 18% and
23%, respectively, for the upscale full
service segment of the lodging industry
during such periods.]
* Although revenue per available room and food and beverage profit margin data
are not determined in accordance with generally accepted accounting
principles, the Company believes these measures are useful for comparing
operating performance within the lodging industry.
** Industry source: Smith Travel Research.
<PAGE> 8
THE RIGHT WAY-THE WYNDHAM WAY
[MAP of the United States showing the locations of the Company's hotels]
HUB-AND-SPOKE STRATEGY
In some markets, the Company seeks to cluster Wyndham Garden Hotels in a
"hub-and-spoke" distribution pattern around one or more Wyndham Hotels in order
to achieve operating and marketing efficiencies and enhance local name
recognition.
[MAP of Los Angeles showing [MAP of Phoenix showing [MAP of Chicago showing
the location of the the location of the the location of the
Company's hotels in Company's hotels in Company's hotels in
this market] this market] this market]
LOS ANGELES PHOENIX CHICAGO
<PAGE> 9
FLEXIBLE GROWTH STRATEGY
REDEVELOPMENT
Wyndham has been successful at acquiring well-located properties requiring
extensive renovation and redeveloping them as Wyndham Garden Hotels.
[PHOTO SHOWING WYNDHAM GARDEN HOTEL-WALTHAM BEFORE AND AFTER DEVELOPMENT]
[CAPTION]
Since January 1994, Wyndham has added 14 Wyndham Garden Hotels through its
redevelopment and conversion program.
Before and after redevelopment, Wyndham Garden Hotel - Waltham.
MANAGEMENT CONTRACTS
Wyndham believes its strong operating performance enhances its ability to
obtain new management contracts as a significant source of growth.
[PHOTO OF WYNDHAM EMERALD PLAZA HOTEL-SAN DIEGO]
[CAPTION]
Wyndham Emerald Plaza Hotel - San Diego
ACQUISITIONS/JOINT VENTURES
Wyndham's growth strategy also includes selective acquisitions and/or joint
ventures of properties suitable for conversion to the Wyndham brand.
<PAGE> 10
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and combined financial statements including the notes thereto
appearing elsewhere in this Prospectus. Except as otherwise indicated, the
information contained in this Prospectus assumes (i) the completion of the
formation of the Company and related transactions (the "Formation," as more
specifically defined under "The Formation and the Financing Plan -- The
Formation") to be effected prior to or substantially simultaneous with the
closing of the sale and purchase of the shares contemplated hereby, (ii) no
exercise of the U.S. Underwriters' overallotment option, (iii) the exercise of
General Electric Pension Trust's ("General Electric") option to purchase from
the Company 537,634 shares of Common Stock contemporaneously with the closing of
the Offering at the initial public offering price less underwriting discounts
and commissions (representing up to an estimated 2.8% of the Company's
outstanding shares of Common Stock following the exercise of the option) (the
"GE Option") and (iv) an initial public offering price of $15.00 per share
(which is the midpoint of the range set forth on the cover page of this
Prospectus and which affects the number of shares of Common Stock to be received
by various parties in the Formation and the calculation of proceeds from the
Offering). See "The Formation and the Financing Plan," "Underwriting" and
"Principal Stockholders." Unless the context otherwise requires, the term
"Company" or "Wyndham" when used in this Prospectus refers to Wyndham Hotel
Corporation, a Delaware corporation, and its predecessors and combined
subsidiaries. As used herein, the term "upscale" means the segment of the
lodging industry classified as such by Smith Travel Research in its industry
reports, which consists of hotels with average daily room rates (total revenues
divided by the total number of rooms occupied) between the 70th and 85th
percentile of the average daily room rates of all hotels in the U.S. markets in
which the Company's Portfolio hotels operate. For information with respect to
certain other defined terms used herein, see "Glossary."
THE COMPANY
Wyndham Hotel Corporation is a leading national hotel company operating
upscale hotels primarily under the Wyndham brand name. Wyndham hotels are
located in 22 states and the District of Columbia as well as on 4 Caribbean
islands, and compete with national hotel chains such as Marriott, Hyatt and
Hilton. The Company offers three distinct full service hotel products under the
Wyndham brand designed to serve its core upscale customers in urban, suburban
and select resort markets. At April 15, 1996, the Company's hotel portfolio
consisted of 65 hotels operated by the Company and 3 franchised hotels (the
"Portfolio"). In 1995, the Company generated $139.6 million in revenues and
$16.9 million in operating income on a pro forma basis after giving effect to
the Formation of the Company described elsewhere in this Prospectus.
Wyndham has a proven track record of consistent growth. The Company has
increased the size of its Portfolio in each year since 1988. Over the last two
calendar years, Wyndham grew its brand at a faster rate than any other upscale
hotel company, as measured by the number of branded rooms added, growing from
10,660 Wyndham hotel rooms at December 31, 1993 to 16,391 at December 31, 1995.
This represents a compound annual growth rate in branded hotel rooms of 24%.
This growth was achieved through a combination of hotel management contracts,
"like new" renovations of acquired hotels, other acquisitions, new construction
and franchising. The Company's business plan emphasizes continued pursuit of its
diverse growth strategy.
STRONG BRAND IMAGE
Wyndham has focused on developing a high quality, clear brand name that is
nationally recognized in the upscale hotel market, and on earning the loyalty of
its core upscale customers: individual business travelers, business groups and
other group customers, and leisure travelers. Because Wyndham has operating
control over more than 95% of the hotels operated under the Wyndham brand name,
it is able to deliver consistently high quality products and services throughout
its hotel system and generate the marketing programs necessary to maintain the
quality associated with the Wyndham name. According to written guest surveys
conducted by Wyndham at its hotels during 1995, 91% of Wyndham guests surveyed
rated the overall quality of Wyndham hotel products and services good or
excellent, and 94% of the guests surveyed indicated that they would return to
that Wyndham hotel on their next trip to the same city. The Company believes
that growing national
3
<PAGE> 11
recognition of the Wyndham brand, together with the quality and efficiency of
Wyndham hotel operations, has facilitated the Company's historical growth and
will enhance its ability to realize its future growth objectives.
MULTIPLE UPSCALE HOTEL PRODUCTS
Wyndham offers three distinct full service hotel products under a single
brand name that are tailored to urban, suburban and select resort markets, the
primary markets that serve its core upscale customers.
- Wyndham Hotels. In urban markets, the Company operates or franchises 20
large upscale hotels under the Wyndham brand ("Wyndham Hotels"), which
contain an average of approximately 400 hotel rooms, generally between
15,000 and 250,000 square feet of meeting space, and a full range of
guest services and amenities. Wyndham Hotels are targeted principally at
business groups and other group customers, as well as individual business
travelers.
- Wyndham Garden Hotels. In suburban markets, Wyndham operates 38 mid-size
hotels under the name "Wyndham Garden"(R) ("Wyndham Garden Hotels"),
which were created by the Company to cater to individual business
travelers and small business groups. With guest services, hotel
finishings and landscaping comparable to Wyndham Hotels, Wyndham Garden
Hotels are designed to provide a guest experience similar to that enjoyed
at Wyndham Hotels, but at a price that is competitive in suburban
markets. The Company locates Wyndham Garden Hotels primarily near
suburban business centers and airports and, where possible, seeks to
cluster these hotels in a "hub-and-spoke" distribution pattern around one
or more Wyndham Hotels in order to achieve operating and marketing
efficiencies and enhance local name recognition. Wyndham Garden Hotels
are full service upscale hotels containing between approximately 150 and
225 hotel rooms that offer a package of services and amenities focused on
the needs of the business traveler, including generally between 1,500 and
5,000 square feet of meeting space, restaurants that serve three meals a
day, exercise rooms, and laundry and room service.
- Wyndham Resorts. Wyndham's Portfolio also includes six resort hotels
("Wyndham Resorts") that are full service destination resorts targeted at
upscale leisure and incentive travelers and are located both domestically
and on four Caribbean islands. Through Wyndham Resorts, the Company is
able to offer guest rewards and other cross-promotional benefits to its
domestic customers, thus improving Wyndham's competitiveness and brand
loyalty.
STABLE PORTFOLIO OF OWNED, LEASED AND MANAGED HOTELS
Wyndham believes that the stability of its Portfolio of owned, leased and
managed hotels provides a strong foundation for the implementation of its growth
strategy. Wyndham's Portfolio consists of 6 owned hotels, 12 leased hotels, 47
managed hotels and 3 franchised hotels. Of the Company's 12 leased hotels, 11
are leased from an unaffiliated third party pursuant to one or more long-term
leases with an initial term of approximately 17 years and renewals for 48
additional years that the Company may elect to exercise. The remaining leased
hotel is leased from an unaffiliated third party pursuant to a lease with a
remaining term of 22 years. The average remaining term at April 15, 1996 of the
Company's 43 management contracts for Wyndham brand hotels was 13.6 years
(including renewals that the Company may elect to exercise), with shorter terms
for 3 of the Company's 4 non-branded management contracts. See
"Business -- Management Contracts." The Company believes that the stability of
its management contracts is enhanced by the fact that 15 of the contracts relate
to hotels in which Mr. and Mrs. Trammell Crow, various descendants of Mr. and
Mrs. Trammell Crow and various corporations, partnerships, trusts and other
entities beneficially owned or controlled by such persons (collectively, the
"Crow Family Members") have interests. Crow Family Members will own 48.9% of the
outstanding Common Stock following this Offering. Sixteen additional management
contracts relate to hotels owned by entities (together with certain affiliates,
"Bedrock") affiliated with the Hampstead Group L.L.C. ("Hampstead"), which will
own 12.3% of the outstanding Common Stock following this Offering. See "Risk
Factors -- Dependence on Management Contracts and on Certain Hotel Owners," "The
Formation and the Financing Plan -- The Formation" and "Principal Stockholders."
For information with respect to the anticipated termination of management
contracts relating to two of the
4
<PAGE> 12
Company's Portfolio hotels, see "Business -- Summary of Hotels" and
"-- Management Contracts." For additional information with respect to two of the
Company's franchised hotels, see "Business -- Summary of Hotels" and
"-- Franchising Program."
OPERATING AND FINANCIAL PERFORMANCE
The Company seeks to maximize revenues through its comprehensive marketing
strategy and the delivery of high quality accommodations and hotel services that
result in satisfied, loyal hotel guests. The Company believes that this strategy
has resulted in strong operating performance. During 1995, the average occupancy
rates, average daily room rates (total room revenues divided by the total number
of rooms occupied) ("ADR") and revenue per available room (ADR multiplied by the
average occupancy percentage) ("REVPAR") for Portfolio hotels were 69%, $88.79
and $60.96, respectively, compared with an average during this period of 68%,
$80.36 and $54.97, respectively, in the upscale segment of the lodging industry.
See "Business -- The Company's Hotels." During the three months ended March 31,
1996 (the "1996 First Quarter"), average occupancy rates, ADR and REVPAR for
Portfolio hotels were 67%, $96.04 and $64.51, respectively, compared with an
average during this period of 64%, $85.06 and $54.69, respectively, in the
upscale segment of the lodging industry. In 1995 and the 1996 First Quarter,
respectively, REVPAR for Portfolio hotels outperformed the upscale segment of
the lodging industry by 11% and 18%, respectively. The Company believes that it
has the opportunity to improve its REVPAR performance through, among other
things, the continued maturation of 10 Wyndham Garden Hotels opened in 1995.
The Company's operating strengths have yielded consistently strong
financial results. The Company believes that its experience as a hotel owner
makes it a better hotel manager by keeping it focused on controlling each
element of operating expenses, which is essential to achieving attractive
returns for both the Company's hotels and managed hotels. See
"Business -- Operating Strategy." The gross operating profit margins for the 30
Wyndham brand hotels that have been operated by the Company since January 1,
1993 ("Comparable Hotels") for 1993, 1994 and 1995 were 32%, 34% and 36%,
respectively, and for the three months ended March 31, 1995 (the "1995 First
Quarter") and the 1996 First Quarter were 37%. In comparison, the average for
the upscale full service segment of the lodging industry was 30%, 31% and 33%,
respectively, during 1993, 1994 and 1995. (Gross operating profit margin
statistics for the lodging industry are not yet available for 1996.) Gross
operating profit per available room for Comparable Hotels in 1993, 1994 and 1995
was $9,612, $11,417 and $12,547, respectively, compared to the average for the
upscale full service segment of the lodging industry of $8,397, $9,364 and
$12,478, respectively, during 1993, 1994 and 1995. The Company's gross operating
profit per available room represents a premium to the upscale full service
segment of 14%, 22% and .1%, respectively, in 1993, 1994 and 1995. For a
presentation of certain financial data for the Company's entire hotel Portfolio,
see "-- Summary Combined Financial and Other Data."
The Company has chosen a Comparable Hotel data set based on Wyndham brand
hotel properties operated by the Company since January 1, 1993 because the
Company believes that these 30 hotels have been operated by the Company for a
sufficient period of time to provide meaningful period-to-period comparisons and
that these hotels more fully reflect the Company's operating capabilities. The
Company's Portfolio contains a significant number of newly opened or renovated
Wyndham brand hotels, which typically begin operations with lower occupancy
rates, ADR, REVPAR and margins than mature hotels. While the period of time
required to achieve improved operating results from the application of Wyndham's
operating standards and integration into Wyndham's programs varies depending on
the unique characteristics of a given hotel and the market in which it operates,
the Company has found that during the third full year under Wyndham management a
hotel will fully reflect the Company's operating capabilities. In addition, the
Company believes that Comparable Hotel data provide a more meaningful comparison
to the lodging industry, which the Company believes has a significantly smaller
percentage of newly opened or renovated hotels than the Company. There can be no
assurance that the Company's hotels opened or renovated subsequent to January 1,
1993 will achieve occupancy rates, ADR, REVPAR or operating results comparable
to the Comparable Hotels.
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<PAGE> 13
COMPREHENSIVE MARKETING STRATEGY
Wyndham has a full complement of sales and marketing capabilities designed
to maximize hotel revenues and brand awareness. The Company's direct sales
program at the hotel level, implemented by a sales force of almost 500
representatives, is designed to "pull" local business into each hotel and in
1995 accounted for over 60% of room revenues at Wyndham brand hotels. The
Company also has a national sales team that focuses on major corporate, group
and association accounts and seeks to "push" business into Wyndham hotels on a
nationwide basis. Over 35% of Wyndham's hotel room revenues in 1995 were booked
through Wyndham's central reservations system, which features a single telephone
number for all Wyndham brand hotels (800-WYNDHAM). See "Business -- Customers
and Marketing."
DEMONSTRATED GROWTH STRATEGY
The Company intends to continue focusing on both internal
growth -- enhancing the revenues, cash flow and profitability of its existing
hotels, and external growth -- increasing the number of hotels in its Portfolio.
The Company believes that the primary factors contributing to internal growth
include (i) revenue increases resulting from continuing improvements in the
lodging industry overall and continuing maturation of 23 hotels opened in the
past 2 years (including 12 Wyndham Garden Hotels), and (ii) improved operating
margins resulting from operating leverage and Wyndham's continued emphasis on
controlling operating expenses. The Company's internal growth strategy has
produced increases in Comparable Hotel REVPAR of 9.3% and 8.7% in 1994 and 1995,
respectively, and has produced an increase in Comparable Hotel gross operating
profit margins from 32% in 1993 to 36% in 1995. The Company's Comparable Hotel
REVPAR in the 1996 First Quarter increased 7.6% over the 1995 First Quarter, and
the Comparable Hotel gross operating profit margin was 37% in both the 1995
First Quarter and the 1996 First Quarter.
The Company's external growth strategy is to continue to increase the
number of Wyndham brand hotels in the upscale full service segment of the
lodging industry. The near-term focus of the Company's external growth strategy
will be to increase the Wyndham Portfolio through additional management
contracts, "like new" renovations of acquired properties, other acquisitions and
joint ventures. The Company also will consider franchising and hotel
construction, depending on market conditions. In addition, the Company expects
to continue its evaluation of other new hotel products that may be offered under
the Wyndham brand or operated by the Company under a different name. See
"-- Planned Portfolio Additions." In executing this growth strategy, the Company
will continue to rely on its senior executive officers (James D. Carreker,
Leslie V. Bentley, Eric A. Danziger, Anne L. Raymond and Stanley M. Koonce, Jr.)
(the "Senior Executive Officers"), who have an average of over 7 years with the
Company and approximately 14 years in the lodging industry, and who have
successfully developed, operated and managed hotel properties in various phases
of the industry cycle.
The Company's strategic business relationships with Crow Family Members and
Bedrock, which collectively will own approximately 61.2% of the Company's Common
Stock following this Offering, have played an important role in the Company's
growth to date. The Company believes that these and other business relationships
will facilitate future growth by providing potential management contract,
acquisition, renovation and development opportunities. See "Business -- Growth
Strategy." The Company believes that its demonstrated ability to achieve both
internal and external growth will help attract third party debt and equity
capital to help fund the growth of the Company's Portfolio. In addition, the
Company believes that its future growth potential will be enhanced by an
improved capital structure and greater access to capital markets following this
Offering. In addition to cash from operations and the net proceeds of this
Offering, the Company anticipates that it will have additional capital resources
through the consummation of the $100.0 million Debt Offering contemporaneously
with the closing of this Offering and the closing of a $100.0 million revolving
credit facility, although there can be no assurance that the Company will enter
into the revolving credit facility. See "The Formation and the Financing Plan"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
6
<PAGE> 14
ATTRACTIVE LODGING INDUSTRY FUNDAMENTALS
The lodging industry as a whole has experienced four consecutive years in
which the growth in room demand has exceeded the growth in room supply. In 1995,
the percentage growth in demand for hotel rooms was nearly double the percentage
growth in supply (3.0% versus 1.6%), and Coopers & Lybrand L.L.P.'s Hospitality
Directions (January 1996) ("Coopers & Lybrand Hospitality Directions") estimates
that the percentage growth in demand will exceed the percentage growth in supply
by .7% and .5% in 1996 and 1997, respectively. The excess of demand growth over
supply growth has led to industry-wide increases in occupancy percentages and
ADR, with occupancy rising to 65.5% in 1995 from 64.7% in 1994, and ADR
increasing 4.8% in 1995 over 1994 levels. Coopers & Lybrand Hospitality
Directions indicates that occupancy will continue to increase in 1996 and 1997
to 66.3% and 66.7%, respectively, and that ADR will increase 4.5% in 1996 over
1995 levels and 4.4% in 1997 over 1996 levels. Historical industry performance,
however, may not be indicative of future results, and there can be no assurance
that such projections will be realized. See "Business -- The Lodging Industry."
The Company believes that its growth prospects are enhanced by the
forecasts for continuing improvements in the lodging industry. While no
assurance can be given as to future conditions in the lodging industry, the
Company believes that increases in room supply in the upscale segment continue
to be limited because of certain barriers to entry in that segment.
Unless otherwise noted, all statistics set forth in this Prospectus
relating to the lodging industry (other than Wyndham statistics) are from, or
have been derived from, information published or provided by Smith Travel
Research, an industry research organization. Smith Travel Research has not
provided any form of consultation, advice or counsel regarding any aspect of the
proposed Offerings, and Smith Travel Research is in no way associated with the
proposed Offerings.
PLANNED PORTFOLIO ADDITIONS
In the past four months, the Company has added three Wyndham brand hotels
to its Portfolio. The Company executed a franchise agreement in January 1996 for
an existing hotel in Breckenridge, Colorado, which opened immediately as The
Village at Breckenridge -- A Wyndham Resort. In addition, the Company entered
into a management contract in February 1996 for a Wyndham Hotel located in Cedar
Rapids, Iowa, which was converted to the Wyndham brand in March 1996. The
Company also executed a management contract in March 1996 to operate a Wyndham
Garden Hotel in Lexington, Kentucky that was recently acquired by Bedrock.
Wyndham began operating this hotel in March and will convert the hotel to the
Wyndham brand following renovations.
As of April 15, 1996, the Company had entered into management contracts for
four additional hotels, three of which the Company expects to open in 1996 and
one of which the Company expects to open by the first quarter of 1997. These
management contracts relate to one Wyndham Hotel, one Wyndham Garden Hotel, one
Wyndham Resort and one non-branded hotel. Crow Family Members own a majority or
minority interest in three of these hotels and the fourth is owned by Bedrock.
See "Business -- The Company's Hotels -- Hotels under Renovation and
Construction" and "Certain Relationships and Transactions."
On March 5, 1996 the Company entered into a contract with an unaffiliated
third party to purchase the Wyndham Garden Hotel -- Vinings (the "Vinings
Wyndham Garden Hotel"), located in the Atlanta metropolitan area. The Company
has managed this hotel since it was built in 1988. The Company expects that the
total acquisition cost will be $12.9 million, comprised of a cash payment of
$3.2 million and assumption of the existing indebtedness encumbering the
property. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." The purchase contract contains certain contingencies, including the
receipt of certain consents related to the Company's assumption of such
indebtedness. (In the event that such consents are not received, the seller may
require the Company to pay the full purchase price in cash.) There can be no
assurance that the property will be acquired. The transaction, if consummated,
is anticipated to close shortly following the consummation of the Offering.
7
<PAGE> 15
Garden Hotel Associates L.P. ("GHALP") has historically owned 11 Wyndham
Garden Hotels managed by the Company (the "GHALP Properties"). A 30% interest in
GHALP was owned by a partnership owned by certain Crow Family Members and the
Senior Executive Officers and the remaining 70% was held by an unaffiliated
third party. On May 2, 1996, Crow Family Members and the Senior Executive
Officers acquired the remaining 70% ownership interest from the third party for
a purchase price of approximately $29.5 million. The $29.5 million purchase
price was funded from the proceeds of the sale of the GHALP Properties to
Hospitality Properties Trust (including its subsidiaries, "HPT"), a publicly
traded real estate investment trust ("REIT"), for $135.3 million, which
properties were leased back pursuant to one or more long-term leases with an
initial term of approximately 17 years (the "GHALP Lease") to a new partnership
("GHALP II"), the ownership of which mirrors the ownership of GHALP. See "Pro
Forma Combined Financial Data" and "Business -- Long-Term Hotel Leases." As part
of the Formation, the Company will succeed to GHALP II's interest in the GHALP
Lease and continue to manage the hotels. The Company anticipates that in the
future, it may enter into similar transactions whereby it would sell mature
hotel properties to REITs, lease the hotels back and manage them as Wyndham
brand hotels. See "Business -- Growth Strategy -- III. Ability to Execute Growth
Strategy -- Sales of Mature Hotels; Long-Term Leases."
The Company expects that in 1996 it will enter into an agreement with a
partnership owned by Crow Family Members, Trammell Crow Residential and
Greystar, Inc. to provide hotel management, purchasing and technical services to
"extended-stay" hotel properties that will be targeted at corporate travelers
who typically spend a week or more in one location. The properties, which will
be limited service and will not be operated under the Wyndham name, are
currently under development. The Company expects that the first extended stay
hotel properties will commence operations in the last quarter of 1996. See
"Business -- Growth Strategy -- II. Additional Growth Opportunities -- New
Lodging Products."
The Company's principal executive offices are located at 2001 Bryan Street,
Suite 2300, Dallas, Texas 75201, and the Company's telephone number is (214)
863-1000.
THE FINANCING PLAN
Contemporaneously with the Formation, which is described under "The
Formation and the Financing Plan -- The Formation," the Company will implement a
financing plan (the "Financing Plan") in order to fund the cash payments
associated with the Formation, repay certain mortgage and other indebtedness
assumed in connection with the Formation and provide liquidity for the Company's
operating and growth strategies. Under the Financing Plan, the Company intends
to (i) offer 3,350,000 shares of Common Stock in the Offering, and thereby raise
$50.3 million in gross proceeds (assuming an initial public offering price of
$15.00 per share); (ii) concurrently offer $100.0 million of % Senior
Subordinated Notes due 2006 (the "Notes") through the Debt Offering; (iii) enter
into a new $100.0 million revolving credit facility (as further defined under
"Glossary," the "Revolving Credit Facility") with Bankers Trust Company
("Bankers Trust"); (iv) receive a contribution from Bedrock of $10.0 million
(the "Bedrock Contribution") pursuant to the Bedrock Exchange Agreement (as
defined under "The Formation and the Financing Plan -- The Formation"); and (v)
eliminate an estimated $7.5 million of outstanding indebtedness under the
Company's current revolving credit facility upon General Electric's exercise of
the GE Option. See "Description of Indebtedness" and "Principal Stockholders."
Consummation of each of the Offerings is conditioned upon consummation of the
other, although there can be no assurance that the Company will enter into the
Revolving Credit Facility. After applying the proceeds from the Offerings and
the Bedrock Contribution as indicated under "Use of Proceeds" (including funding
the $3.2 million cash portion of the Vinings Wyndham Garden Hotel acquisition
cost and $4.0 million of improvements to the Wyndham Rose Hall Resort), the
Company will have remaining proceeds of approximately $18.4 million. This
amount, together with cash generated from operations and capital available under
the Revolving Credit Facility (the availability of which will be subject to the
terms and financial covenants to be set forth in the agreement relating to the
Revolving Credit Facility (the "Revolving Credit Agreement")), will be available
to fund the Company's operating and growth strategies. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" and "Description of Indebtedness."
8
<PAGE> 16
The following table sets forth the anticipated sources and uses of funds
for the Financing Plan:
<TABLE>
<CAPTION>
(IN MILLIONS)(1)
<S> <C>
Sources of Funds:
Common Stock (gross proceeds derived from the Offering)............. $ 50.3
The Notes (gross proceeds derived from the Debt Offering)........... 100.0
Revolving Credit Facility........................................... 0
Bedrock Contribution................................................ 10.0
-----
Total....................................................... $160.3
=====
Uses of Funds:
Cash funding of Formation........................................... $ 53.9
Repayment of certain mortgage and other indebtedness(2)............. 65.0
Fees and expenses................................................... 15.8
Cash to fund operating and growth strategies(2)(3).................. 25.6
-----
Total....................................................... $160.3
=====
</TABLE>
- ---------------
(1) See "The Formation and the Financing Plan" for more specific information
with respect to the Formation and the Financing Plan.
(2) Included in the repayment of mortgage and other indebtedness is an estimated
$7.5 million of the estimated $15.0 million of indebtedness owing to General
Electric under a Credit Agreement between the Company and General Electric
relating to the Company's current revolving credit facility (the "GE Credit
Agreement"). Under the GE Credit Agreement, as subsequently modified,
General Electric has committed to purchase an estimated 537,634 shares of
Common Stock pursuant to the GE Option at the initial public offering price
(less underwriting discounts and commissions) for an estimated total
purchase price of approximately $7.5 million (which represents the remaining
one-half of the estimated $15.0 million of indebtedness that will be
outstanding under the GE Credit Agreement upon consummation of the
Offerings). In the event the actual public offering price per share of
Common Stock is lower than $13.00 or higher than $17.00, the GE Option will
be terminated and the Company will be required to repay the entire estimated
$15.0 million of indebtedness(unless such price limitation is waived by
General Electric). For additional information with respect to the GE Option,
see "Principal Stockholders."
(3) Does not reflect (i) the intended acquisition from an unaffiliated party the
Vinings Wyndham Garden Hotel shortly following the consummation of the
Offerings, the estimated acquisition cost of which is $12.9 million,
comprised of a cash payment of $3.2 million, which cash payment will be
funded with a portion of the net proceeds of the Offerings, and assumption
of the existing indebtedness encumbering the property or (ii) funding
certain improvements to the Wyndham Rose Hall Resort in the approximate
amount of $4.0 million.
9
<PAGE> 17
THE OFFERING
Common Stock offered
United States and Canadian
offering............................ 2,680,000 shares
International offering............ 670,000 shares
Total..................... 3,350,000 shares
Common Stock to be outstanding after
the Offering(1)..................... 19,204,301 shares
Proposed New York Stock Exchange
Symbol.............................. WYN
Use of proceeds..................... To fund the cash payments associated
with the Formation, repay certain
mortgage and other indebtedness, fund
the cash portion of the acquisition
cost associated with the purchase of a
hotel, fund improvements at a hotel and
provide liquidity for the Company's
operating and growth strategies (see
"Use of Proceeds")
- ---------------
(1) Includes an estimated 537,634 shares of Common Stock to be issued upon
exercise of the GE Option. Excludes (i) 2,133,811 shares of Common Stock
reserved for issuance under the Company's 1996 Long Term Incentive Plan
("Incentive Plan"), of which the Company expects to grant options to
purchase 797,700 shares prior to the date of this Prospectus with exercise
prices equal to the initial public offering price per share and (ii) 50,000
shares of Common Stock reserved for issuance under the Company's Non-
Employee Directors' Retainer Stock Plan ("Retainer Plan"). See
"Management -- 1996 Long Term Incentive Plan," "-- Director Compensation"
and "Principal Stockholders."
10
<PAGE> 18
SUMMARY COMBINED FINANCIAL AND OTHER DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING, MARGIN AND RATIO DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------ -------------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1995(1) 1995 1996 1996(1)
-------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PORTFOLIO HOTEL REVENUES(2)........................ $345,733 $394,949 $534,204 $534,204 $106,610 $158,619 $158,619
======== ======== ======== ======== ======== ======== ========
STATEMENT OF INCOME DATA:
Revenues:
Hotel Revenues................................. $ 43,921 $ 51,799 $ 54,673 $111,315 $ 15,359 $ 16,829 $ 32,840
Management fees................................ 10,731 13,302 16,921 14,274 3,404 5,202 4,444
Service fees................................... 2,127 2,904 4,120 3,391 707 964 741
Reimbursements................................. 4,164 8,004 10,836 9,095 2,357 3,582 3,318
Other income................................... 334 257 1,340 1,500 92 33 33
-------- -------- -------- -------- -------- -------- --------
Total Company Revenues..................... 61,277 76,266 87,890 139,575 21,919 26,610 41,376
Operating costs and expenses..................... 54,183 63,929 73,264 122,663 16,942 19,868 32,908
Operating income................................. 7,094 12,337 14,626 16,912 4,977 6,742 8,468
Interest expense, net............................ (7,075) (7,526) (8,021) (12,600) (2,045) (1,810) (2,952)
Income before income taxes....................... 1,654 6,265 7,949 5,095 3,018 5,167 5,698
Income taxes(3).................................. -- -- -- (2,013) -- -- (2,251)
Net income....................................... 1,654 6,265 7,949 3,082 3,018 5,167 3,447
Pro forma income tax adjustment(4)............... $ (3,140) (1,192) (2,041)
Historical net income as adjusted for pro forma
income tax..................................... 4,809 1,826 3,126
Historical net income as adjusted per common
share(5)....................................... .30 .12 .20
Common shares outstanding prior to the
Offerings(5)................................... 15,854 15,854 15,854
Pro forma net income per common share(6)......... .16 .18
Pro forma common shares outstanding(6)........... 19,204 19,204
PORTFOLIO HOTEL OPERATING DATA:(7)
Number of hotels(8).............................. 47 53 66 53 68
Number of rooms(8)............................... 12,116 12,866 17,604 12,918 17,875
Occupancy percentage(9).......................... 65% 68% 69% 70% 67%
ADR(10).......................................... $ 80.60 $ 86.13 $ 88.79 $ 89.26 $ 96.04
REVPAR(11)....................................... $ 52.45 $ 58.84 $ 60.96 $ 62.25 $ 64.51
Gross operating profit margin(12)................ 26% 30% 29% 31% 30%
Food and beverage margin(13)..................... 25% 25% 26% 23% 22%
Gross operating profit per available room(14).... $ 8,279 $ 10,484 $ 10,813 $ 2,553 $ 2,684
COMPARABLE HOTEL OPERATING DATA:(15)
Number of hotels................................. 30 30 30 30 30
Number of rooms.................................. 7,334 7,334 7,334 7,334 7,334
Occupancy percentage(9).......................... 67% 70% 72% 73% 72%
ADR(10).......................................... $ 76.39 $ 80.16 $ 84.38 $ 87.89 $ 95.92
REVPAR(11)....................................... $ 51.31 $ 56.09 $ 60.99 $ 64.14 $ 69.03
Gross operating profit margin(12)................ 32% 34% 36% 37% 37%
Food and beverage margin(13)..................... 29% 31% 31% 30% 28%
Gross operating profit per available room(14).... $ 9,612 $ 11,417 $ 12,547 $ 3,307 $ 3,570
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995 AS OF MARCH 31, 1996
----------------------- -----------------------
ACTUAL PRO FORMA(1) ACTUAL PRO FORMA(1)
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................... $ 4,160 $ 30,968 $ 6,084 $ 33,996
Total assets................................................................ 133,403 196,499 138,571 203,236
Long-term obligations including current portion............................. 90,978 120,783 92,428 120,729
Total partners' capital and stockholders' equity............................ 17,557 47,889 22,464 54,264
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------ -------------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1995(1) 1995 1996 1996(1)
-------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDA(16)....................................... $ 13,351 $ 19,122 $ 21,876 $ 24,147 $ 6,495 $ 8,639 $ 10,371
Net cash provided by operating activities........ 8,265 15,085 16,215 11,672 2,092 4,685 1,085
Net cash (used in) provided by investing
activities..................................... (9,758) (616) (21,343) 66,383 (4,489) (3,095) 83,854
Net cash provided by (used in) financing
activities..................................... 1,638 (11,676) 5,667 (50,706) 4,863 334 (55,103)
MARGIN AND RATIO DATA:
Ratio of EBITDA to interest expense, net......... 1.9x 2.5x 2.7x 1.9x 3.2x 4.8x 3.5x
Ratio of earnings to fixed charges(17)........... 1.2x 1.7x 1.9x 1.3x 2.3x 3.3x 2.2x
</TABLE>
11
<PAGE> 19
- ---------------
(1) Reflects the Formation, the Financing Plan and other adjustments described
under "Pro Forma Combined Financial Data" (assuming an initial public
offering price of $15.00 per share).
(2) Represents revenues of hotels owned, leased or managed by the Company, as
distinguished from Total Company Revenues.
(3) For the years 1993 through 1995 and the 1996 First Quarter, Wyndham made no
provision for income taxes because the combined company was a combination
of partnerships, S corporations and a nontaxable Bermuda corporation that
are not subject to U.S. federal income taxes. The provision for income
taxes to arrive at pro forma net income assumes a combined federal and
state effective income tax rate of 39.5% computed as follows:
<TABLE>
<S> <C>
Federal income tax rate............................................................ 35.0%
Weighted average state income tax rate (net of federal benefit).................... 4.5%
-----
39.5%
=====
</TABLE>
(4) Pro forma income tax adjustment represents a pro forma provision for income
taxes based on the assumed effective tax rate of 39.5%.
(5) Historical net income as adjusted per common share is based on historical
net income as adjusted for pro forma income tax divided by the number of
shares that would have been outstanding if the Company had been a
corporation prior to the Offering.
(6) Pro forma net income per share is based on 19,204,301 shares of Common
Stock outstanding after the Offering, which assumes an estimated $15.0
million outstanding indebtedness under the GE Credit Agreement at the time
of the consummation of the Offering, and therefore the issuance of an
estimated 537,634 shares of Common Stock upon the exercise of the GE
Option. See "Principal Stockholders."
Supplemental pro forma earnings per share would have been $.11 for the year
ended December 31, 1995 and $.13 for the 1996 First Quarter, giving effect
only to (i) the application of the net proceeds from the Offerings to the
repayment of indebtedness and (ii) pro forma provision for income taxes
based on the assumed effective tax rate of 39.5%.
(7) Includes hotels owned, leased, managed or franchised during the periods
presented, except data for gross operating profit margin, food and beverage
margin and gross operating profit per available room excludes franchised
properties, for which the information is not available. The number of
hotels listed in 1994 does not include 7 hotels for which the Company had
signed management contracts that were closed for renovations or
construction in that period. Annual changes in occupancy percentage, ADR
and REVPAR and fluctuations in gross operating profit margins for the
Company's Portfolio of hotels have been affected by the addition of newly
opened or renovated Wyndham brand hotels, which typically begin operations
with lower occupancy rates, ADR, REVPAR and margins than mature hotels and
improve over time as the hotels benefit from Wyndham's operating standards
and become integrated into Wyndham's sales and marketing programs and
central reservations system. There can be no assurance that the Company's
hotels opened or renovated subsequent to January 1, 1993 will achieve
occupancy rates, ADR, REVPAR or operating results comparable to the
Comparable Hotels.
(8) At end of period.
(9) Occupancy percentage represents total rooms occupied divided by total
available rooms. Total available rooms represents the number of rooms
available for rent multiplied by the number of days in the reported period.
(10) ADR represents total room revenues divided by the total number of rooms
occupied.
(11) REVPAR represents total room revenues divided by total available rooms.
(12) Gross operating profit margin represents gross operating profit as a
percentage of total revenues. "Gross operating profit" represents gross
revenues less department expenses and undistributed operating expenses.
Gross operating profit margins are included herein because management uses
them as a measure of hotel operating performance and because management
believes that these items are useful in making industry comparisons.
(13) Food and beverage margin represents food and beverage operating profit as a
percentage of food and beverage revenues.
(14) Gross operating profit per available room represents gross operating profit
divided by total available rooms for the period.
(15) The Company has chosen a Comparable Hotel data set based on Wyndham brand
hotel properties operated by the Company since January 1, 1993 because the
Company believes that these 30 hotels have been operated by the Company for
a sufficient period of time to provide meaningful period-to-period
comparisons and that these hotels more fully reflect the Company's
operating capabilities. The Company's Portfolio contains a significant
number of newly opened or renovated Wyndham brand hotels, which typically
begin operations with lower occupancy rates, ADR, REVPAR and margins than
mature hotels. While the period of time required to achieve improved
operating results from the application of Wyndham's operating standards and
integration into Wyndham's programs varies depending on the unique
characteristics of a given hotel and the market in which it operates, the
Company has found that during the third full year under Wyndham management
a hotel will fully reflect the Company's operating capabilities. In
addition, the Company believes that Comparable Hotel data provide a more
meaningful comparison to the lodging industry, which the Company believes
has a significantly smaller percentage of newly opened or renovated hotels
than the Company. There can be no assurance that the Company's hotels
opened or renovated subsequent to January 1, 1993 will achieve occupancy
rates, ADR, REVPAR or operating results comparable to the Comparable
Hotels.
(16) EBITDA represents operating income before depreciation and amortization
plus equity in earnings of partnership and any increase or decrease in
earnings attributable to minority interests. EBITDA is used by the Company
for the purpose of analyzing its operating performance, leverage and
liquidity. Such data are not a measure of financial performance under
generally accepted accounting principles and should not be considered as an
alternative to net income as an indicator of the Company's operating
performance or as an alternative to cash flows as a measure of liquidity.
The EBITDA margin is calculated by dividing EBITDA by Total Company
Revenues. EBITDA and EBITDA ratio information are included herein because
management believes that investors find it to be a useful tool for
measuring the ability to service debt. Management also believes EBITDA
enables investors to assess the operations of a business without
considering the impact of financing and tax consequences that vary
depending on the capital structure and tax position of individual
companies.
EBITDA for the Company in the periods presented includes non-cash equity
participation compensation expense of $2,709,770, $2,802,387, $3,992,143
and $3,992,143 in 1993, 1994, 1995 and pro forma 1995, respectively, and
$998,035, zero and zero in the 1995 First Quarter, the 1996 First Quarter
and the pro forma 1996 First Quarter, respectively.
(17) Earnings used in computing the ratio of earnings to fixed charges consist
of income before income taxes, fixed charges and extraordinary items. Fixed
charges consist of interest expense, including amounts capitalized and the
amortization of deferred financing fees, and that portion of rental expense
representative of interest (deemed to be one third of rental expense).
12
<PAGE> 20
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following factors in
evaluating the Company and its business before purchasing the shares of Common
Stock offered by this Prospectus.
RISKS ASSOCIATED WITH THE LODGING INDUSTRY
The Company's business is subject to the operating risks inherent in the
lodging industry. These risks include changes in general and local economic
conditions, cyclical overbuilding in the lodging industry, varying levels of
demand for rooms and related services, competition from other hotels, changes in
travel patterns, the recurring need for renovation, refurbishment and
improvement of hotel properties, changes in governmental regulations that
influence or determine wages, prices and construction and maintenance costs,
changes in interest rates, the availability of financing for operating or
capital needs and changes in real estate taxes and other operating expenses.
There can be no assurance that regulatory compliance or downturns or prolonged
adverse conditions in real estate or capital markets or national or local
economies will not have a material adverse effect on the Company's results of
operations. See "Business -- The Lodging Industry."
COMPETITION IN THE LODGING INDUSTRY
The lodging industry is highly competitive. The Company's hotels compete
with other national limited and full service hotel companies, as well as with
various regional and local hotels. Some of the larger hotel chains with which
the Company competes include Marriott, Sheraton, Hyatt, Hilton and Embassy
Suites. A number of the Company's competitors are larger, operate more hotels
and have substantially greater financial and other resources than the Company.
In addition, some of the Company's competitors operate hotel properties that
have locations superior to those of the Company's hotels. Competitive factors in
the lodging industry include room rates, quality of accommodations, name
recognition, service levels and convenience of location. There can be no
assurance that demographic, geographic or other changes in markets in which the
Company's hotels are located will not adversely affect the convenience or
desirability of certain of the Company's hotels. Furthermore, there can be no
assurance that new or existing competitors will not significantly lower rates or
offer greater conveniences, services or amenities or significantly expand or
improve facilities in a market in which the Company's hotels compete, thereby
adversely affecting the Company's results of operations. See
"Business -- Competition."
RISKS ASSOCIATED WITH EXPANSION
Growth Risks. The Company's revenues and net income have grown
substantially during the past several years as a result of adding new management
contracts, acquiring, renovating and developing additional hotels, and from
increases in revenues and net income at existing hotels. The Company intends to
continue to pursue an aggressive growth strategy for the foreseeable future, but
there can be no assurance that the Company will successfully achieve its growth
objectives. The Company is subject to a variety of business risks generally
associated with growing companies. The Company's ability to pursue successfully
new growth opportunities will depend on many factors, including, among others,
the Company's ability to identify suitable growth opportunities, finance
acquisitions and renovations and successfully integrate new hotels into its
operations. While the Company believes that it will have sufficient capital
following the Offerings to fund its growth strategy in the near term, this
belief is primarily premised on adequate cash being generated from operations
and the Company's entry into the Revolving Credit Facility. There can be no
assurance that the Company will generate adequate cash from operations or that
it will be successful in entering into the Revolving Credit Facility, and, if
so, on what terms. The Revolving Credit Facility would be an important source of
capital to fund the Company's future growth strategy and, if the Company is not
able to agree with Bankers Trust on the terms of the Revolving Credit Agreement,
it would need to seek other sources of financing to help fund its future growth
strategy. If the Company does enter into the Revolving Credit Facility and
generates anticipated cash from operations, the Company may seek an increase in
the capital available to it under the Revolving Credit Facility or otherwise
obtain additional debt or equity financing, depending upon the amount of capital
required to pursue future growth opportunities or address other needs. There can
be no assurance that such
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increase or additional financing will be available to the Company on acceptable
terms, if at all. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
In addition, there can be no assurance that the Company will be able to
integrate successfully new hotels or new hotel products into its operations,
that new hotels or new hotel products will achieve revenue and profitability
levels comparable to the Company's existing hotels or that the combined business
will be profitable. Newly acquired or developed hotels typically begin with
lower occupancy and room rates. Furthermore, the Company's expansion within its
existing markets could adversely affect the financial performance of the
Company's existing hotels or its overall results of operations. Expansion into
new markets may present operating and marketing challenges that are different
from those currently encountered by the Company in its existing markets. There
can be no assurance that the Company will anticipate all of the changing demands
that expanding operations will impose on its management, management information
and reservation systems, and the failure to adapt its systems and procedures
could have a material adverse effect on the Company's business. See
"Business -- Growth Strategy."
Competition for Expansion Opportunities. The Company competes for
management contract, acquisition, development, lease, franchise and other
expansion opportunities. The Company competes for these expansion opportunities
with national and regional hotel companies, some of which have greater financial
and other resources than the Company. Competitive factors for expansion
opportunities include relationships with hotel owners and investors, the
availability of capital, financial performance, management fees, lease payments,
brand name recognition, marketing support, reservation system capacity and the
willingness to provide funds in connection with new management and lease
arrangements. The Company's failure to compete successfully for expansion
opportunities or to attract and maintain relationships with hotel owners and
investors could adversely affect the Company's results of operations. See
"Business -- Competition."
Acquisition and Development Risks. The Company expects that it may acquire
additional hotels in the future. Acquisitions entail the risk that investments
will fail to perform in accordance with expectations. The Company also intends
to continue redevelopment and conversion of other acquired hotels to Wyndham
Garden Hotels. The Company has entered into a contract to purchase one hotel
(the Vinings Wyndham Garden Hotel). The Company has entered into management
contracts with respect to two hotels under construction pursuant to which the
Company has undertaken certain obligations to provide furniture, fixtures and
equipment at specified prices. The Company also has entered into management
contracts for four additional hotels under renovation, two of which will remain
open during renovations. In addition, the Company may develop new hotels in the
future, depending on market conditions. Significant hotel renovations and new
project development are subject to a number of risks, including risks of
construction delays or cost overruns, risks that the properties will not achieve
anticipated performance levels and new project commencement risks such as
receipt of zoning, occupancy and other required governmental permits and
authorizations. These and other risks could result in the incurrence of
substantial costs for a project that is never completed. The Company anticipates
that most acquisitions, substantial renovations and development will be financed
under the Revolving Credit Facility, through joint ventures or with other forms
of short-term secured or unsecured financing. See "Business -- Growth Strategy"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." Permanent financing for these
projects, however, might not be available or might be available only on
disadvantageous terms. If permanent debt or equity financing were not available
on acceptable terms to refinance projects undertaken without permanent
financing, such projects could be curtailed and the Company's working capital
could be adversely affected.
DEPENDENCE ON MANAGEMENT CONTRACTS AND ON CERTAIN HOTEL OWNERS
Management contracts are acquired, terminated, renegotiated or converted to
franchise agreements in the ordinary course of the Company's business. Crow
Family Members, who will own approximately 48.9% of the Company's issued and
outstanding Common Stock following the Offering, have interests in 15 hotels
that the Company manages pursuant to management contracts. The Company also
manages 16 hotels owned by Bedrock, which will own approximately 12.3% of the
Company's issued and outstanding Common Stock
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following the Offering. See "The Formation and the Financing Plan -- The
Formation" and "Principal Stockholders." While the average remaining term of the
Company's management contracts for Wyndham brand hotels as of April 15, 1996 was
13.6 years (including renewals that the Company may elect to exercise), the
Company's management contracts generally may be terminated by the owner of the
hotel property if the Company fails to meet certain performance standards, if
the property is sold to a third party, if the property owner defaults on
indebtedness encumbering the property and/or upon a foreclosure of the property.
The terms of the four non-Wyndham brand hotel management contracts range from
one month to fifteen years. Other grounds for termination include a hotel
owner's election to close a hotel and certain business combinations involving
the Company in which the Wyndham name or current management team does not
survive. There can be no assurance that the Company will be able to replace
terminated contracts or that the terms of renegotiated or converted contracts
will be as favorable as the terms that existed before such renegotiation or
conversion. The Company also is subject to the risk of deterioration in the
financial condition of a hotel owner and such owner's ability to pay management
fees to the Company. In addition, in certain circumstances, the Company makes or
may be required to make loans to or capital investments in hotel properties in
connection with management contracts. See "Business -- Management Contracts." A
material deterioration in the operating results of one or more of these hotel
properties and/or a loss of the related management contracts could adversely
affect the value of the Company's investment in such hotel properties. In
addition, the Company historically has relied on Crow Family Members, Bedrock
and other hotel owners and investors for various acquisition, renovation,
development and other expansion opportunities. Although the Company believes
that it enjoys satisfactory relationships with such hotel owners and investors,
there can be no assurance that such relationships will remain satisfactory or
that such owners and investors will continue to provide expansion opportunities
in the future. See "Business -- Growth Strategy."
CONFLICTS OF INTEREST
Absence of Arms-Length Negotiations in the Formation of the Company. The
determination of the amount of cash to be paid and the equity interests in the
Company to be issued to the various participants in the Formation of the Company
and the allocation of the equity interests in the Company between the purchasers
of Common Stock in the Offering and the participants in the Formation were not
made through arms-length negotiations and were not based upon independent third
party determinations of value. The consideration to be paid by the Company in
connection with the transactions comprising the Formation were negotiated by
certain Senior Executive Officers, who will receive substantial economic
benefits as a result of the Formation. See "The Formation and the Financing
Plan" and "Certain Relationships and Transactions." The value of one of the
Assigned Businesses was determined on the basis of discounted projected pre-tax
cash flow. The value of each of the other Assigned Businesses, other than the
Old Management Company (as such terms are defined under "The Formation and the
Financing Plan -- The Formation"), was determined on the basis of a multiple of
the adjusted historical pre-tax cash flow of such Assigned Businesses, while the
value of the Old Management Company was based upon the remaining value
attributable to the combined enterprise. There can be no assurance that the
consideration given by the Company for such assets is equivalent to the fair
market value of such assets. See "The Formation and the Financing
Plan -- Allocation of Consideration in the Formation Transactions."
Future Dealings with Affiliates of the Company. Crow Family Members,
certain of their affiliates and Bedrock are, collectively, parties to 31
management contracts as well as other business arrangements with the Company.
See "Certain Relationships and Transactions" and "The Formation and the
Financing Plan." These relationships, coupled with the ownership of Common Stock
by Crow Family Members and Bedrock, as well as their representation on the
Company's Board of Directors, could give rise to conflicts of interest. Although
the Company believes that its management contracts with these persons are on
terms no less favorable to the Company than those that could have been obtained
from unaffiliated third parties, there can be no assurance that these parties
will continue to transact business with the Company or that they will not
attempt to use their ownership positions with the Company to influence the terms
on which they transact business with the Company in the future. In addition, the
Senior Executive Officers have ownership interests in hotels that are managed
but not owned by the Company. An entity owned by Crow Family Members and the
Senior Executive Officers is developing a new central reservations system for
the Company, and the
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timing, performance and continued availability of such system is not fully
within the Company's control. The outside interests of the Senior Executive
Officers could give rise to certain conflicts of interest that may result in
decisions that do not fully reflect the interests of all stockholders. See
"Business -- Growth Strategy -- III. Ability to Execute Growth
Strategy -- Relationships with Hotel Investors" and "Certain Relationships and
Transactions."
Conflicts Involving Certain Board Members. Robert A. Whitman and Daniel A.
Decker, who are directors of the Company, are principals of Hampstead, which has
an ownership interest in Bedrock in addition to another hotel company that in
the past has competed, and in the future may compete, with the Company for both
guests and hotel acquisitions. Hampstead is an investment firm and may from time
to time acquire interests in other hotel companies or assets. Consequently,
Messrs. Whitman and Decker may have conflicts of interest with respect to
certain matters potentially or actually involving or affecting the Company and
such other hotel-related investments, such as acquisition, development,
financing and other corporate opportunities that may be suitable for the Company
and such other hotel companies. In addition, such directors also may have
conflicts of interest with respect to corporate opportunities suitable for both
the Company and Hampstead. To the extent such opportunities arise, such
directors will make a determination after consideration of a number of factors,
including whether such opportunity is presented to any such director in his
capacity as a director of the Company or as an affiliate of such other hotel
company or of Hampstead, whether such opportunity is within the Company's line
of business or consistent with its strategic objectives and whether the Company
will be able to undertake or benefit from such opportunity. The Company and
Bedrock have agreed that the Company will be permitted to manage for a term of
15 years any hotel that is financed by Bedrock and contains 250 or fewer rooms.
See "Certain Relationships and Transactions -- Bedrock Investment Program."
Policy with Respect to Related Party Transactions. The Company has
implemented a policy requiring any material transaction (or series of related
transactions) between the Company and related parties to be approved by a
majority of the directors not affiliated with the Company (the "Independent
Directors"), if any, upon such directors' determination that the terms of the
transaction are no less favorable to the Company than those that could have been
obtained from unrelated third parties. The policy defines a material related
party transaction (or series of related transactions) as one involving a
purchase, sale, lease or exchange of property or assets or the making of any
investment with a value to the Company in excess of $1.0 million or a service
agreement (or series of related agreements) with a value in excess of $1.0
million in any fiscal year. There can be no assurance that this policy always
will be successful in eliminating the influence of conflicts of interest. See
"Management -- Directors and Executive Officers" and "Certain Relationships and
Transactions -- Policy with Respect to Related Party Transactions."
RISKS ASSOCIATED WITH OWNING OR LEASING REAL ESTATE
The Company owns or leases 18 of its Portfolio of 68 hotels. Accordingly,
the Company will be subject to varying degrees of risk generally related to
owning and leasing real estate. These risks include, among others, changes in
national, regional and local economic conditions, local real estate market
conditions, changes in interest rates and in the availability, cost and terms of
financing, liability for long-term lease obligations, the potential for
uninsured casualty and other losses, the impact of present or future
environmental legislation and compliance with environmental laws, and adverse
changes in zoning laws and other regulations, many of which are beyond the
control of the Company. In addition, real estate investments are relatively
illiquid; therefore, the ability of the Company to vary its Portfolio in
response to changes in economic and other conditions may be limited.
Pursuant to the Formation Agreements, certain owners of (i) six Wyndham
brand hotels to be transferred to the Company, (ii) the GHALP Lease and (iii) an
additional leasehold interest to be transferred to the Company (collectively,
the "Assigned Real Property") have made representations to the Company as to,
among other things, no knowledge of material undisclosed environmental
liabilities relating to the Assigned Real Property, no knowledge of material
undisclosed litigation relating to the Assigned Real Property and no knowledge
of defects in title to the Assigned Real Property, and have agreed to indemnify
the Company for breach of such representations. Such representations and
indemnity will survive for one year following the Formation. See
"Business -- Long-Term Hotel Leases." Because such representations are qualified
as to
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knowledge and have a limited period of survival, they are more limited in scope
than those often found in comparable real estate transactions. In addition, the
owners of the Assigned Businesses (other than the Assigned Real Property) make
no representations to the Company as to these Assigned Businesses. As a
consequence, certain obligations or losses relating to the Assigned Real
Property or the other Assigned Businesses or their respective operations,
whether arising before or after the Formation, will become the responsibility of
the Company. As is customary in real estate transactions comparable to the
transfer to the Company of the Assigned Real Property, however, the Company will
obtain policies of title insurance insuring against losses from certain defects
in title relating to the Assigned Real Property. There can be no assurance,
however, that the Company would be able to obtain recoveries under the title
insurance policies in the event of a defect in title or that any proceeds or
replacement properties would provide returns comparable to those of the Assigned
Real Property. See "The Formation and the Financing Plan -- The Formation."
Pursuant to the Formation Agreements, the Company has agreed to indemnify
certain of the owners of the Assigned Businesses for liabilities arising in
connection with the Formation resulting from claims brought by unaffiliated
third parties.
CONTROL BY PRINCIPAL STOCKHOLDERS
Following the Offering, Crow Family Members will beneficially own an
aggregate of approximately 48.9% of the outstanding shares of the Company's
Common Stock (47.9% if the U.S. Underwriters' over-allotment option is exercised
in full), and Bedrock will beneficially own approximately 12.3% of the Company's
issued and outstanding Common Stock (11.7% if the U.S. Underwriters'
over-allotment option is exercised in full). See "The Formation and the
Financing Plan -- The Formation" and "Principal Stockholders." In addition to
the ability of Crow Family Members, either independently or together with
Bedrock, to block certain actions requiring stockholder approval by virtue of
the substantial number of shares of Common Stock held by them, the terms of a
Stockholders' Agreement (as more specifically defined under "Description of
Capital Stock -- Stockholders' Agreement," the "Stockholders' Agreement") to be
entered contemporaneously with the Formation among the Company, Crow Family
Members, Bedrock, the Senior Executive Officers, Wyndham Employees Ltd. ("WEL")
and Susan T. Groenteman, a director of the Company, will have the effect of
concentrating control of the Company by these parties. Under the terms of the
Stockholders' Agreement, Crow Family Members (together with the Senior Executive
Officers, WEL and Ms. Groenteman) and Bedrock agree, among other things, to
allocate between themselves the right to nominate members of the Board of
Directors of the Company as long as they continue to own a substantial number of
shares of the Company's Common Stock. In addition, pursuant to the terms of the
Stockholders' Agreement, Crow Family Members and Bedrock have allocated among
themselves the right to designate the Chairman of the Board so long as either
party owns shares of Common Stock covered by the Stockholders' Agreement that
represents at least 30% of the Company's outstanding Common Stock. Such
provisions in the Stockholders' Agreement will ensure such parties' ability to
control the election of the members of the Board of Directors and will enable
such parties to control the management and affairs of the Company. See
"Description of Capital Stock -- Stockholders' Agreement."
SIGNIFICANT DEBT AND LEASE OBLIGATIONS
At March 31, 1996, on a pro forma basis after giving effect to the
Formation, the Financing Plan and other adjustments described under "Pro Forma
Combined Financial Data", the Company's long term consolidated debt was
approximately $100.0 million, its total stockholders' equity was approximately
$55.3 million and its ratio of earnings to fixed charges was 2.1 to 1. The
Company's indebtedness is substantial in relation to its shareholders' equity.
In addition, the Company will have significant lease obligations with respect to
the 12 hotel properties operated pursuant to long-term leases. See
"Business -- Long-Term Hotel Leases." For the year ended December 31, 1995 and
the 1996 First Quarter, on a pro forma basis after giving effect to the
Formation, the Financing Plan and other adjustments described under "Pro Forma
Combined Financial Data," the Company's rent expense was approximately $15.5
million and $4.7 million, respectively. (See Notes 10 and 11 to the Combined
Financial Statements for information with respect to the Company's historical
mortgage indebtedness and lease obligations.) The degree to which the Company is
leveraged, as
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well as its rent expense, could have important consequences to holders of Common
Stock and the Notes, including: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions
or general corporate purposes may be impaired; (ii) a substantial portion of the
Company's cash flow from operations may be dedicated to the payment of principal
and interest on its indebtedness and rent expense, thereby reducing the funds
available to the Company for its operation; and (iii) certain of the Company's
indebtedness contains, and the Revolving Credit Facility is expected to contain,
financial and other restrictive covenants, including those restricting the
incurrence of additional indebtedness, the creation of liens, the payment of
dividends and sales of assets and imposing minimum net worth requirements. See
"Description of Indebtedness." There can be no assurance that the Company's
operating results will be sufficient for the payment of the Company's
indebtedness. In addition, the Company's indebtedness could increase the
Company's vulnerability to adverse general economic and lodging industry
conditions (including increases in interest rates) and could impair the
Company's ability to take advantage of significant business opportunities that
may arise.
DEPENDENCE ON SENIOR MANAGEMENT
The Company's success will depend largely on the efforts and abilities of
senior management. The loss of the services of the Senior Executive Officers
could have a material adverse effect on the Company's business. The Company has
not entered into employment agreements with any member of senior management. See
"Management."
QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
The lodging industry is seasonal in nature. Quarterly earnings may be
adversely affected by events beyond the Company's control, such as poor weather
conditions, economic factors and other considerations affecting travel. In
addition, the loss of one or several management contracts, the timing of
achieving incremental revenues from additional hotels and the realization of a
gain or loss upon the sale of a hotel also may adversely impact earnings
comparisons. If the Company loses a management contract that has capitalized
acquisition costs, the Company will record a write-off of the remaining book
value (less any termination fees received) of such capitalized costs, which
could have a material adverse effect on the operating results during the period
in which the write-off occurred. In addition, the Company's quarterly earnings
could be adversely affected by the loss of a hotel investment made in connection
with a management contract or other investment arrangement. The Company also may
experience earnings fluctuations resulting from equity participation plan
compensation expenses incurred in connection with periodic revaluations of WEL,
which is an equity participation program for certain of the Company's management
personnel and employees. Increases in the price per share of the Company's
Common Stock in the public market may have the effect of increasing the amount
of this component of the Company's compensation expense. In particular, assuming
an initial public offering price of $15.00 per share, the Company expects that
it will recognize equity compensation expense relating to both WEL and certain
interests held by Senior Executive Officers during the period in which the
Offering is consummated of an aggregate amount of $1.7 million. The Company
estimates that it would recognize an increase of $1.4 million in such
compensation expense for each $1.00 higher initial public offering price (or a
correspondingly lower amount in the event of a lower initial public offering
price). See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview" and "-- Seasonality."
ENVIRONMENTAL MATTERS
Under various federal, state, local and foreign environmental laws,
ordinances and regulations ("Environmental Laws"), a current or previous owner
or operator of real property may be liable for the cost of removal or
remediation of hazardous or toxic substances on, under or in such property. Such
laws often impose liability without regard to whether the owner or operator knew
of, or was responsible for, the release of such hazardous or toxic substances.
The presence of contamination from hazardous or toxic substances, or the failure
to remediate such contaminated property properly, may adversely affect the
owner's ability to sell or rent such real property or to borrow using such real
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances also may be liable for the cost of removal or
remediation of such substances at the disposal or treatment facility, whether or
not such facility is or ever was owned or operated
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by such person. The operation and removal of certain underground storage tanks
also are regulated by federal and state laws. In connection with the ownership
and operation of its hotel properties, including properties owned, as well as
leased, managed or franchised by the Company, the Company could be held liable
for the cost of remedial action with respect to such regulated substances and
storage tanks and claims related to them. In addition to clean-up actions
brought by federal, state and local agencies, the presence of hazardous or toxic
substances on a hotel property also could result in personal injury or similar
claims by private plaintiffs. The Company has received environmental information
covering its owned and leased properties and certain of its managed and
franchised properties; however on many of the managed and franchised properties,
the Company has not performed or received the results from any environmental
investigations. As a result of the foregoing limitations on performing
environmental investigation and due to the fact that Environmental Laws and
conditions are subject to frequent change, there can be no assurance that
environmental liabilities or claims will not adversely affect the Company in the
future. See "Business -- Environmental Matters" for further information germane
to environmental issues relating to the Company.
ANTI-TAKEOVER MATTERS
The Company's Certificate of Incorporation and By-laws contain provisions
that may have the effect of delaying, deterring or preventing a takeover of the
Company that stockholders purchasing shares in the Offering may consider to be
in their best interest. The Company's Certificate of Incorporation and By-laws
provide for a classified Board of Directors serving staggered terms of three
years, the prohibition of stockholder action by written consent and advance
notice requirements for stockholder proposals and director nominations. The
Company's Certificate of Incorporation also grants the Board of Directors the
authority to issue up to 5,000,000 shares of preferred stock, having such
rights, preferences and privileges as designated by the Board of Directors
without stockholder approval. In addition, Section 203 of the Delaware General
Corporation Law, which is applicable to the Company, contains provisions that
restrict certain business combinations with interested stockholders, which may
have the effect of inhibiting a non-negotiated merger or other business
combination involving the Company. (The Company believes that by its terms,
Section 203 does not restrict transactions with C.F. Securities L.P., a
partnership owned by Crow Family Members, or any other party to the
Stockholders' Agreement that becomes an Interested Stockholder (for purposes of
Section 203) as a result of the exercise of the right of first offer described
under "Description of Capital Stock -- Stockholders' Agreement.") Finally, the
Stockholders' Agreement may have the effect of delaying, deterring or preventing
a takeover of the Company, as it restricts the transfer of shares of Common
Stock held by Crow Family Members, the Senior Executive Officers, WEL, Bedrock
and Ms. Groenteman, and also provides for an agreed allocation of director
nominations among such parties. See "Description of Capital Stock -- Anti-
Takeover Provisions" and "-- Stockholders' Agreement."
The indenture governing the Notes provides that, upon the occurrence of (i)
the sale of a majority of the fair market value of the assets of the Company, on
a consolidated basis, (ii) any person or group not affiliated with the Company's
current stockholders becoming the beneficial owner of more than 45% of the total
voting power of the Company or (iii) certain changes in a majority of the Board
of Directors of the Company during a two-year period (collectively, a "Change of
Control"), the holders of the Notes will have the right to require the Company
to repurchase their Notes at a price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest. Should a Change of Control
occur and a substantial amount of the Notes be presented for purchase, there can
be no assurance that the Company or the acquiring party would have sufficient
financial resources to enable it to purchase such Notes. In addition, the Change
of Control purchase feature of the Notes may make more difficult or discourage a
takeover of the Company, and, thus, the removal of incumbent management. It is
anticipated that the terms of the Revolving Credit Facility will prohibit such a
Note repurchase. In addition, it is expected that certain "changes of control,"
as defined in the Revolving Credit Facility, will constitute a default
thereunder. After giving pro forma effect to the Formation, the Financing Plan
and other adjustments described under "Pro Forma Combined Financial Data," at
December 31, 1995 approximately $100.0 million of indebtedness (representing the
$100.0 million of Notes expected to be issued pursuant to the Debt Offering)
would have had to be repaid or repurchased in the event a Change of Control had
occurred. See "Description of Indebtedness."
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ABSENCE OF PUBLIC MARKET
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market will develop
or continue after the Offering. The initial public offering price of the Common
Stock was determined through negotiations among the Company and the
representatives of the Underwriters (the "Representatives"), and there can be no
assurance that the Common Stock will trade at or in excess of the initial public
offering price. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price of the Common Stock.
PRICE VOLATILITY
The market price of the Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results and other
factors. In addition, the securities markets have experienced significant price
and volume fluctuations from time to time in recent years that often have been
unrelated or disproportionate to the operating performance of particular
companies. These broad fluctuations may adversely affect the market price of the
Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
The Company will have 19,204,301 shares of Common Stock outstanding
immediately following the Offering, of which the 3,350,000 shares sold in the
Offering will be freely tradeable by persons other than "affiliates" of the
Company without restriction or limitation under the Securities Act of 1933, as
amended (the "Act"). The remaining 15,854,301 shares are "restricted securities"
within the meaning of Rule 144 adopted under the Act and may not be sold in the
absence of registration under the Act unless an exemption from registration is
available, including the exemption contained in Rule 144. The holders of the
15,316,667 shares of restricted securities received in connection with the
Formation of the Company possess registration rights with respect to such shares
of Common Stock. General Electric also possesses registration rights with
respect to the estimated 537,634 shares to be purchased by it pursuant to the GE
Option. See "Description of Capital Stock -- Registration Rights." In addition,
shortly following the Offering the Company intends to register under the Act
2,133,811 shares of Common Stock reserved for issuance under the Company's
Incentive Plan (options for 797,700 shares of which are expected to be granted
prior to the date of this Prospectus) and 50,000 shares of Common Stock reserved
for issuance under the Company's Retainer Plan. Future sales of shares of Common
Stock registered under the Act or pursuant to Rule 144 or otherwise, or the
perception that such sales could occur, could have an adverse effect upon the
market price for the Common Stock. The Company and all of its existing
stockholders have agreed that, subject to certain exceptions, for a period of
180 days from the date of this Prospectus, they will not, without the prior
written consent of Smith Barney Inc. ("Smith Barney"), offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for, Common Stock. However, the
Senior Executive Officers will be permitted to pledge Common Stock owned by them
within such 180 day period to Smith Barney in connection with margin loan
transactions into which Smith Barney and certain Senior Executive Officers may
enter subsequent to the completion of the Offerings. The proceeds of such loans
would be used by such Senior Executive Officers to repay to the Company all or a
part of their outstanding indebtedness under the DAB Notes. There can be no
assurance that such margin loans will be made. In the event that Smith Barney
were to foreclose on the shares of Common Stock securing any such loans within
such 180 day period, Smith Barney would attempt to resell such Common Stock, and
any such resale would not be subject to such lock-up provisions. In addition,
the Senior Executive Officers may enter into margin loan transactions with
financial institutions other than Smith Barney within such 180 day period. In
such case, it is expected that the Senior Executive Officers would request the
consent of Smith Barney to pledge Common Stock in connection with such margin
loans, and the Company has been informed that Smith Barney expects that it would
grant its consent in such case. While Smith Barney has not agreed that any
consent to any other sale or other disposition by the Company or any of its
stockholders would not be unreasonably withheld, the Company has been informed
that Smith Barney expects that it would not unreasonably withhold any such
consent. See "Shares Eligible for Future Sale."
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THE FORMATION AND THE FINANCING PLAN
THE FORMATION
The first Wyndham brand hotel was established in 1982. Wyndham brand hotels
have primarily been developed through developmental and management expertise
supplied by the Company and capital provided by Crow Family Members (and, to a
lesser extent, certain Senior Executive Officers). In 1994, the Company and
Bedrock commenced a program of accelerated development of Wyndham Garden Hotels,
with Bedrock providing the necessary capital and the Company primarily providing
developmental and management expertise. The Company has worked with a number of
other unaffiliated hotel owners and investors to expand the Company's Portfolio
to its current size.
Wyndham Hotel Corporation was formed on February 16, 1996 to succeed to the
business of Wyndham Hotel Company Ltd., which, directly and through its
subsidiaries, currently manages and franchises the Company's Portfolio of hotels
(the "Old Management Company"), as well as succeed to the ownership of six
Wyndham brand hotels, leasehold interests relating to the GHALP Lease and an
additional leased hotel (an aggregate of 12 leased Wyndham brand hotels) and a
contract to purchase a single additional hotel (collectively, the "Assigned
Businesses"). See "Business -- Summary of Hotels" for a listing of these hotels.
In March, 1996, the Company entered into certain agreements with the current
owners of direct and indirect interests in the Old Management Company and hotels
(the "Formation Agreements"), which collectively provide for the transfer to the
Company of the Assigned Businesses, as well as certain other transactions
described below that involve the parties thereto. In addition, on March 10,
1996, the Company entered into an agreement (the "Bedrock Exchange Agreement")
with various affiliates of Bedrock, pursuant to which Bedrock will transfer to
the Company options to acquire equity interests in the Old Management Company
(as more specifically defined under "Certain Relationships and
Transactions -- Bedrock Investment Program," the "Bedrock Options") and the
Bedrock Contribution in the amount of $10.0 million. Pursuant to the Formation
Agreements, the Old Management Company's rights and obligations under its
management agreements and franchise agreements will be transferred to the
Company by operation of law and will remain in full force and effect. The
Company has obtained the necessary consents to such transfers.
Formation Transactions. Set forth below is a description of the
transactions related to the formation of the Company (the "Formation").
- The Assigned Businesses are being transferred to the Company in
consideration of the Company's issuance of 12,948,777 shares of Common
Stock and the payment of $25.3 million, in cash. The number of shares
issuable and the cash payable in exchange for interests in certain of the
Assigned Businesses are subject to working capital adjustments. The
shares of Common Stock are being issued in exchange for all of the
interests in the Assigned Businesses held by the Company's management and
other personnel and a portion of the interests in the Assigned Businesses
held by Crow Family Members. Of the total cash amount being paid for the
Assigned Businesses, $19.1 million is being paid for the remaining
portion of the interests in the Assigned Businesses held by Crow Family
Members and $6.2 million is being paid for the interests in the Assigned
Businesses held by various unaffiliated parties.
- The Company will repay the indebtedness of certain of the Assigned
Businesses owing to various Crow Family Members in the aggregate amount
of $4.0 million.
- The Company will pay $6.0 million in cash to Caribbean Hotel Management
Company, a company owned by Crow Family Members ("CHMC"), in
consideration of the release and discharge of the Company from its
obligation to make payments to CHMC under an agreement between CHMC and
the Company (the "CHMC Agreement"). Pursuant to the CHMC Agreement, the
Company acquired in 1988 from CHMC a number of management agreements
relating to certain Wyndham brand hotels then in operation, and in
partial consideration therefor the Company agreed to pay CHMC 16% of the
revenues derived from such management agreements. The Company's
obligation to continue paying such amounts to CHMC will terminate upon
its release and discharge.
21
<PAGE> 29
- The Company will pay $18.6 million in cash to Wyndham Finance Limited
Partnership, a partnership owned by Crow Family Members ("WFLP"), in
connection with the Company's purchase from WFLP of notes representing an
equal amount of "Division Account Balance" receivables held by WFLP (the
"DAB Notes"). The DAB Notes represent the outstanding principal and
accrued interest as of December 31, 1995 severally owing by the Senior
Executive Officers and WEL to WFLP and are evidenced by promissory notes
made payable to the Company. Such notes will accrue interest at 6% per
annum, and are fully secured by the pledge of shares of Common Stock held
by the note obligors, and the outstanding principal and accrued interest
(compounded quarterly) will be payable in a single lump sum in May 2001.
- In consideration of Bedrock's transfer of the Bedrock Options and the
Bedrock Contribution in the amount of $10.0 million to the Company, the
Company will issue to Bedrock 2,367,890 shares of Common Stock pursuant
to the Bedrock Exchange Agreement. See "Principal Stockholders."
All of the transactions relating to the Formation will be completed
immediately prior to, or substantially simultaneously with, the consummation of
the Offerings. See "Description of Capital Stock -- Stockholders' Agreement" and
"-- Registration Rights" for information relating to other arrangements among
the Company, Crow Family Members, the Senior Executive Officers, WEL, Ms.
Groenteman and Bedrock that will be consummated contemporaneously with the
Formation.
In connection with the Formation, the Company and certain owners of
Assigned Businesses are seeking certain consents and approvals, and the
consummation of the Formation is conditioned upon the receipt of such consents
and approvals and the expiration of such waiting periods.
Pursuant to the Formation Agreements, certain owners of (i) the six Wyndham
brand hotels to be transferred to the Company, (ii) leasehold interests in the
GHALP Properties and (iii) the additional leasehold interest to be transferred
to the Company (collectively, the "Assigned Real Property") have made
representations to the Company as to, among other things, no knowledge of
material undisclosed environmental liabilities relating to the Assigned Real
Property, no knowledge of material undisclosed litigation relating to the
Assigned Real Property and no knowledge of defects in title to the Assigned Real
Property, and have agreed to indemnify the Company for breach of such
representations. Such representation and indemnity will survive for one year
following the Formation. See "Business -- Long-Term Hotel Leases." Because such
representations are qualified as to knowledge and have a limited period of
survival, they are more limited in scope than those often found in comparable
real estate transactions. In addition, the owners of the Assigned Businesses
(other than the Assigned Real Property) make no representations to the Company
as to these Assigned Businesses. As a consequence, certain obligations or losses
relating to the Assigned Real Property or the other Assigned Businesses or their
respective operations, whether arising before or after the Formation, will
become the responsibility of the Company. As is customary in real estate
transactions comparable to the transfer to the Company of the Assigned Real
Property, however, the Company will obtain policies of title insurance insuring
against losses from certain defects in title relating to the Assigned Real
Property. There can be no assurance, however, that the Company would be able to
obtain recoveries under the title insurance policies in the event of a defect in
title or that any proceeds or replacement properties would provide returns
comparable to those of the Assigned Real Property.
Pursuant to the Formation Agreements, the Company has agreed to indemnify
certain of the owners of the Assigned Businesses and Bedrock for liabilities
arising in connection with the Formation resulting from claims brought by
unaffiliated third parties.
ALLOCATION OF CONSIDERATION IN THE FORMATION TRANSACTIONS
The amount of cash and shares of Common Stock to be received by Crow Family
Members, Senior Executive Officers and WEL in the transactions comprising the
Formation was not determined as a result of arm's length negotiations. The
consideration to be paid by the Company in connection with the transactions
comprising the Formation was negotiated by certain Senior Executive Officers,
who will receive substantial economic benefits as a result of the consummation
of the Formation transactions. See "Certain Relationships
22
<PAGE> 30
and Transactions -- Benefits of the Formation and the Financing Plan to Related
Parties." Therefore, there can be no assurance that the consideration to be paid
by the Company for these interests will not exceed the fair market value of such
interests.
The aggregate amount of cash and shares of Common Stock to be received by
the current owners of the Assigned Businesses was determined through
negotiations between the Company and Crow Family Members, which own a majority
interest in each of the Assigned Businesses and will also beneficially own an
aggregate of approximately 48.9% of the outstanding shares of the Company's
Common Stock following the Offering. These parties reached an agreement with
respect to the value of one of the Assigned Businesses on the basis of
discounted projected pre-tax cash flow. The value of each of the other Assigned
Businesses (other than the Old Management Company) was determined on the basis
of a multiple of the adjusted historical pre-tax cash flow of such Assigned
Businesses, while the value of the Old Management Company was based upon the
remaining value attributable to the combined enterprise. These methodologies
were used because the Company believed it most appropriate to value the Assigned
Businesses as ongoing businesses. The aggregate amount of shares of Common Stock
that has been allocated to the current owners of the Assigned Businesses was
determined based on the agreed value of the Assigned Businesses, compared with
the estimated value contributed to the Company by the Company's other
stockholders, including the investors purchasing shares of Common Stock in this
Offering.
The amount of indebtedness owing by the Assigned Businesses that will be
assumed and repaid by the Company to various Crow Family Members will be equal
to the outstanding principal amount and accrued interest thereon as of the date
of consummation of the Formation. The amount to be paid by the Company to CHMC
in consideration of the release and discharge of the Company from its payment
obligations under the CHMC Agreement was determined through negotiations between
the Company and Crow Family Members, and was based upon the value of the
anticipated stream of payments that would have been payable by the Company to
CHMC through the remaining term of the CHMC Agreement. The amount to be paid by
the Company to WFLP for the purchase of the DAB Notes will be equal to the
outstanding principal and accrued interest owing thereon as of December 31,
1995.
The Bedrock Options are currently exercisable for up to a 37.5% interest in
the Old Management Company. See "Certain Relationships and
Transactions -- Bedrock Investment Program." The number of shares of Common
Stock to be issued by the Company to Bedrock for its transfer to the Company of
the Bedrock Options and the Bedrock Contribution was determined through
negotiations between the Company and Bedrock. The value of the Bedrock Options
was generally based upon the difference between the exercise price for such
options and the estimated value of Bedrock's equity ownership in the Old
Management Company, based upon certain assumptions, including the assumption
that such options were exercised prior to their expiration for an interest in
the Old Management Company component of the combined businesses comprising the
Company.
No third party determination of the value of assets transferred to the
Company was made in connection with the transactions comprising the Formation.
See "Risk Factors -- Conflicts of Interest."
THE FINANCING PLAN
The Company will implement the Financing Plan in order to fund the cash
payments associated with the Formation, repay certain mortgage and other
indebtedness assumed in connection with the Formation and provide liquidity for
the Company's operating and growth strategies. Under the Financing Plan, the
Company intends to (i) offer 3,350,000 shares of Common Stock in the Offering,
and thereby raise approximately $50.3 million in gross proceeds (assuming an
initial public offering price of $15.00 per share); (ii) concurrently offer
$100.0 million of Notes through the Debt Offering; (iii) enter into the
Revolving Credit Facility; (iv) receive the Bedrock Contribution in the amount
of $10.0 million pursuant to the Bedrock Exchange Agreement; and (v) eliminate
approximately $7.5 million of outstanding indebtedness under the Company's
current revolving credit facility upon General Electric's exercise of the GE
Option. See "Description of Indebtedness" and "Principal Stockholders."
Consummation of each of the Offerings is conditioned upon consummation of the
other, although there can be no assurance that the Company will enter
23
<PAGE> 31
into the Revolving Credit Facility. See "Description of Indebtedness." After
applying the net proceeds from the Offerings and the Bedrock Contribution as
indicated under "Use of Proceeds," the Company will have remaining proceeds of
approximately $18.4 million. This amount, together with cash generated from
operations and capital available under the Revolving Credit Facility (the
availability of which will be subject to the terms and financial covenants to be
set forth in the Revolving Credit Agreement), will be available to fund the
Company's operating and growth strategies. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Description of Indebtedness."
The following table sets forth the anticipated sources and uses of funds
for the Financing Plan:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C>
Sources of Funds:
Common Stock (gross proceeds derived from the Offering)................ $ 50.3
The Notes (gross proceeds derived from the Debt Offering).............. 100.0
Revolving Credit Facility.............................................. 0
Bedrock Contribution(1)................................................ 10.0
------
Total.......................................................... $ 160.3
======
Uses of Funds:
Cash funding of Formation(2)........................................... $ 53.9
Repayment of certain mortgage and other indebtedness(3)................ 65.0
Fees and expenses(4)................................................... 15.8
Cash to fund operating and growth strategies(3)(5)(6).................. 25.6
------
Total.......................................................... $ 160.3
======
</TABLE>
- ---------------
(1) Pursuant to the Bedrock Exchange Agreement, Bedrock is required to transfer
the Bedrock Options and the sum of $10.0 million to the Company in
consideration of the issuance to Bedrock of shares of Common Stock.
(2) Comprised of cash payments of (a) $19.1 million payable to Crow Family
Members in partial consideration of the transfer of their interests in the
Assigned Businesses, (b) $4.0 million payable to various Crow Family Members
in repayment of certain indebtedness owing by the Assigned Businesses, (c)
$6.2 million payable to certain unaffiliated third parties in consideration
of the transfer of their interests in the Assigned Businesses, (d) $6.0
million payable to CHMC in consideration of the release and discharge of the
Company's payment obligations under the CHMC Agreement, and (e) $18.6
million payable to WFLP in connection with the purchase of the DAB Notes.
(3) Prior to or substantially simultaneous with the Formation, the Company will
(a) fully repay mortgage and other indebtedness in the approximate amount of
$55.5 million owing to third party lenders relating to the six Wyndham brand
hotels acquired in the Formation, (b) fully repay remaining indebtedness in
the approximate amount of $2.0 million, which arose in connection with the
original acquisition of the GHALP Properties and (c) repay an estimated $7.5
million of the estimated $15.0 million of indebtedness owing to General
Electric under the GE Credit Agreement. Under the GE Credit Agreement, as
subsequently modified, General Electric has committed to purchase an
estimated 537,634 shares of Common Stock pursuant to the GE Option at the
initial public offering price (less underwriting discounts and commissions)
for an estimated total purchase price of approximately $7.5 million (which
represents the remaining one-half of the estimated $15.0 million of
indebtedness that will be outstanding under the GE Credit Agreement upon
consummation of the Offerings). In the event the actual public offering
price per share of Common Stock is lower than $13.00 or higher than $17.00,
the GE Option will be terminated and the Company will be required to repay
the entire estimated $15.0 million of indebtedness (unless such pricing
limitation is waived by General Electric). For additional information with
respect to the GE Option, see "Principal Stockholders."
(4) Represents estimated fees and expenses (including underwriting discounts and
commissions) in connection with the Offerings and the Financing Plan and the
transactional expenses relating to the GHALP transactions.
(5) The Company intends to acquire from an unaffiliated party the Vinings
Wyndham Garden Hotel shortly following the consummation of the Offerings.
The estimated acquisition cost is $12.9 million, comprised of a cash payment
of $3.2 million, which cash payment will be funded with a portion of the net
proceeds from the Offerings, and the assumption of existing indebtedness
encumbering the property. In addition, the Company intends to make certain
improvements to the Wyndham Rose Hall Resort in the approximate amount of
$4.0 million. See "Prospectus Summary -- The Company -- Planned Portfolio
Additions," "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
(6) Cash to fund operating and growth strategies is lower than the net increase
in cash and cash equivalents reflected on the pro forma combined balance
sheet by $2.4 million because the pro forma data reflects activity as of
March 31, 1996, while the Financing Plan reflects projected activity as of
the date of consummation of the Formation transactions. The reductions in
cash are: (a) net projected higher indebtedness of $.3 million that will be
repaid as part of the Formation, (b) $1.3 million arising from not giving
effect to the GHALP transactions, which are not part of the Financing Plan,
as the transactions have already been consummated, (c) not reclassifying $.7
million of restricted cash to cash and cash equivalents and (d) not
considering $.6 million in transaction costs already paid as of March 31,
1996. These reductions are offset by an expectation that working capital
will be sufficient to pay accrued interest upon the date of consummation of
the Formation and not require proceeds from the "Sources of Funds"
identified above. Accrued interest was approximately $.6 million at March
31, 1996. See the explanations of pro forma adjustments to the pro forma
combined balance sheet under "Pro Forma Combined Financial Data."
24
<PAGE> 32
BENEFITS OF THE FORMATION AND THE FINANCING PLAN TO RELATED PARTIES
In connection with their participation in the transactions related to the
Formation of the Company, certain major stockholders, directors and executive
officers of the Company will receive the following benefits.
Crow Family Members will receive, collectively, 9,386,135 shares of Common
Stock and $19.1 million in cash in exchange for their interests in the Assigned
Businesses. In addition, Crow Family Members will receive $4.0 million in cash
as a result of the repayment of certain loans that they made to certain of the
Assigned Businesses. In addition, WFLP, a partnership owned by Crow Family
Members, will receive $18.6 million in cash for the sale of the DAB Notes, which
represent obligations of the Senior Executive Officers (James D. Carreker,
Leslie V. Bentley, Eric A. Danziger, Anne L. Raymond and Stanley M. Koonce, Jr.)
and WEL. CHMC, which is owned by certain Crow Family Members, will receive $6.0
million in cash as consideration for the release and discharge of the Company's
payment obligations under the CHMC Agreement.
The Senior Executive Officers of the Company will receive the following
number of shares of Common Stock in exchange for their respective interests in
the Assigned Businesses:
-- James D. Carreker: 1,167,970 shares;
-- Leslie V. Bentley: 329,180 shares;
-- Eric A. Danziger: 377,964 shares;
-- Anne L. Raymond: 376,906 shares; and
-- Stanley M. Koonce, Jr.: 385,553 shares.
Bedrock (in which Messrs. Whitman and Decker have ownership interests) will
receive 2,367,890 shares of Common Stock in consideration of Bedrock's transfer
to the Company of the Bedrock Options and the Bedrock Contribution in the amount
of $10.0 million.
WEL (in which certain executive officers and employees of the Company
participate) will receive 642,588 shares of Common Stock in exchange for its
interests in the Assigned Businesses.
TCI 2001 Limited Partnership ("TCI"), which is owned by certain Crow Family
Members and the Senior Executive Officers, will receive a payment of
approximately $250,000 from the Company as a commission to be paid to an
employee of TCI for his efforts in facilitating the sale of the 11 Wyndham
Garden Hotels to an unaffiliated publicly traded REIT. See
"Business -- Long-Term Hotel Leases."
25
<PAGE> 33
USE OF PROCEEDS
Assuming an initial public offering price of $15.00 per share, the net
proceeds to the Company from the sale of 3,350,000 shares of Common Stock in the
Offering are estimated to be approximately $44.0 million ($51.0 million assuming
exercise of the U.S. Underwriters' over-allotment option), after deduction of
the underwriting discounts and commissions and the Company's estimated offering
expenses. The Company estimates net proceeds from the concurrent Debt Offering
to be approximately $95.5 million, yielding estimated combined net proceeds from
the Offerings of $139.5 million. The consummation of each of the Offerings is
conditioned upon consummation of the other. The net proceeds from the Offerings
will be used in accordance with the Financing Plan to fund the cash payments
associated with the Formation in the approximate total amount of $53.9 million,
to repay certain mortgage and other indebtedness in the approximate total amount
of $65.0 million assumed in connection with the Formation, to pay approximately
$5.0 million of fees and expenses incurred in connection with the GHALP
transactions and consummating the elements of the Financing Plan other than the
Offerings, to fund the cash portion of the estimated acquisition cost to
purchase the Vinings Wyndham Garden Hotel in the amount of $3.2 million and to
fund certain improvements to the Wyndham Rose Hall Resort in the approximate
amount of $4.0 million. The remainder of the net proceeds from the Offerings and
the Bedrock Contribution, approximately $18.4 million, will be used together
with cash generated from operations and capital available under the Revolving
Credit Facility (the availability of which will be subject to the negotiated
terms and financial covenants to be included therein) to provide liquidity for
the Company's operating and growth strategies. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Description of Indebtedness."
Of the $139.5 million net proceeds from the Offerings, the Company will pay
Crow Family Members $19.1 million in consideration of the transfer of the
Assigned Businesses, $4.0 million in repayment of indebtedness owing by the
Assigned Businesses, $6.0 million in consideration of the release and discharge
of the Company's payment obligations under the CHMC Agreement and $18.6 million
in consideration of the sale of the DAB Notes. See "The Formation and the
Financing Plan -- The Formation" and "Certain Relationships and Transactions"
for further information relating to these transactions. Of the approximately
$65.0 million portion of net proceeds from the Offerings used to repay
indebtedness, the Company estimates that (i) $55.5 million will be used to repay
mortgage and other indebtedness owing to unrelated third party lenders
(comprised of a mortgage loan in the approximate outstanding principal amount of
$12.5 million, with a maturity of May 2, 1996 and a fluctuating interest rate at
prime plus .5%; a mortgage loan in the approximate outstanding principal amount
of $10.0 million, with a maturity date of December 31, 1999 and a fluctuating
interest rate at the London Interbank Offered Rate ("LIBOR") plus 1.75%; a
mortgage loan in the approximate outstanding principal amount of $10.1 million,
with a maturity date of December 31, 1999 and a fluctuating interest rate at
LIBOR plus 1.5%; a mortgage loan with an approximate outstanding principal
amount of $5.4 million, with a maturity date of May 21, 2000 and a fluctuating
interest rate at LIBOR plus 3.25%; a mortgage loan in the approximate
outstanding principal amount of $8.7 million, with a maturity date of August 28,
1997 and a fluctuating interest rate at prime plus 1.25%; a mortgage loan with
an approximate outstanding principal amount of $5.6 million, with a maturity
date of November 15, 1999 and a fluctuating interest rate at 86% of the London
Interbank Bid Rate; a note in the approximate outstanding principal amount of
$2.3 million, with a maturity date of November 15, 1999 and an interest rate of
11.5%; a note in the approximate outstanding principal amount of $187,000, with
a maturity date of November 15, 1999 and a fluctuating interest rate at Jamaican
prime plus 1.5%; an operating deficit loan in the approximate outstanding
principal amount of $222,000, with no stated maturity and a fluctuating interest
rate at prime plus 2.0%; and a partnership development loan in the approximate
outstanding principal and accrued interest amount of $525,000, with a maturity
that has been extended to the date of consummation of the Offerings and a
fluctuating interest rate equal to the partnership cost of capital plus 2.0%);
(ii) $2.0 million will be used to repay indebtedness arising in connection with
the original acquisition of the GHALP Properties (with a maturity date of
December 1999 and a fixed interest rate of 11.5%); and (iii) $7.5 million will
be used to repay one-half of the estimated $15.0 million of indebtedness owing
to General Electric under the GE Credit Agreement (with a maturity date of June
2002 and an interest rate at December 31, 1995 of 9.0%) (in the event that the
actual public offering price per share of Common Stock is lower than $13.00 or
higher than $17.00, the GE Option will be terminated and the Company will be
required to repay the entire estimated $15.0 million of indebtedness (unless
such pricing limitation is waived by General Electric)). See Note 10 of Notes to
Combined Financial Statements for further information relating to the
indebtedness to be repaid.
Pending application of the net proceeds as described above, the Company
intends to invest such proceeds in short-term, investment grade, interest
bearing securities.
26
<PAGE> 34
DILUTION
At March 31, 1996, the Company's net tangible book value was $21.7 million,
or $1.37 per share. Net tangible book value per share is determined by dividing
the net tangible book value (tangible assets less liabilities) of the Company by
the number of shares of Common Stock outstanding. After giving effect to the
Formation and the Offering, including the issuance and sale of the 3,350,000
shares of Common Stock offered hereby (at an assumed initial public offering
price of $15.00 per share) and the issuance and sale of the Notes, in each case
after the deduction of the Company's underwriting discounts and commissions and
estimated offering expenses, and the application of the net proceeds from the
Offerings as set forth in "Use of Proceeds," the pro forma net tangible book
value of the Company at March 31, 1996 would have been $46.4 million, or $2.42
per share. This represents an immediate increase in pro forma net tangible book
value of $1.05 per share to existing stockholders and an immediate dilution of
$12.58 per share to new investors. The following table illustrates this dilution
per share:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $15.00
Net tangible book value per share as of March 31, 1996............. 1.37
Increase attributable to the Formation and the Offerings........... 1.05
---
Pro forma net tangible book value per share after giving effect to
the Formation and the Offerings.................................... 2.42
------
Dilution per share to new investors.................................. $12.58
======
</TABLE>
The following table summarizes, as of March 31, 1996, on a pro forma basis
after giving effect to the Formation and the Offering, the difference between
the number of shares of Common Stock purchased from the Company, the aggregate
consideration paid and the average price per share paid by existing stockholders
and new investors purchasing shares in the Offering (based upon an assumed
initial public offering price of $15.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)...... 15,854,301 83% $ 61,775,881 55.1% $ 3.90
New investors................. 3,350,000 17% 50,250,000 44.9% $ 15.00
---------- ---- ------------ ----
Total............... 19,204,301 100% $112,025,881 100%
========== ==== ============ ====
</TABLE>
- ---------------
(1) Includes stock held by Crow Family Members, Senior Executive Officers, WEL,
Bedrock, Susan T. Groenteman and General Electric (assuming an estimated
$15.0 million outstanding indebtedness under the GE Credit Agreement of the
time of consummation of the Offerings, and therefore the issuance of an
estimated 537,634 shares of Common Stock upon the exercise of the GE
Option). See "Principal Stockholders."
DIVIDEND POLICY
The Company intends to retain any future earnings for use in its business
and does not intend to pay cash dividends in the foreseeable future.
Furthermore, the Company anticipates that the terms of the Revolving Credit
Agreement will prohibit the Company from paying, and the indenture governing the
Notes will limit the Company's ability to pay, dividends on the Common Stock.
See "Description of Indebtedness." The payment of future dividends, if any, will
be at the discretion of the Company's Board of Directors and will depend upon,
among other things, future earnings, operations, capital requirements,
restrictions in future financing agreements, the general financial condition of
the Company and general business conditions.
27
<PAGE> 35
CAPITALIZATION
The following table sets forth at March 31, 1996 the historical
capitalization of the Company, and the pro forma capitalization of the Company
after giving effect to the Formation, the Financing Plan (assuming an initial
public offering price of $15.00 per share) and other adjustments described under
"Pro Forma Combined Financial Data." See "The Formation and the Financing Plan"
and "Pro Forma Combined Financial Data." The information set forth in the table
should be read in conjunction with the Combined Financial Statements and the
Notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
HISTORICAL PRO FORMA
---------- ---------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents......................................... $ 6,084 $ 33,996(1)
========= ========
Long-term debt, including current maturities...................... 71,699 100,000(1)(2)
--------- --------
Capitalized lease obligations, including current portion.......... 20,729 20,729
--------- --------
Minority interest................................................. 7,972 --
---------
Partners' capital and stockholders' equity:
Partners' capital............................................... 24,839 --
Preferred Stock, $.01 par value, 5,000,000 shares authorized; no
shares outstanding........................................... -- --
Common Stock, $.01 par value, 45,000,000 shares authorized;
19,204,301 shares outstanding, pro forma(3).................. -- 192
Additional paid-in capital...................................... -- 66,676
Retained earnings............................................... -- 7,212
Receivables from affiliates..................................... (2,375) (1,242)
Notes receivable from stockholders.............................. -- (18,576)
--------- --------
Total partners' capital and stockholders' equity........ 22,464 54,262
--------- --------
Total capitalization.................................... $ 122,864 $ 174,990
========= ========
</TABLE>
- ---------------
(1) Does not reflect (i) the acquisition of the Vinings Wyndham Garden Hotel,
which is expected to close shortly following consummation of the Offering,
the estimated acquisition cost for which is $12.9 million (including
estimated closing costs of $395,000), comprised of a cash payment of $3.2
million and the assumption of $9.7 million of industrial revenue bond
indebtedness or (ii) funding certain improvements to the Wyndham Rose Hall
Resort in the approximate amount of $4.0 million. See "Pro Forma Combined
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
(2) After giving full effect to the implementation of the Formation and the
Financing Plan, the Company does not expect that it will initially draw any
amounts under the Revolving Credit Facility. See "The Formation and the
Financing Plan" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
(3) Based on 19,204,301 shares of Common Stock outstanding after the Offering,
which assumes an estimated $15.0 million outstanding indebtedness under the
GE Credit Agreement at the time of the consummation of the Offering and
therefore the issuance of an estimated 537,634 shares of Common Stock upon
the exercise of the GE Option. Excludes (i) 2,133,811 shares of Common Stock
reserved for issuance under the Incentive Plan, of which the Company expects
to grant options to purchase 797,700 shares prior to the date of this
Prospectus with exercise prices equal to the initial public offering price
per share and (ii) 50,000 shares of Common Stock reserved for issuance under
the Retainer Plan. See "Management -- 1996 Long Term Incentive Plan,"
"-- Director Compensation" and "Principal Stockholders."
28
<PAGE> 36
PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined balance sheet of the Company as
of March 31, 1996 presents, in the "The Company Pro Forma" column, the financial
position of the Company as if the Formation and the Financing Plan had been
completed on March 31, 1996. The unaudited pro forma combined statements of
income of the Company for the year ended December 31, 1995 and the 1996 First
Quarter present, in the "The Company Pro Forma" column, the results of
operations of the Company as if the Formation and the Financing Plan had been
completed on January 1, 1995. The adjustments required to reflect the Formation
and the Financing Plan are set forth in the "Pro Forma Adjustments" columns and
are discussed in the accompanying notes.
The Formation has been accounted for as an exchange between entities under
common control, and, accordingly, the assets received by the Company and its
affiliates in the Formation will be recorded at historical cost.
The pro forma combined balance sheet and statements of income reflect (i)
the acquisition of a 70% interest in GHALP from an unaffiliated third party and
(ii) the sale/leaseback of the GHALP Properties to an unaffiliated REIT. These
transactions were consummated on May 2-3, 1996. Pro forma adjustments related to
the GHALP transactions have been set forth in a separate column under "Pro Forma
Adjustments." See "Business -- Long-Term Hotel Leases."
The following pro forma combined financial data does not reflect the
acquisition of the Vinings Wyndham Garden Hotel anticipated to be consummated
shortly following the Offering. If the effects of this acquisition had been
included in the pro forma combined balance sheet, cash would have decreased by
$3.2 million, property and equipment would have increased by $12.5 million,
other assets would have increased by $395,000, and debt would have increased by
$9.7 million. If the acquisition had been consummated January 1, 1995, and the
results of the Vinings Wyndham Garden Hotel had been included in the pro forma
statement of income, revenues would have increased by $4.6 million, operating
income would have increased by $1.4 million, interest expense would have
increased by approximately $736,000 and net income would have increased by
approximately $400,000.
The unaudited pro forma combined financial data of the Company are
presented for informational purposes only and may not reflect the Company's
future results of operations and financial position or what the results of
operations and financial position of the Company would have been had such
transactions occurred as of the dates indicated. The unaudited pro forma
combined financial statements and accompanying notes of the Company should be
read in conjunction with the combined financial statements and notes thereto
contained elsewhere in this Prospectus.
29
<PAGE> 37
WYNDHAM HOTEL CORPORATION
1995 PRO FORMA COMBINED BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
-------------------------------
THE COMPANY FORMATION AND THE COMPANY
HISTORICAL FINANCING GHALP PRO FORMA
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 6,084,420 $ 30,391,090 (a) $(2,479,954)(o) $ 33,995,556
Cash, restricted....................... 2,932,921 (302,391 )(b) 1,196,519(p) 3,827,049
Accounts receivable, net............... 13,623,182 -- 2,232,371(q) 15,855,553
Due from affiliates.................... 2,438,362 -- 152,389(r) 2,590,751
Inventories............................ 1,062,044 -- 189,754(q) 1,251,798
Deferred income taxes.................. -- 1,000,000 (c) -- 1,000,000
Other.................................. 529,892 -- 1,408,883(s) 1,938,775
------------ ------------ ----------- ------------
Total currents assets................ 26,670,821 31,088,699 2,699,962 60,459,482
Investment in an affiliate's hotel
partnership............................ 3,052,355 -- (3,052,355)(t) --
Notes and other receivables from
affiliates............................. 7,709,262 -- -- 7,709,262
Notes receivable......................... 2,450,587 -- -- 2,450,587
Property and equipment, net.............. 86,846,677 (1,898,623 )(d) --(u) 84,948,054
Management contract costs, net........... 7,299,226 -- -- 7,299,226
Security deposits........................ -- -- 13,600,000(v) 13,600,000
Deferred income taxes.................... -- 16,000,000 (c) -- 16,000,000
Other.................................... 4,541,630 5,957,880 (e) 269,613(w) 10,769,123
------------ ------------ ----------- ------------
Total assets.................... $138,570,558 $ 51,147,956 $13,517,220 $203,235,734
============ ============ =========== ============
LIABILITIES AND PARTNERS' CAPITAL AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses............................. $ 9,210,678 $ (571,157 )(f) $ 4,426,716(x) $ 13,066,237
Accounts payable and accrued expenses
due to affiliates.................... 900,363 -- -- 900,363
Deposits............................... 952,415 -- 605,790(y) 1,558,205
Deposits from affiliates............... 316,000 -- -- 316,000
Current portion of long-term debt...... 15,578,362 (14,011,067 )(g) (1,567,295)(z) --
Current portion of capital lease
obligation........................... 387,944 -- -- 387,944
Due to affiliates...................... 2,337,876 (2,337,876 )(g) --(aa) --
------------ ------------ ----------- ------------
Total current liabilities............ 29,683,638 (16,920,100 ) 3,465,211 16,228,749
------------ ------------ ----------- ------------
Payable to affiliate..................... 1,767,985 (1,767,985 )(g) -- --
Payable to minority interest............. 222,052 (222,052 )(g) -- --
Long-term debt........................... 56,120,312 44,323,820 (h) (444,132)(bb) 100,000,000
Capital lease obligation................. 20,340,917 -- -- 20,340,917
Deferred gain............................ -- -- 12,402,259(cc) 12,402,259
------------ ------------ ----------- ------------
78,451,266 42,333,783 11,958,127 132,743,176
------------ ------------ ----------- ------------
Minority interest........................ 7,971,623 (7,971,623 )(i) -- --
Partners' capital and stockholders'
equity:
Partners' capital...................... 24,838,632 (22,932,514 )(j) (1,906,118)(dd) --
Preferred Stock........................ -- -- --
Common Stock........................... -- 192,043 (k) -- 192,043
Additional paid-in capital............. -- 66,676,693 (k) -- 66,676,693
Retained earnings...................... -- 7,212,863 (l) -- 7,212,863
Receivables from affiliates............ (2,374,601) 1,132,457 (m) -- (1,242,144)
Notes receivable from stockholders..... -- (18,575,646 )(n) -- (18,575,646)
------------ ------------ ----------- ------------
Total partners' capital and
stockholders' equity.......... 22,464,031 33,705,896 (1,906,118) 54,263,809
------------ ------------ ----------- ------------
Total liabilities and
equity.................... $138,570,558 $ 51,147,956 $13,517,220 $203,235,734
============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
30
<PAGE> 38
WYNDHAM HOTEL CORPORATION
PRO FORMA COMBINED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------------
PRO FORMA ADJUSTMENTS
-------------------------------
THE COMPANY FORMATION AND THE COMPANY
HISTORICAL FINANCING PLAN GHALP PRO FORMA
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Hotel revenues..................... $54,673,322 $ $56,641,646(j) $111,314,968
Management fees.................... 7,392,515 93,020(a) 7,485,535
Management fees -- affiliates...... 9,528,374 577,145(a) (3,317,170)(k) 6,788,349
Service fees....................... 2,191,816 2,191,816
Service fees -- affiliates......... 1,927,669 (728,758)(l) 1,198,911
Reimbursements..................... 4,377,626 4,377,626
Reimbursements -- affiliates....... 6,458,554 (1,740,429)(m) 4,718,125
Other.............................. 1,339,832 160,000(a) 1,499,832
----------- ----------- ----------- ------------
Total revenues........... 87,889,708 830,165 50,855,289 139,575,162
----------- ----------- ----------- ------------
Operating costs and expenses:
Hotel expenses..................... 36,851,511 48,915,052(n) 85,766,563
Hotel expenses -- affiliates....... 125,556 125,556
Selling, general and administrative
expenses......................... 14,526,732 1,300,000(b) 15,826,732
Selling, general and administrative
expenses -- affiliates........... 473,920 473,920
Equity participation
compensation..................... 3,992,143 3,992,143
Reimbursable expenses.............. 4,377,626 4,377,626
Reimbursable
expenses -- affiliates........... 6,458,554 (1,740,429)(m) 4,718,125
Depreciation and amortization...... 6,310,730 924,298(c) 7,235,028
Other.............................. 147,584 147,584
----------- ----------- ----------- ------------
Total operating costs and
expenses............... 73,264,356 2,224,298 47,174,623 122,663,277
----------- ----------- ----------- ------------
Operating income................... 14,625,352 (1,394,133) 3,680,666 16,911,885
Interest income.................... 344,124 --(d) 344,124
Interest income -- affiliates...... 100,377 100,377
Interest expense................... (8,465,239) (4,578,781)(e) (13,044,020)
Equity in earnings of affiliate's
hotel partnership................ 1,664,187 (1,664,187)(o) --
Foreign currency gain.............. 405,096 (347,131)(f) 57,965
Amortization of deferred gain...... -- 724,776(p) 724,776
----------- ----------- ----------- ------------
Income before minority interests... 8,673,897 (6,320,045) 2,741,255 5,095,107
Income attributable to minority
interests........................ 724,415 (724,415)(g) --
----------- ----------- ----------- ------------
Income before income taxes......... $ 7,949,482 $ (5,595,630) 2,741,255 $ 5,095,107
Provision for income taxes......... -- (2,012,567)(h) (2,012,567)
----------- ----------- ----------- ------------
Net income......................... $ 7,949,482 $ (7,608,197) $ 2,741,255 $ 3,082,540
=========== =========== =========== ============
Pro forma net income per common
share............................ $ .16(i)
============
Pro forma common shares
outstanding...................... 19,204,301(i)
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
31
<PAGE> 39
WYNDHAM HOTEL CORPORATION
PRO FORMA COMBINED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
----------------------------------------------------------------
PRO FORMA ADJUSTMENTS
-------------------------------
THE COMPANY FORMATION AND THE COMPANY
HISTORICAL FINANCING PLAN GHALP PRO FORMA
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Hotel revenues.................... $16,828,688 $ $16,010,896(j) $ 32,839,584
Management fees................... 2,610,954 8,485(a) 2,619,439
Management fees -- affiliates..... 2,590,628 158,686(a) (924,438)(k) 1,824,876
Service fees...................... 410,370 410,370
Service fees -- affiliates........ 554,283 (223,344)(l) 330,939
Reimbursements.................... 1,626,521 1,626,521
Reimbursements -- affiliates...... 1,955,878 (264,149)(m) 1,691,729
Other............................. 32,724 32,724
----------- ----------- ----------- ------------
Total revenues.......... 26,610,046 167,171 14,598,965 41,376,182
----------- ----------- ----------- ------------
Operating costs and expenses:
Hotel expenses.................... 10,175,947 12,737,737(n) 22,913,684
Hotel expenses -- affiliates...... 31,389 31,389
Selling, general and
administrative expenses......... 4,153,321 325,000(b) 4,478,321
Selling, general and
administrative
expenses -- affiliates.......... 119,902 119,902
Equity participation
compensation.................... -- --
Reimbursable expenses............. 1,626,521 1,626,521
Reimbursable
expenses -- affiliates.......... 1,955,878 (264,149)(m) 1,691,729
Depreciation and amortization..... 1,661,200 241,855(c) 1,903,055
Other............................. 143,995 143,995
----------- ----------- ----------- ------------
Total operating costs
and expenses.......... 19,868,153 566,855 12,473,588 32,908,596
----------- ----------- ----------- ------------
Operating income.................. 6,741,893 (399,684) 2,125,377 8,467,586
Interest income................... 126,036 --(d) 126,036
Interest income -- affiliates..... 178,003 178,003
Interest expense.................. (2,114,357) (1,141,697)(e) (3,256,054)
Equity in earnings of affiliate's
hotel partnership............... 828,853 (828,853)(o) --
Foreign currency gain............. -- --(f)
Amortization of deferred gain..... -- 182,386(p) 182,386
----------- ----------- ----------- ------------
Income before minority
interests....................... 5,760,428 (1,541,381) 1,478,910 5,697,957
Income attributable to minority
interests....................... 593,237 (593,237)(g) --
----------- ----------- ----------- ------------
Income before income taxes........ 5,167,191 (948,144) 1,478,910 5,697,957
Provision for income taxes........ -- (2,250,693)(h) (2,250,693)
----------- ----------- ----------- ------------
Net income........................ $ 5,167,191 $ (3,198,837) $ 1,478,910 $ 3,447,264
=========== =========== =========== ============
Pro forma net income per common
share........................... $ .18(i)
============
Pro forma common shares
outstanding..................... 19,204,301(i)
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
32
<PAGE> 40
WYNDHAM HOTEL CORPORATION
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The pro forma combined balance sheet presents the historical combined
balance sheet before the Formation and Financing Plan, adjusted to reflect the
transactions contemplated in connection with the Formation and Financing Plan
and the transactions relating to GHALP, to arrive at the balance sheet of the
Company on a pro forma basis as of March 31, 1996, as if such transactions had
been effected on that date. The transactions contemplated in connection with the
Formation and Financing Plan have been accounted for as an exchange between
entities under common control and individuals who are considered promoters and,
accordingly, have been accounted for in a manner similar to a pooling of
interests.
The pro forma combined statements of income present the historical combined
operations for the year ended December 31, 1995 and the 1996 First Quarter
before the Formation and Financing Plan, adjusted to reflect the transactions
contemplated in connection with the Formation and Financing Plan and the
transactions relating to GHALP, to arrive at the income statements of the
Company on a pro forma basis for the year ended December 31, 1995 and the 1996
First Quarter, as if such transactions had been effected on January 1, 1995 or
January 1, 1996, respectively.
The unaudited pro forma combined financial statements of the Company are
presented for informational purposes only and may not reflect the Company's
future results of operations and financial position or what the results of
operations and financial position of the Company would have been had such
transactions occurred as of the dates indicated.
TRANSACTIONS RELATING TO GHALP
On May 2, 1996, a 70% partnership interest in GHALP owned by an
unaffiliated third party was acquired by a newly formed partnership owned by
Crow Family Members and Senior Executive Officers. The Company accounted for
this transaction using the purchase method of accounting. Immediately prior to
the acquisition of such partnership interest, GHALP sold two of its hotel
properties, including land, buildings, furnishings and equipment, to an
unaffiliated REIT, and immediately following the acquisition of such partnership
interest, GHALP sold the remainder of its hotel properties to such REIT for an
aggregate purchase price of $135.3 million, $121.7 million of which was paid in
cash at closing (prior to adjustments for closing costs) and $13.6 million of
which was held as retained funds for payment at the end of the leasing
arrangement described below provided no default under the lease has occurred.
Proceeds from the sale were utilized by GHALP to extinguish mortgage
indebtedness of $93.0 million plus accrued interest, and $29.5 million (subject
to adjustment for closing costs) was distributed to the partner acquiring the
70% partnership interest. The hotel properties were leased to a newly formed
limited partnership owned by Crow Family Members and the Senior Executive
Officers under a leasing arrangement qualifying as an operating lease. The
operations of GHALP, which had historically been accounted for under the equity
method, will be presented on a combined basis. Upon being combined, all
intercompany transactions relating to GHALP will be eliminated and the leasehold
interest will be contributed to a special purpose subsidiary of the Company. Pro
forma adjustments related to the GHALP transactions have been set forth in a
separate column under "Pro Forma Adjustments."
33
<PAGE> 41
PRO FORMA ADJUSTMENTS
The pro forma adjustments to the combined balance sheet and combined
statement of income are detailed below:
PRO FORMA COMBINED BALANCE SHEET
FORMATION AND FINANCING PLAN
<TABLE>
<S> <C> <C>
(a) Adjustments to reflect a net increase in cash and cash equivalents:
Proceeds from the issuance of 3,350,000 shares of Common Stock in
the Offering assuming an initial public offering price of
$15.00 per share (See "The Formation and the Financing
Plan -- The Financing
Plan")...................................................... $ 50,250,000(8)
Proceeds from the issuance of $100.0 million of Notes (See "The
Formation and the Financing Plan -- The Financing Plan").... 100,000,000(8)
Issuance of 2,367,890 shares of Common Stock in exchange for the
Bedrock Contribution of $10.0 million under the terms of the
Bedrock Exchange Agreement (See "The Formation and the
Financing
Plan")...................................................... 10,000,000(5)
Change in restricted cash resulting from the removal of
restricted cash requirements under existing loan agreements
which are to be repaid and the addition of the restricted
cash requirements under the terms of the $100.0 million
Revolving Credit Facility................................... 737,349(9)
Payment of estimated fees and expenses relating to issuance of
Common Stock, the Notes and the $100.0 million Revolving
Credit Facility............................................. (13,440,296)(8)
Repayment of existing mortgage indebtedness of hotels acquired in
the Formation (See "The Formation and The Financing
Plan")...................................................... (54,687,247)(9)
Repayment of indebtedness to General Electric under the GE Credit
Agreement, net of the GE Option under which General Electric
has committed to purchase shares of Common Stock at the
initial public offering price (less underwriters' discount
and commissions) for a total purchase price of approximately
$7.5 million (which represents the remaining one-half of the
$15.0 million of indebtedness outstanding at March 31,
1996)....................................................... (7,500,000)(9)
Repayment of existing indebtedness to Crow Family Members
($4,105,861) and unaffiliated partners ($222,052) of hotels
acquired in the Formation................................... (4,327,913)(3)
Payment of accrued interest related to existing indebtedness..... (571,157)(9)
Payments relating to the purchase of partnership interests in six
Wyndham brand hotels from related parties. This has been
accounted for in a manner similar to a dividend and
appropriately reduced partner's equity and additional paid
in capital as shown below in notes (j) and (k).............. (19,421,000)(1)
Payment related to the purchase of the minority partnership
interest in Rose Hall Associates from an unrelated third
party. Rose Hall Associates owns one of the six Wyndham
brand hotels acquired in the Formation...................... (6,073,000)(2)
Purchase of the DAB Notes comprising the outstanding principal
and accrued interest severally owing by the Senior Executive
Officers and WEL to WFLP.................................... (18,575,646)(1)
Payment to CHMC in consideration of the release and discharge of
the Company from its obligation to make payments to CHMC
under the CHMC Agreement.................................... (6,000,000)(4)
-------------
$ 30,391,090
============
(b) Change in restricted cash resulting from the removal of
restricted cash requirements under the existing loan
agreements, which loans are to be repaid.................... $ (302,391)(9)
============
</TABLE>
34
<PAGE> 42
<TABLE>
<S> <C> <C>
(c) Adjustments to reflect deferred income taxes in accordance with
Statement of Financial Accounting Standard 109 ("SFAS 109")
following the transition from a partnership to a corporate status
and the effect of the Formation transactions:
Deferred income taxes -- current................................. $ 1,000,000(7)
============
Deferred income taxes -- long-term............................... $ 16,000,000(7)
============
(d) Adjustment to reflect a reduction in the basis of property and
equipment resulting from the purchase of the minority partnership
interest in Rose Hall Associates from an unrelated third party.
Rose Hall Associates owns one of the six Wyndham brand hotels
acquired in the Formation........................................ $ (1,898,623)(2)
============
(e) Adjustments to reflect a net increase in other assets:
Recording of the estimated unpaid fees and expenses to be
deferred which relate to the issuance of $100.0 million of
Notes and the $100.0 million Revolving Credit Facility...... $ 7,179,975(8)
Write-off of the unamortized portion of deferred loan costs as a
result of the repayment of indebtedness noted in (a)
above....................................................... (787,137)(9)
Change in long term restricted cash resulting from the removal of
restricted cash requirements under the existing loan
agreements, which loans are to be repaid, and the addition
of the restricted cash requirements under the terms of the
$100.0 million Revolving Credit Facility.................... (434,958)(9)
-------------
$ 5,957,880
============
(f) Adjustment to reflect a net decrease in accounts payable and
accrued expenses due to payment of accrued interest related to
indebtedness
repaid........................................................... $ 571,157(9)
============
(g) Adjustments to reflect the repayment of existing indebtedness:
Current portion of long-term debt................................ $ 14,011,067(9)
============
Due to affiliates................................................ $ 2,337,876(3)
============
Payable to affiliate............................................. $ 1,767,985(3)
============
Payable to minority interest..................................... $ 222,052(3)
============
(h) Adjustments to reflect a net increase in long-term debt,
excluding the current portion:
Repayment of existing indebtedness excluding debt relating to
GHALP....................................................... $ 55,676,180(9)
Indebtedness relating to issuance of the Notes................... (100,000,000)(8)
-------------
$ (44,323,820)
============
(i) Acquisition of the 37.5% minority partnership interest in Rose
Hall Associates owned by an unrelated third party. Rose Hall
Associates owns one of the six Wyndham brand hotels acquired in
the Formation.................................................... $ 7,971,623(2)
============
(j) Adjustments to reflect a net decrease in partners' capital
consisting of:
Distribution of notes receivable proceeds........................ $ 1,132,457(6)
Excess of the purchase price over the book value of partnership
interests merged in the Formation (subject to further
adjustment for working capital settlement, which is not
presently determinable). This adjustment is the result of
the Formation being accounted for using the historical cost
of the Assigned Businesses ................................. 21,800,057(l)
-------------
$ 22,932,514
============
</TABLE>
35
<PAGE> 43
<TABLE>
<S> <C> <C>
(k) Adjustments to reflect a net increase in Common Stock and
additional paid-in capital consisting of:
Issuance of 3,350,000 shares of Common Stock in the Offering
assuming an initial public offering price of $15.00 per
share (See "The Formation and the Financing Plan -- The
Financing Plan")............................................ $ (50,250,000)(8)
Issuance of 2,367,890 shares of Common Stock in exchange for the
Bedrock Contribution of $10.0 million under the terms of the
Bedrock Exchange Agreement (See "The Formation and the
Financing
Plan")...................................................... (10,000,000)(5)
Estimated fees and expenses relating to the issuance of shares of
Common Stock in the Offering................................ 6,260,321(8)
Issuance of shares of Common Stock pursuant to exercise of the GE
Option under which General Electric would purchase shares of
Common Stock at the initial public offering price (less
underwriters discount and commissions) for a total purchase
price of approximately $7.5 million (which represents the
remaining one-half of the $15.0 million of indebtedness
outstanding as of March 31, 1996)........................... (7,500,000)(9)
Estimated excess of the book value of partnership interests
merged in the Formation (subject to further adjustment for
working capital settlement, which is not presently
determinable) over the purchase price. This adjustment is
the result of the Formation being accounted for using the
historical cost of the assigned businesses.................. (2,379,057)(1)
Effect of recording deferred income taxes, in accordance with
SFAS 109, arising as a result of the Formation
transactions................................................ (3,000,000)(7)
-------------
$ (66,868,736)
============
Common Stock (19,204,301 shares of Common Stock at par value of
$.01)....................................................... (192,043)
Additional paid-in capital....................................... (66,676,693)
-------------
(66,868,736)
============
(l) Adjustments to reflect a net increase in retained earnings
consisting of:
Write-off of the unamortized portion of deferred loan costs as a
result of the repayment of indebtedness noted in (a)
above....................................................... 787,137(9)
Payment to CHMC in consideration of release and discharge of the
Company from its obligation to make payments to CHMC under
the CHMC Agreement.......................................... 6,000,000(4)
Effect of recording deferred income taxes, in accordance with
SFAS 109, arising as a result of the transition from
partnership to corporate
status...................................................... (14,000,000)(7)
-------------
$ (7,212,863)
============
(m) Adjustment to reflect the collection of affiliated partnerships'
notes
receivable....................................................... $ (1,132,457)(6)
============
(n) Purchase of DAB Notes comprising the outstanding principal and
accrued interest severally owing by the Senior Executive Officers
and WEL to WFLP.................................................. $ 18,575,646(l)
============
</TABLE>
GHALP
<TABLE>
<S> <C> <C>
(o) Adjustments to reflect a net decrease in cash and cash equivalents:
Addition of the cash balances of GHALP as a result of acquiring
70% partnership interest in GHALP from an unrelated third
party....................................................... $ 4,515,845(10)
Net proceeds from sale of the land, buildings, furnishings and
equipment of GHALP to HPT for $135.3 million net of
transaction expenses of $1.6 million and a $13.6 million
security deposit, which will be held as retained funds
pursuant to the HPT sale/leaseback agreement................ 120,081,544(12)
Repayment of existing indebtedness including accrued interest.... (95,567,969)(13)
</TABLE>
36
<PAGE> 44
<TABLE>
<S> <C> <C>
Distribution received by Garden Hotel Partners, L.P., a
predecessor in interest to the Company, prior to the
acquisition of 70% partnership interest in GHALP,
representing its share of GHALP's cash flow distributed in
accordance with the GHALP partnership agreement............. 476,000(10)
Distribution of $29.6 million to Garden Hotel Partners Two, which
was formed to acquire 70% partnership interest in GHALP from
an unrelated third party. The distribution is equivalent to
the purchase price plus expenses paid by Garden Hotel
Partners Two to an unaffiliated third party. The remaining
$.4 million represents a distribution by Garden Hotel
Partners, L.P. to its shareholders.......................... (30,042,666)(14)
Distribution to the GHALP partners of excess working capital
generated by operations..................................... (474,584)(14)
Change in restricted cash resulting from removal of the
restricted cash requirements under existing loan agreements
which were repaid and the addition of restricted cash
requirements under terms of the GHALP Lease, which will
qualify as an operating lease............................... (584,791)(15)
Refund of purchase price deposit required pursuant to purchase of
70% partnership interest in GHALP from an unrelated third
party....................................................... 250,000(10)
Payment in advance of the first month's rent under the GHALP
Lease....................................................... (1,133,333)(16)
-------------
$ (2,479,954)
============
(p) Adjustments to reflect a net increase in restricted cash:
Addition of the restricted cash balances of GHALP as a result of
acquiring 70% partnership interest in GHALP from an
unrelated third party....................................... $ 611,729(10)
Change in restricted cash resulting from removal of the
restricted cash requirements under existing loan agreements
which were repaid and the addition of restricted cash
requirements under terms of the GHALP Lease, which qualifies
as an operating lease....................................... 584,790(15)
-------------
$ 1,196,519
============
(q) Adjustments necessary to record the balances of accounts
receivable and inventories as a result of acquiring 70%
partnership interest in GHALP from an unrelated third party:
Addition of the accounts receivable.............................. $ 2,232,371(10)
============
Addition of the inventories...................................... $ 189,754(10)
============
(r) Adjustments to reflect a net increase in amounts due from
affiliates:
Elimination of amounts due to Wyndham Hotel Company Ltd. from
GHALP as a result of acquiring 70% partnership interest in
GHALP from an unrelated third party......................... $ (117,750)(11)
Addition of the amounts due from affiliates of GHALP as a result
of acquiring 70% partnership interest in GHALP from an
unrelated third party....................................... 270,139(10)
-------------
$ 152,389
============
(s) Adjustments to reflect a net increase in other current assets:
Addition of the other current assets of GHALP as a result of
acquiring 70% partnership interest in GHALP from an
unrelated third party....................................... $ 275,550(10)
Recording of the payment in advance of the first month's rent
under the GHALP Lease....................................... 1,133,333(16)
-------------
$ 1,408,883
============
(t) Adjustment to reflect elimination of the 30% equity investment in
GHALP upon acquisition of the remaining 70% partnership interest
and the combination of 100% of the account balances.............. $ (3,052,355)(10)
============
</TABLE>
37
<PAGE> 45
<TABLE>
<S> <C> <C>
(u) Adjustments to reflect activity in property and equipment, net:
Addition of property and equipment of GHALP as a result of
acquiring 70% partnership interest in GHALP from an
unrelated third party after giving effect to an $18.2 step
up representing the difference between the acquired
partners' equity balance and the purchase price of
approximately $29.5 million................................. $ 121,426,880(10)
Sale of the land, buildings, furnishings and equipment of GHALP
to HPT for $135.3 million net of transaction expenses of
$1.6 million and a $13.6 million security deposit, which
will be held as retained funds pursuant to the HPT
sale/leaseback agreement. A gain of $12.3 million has been
recorded on the transaction, which has been deferred and is
being recognized over the initial term of the GHALP Lease... (121,426,880)(12)
-------------
$ 0
============
(v) Adjustment to reflect the security deposit, which will be held as
retained funds pursuant to the HPT sale/leaseback agreement...... $ 13,600,000(12)
============
(w) Adjustments to reflect a net increase in other assets:
Elimination of advance deposits of GHALP......................... $ (3,000)(11)
Addition of the other assets of GHALP as a result of acquiring
70% partnership interest in GHALP from an unrelated third
party....................................................... 1,330,552(10)
Refund of purchase price deposit required pursuant to agreement
to purchase 70% partnership interest in GHALP from an
unrelated third party....................................... (250,000)(10)
Write off of the unamortized portion of deferred loan costs as a
result of the repayment of indebtedness..................... (807,939)(13)
-------------
$ 269,613
============
(x) Adjustments to reflect a net increase in accounts payable and accrued
liabilities:
Payment of accrued interest relating to indebtedness repaid...... $ 556,542(13)
Addition of the accounts payable and accrued expenses of GHALP as
a result of acquiring 70% partnership interest in GHALP from
an unrelated third party.................................... (4,983,258)(10)
-------------
$ (4,426,716)
============
(y) Adjustments to reflect a net increase in advance deposits:
Addition of the advance deposits of GHALP as a result of
acquiring 70% partnership interest in GHALP from an
unrelated third party....................................... $ (608,790)(10)
Elimination of advance deposits of GHALP......................... 3,000(11)
-------------
$ (605,790)
============
(z) Adjustment to reflect the repayment of existing indebtedness of
Garden Hotel Partners LP which, prior to the Formation, held a
30% partnership interest in GHALP................................ $ 1,567,295(13)
============
(aa) Adjustments to reflect activity in amounts due to affiliates:
Addition of the amounts due to an affiliate of GHALP as a result
of acquiring 70% partnership interest in GHALP from an
unrelated third party....................................... $ (117,750)(10)
Elimination of amounts due from GHALP to Wyndham Hotel Company,
Ltd. as a result of acquiring 70% partnership interest in
GHALP from an unaffiliated third party...................... 117,750(11)
-------------
$ 0
============
</TABLE>
38
<PAGE> 46
<TABLE>
<S> <C> <C>
(bb) Adjustments to reflect activity relating to long-term debt:
Addition of long-term debt of GHALP as a result of acquiring 70%
partnership interest in GHALP from an unrelated third
party....................................................... $ (93,000,000)(10)
Adjustments to reflect the repayment of long-term indebtedness
(net of current portion) of Garden Hotel Partners LP which,
prior to the Formation, held a 30% partnership interest in
GHALP....................................................... 444,132(13)
Repayment of existing mortgage indebtedness...................... 93,000,000(13)
-------------
$ 444,132
============
(cc) Adjustments to record deferred gain:
Deferred gain resulting from sale of the land, buildings,
furnishings and equipment of GHALP to HPT for $135.3 million
net of transaction expenses of $1.6 million and a $13.6
million security deposit which will be held as retained
funds for payment pursuant to the HPT sale/leaseback
agreement. The gain is being recognized over the initial
term of the GHALP Lease..................................... $ (12,254,664)(12)
Increase in the deferred gain of GHALP as a result of acquiring
70% partnership interest in GHALP from an unrelated third
party....................................................... (147,595)(11)
-------------
$ (12,402,259)
============
(dd) Adjustment to reflect a net decrease in partners' capital
consisting of:
Recording the purchase of 70% partnership interest in GHALP from
an unrelated third party.................................... $ (29,566,666)(10)
Write-off of the unamortized portion of deferred loan costs as a
result of the repayment of indebtedness noted in (bb)
above....................................................... 807,939(13)
Distribution of $29.6 million to Garden Hotel Partners Two, which
was formed to acquire 70% partnership interest in GHALP from
an unrelated third party. The distribution is equivalent to
the purchase price plus expenses paid by Garden Hotel
Partners Two to an unaffiliated third party. The remaining
$.4 million represents a distribution by Garden Hotel
Partners, L.P. to its shareholders.......................... 30,042,666(14)
Distribution to the GHALP partners of excess working capital
generated by operations..................................... 474,584(14)
Adjustment of the deferred gain as a result of acquiring 70%
partnership interest in GHALP from an unrelated third
party....................................................... 147,595(11)
-------------
$ 1,906,118
============
</TABLE>
The detail supporting the pro forma balance sheet as of March 31, 1996
reflect sixteen self-balancing entries which are identified in (1) through (16)
below and reflect the following:
(1) Record cash received by Crow Family Members for interests in Assigned
Businesses and purchase of promissory notes (DAB Notes).
(2) Record purchase of minority partnership interest from an unrelated third
party and adjustment of the basis of assets.
(3) Record repayment of indebtedness to affiliated and unaffiliated partners.
(4) Record cash received by Crow Family Members in consideration for release
and discharge from payment obligations under the CHMC Agreement.
(5) Record the Bedrock Contribution.
(6) Record receipt of payment of notes receivable and distribution in the same
amount.
(7) Record deferred income taxes in accordance with SFAS 109 following the
Formation.
(8) Record financing obtained through debt and equity Offerings.
(9) Record repayment of indebtedness to unaffiliated third parties.
(10) Record combination of GHALP upon acquisition of 70% interest from an
unrelated third party and cash distributed to Garden Hotel Partners, L.P.
prior to the acquisition.
(11) Record eliminating entries resulting from combination of GHALP.
(12) Record sale of land, buildings, furniture and equipment as part of GHALP
sale/leaseback transaction.
(13) Record repayment of indebtedness and write-off of related deferred loan
costs.
(14) Record distribution to partners as a result of the GHALP transaction.
(15) Record change in restricted cash under terms of the GHALP lease agreement
as compared to the restricted cash requirements of the existing GHALP loan
agreements.
(16) Record payment in advance of first month's rent under the GHALP lease
agreement.
39
<PAGE> 47
PRO FORMA COMBINED STATEMENTS OF INCOME
FORMATION AND FINANCING PLAN
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1995 1996
------------ ---------------
<S> <C> <C> <C>
(a) Adjustment to reflect an increase in management fee revenues
and other income due to the release and discharge of the
Company from its obligation to make payments to CHMC under
the CHMC Agreement, which payments have historically been
offset against management fee revenues from the management
agreements to which they relate:
Unaffiliated -- Management Fees............................. $ 93,020 $ 8,485
Unaffiliated -- other....................................... 160,000 --
Affiliated -- Management Fees............................... 577,145 158,686
------------ ---------------
Total....................................................... $ 830,165 $ 167,171
=========== ============
(b) Adjustment to reflect an increase in selling, general and
administrative expenses related to managing and
administering a publicly held company....................... $ 1,300,000 $ 325,000
=========== ============
(c) Adjustments to reflect a net increase in depreciation and
amortization expense:
Amortization of loan costs relating to the Notes and the
$100.0 million Revolving Credit Facility............... $ 1,272,020 $ 318,005
Elimination of amortization of deferred loan costs upon
repayment of existing indebtedness..................... (250,289) (50,993)
Depreciation expense reduction resulting from purchase of
the 37.5% minority partnership interest in Rose Hall
Associates from an unrelated third party. Rose Hall
Associates owns one of the six Wyndham brand hotels
acquired in the Formation.............................. (97,433) (25,157)
------------ ---------------
$ 924,298 $ 241,855
=========== ============
(d) The pro forma combined statements do not include any
estimated interest earned on $27.9 million cash and cash
equivalents arising from proceeds of the Offering,
representing the estimated pro forma cash balance. At a
simple interest rate of 5%, annual interest earned would be
approximately $1,395,000.
(e) Pro Forma interest expense consists of the following:
Interest expense on the Notes............................... $ 10,375,000 $ 2,593,750
Interest expense on the hotel property accounted for as a
capital lease.......................................... 2,109,515 522,428
Interest expense on affiliated borrowings................... 84,505 21,126
Commitment fee of .375% per annum on the unused portion of
the $100.0 million Revolving Credit Facility and
administration fee..................................... 475,000 118,750
------------ ---------------
Total Company Pro Forma interest expense.................... $ 13,044,020 $ 3,256,054
=========== ============
Adjustments to reflect a net increase in interest expense
consisting of:
Pro Forma interest expense set forth immediately above...... $(13,044,020) $(3,256,054)
Less historical interest expense, which is replaced by the
Notes and the $100.0 million Revolving Credit
Facility............................................... 8,465,239 2,114,357
------------ ---------------
$ (4,578,781) $(1,141,697)
=========== ============
</TABLE>
40
<PAGE> 48
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1995 1996
------------ ---------------
<S> <C> <C> <C>
Pro forma interest on the Notes is calculated using an
assumed rate of 10 3/8%. This assumed rate is based upon the
current market rate for comparable debt securities of
hospitality companies. Bank fees are calculated based on an
assumed administration fee and an assumed .375% fee charged
on the unused portion of the $100.0 million Revolving Credit
Facility.
(f) Adjustment to reflect a reduction of the foreign currency
gain as a result of the repayment of foreign indebtedness to
which the foreign currency gain is attributable............. $ (347,131) $ --
=========== ============
(g) Adjustment to eliminate 100% of the reduction in earnings
attributable to a 37.5% minority interest in a resort hotel
as a result of the purchase of that minority partnership
interest from an unaffiliated third party................... $ (724,415) $ (593,237)
=========== ============
(h) Adjustment to record the income tax expense associated with
operating as a corporation using an effective income tax
rate of 39.5%. The pro forma consolidated statements of
income for the year ended December 31, 1995 and the 1996
First Quarter, does not include the initial recording of
estimated deferred income tax benefits of $14,000,000
associated with the change in tax status. This amount will
be recorded by the Company subsequent to the closing of the
Offering.................................................... $ (2,012,567) $(2,250,693)
=========== ============
(i) Pro forma net income per share is based on 19,204,301 shares
of Common Stock outstanding after the Offering, which
assumes an estimated $15.0 million outstanding indebtedness
under the GE Credit Agreement at the time of consummation of
the Offering and therefore the issuance of an estimated
537,634 shares of Common Stock upon the exercise of the GE
Option. See "Principal Stockholders."
Supplemental pro forma earnings per share would have been
$.11 for the year ended December 31, 1995 and $.13 per share
for the three months ended March 31, 1996, giving effect
only to (i) the application of the net proceeds from the
Offerings to the repayment of indebtedness and (ii) pro
forma provision for income taxes based on the assumed
effective tax rate of 39.5%.
GHALP
(j) Adjustment to reflect the addition of revenue from 11 hotels
upon combination of GHALP as a result of acquisition of 70%
partnership interest in GHALP from an unrelated third
party....................................................... $ 56,641,646 $16,010,896
=========== ============
(k) Adjustments to reflect elimination of management fees earned
by the Company from the 11 GHALP hotels upon combination as
a result of acquisition of 70% partnership interest in GHALP
from an unrelated third party............................... $ (3,317,170) $ (924,438)
=========== ============
(l) Adjustment to reflect elimination of service fees earned by
the Company from the 11 GHALP hotels upon combination as a
result of acquisition of 70% partnership interest in GHALP
from an unrelated third party............................... $ (728,758) $ (223,344)
=========== ============
</TABLE>
41
<PAGE> 49
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
1995 1996
------------ ---------------
<S> <C> <C> <C>
(m) Adjustment to reflect elimination of reimbursements between
the 11 GHALP hotels and the Company as a result of
acquisition of 70% partnership interest in GHALP from an
unrelated third party:
Reimbursements include but are not limited to reimbursements
for services provided, such as accounting, legal, tax,
finance and national sales and marketing fund.
Elimination of reimbursement income......................... $ (1,740,429) $ (264,149)
=========== ============
Elimination of reimbursement expense........................ $ (1,740,429) $ (264,149)
=========== ============
(n) Adjustments to reflect net increase in hotel expenses from
the 11 hotels upon combination of GHALP as a result of
acquisition of 70% partnership interest in GHALP from an
unrelated third party
Addition of the hotel expenses upon combination of GHALP,
consisting of the following expenses as of December 31,
1995 and March 31, 1996, respectively: Departmental
operating expenses of $19.6 million and $5.3 million;
undistributed operating expenses of $13.7 million and
$3.4 million; management fees of $3.3 million and
approximately $924,000; rent, taxes and insurance
expenses of $2.6 million and approximately $666,000;
and lease expenses of $13.6 million and $3.4 million... $ 52,825,729 $13,737,924
Elimination of management and service fee expenses of GHALP,
net of deferred gain on sale of GHALP Properties of
$135,251 and $147,595 at December 31, 1995 and March
31, 1996, respectively................................. (3,910,677) (1,000,187)
------------ ---------------
$ 48,915,052 $12,737,737
=========== ============
(o) Adjustment to reflect elimination of 30% equity interest in
earnings of GHALP as a result of acquisition of 70%
partnership interest in GHALP from an unrelated third party,
which resulted in the combination of GHALP.................. $ (1,664,187) $ (828,853)
=========== ============
(p) Adjustment to reflect amortization of the deferred gain
recognized from the GHALP sale/leaseback transaction. The
deferred gain is being recognized over the initial term of
the GHALP Lease............................................. $ 724,766 $ 182,386
=========== ============
</TABLE>
42
<PAGE> 50
SELECTED COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected combined financial data of Wyndham
Hotel Corporation. The selected combined statement of operations data of the
Company for the fiscal years ended December 31, 1991 and 1992 and the selected
combined balance sheet data as of December 31, 1991, 1992 and 1993 are derived
from the Company's unaudited Combined Financial Statements. The selected
combined statement of operations data of the Company for the fiscal years ended
December 31, 1993, 1994 and 1995 and the selected combined balance sheet data as
of December 31, 1994 and 1995 are derived from the Company's audited Combined
Financial Statements included elsewhere in this Prospectus. The selected
combined statement of operations data of the Company presented for the three
months ended March 31, 1995 and 1996 have been derived from unaudited combined
financial statements and, in the opinion of the Company, reflect all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the information set
forth therein. The interim results are not necessarily indicative of the
operating results for a full year. The pro forma combined statement of
operations data and balance sheet data set forth below, as of and for the year
ended December 31, 1995 and as of and for the three months ended March 31, 1996
are unaudited and are derived from pro forma financial data included elsewhere
in the Prospectus.
The selected combined financial data set forth below should be read in
conjunction with, and are qualified in their entirety by, the Combined Financial
Statements and related Notes, Pro Forma Combined Financial Data, Management's
Discussion and Analysis of Financial Condition and Results of Operations and
other financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------- -------------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(1) 1995 1996 1996(1)
-------- -------- -------- -------- -------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PORTFOLIO HOTEL
REVENUES(2)............ $269,557 $315,151 $345,733 $394,949 $534,204 $ 534,204 $106,610 $158,619 $158,619
======== ======== ======== ======== ======== ======== ======== ======== ========
STATEMENT OF OPERATIONS
DATA:
Revenues:
Hotel Revenues....... $ 34,859 $ 41,604 $ 43,921 $ 51,799 $ 54,673 $ 111,315 $ 15,359 $ 16,829 $ 32,840
Management fees...... 8,472 10,130 10,731 13,302 16,921 14,274 3,404 5,202 4,444
Service fees......... 784 782 2,127 2,904 4,120 3,391 707 964 741
Reimbursements....... 3,650 4,130 4,164 8,004 10,836 9,095 2,357 3,582 3,318
Other income......... 253 156 334 257 1,340 1,500 92 33 33
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total Company
Revenues....... 48,018 56,802 61,277 76,266 87,890 139,575 21,919 26,610 41,376
Operating costs and
expenses............. 42,988 48,383 54,183 63,929 73,264 122,663 16,942 19,868 32,908
Operating income....... 5,030 7,419 7,094 12,337 14,626 16,912 4,977 6,742 8,468
Interest expense,
net.................. (8,449) (7,831) (7,075) (7,526) (8,021) (12,600 ) (2,045) (1,810) (2,952 )
Income (loss) before
income taxes......... (2,049) 163 1,654 6,265 7,949 5,095 3,018 5,167 5,698
Pro forma income
taxes(3)............. -- -- -- -- -- (2,013 ) -- -- (2,251 )
Net income (loss)...... (2,049) 163 1,654 6,265 7,949 3,082 3,018 5,167 3,447
Pro forma income tax
adjustment(4)........ $ (3,140) (1,192) (2,041)
Historical net income
as adjusted for pro
forma
income tax........... 4,809 1,826 3,126
Historical net income
as adjusted per
common share(5)...... .30 .12 .20
Common shares
outstanding prior to
the Offerings(5)..... 15,854 15,854 15,854
Pro forma net income
per common
share(6)............. .16 .18
Pro forma common shares
outstanding(6)....... 19,204 19,204
</TABLE>
43
<PAGE> 51
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
----------------------------------------------------------------- -------------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(1) 1995 1996 1996(1)
-------- -------- -------- -------- -------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents.......... $ 3,086 $ 682 $ 827 $ 3,619 $ 4,160 $ 30,968 $ 5,371 $ 6,084 $ 33,996
Total assets........... 113,426 108,647 113,465 113,276 133,403 196,499 125,289 138,571 203,236
Long-term obligations,
including current
portion.............. 90,881 87,064 88,410 84,161 90,978 120,783 82,433 92,428 120,729
Total partners' capital
and stockholders'
equity
(deficit)............ (9,075) (7,303) (1,488) 1,716 17,557 47,889 17,247 22,464 54,264
</TABLE>
- ---------------
(1) Reflects the Formation, the Financing Plan and other adjustments described
under "Pro Forma Combined Financial Data" (assuming an initial public
offering price of $15.00 per share).
(2) Represents revenues of hotels owned, leased or managed by the Company, as
distinguished from Total Company Revenues.
(3) For the years 1993 through 1995 and the 1996 First Quarter, Wyndham made no
provision for income taxes because the combined Company was a combination of
partnerships, S corporations and a nontaxable Bermuda corporation that are
not subject to U.S. federal income taxes. The provision for income taxes to
arrive at pro forma net income assumes a combined federal and state
effective income tax rate of 39.5% computed as follows:
<TABLE>
<S> <C>
Federal income tax rate.................................................... 35.0%
Weighted average state income tax rate (net of federal benefit)............ 4.5%
-----
39.5%
=====
</TABLE>
(4) Pro forma income tax adjustment represents a pro forma provision for income
taxes based on the assumed effective tax rate of 39.5%.
(5) Historical net income as adjusted per common share is based on historical
net income as adjusted for pro forma income tax divided by the number of
shares that would have been outstanding if the Company had been a
corporation prior to the Offering.
(6) Pro forma net income per share is based on 19,204,301 shares of Common
Stock outstanding after the Offering, which assumes an estimated $15.0
million outstanding indebtedness under the GE Credit Agreement at the time
of the consummation of the Offering, and therefore the issuance of an
estimated 537,634 shares of Common Stock upon the exercise of the GE
Option. See "Principal Stockholders."
Supplemental pro forma earnings per share would have been $.11 for the year
ended December 31, 1995, and $.13 for the 1996 First Quarter, giving effect
only to (i) the application of the net proceeds from the Offerings to the
repayment of indebtedness and (ii) pro forma provision for income taxes
based on the assumed effective tax rate of 39.5%.
44
<PAGE> 52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis addresses the Company's results of
operations on a pro forma combined basis for the year ended December 31, 1995
and the three months ended March 31, 1996, and on an historical combined basis
for the years ended December 31, 1993, 1994 and 1995 and the three months ended
March 31, 1995 and 1996. The following should be read in conjunction with the
Company's pro forma combined financial statements, historical combined financial
statements and the summary and selected combined financial and other information
located elsewhere in this Prospectus.
The Company's revenues are derived from the following primary sources:
(1) The Company's hotel revenues are generated from the hotels owned
or leased by the Company during the periods presented and reflect revenues
from room rentals, food and beverage sales and other sources, including
telephone, guest services, meeting room rentals, gift shops and other
amenities.
(2) The Company derives management fees from the hotels it manages.
These fees are comprised of base and incentive management fees, as well as
trade name fees. Base management fees are typically calculated based upon a
specified percentage of gross revenues from hotel operations, and incentive
management fees are usually calculated based upon a specified percentage of
the hotel's operating profit or the amount by which the hotel's operating
profit exceeds specified performance targets. Trade name fees are typically
calculated based upon a specified percentage of gross room revenues for
hotels operated under the Wyndham brand name. See "Business -- Management
Contracts" for further information relating to the foregoing fees.
(3) The Company generates service fee revenues from hotels that it
manages or franchises. Service fee revenues include fees derived from
accounting, design, construction and purchasing services, as well as
technical assistance provided to managed or franchised Portfolio hotels. As
a substantial portion of the fees derived from the provision of design,
construction and initial purchasing services are generated in connection
with hotel construction and renovation activities, the amount of these fees
varies depending upon the level of the Company's external growth
activities, including new hotel management contracts and construction
projects.
(4) The Company derives reimbursement revenues from hotels that it
manages or franchises. These revenues are intended primarily to match
corresponding expenses and serve to reimburse the Company for the expenses
associated with providing advertising and promotion (through the Company's
Marketing Fund), sales and marketing, centralized reservations and other
services.
The Company's total revenues grew at a compound annual rate of 19.8% from
1993 through 1995, from $61.3 million to $87.9 million. The Company's revenue
growth is attributable to both the improving financial performance of the
existing hotels in its Portfolio, as well as the addition of new hotels to its
Portfolio. During this period, the occupancy rates for Comparable Hotels (hotels
that have been operated by the Company since January 1, 1993) improved from year
to year (67%, 70% and 72% in 1993, 1994 and 1995, respectively), while the ADR
for Comparable Hotels also increased ($76.39, $80.16 and $84.38 for the same
periods). These improvements led to year to year improvements in REVPAR for the
Comparable Hotels of 9.3% and 8.7% in 1994 and 1995, respectively. The Company's
revenue growth continued in the 1996 First Quarter, as revenues increased 21.4%
over revenues generated in the 1995 First Quarter, from $21.9 million to $26.6
million. Occupancy rates declined while ADR for Comparable Hotels improved
during the 1996 First Quarter to 72% and $95.92, respectively, from 73% and
$87.89 in the 1995 First Quarter. This performance led to a period over period
improvement of 7.6% in REVPAR. For presentation of certain operating and
financial data for the Company's entire Portfolio, see "Prospectus
Summary -- Summary Combined Financial and Other Data."
Of the $26.6 million increase in the Company's total revenues from 1993 to
1995, 40.4% is attributable to increases in hotel revenues from the Company's
owned and leased hotels and 59.6% is attributable to managed
45
<PAGE> 53
hotels within the Company's Portfolio. Revenues derived from managed hotels not
only include management fees, but also service fees and reimbursement revenues
paid to the Company.
The Company's operating strengths have also yielded consistently strong
financial results. As a result of continued improvement in the generation of
revenues in the Company's existing Portfolio of hotels, and the Company's
emphasis upon tight control of operating expenses, the gross operating profit
margins for the Company's Comparable Hotels were 32%, 34% and 36% in 1993, 1994
and 1995, respectively, and for both the 1995 First Quarter and the 1996 First
Quarter were 37%. Gross operating profit per available room for Comparable
Hotels during 1993, 1994 and 1995 was $9,612, $11,417 and $12,547, respectively.
In addition, the average food and beverage margins for the Comparable Hotels
during 1993, 1994 and 1995 were 29%, 31% and 31%, respectively, and were 30% and
28% in the 1995 First Quarter and 1996 First Quarter, respectively. For
presentation of certain operating and financial data for the Company's entire
Portfolio, see "Summary Prospectus -- Summary Combined Financial and Other
Data."
The Company effectively held a 30% investment in GHALP during the periods
presented below. Historically, the results of operations of the GHALP Properties
have been accounted for using the equity method. Consequently, the results of
the GHALP Properties are not included in combined historical hotel revenues and
hotel expenses. As a result of the acquisition of a 70% partnership interest in
GHALP from an unrelated third party and the sale/leaseback transaction, the
results of the GHALP Properties are combined into hotel revenue and hotel
expenses in the 1995 and 1996 First Quarter pro forma financial data. See
"-- Pro Forma Results of Operations" and "Pro Forma Combined Financial Data."
The Company maintains an equity participation plan, named Wyndham Employees
Ltd. ("WEL"), which is designed to enable eligible Company employees to invest
in certain of the Portfolio hotels managed by the Company (together with the Old
Management Company, certain other Assigned Businesses being transferred to the
Company in the Formation, and certain affiliated companies, the "WEL
Properties"). The number of WEL Properties has grown with the continuing
expansion of the number of Portfolio hotels managed by the Company. As of April
15, 1996, 97 Wyndham employees had an interest in WEL. The Senior Executive
Officers may on one or more occasions direct that an eligible Company employee
receive an interest in WEL, which interest initially has no value. From time to
time, the value of WEL's interests in the WEL Properties is revalued, which
results in the revaluation of the interest of each participant in WEL. The
increase in value obtained by each participant in WEL by virtue of this
revaluation process is treated by the Company as compensation expense in a
manner similar to the expense associated with a formula unit incentive plan. The
Company recognized equity participation compensation expenses derived from WEL
of $1.5 million, $1.4 million and $2.7 million in 1993, 1994, 1995,
respectively, and of approximately $677,000 and zero in the 1995 First Quarter
and 1996 First Quarter, respectively. The WEL plan document governing the rights
of the various participants in WEL was amended effective February 13, 1996 to
provide for a modified method of valuing WEL's investments to reflect the fact
that WEL's interests in certain of the WEL Properties will be exchanged for
642,588 shares of the Company's Common Stock as part of the Formation
(representing 3.5% of the Company's outstanding shares of Common Stock
immediately following consummation of the Offering). The Company expects that it
will recognize during the period in which the Offering is consummated
compensation expense due to the revaluation of WEL's ownership interest in the
Company's Common Stock. Assuming an initial public offering price of $15.00 per
share, the Company expects that it will recognize compensation expense relating
to WEL in the approximate amount of $283,000. The Company estimates that it will
recognize an approximate increase of $643,000 in such compensation expense for
each $1.00 higher initial public offering price (or a correspondingly lower
amount in the event of a lower initial public offering price). Increases in the
price per share of the Company's Common Stock in the public market subsequent to
this Offering would have the effect of increasing the amount of this component
of the Company's compensation expense, which could adversely affect the
Company's results of operations. See "Management -- Wyndham Employees Ltd.
Equity Participation Plan" and "Principal Stockholders."
In addition, certain Senior Executive Officers own limited partner
interests in Old Management Company and several affiliates of the Old Management
Company. These limited partner interests were purchased by these Senior
Executive Officers for amounts equal to the fair market value of such interests.
The Senior Executive Officers borrowed the funds used to purchase such limited
partner interests from an affiliate
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<PAGE> 54
and pledged their limited partner interests to secure such loans. The Senior
Executive Officers' shares of the distributable cash of the limited partnerships
is used to repay such affiliate loans. For financial reporting purposes, the net
appreciation in the Senior Executive Officers' limited partner interest results
in compensation expense to the Company. The Company has recognized compensation
expense due to the Senior Executive Officers' equity participation of $1.2
million, $1.4 million and $1.3 million for the years ended December 31, 1993,
1994, 1995, respectively, and of approximately $321,000 and zero in the 1995
First Quarter and 1996 First Quarter, respectively. Assuming an initial public
offering price of $15.00 per share, the Company expects that it will recognize
during the period in which the Offering is consummated compensation expense due
to the Senior Executive Officer's equity participation of $1.4 million. The
Company estimates that it will recognize an approximate increase of $755,000 in
such compensation expense for each $1.00 higher initial public offering price
(or a corresponding lower amount in the event of a lower initial public offering
price). As a result of the Offering, this component of compensation expense will
be fixed at the initial public offering price; therefore, no such compensation
expense will be incurred for periods subsequent to the Offering.
The Company's predecessors in interest have operated the Assigned
Businesses through a combination of partnerships, S corporations and a
nontaxable Bermuda corporation that are not subject to U.S. federal income
taxes. As a result, the following discussion of the Company's combined
historical results of operations does not include a discussion of income tax
expense, and the Company's net income results are presented on a pre-tax basis.
The Company will become fully subject to state and federal income taxes upon
consummation of the transactions comprising the Formation. See Note 2 of Notes
to Combined Financial Statements.
PRO FORMA RESULTS OF OPERATIONS
Overview
The following discussion and analysis addresses the Company's combined
results of operations for the year ended December 31, 1995 and the three months
ended March 31, 1996 on a pro forma and an historical basis. The pro forma data
reflect the inclusion of the results of the GHALP Properties because the
Company's interests in the GHALP Properties changed from a minority equity
investment to a leasehold interest. The inclusion of all of the revenues and
expenses of the GHALP Properties in the Company's results of operations has the
effect of increasing operating income, but decreasing operating margins. Pro
forma interest expense also increases as a result of increased indebtedness, but
no return on the investment of the proceeds of such
indebtedness is reflected. Finally, pro forma results reflect a provision for
income taxes.
Pro Forma 1996 First Quarter Compared to Historical 1996 First Quarter
Pro forma total revenues increased by 55.5%, or $14.8 million, to $41.4
million in 1996 from $26.6 million in historical 1996. Pro forma hotel revenues
increased by 95.1%, or $16.0 million, to $32.8 million in 1996 from $16.8
million in historical 1996, reflecting the combination of the results of GHALP
Properties, because the Company's interests in the GHALP Properties changed from
an equity investment to a leasehold interest.
Pro forma revenues from management fees decreased by 14.6%, or
approximately $757,000, to $4.4 million in 1996 from $5.2 million in historical
1996. Of this decrease, approximately $924,000 resulted from the elimination of
management fees earned from the GHALP Properties as a result of the
consolidation of the results of operations of the GHALP Properties. This
decrease is offset by the reduction of approximately $167,000 in management
contract costs related to the buyout of the CHMC Agreement.
Pro forma revenues from service fees decreased by 23.2%, or approximately
$223,000, to approximately $741,000 in 1996 from approximately $965,000 in
historical 1996, reflecting the elimination of service fees earned from the
GHALP Properties as a result of the consolidation of the results of operations
of the GHALP Properties.
Pro forma reimbursable revenues decreased by 7.3%, or approximately
$264,000, to $3.3 million in 1996 from $3.6 million in historical 1996,
reflecting the elimination of reimbursable revenues earned from the GHALP
Properties as a result of the consolidation of the results of operations of the
GHALP Properties.
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<PAGE> 55
Pro forma hotel expenses increased by 124.5%, or $12.7 million, to $22.9
million in 1996 from $10.2 million in historical 1996, reflecting the additional
hotel expenses from the GHALP Properties as a result of the consolidation of the
results of operations of the GHALP Properties.
Pro forma selling, general and administrative ("SG&A") expenses increased
by 7.6%, or approximately $325,000 million, to $4.6 million in 1996 from $4.3
million in historical 1996, reflecting the additional cost of managing and
administering a publicly held company.
Pro forma reimbursable expenses decreased by 7.3%, or approximately
$264,000, to $3.3 million in 1996 from $3.6 million in historical 1996,
reflecting the elimination of reimbursable expenses from the GHALP Properties as
a result of the consolidation of the results of operations of the GHALP
Properties.
Pro forma depreciation and amortization expense increased by 14.6%, or
approximately $242,000, to $1.9 million in 1996 from $1.7 million in historical
1996, primarily reflecting the additional amortization of approximately $318,000
from loan costs relating to the Notes and the Revolving Credit Facility less
approximately $51,000 in amortization costs from the retired debt.
As a result of the changes noted above, pro forma operating income
increased by 25.6%, or $1.7 million, to $8.5 million in 1996 from $6.7 million
in historical 1996.
Pro forma interest expense increased by 5.0%, or $1.1 million, to $3.3
million in 1996 from $2.1 million in historical 1996, reflecting the additional
interest from the Notes, capital leases, affiliated borrowings and bank fees
less interest expense from the retired debt. Pro forma interest on the Notes is
calculated using an assumed rate of 10.375%. This assumed rate is based upon the
current market for comparable debt securities of hospitality companies. Bank
fees are calculated based on an assumed administrative fee and an assumed .375%
fee charged on the unused portion of the $100.0 million Revolving Credit
Facility.
Pro forma equity in earnings of affiliate's hotel partnership of
approximately $828,000 was eliminated upon the consolidation of the results of
operations of the GHALP Properties.
Pro forma amortization of deferred gain totalling approximately $182,000 is
the result of a $12.3 million deferred gain as a result of the GHALP
sale/leaseback transaction. This gain is being amortized over the initial 17
year lease term.
Income attributable to minority interest is eliminated in the pro forma
statement as a result of the acquisition of the minority interest as part of the
Formation.
The pro forma provision for income taxes of $2.3 million is the result of
operating as a corporation subject to taxation using an effective tax rate of
39.5%.
As a result of the changes noted above, pro forma net income decreased
33.3%, or $1.7 million, to $3.4 million in 1996 from $5.2 million in historical
1996.
Pro Forma 1995 Compared to Historical 1995
Pro forma total revenues increased by 58.8%, or $51.7 million, to $139.6
million in 1995 from $87.9 million in historical 1995. Pro forma hotel revenues
increased by 103.6%, or $56.6 million, to $111.3 million in 1995 from $54.7
million in historical 1995, reflecting the combination of the results of GHALP
Properties, because the Company's interests in the GHALP Properties changed from
an equity investment to a leasehold interest.
Pro forma revenues from management fees decreased by 15.6%, or $2.6
million, to $14.3 million in 1995 from $16.9 million in historical 1995. Of this
decrease, $3.3 million results from the elimination of management fees earned
from the GHALP Properties as a result of the consolidation of the results of
operations of the GHALP Properties. This decrease is offset by the reduction of
approximately $670,000 in management contract costs related to the buyout of the
CHMC Agreement.
Pro forma revenues from service fees decreased by 17.7%, or approximately
$729,000, to $3.4 million in 1995 from $4.1 million in historical 1995,
reflecting the elimination of service fees earned from the GHALP Properties as a
result of the consolidation of the results of operations of the GHALP
Properties.
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<PAGE> 56
Pro forma reimbursable revenues decreased by 16.1%, or $1.7 million, to
$9.1 million in 1995 from $10.8 million in historical 1995, reflecting the
elimination of reimbursable revenues earned from the GHALP Properties as a
result of the consolidation of the results of operations of the GHALP
Properties.
Pro forma other income increased by 12.0%, or approximately $160,000, to
$1.5 million in 1995 from $1.3 million in historical 1995, reflecting the
elimination of CHMC management contract costs relating to a contract termination
fee.
Pro forma hotel expenses increased by 132.3%, or $48.9 million, to $85.9
million in 1995 from $37.0 million in historical 1995, reflecting the additional
hotel expenses from the GHALP Properties as a result of the consolidation of the
results of operations of the GHALP Properties.
Pro forma SG&A expenses increased by 8.7%, or $1.3 million, to $16.3
million in 1995 from $15.0 million in historical 1995, reflecting the additional
cost of managing and administering a publicly held company.
Pro forma reimbursable expenses decreased by 16.1%, or $1.7 million, to
$9.1 million in 1995 from $10.8 million in historical 1995, reflecting the
elimination of reimbursable expenses from the GHALP Properties as a result of
the consolidation of the results of operations of the GHALP Properties.
Pro forma depreciation and amortization expense increased by 14.6%, or
approximately $924,000, to $7.2 million in 1995 from $6.3 million in historical
1995, primarily reflecting the additional amortization of $1.2 million from loan
costs relating to the Notes and the Revolving Credit Facility less $250,000 in
amortization costs from the retired debt.
As a result of the changes noted above, pro forma operating income
increased by 15.6%, or $2.3 million, to $16.9 million in 1995 from $14.6 million
in historical 1995.
Pro forma interest expense increased by 54.1%, or $4.6 million, to $13.0
million in 1995 from $8.5 million in historical 1995, reflecting the additional
interest from the Notes, capital leases, affiliated borrowings and bank fees
less interest expense from the retired debt. Pro forma interest on the Notes is
calculated using an assumed rate of 10.375%. This assumed rate is based upon the
current market for comparable debt securities of hospitality companies. Bank
fees are calculated based on an assumed administrative fee and an assumed .375%
fee charged on the unused portion of the $100.0 million Revolving Credit
Facility.
Pro forma equity in earnings of affiliate's hotel partnership of $1.7
million was eliminated upon the consolidation of the results of operations of
the GHALP Properties.
Pro forma foreign currency gain decreased by 85.7%, or approximately
$347,000, to approximately $58,000 in 1995 from approximately $405,000 in
historical 1995, reflecting the repayment of indebtedness denominated in foreign
currency as a result of the Formation and Financing Plan.
Pro forma amortization of deferred gain totalling approximately $725,000 is
the result of a $12.3 million deferred gain as a result of the GHALP
sale/leaseback transaction. This gain is being amortized over the initial 17
year lease term.
Income attributable to minority interest is eliminated in the pro forma
statement as a result of the acquisition of the minority interest as part of the
Formation.
The pro forma provision for income taxes of $2.0 million is the result of
operating as a corporation subject to taxation using an effective tax rate of
39.5%.
As a result of the changes noted above, pro forma net income decreased
61.2%, or $4.8 million, to $3.1 million in 1995 from $7.9 million in historical
1995.
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<PAGE> 57
HISTORICAL RESULTS OF OPERATIONS
The following table sets forth certain financial data expressed as a
percentage of total revenues and certain other data for each of the periods
presented.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- --------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Hotel revenues............................... 71.7% 67.9% 62.2% 70.1% 63.2%
Management fees.............................. 17.5 17.5 19.3 15.5 19.5
Service fees................................. 3.5 3.8 4.7 3.2 3.6
Reimbursement revenues....................... 6.8 10.5 12.3 10.8 13.5
Other........................................ 0.5 0.3 1.5 0.4 0.1
----- ----- -----
Total revenues....................... 100.0 100.0 100.0 100.0 100.0
----- ----- -----
Operating costs & expenses:
Hotel expenses............................... 51.8 47.9 42.0 42.0 38.4
Selling, general and administrative
expense................................... 16.2 14.0 17.1 13.3 16.1
Equity participation compensation............ 4.4 3.7 4.5 4.6 0.0
Reimbursable expense......................... 6.8 10.5 12.3 10.8 13.5
Depreciation and amortization................ 8.6 7.5 7.2 6.7 6.2
Other........................................ 0.6 0.2 0.2 (0.0) 0.5
----- ----- -----
Total operating costs and expenses... 88.4 83.8 83.3 77.3 74.7
----- ----- -----
Operating income............................... 11.6 16.2 16.7 22.7 25.3
----- ----- -----
Interest expense, net.......................... (11.5) (9.8) (9.1) (9.3) (6.8)
Equity in earnings of affiliate's hotel
partnership.................................. 1.3 1.6 1.9 2.5 3.1
Foreign currency gain.......................... 1.0 0.5 0.4 0.2 0.0
----- ----- -----
Income before minority interests............... 2.4 8.5 9.9 16.1 21.6
Income (loss) attributable to minority
interests.................................... (0.3) 0.3 0.9 2.3 2.2
----- ----- -----
Net income........................... 2.7% 8.2% 9.0% 13.8% 19.4%
===== ===== =====
</TABLE>
1996 First Quarter Compared to 1995 First Quarter
Total revenues increased by 21.4%, or $4.7 million, to $26.6 million in
1996 from $22.0 million in 1995. Hotel revenues increased by 9.6%, or $1.5
million, to $16.8 million in 1996 from $15.4 million in 1995. Approximately
63.9% of this increase in hotel revenues was due to an approximately $935,000
increase in existing hotel room rental revenues, while 27.8% of the increase was
due to an approximately $407,000 increase in existing hotel food and beverage
revenues. The increase in hotel room rental revenue is due to a 11% increase in
ADR offset by a 2% decrease in occupancy percentage.
Revenues from management fees increased by 52.8%, or $1.8 million, to $5.2
million in 1996 from $3.4 million in 1995. Approximately 88.2% of this increase
resulted from 17 new managed hotels added between March 31, 1995 and March 31,
1996, while 2.7% of the increase resulted from increases in base management fees
and trade name fees and 9.1% of the increase resulted from increases in
incentive management fees derived from existing managed hotels.
Revenues from service fees increased by 36.5%, or approximately $258,000,
to approximately $965,000 in 1996 from approximately $707,000 in 1995. Design
fees relating to the conversion of hotels to Wyndham brand hotels accounted for
45.4% of the increase, while 52.8% of the increase was derived from new central
accounting fees resulting from Portfolio hotels added between March 31, 1995 and
March 31, 1996. The balance of the increase reflected increased service fees
from existing hotels.
Reimbursable revenues increased by 52.0%, or $1.2 million, to $3.6 million
in 1996 from $2.4 million in 1995. Of this increase, 24.7% resulted from
increased payments to the Company's Marketing Fund from both new and existing
Portfolio hotels, while 36.6% of the increase resulted from fees generated from
room sales booked by the Company's National Sales Offices.
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<PAGE> 58
Hotel expenses increased by 10.9%, or approximately $1.0 million, to $10.2
million in 1996 from $9.2 million in 1995. This increase reflects a 10.1%
increase in room expenses and a 10.4% increase in food and beverage expenses.
Hotel expenses were relatively flat as a percentage of hotel revenues at 60.7%
in 1996 versus 59.9% in 1995. The operating profit margin on hotels owned or
leased by the Company remained relatively flat at 39.3% in 1996 from 40.1% in
1995.
SG&A expenses increased 46.3%, or $1.4 million, to $4.3 million in 1996
from $2.9 million in 1995. As a percentage of total revenues, SG&A expenses
increased to 16.1% in 1996 from 13.3% in 1995. Of the $1.4 million increase in
SG&A expenses, 52.9% of the increase, or approximately $714,000, is due to
increased wages, contract labor and benefit costs arising from the addition of
corporate management and staff personnel in anticipation of the Company's need
to manage and provide services to the substantially larger number of hotels it
anticipates operating as it executes its growth strategy. In addition, 6.9% of
the increase, or approximately $94,000, is due to the establishment of a
provision for bad debt expense for management fees on an unaffiliated hotel, and
5.2% of the increase, or approximately $71,000, is due to increased processing
costs associated with the accounts payable and payroll departments as a result
of the increase in management contracts.
Equity participation compensation expenses decreased by 100%, or
approximately $998,000, to zero in 1996 from approximately $998,000 in 1995.
This decrease is due to the application of the Company's current method of
valuing WEL's and the Senior Executive Officers' investments in the Old
Management Company and affiliates. The Company expects that it will recognize
significant equity participation compensation expense during the period in which
the Offering is consummated. See "-- Overview."
Reimbursable expenses grew by 52.0%, or $1.2 million, to $3.6 million in
1996 from $2.4 million in 1995. As a percentage of total revenues, reimbursable
expenses constituted 13.5% of total revenues in 1996, compared with 10.8% in
1995. These increases were primarily due to increased advertising and
promotional expense, as well as costs associated with expanding the Company's
national sales staff to support both individual business and group sales.
Depreciation and amortization expense increased by 13.0%, or approximately
$192,000, to $1.7 million in 1996 from $1.5 million in 1995 due to the net
acquisition of approximately $562,000 in property and equipment and the addition
of amortization of the Bedrock Options. See Note 13 of Notes to Combined
Financial Statements.
Interest expense, net, decreased by 12.9%, or approximately $234,000, to
$1.8 million in 1996 from $2.0 million in 1995. Interest expense, net, as a
percentage of total revenues decreased to 6.8% in 1996 from 9.3% in 1995,
reflecting relatively static interest expense while the Company's revenues grew
over this period.
Earnings from the Company's equity investment in GHALP grew by 49.0%, or
approximately $273,000, to approximately $829,000 in 1996 from approximately
$556,000 in 1995, reflecting improvements in the operating performance of the
GHALP Properties.
As a result of the changes noted above, net income (exclusive of income
taxes) increased by 71.2%, or $2.2 million, to $5.2 million in 1996 from $3.0
million in 1995. Interim results are not necessarily indicative of operating
results for a full year, and there can be no assurance that the Company will
achieve operating results during the balance of 1996 that are comparable to its
1996 First Quarter operating results.
1995 Compared to 1994
Total revenues increased by 15.2%, or $11.6 million, to $87.9 million in
1995 from $76.3 million in 1994. Hotel revenues increased by 5.6%, or $2.9
million, to $54.7 million in 1995 from $51.8 million in 1994. Approximately 69%
of this increase in hotel revenues was due to a $2.0 million increase in
existing hotel room rental revenues, while 35% of the increase was due to a $1.0
million increase in existing hotel food and beverage revenues, which increases
were offset by minor decreases in other hotel revenue categories. The increase
in hotel room rental revenue is due to a 1% increase in ADR and a 3% increase in
occupancy percentage.
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<PAGE> 59
Revenues from management fees increased by 26%, or $3.5 million, to $16.8
million in 1995 from $13.3 million in 1994. Approximately 64% of this increase
resulted from the addition of 14 new managed hotels in 1995, while 20% of the
increase resulted from increases in base management fees and trade name fees and
16% of the increase resulted from increases in incentive management fees derived
from existing managed hotels.
Revenues from service fees increased by 41.8%, or $1.2 million, to $4.1
million in 1995 from $2.9 million in 1994. Design fees relating to the
conversion of hotels to Wyndham brand hotels accounted for 31% of the increase,
while 29% of the increase was derived from new central accounting fees resulting
from Portfolio hotels added in 1995. The balance of the increase reflected
increased service fees from existing hotels.
Reimbursable revenues increased by 35.4%, or $2.8 million, to $10.8 million
in 1995 from $8.0 million in 1994. Of this increase, 39% resulted from increased
payments to the Company's Marketing Fund from both new and existing Portfolio
hotels, while 29% of the increase resulted from fees generated from room sales
booked by the Company's National Sales Offices.
During 1995, the Company received $1.0 million for a terminated management
agreement that is included in other income. This termination occurred as a
result of a third party owner terminating the Company's management agreement due
to the third party owner's affiliation with another hotel management company.
This termination fee is offset by a payment of approximately $160,000 relating
to the CHMC Agreement. The remaining approximately $500,000 of other income was
derived from franchise fees and miscellaneous income sources.
Hotel expenses increased by 1.1%, or approximately $401,000, to $37.0
million in 1995 from $36.6 million in 1994. This increase reflects a 9% increase
in room expenses and a 3.7% increase in food and beverage expenses. These
increased expenses were offset by a drop in other hotel expenses. Hotel expenses
decreased as a percentage of hotel revenues to 67.6% in 1995 from 70.6% in 1994,
primarily as a result of operating leverage and increased operating
efficiencies. The operating profit margin on hotels owned or leased by the
Company improved to 32.4% in 1995 from 29.4% in 1994, due primarily to increases
in hotel occupancy rates and inflation (partially offset by a decrease in rental
income at one hotel).
SG&A expenses increased 40.9%, or $4.4 million, to $15.0 million in 1995
from $10.6 million in 1994. As a percentage of total revenues, SG&A expenses
increased to 17.1% in 1995 from 14.0% in 1994. Of the $4.4 million increase in
SG&A expenses, 64% of the increase, or $2.8 million, is due to increased wages,
contract labor and benefit costs arising from the addition of corporate
management and staff personnel in anticipation of the Company's need to manage
and provide services to the substantially larger number of hotels it anticipates
operating as it executes its growth strategy. In addition, 10% of the increase,
or approximately $426,000, is due to costs associated with improved management
information systems support and 8% of the increase, or approximately $356,000,
is due to development costs incurred in connection with possible acquisitions of
management contracts.
Equity participation compensation expenses increased by 42.5%, or $1.2
million, to $4.0 million in 1995 from $2.8 million in 1994. This increase
reflects the improved operating performance of the Company and affiliated
entities and the consequent increased valuation of WEL's and the Senior
Executive Officers' investments in the Old Management Company and affiliates.
Reimbursable expenses grew by 35.4%, or $2.8 million, to $10.8 million in
1995 from $8.0 million in 1994. As a percentage of total revenues, reimbursable
expenses constituted 12.3% of total revenues in 1995, compared with 10.5% in
1994. These increases were primarily due to increased advertising and
promotional expense, as well as costs associated with expanding the Company's
national sales staff to support both individual business and group sales.
Depreciation and amortization expense increased by 10.0%, or approximately
$576,000, to $6.3 million in 1995 from $5.7 million in 1994 due to the net
acquisition of $3.3 million in property and equipment and the addition of
amortization of the Bedrock Options. See Note 13 of Notes to Combined Financial
Statements.
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<PAGE> 60
Interest expense, net, increased by 6.6%, or approximately $495,000, to
$8.0 million in 1995 from $7.5 million in 1994. Interest expense, net, as a
percentage of total revenues decreased to 9.1% in 1995 from 9.8% in 1994,
reflecting relatively static interest expense while the Company's revenues grew
over this period.
Earnings from the Company's equity investment in GHALP grew by 34.6%, or
approximately $427,000, to $1.7 million in 1995 from $1.2 million in 1994,
reflecting improvements in the operating performance of the GHALP Properties.
As a result of the changes noted above, net income (exclusive of income
taxes) increased by 26.9%, or $1.7 million, to $7.9 million in 1995 from $6.3
million in 1994.
1994 Compared to 1993
Total revenues increased by 24.5%, or $15.0 million, to $76.3 million in
1994 from $61.3 million in 1993. Of this increase, hotel revenue generated by
the hotels owned or leased by the Company increased by 17.9%, or $7.9 million,
to $51.8 million in 1994 from $43.9 million in 1993. Approximately 42% of this
increase in hotel revenues resulted from an increase of $3.3 million in existing
hotel room rental revenues, while 30% of the increase resulted from an increase
of $2.4 million in existing hotel food and beverage revenues. The increase in
hotel room rental revenue is due to a 5% increase in ADR and a 5% increase in
occupancy percentage. The remaining portion of the increase is primarily
attributable to the effects of a full year of operations generated by the
Wyndham Garden Hotel in Schaumburg, Illinois, which the Company acquired in May
1993.
Revenues from management fees increased by 24%, or $2.6 million, to $13.3
million in 1994 from $10.7 million in 1993. Of this increase, 33% is
attributable to fees earned from 11 new management contracts executed in 1994,
32% is from increases in base management and trade name fees and 35% is from
increases in management incentive fees derived from existing managed hotels.
Service fee revenues increased by 36.5%, or approximately $777,000, to $2.9
million in 1994 from $2.1 million in 1993, due primarily to increased central
accounting fees and higher revenues derived from the provision of purchasing
services.
Reimbursement revenues increased by 92.2%, or $3.8 million, to $8.0 million
in 1994 from $4.2 million in 1993. The Company established a Marketing Fund in
January 1994 to which all Portfolio hotels pay a percentage of room revenues.
Payments to the new Marketing Fund accounted for approximately 87% of the
increase in reimbursement revenues.
Hotel expenses increased by 15.2%, or $4.8 million, to $36.6 million in
1994 from $31.7 million in 1993. Approximately 24% of the increase is
attributable to the effect of operating the Wyndham Garden Hotel in Schaumburg,
Illinois during all of 1994, and the balance is due to normal increases in hotel
operating expenses arising from increased hotel revenues (the most important
components of which were an increase in room expense of 11% and an increase in
food and beverage expense of 16%, which represented 12% and 31% of the total
increase in hotel expenses, respectively). Hotel expenses as a percentage of
hotel revenues decreased to 70.6% in 1994 from 72.3% in 1993, primarily as a
result of operating leverage and increased operating efficiencies.
SG&A expenses increased by 7.4%, or approximately $732,000, to $10.6
million in 1994 from $9.9 million in 1993. This increase in SG&A expenses is
primarily attributable to an increase of approximately $872,000 in corporate
staffing and office expenses, partially offset by the non-recurrence in 1994 of
various 1993 expenses (approximately $250,000 established for a then pending
lawsuit, approximately $156,000 for a terminated employee and the remainder
relating to the reclassification of certain expenses). SG&A expenses as a
percentage of total revenues decreased to 14.0% in 1994 compared to 16.2% in
1993, as the growth in total revenues more than offset increased SG&A expenses.
Equity participation compensation expenses increased by 5.0%, or
approximately $93,000, to $2.8 million in 1994 from $2.7 million in 1993. This
increase reflects the improved operating performance of the Company
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and affiliated entities and the consequent increased valuation of WEL's and the
Senior Executive Officers' investments in the Old Management Company and
affiliates.
Reimbursable expenses increased by 92.2%, or $3.8 million, to $8.0 million
in 1994 from $4.2 million in 1993. Approximately 87% of this increase is due to
increased advertising and promotional expenses associated with the operation of
the Company's Marketing Fund, which was established in January 1994.
Depreciation and amortization expense increased by 8.8%, or approximately
$466,000, due to the effect of a full year of ownership in 1994 of the Wyndham
Garden Hotel in Schaumburg, Illinois and increased amortization of management
contract costs.
Interest expense, net, increased by 6.4%, or approximately $451,000, to
$7.5 million in 1994 from $7.1 million in 1993 primarily as a result of
increases in interest rates.
Earnings from the equity investment in GHALP increased by 59.1%, or
approximately $459,000, to $1.2 million in 1994 from approximately $777,000 in
1993 due to increased gross operating profits from the GHALP Properties.
As a result of the changes noted above, net income (exclusive of income
taxes) increased by 278.8%, or $4.6 million, to $6.3 million in 1994 from $1.7
million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital and liquidity needs include cash to finance
operations, capital requirements relating to ongoing hotel maintenance and
improvements at the Company's owned and leased hotels, capital requirements
associated with the Company's entry into new management contracts and
improvements to the related hotel properties, hotel acquisition financing and
the repayment of indebtedness.
The Company has historically satisfied its capital and liquidity needs
through cash generated by operations, mortgage indebtedness and debt financing
obtained under the $20.0 million revolving credit facility provided for in the
GE Credit Agreement. See "Principal Stockholders" for further information
relating to the GE Option provided for under the GE Credit Agreement. During the
year ended December 31, 1995, the Company generated cash from operations of
$16.2 million as compared to $15.1 million in 1994. The Company used cash in
investing activities of $21.3 million in 1995 as compared to approximately
$616,000 in 1994. This increased usage is primarily the result of $14.5 million
used in connection with obtaining management agreements where the Company was
required to make loans or payments to the related hotel owners and an additional
$2.6 million reserved for the purpose of funding a loan to a hotel owner. The
Company generated cash from financing activities of $5.7 million in 1995
compared with cash used in financing activities of $11.7 million in 1994. This
increase in cash provided by financing activities was generated primarily
through the GE Credit Agreement ($12.5 million was outstanding as of December
31, 1995) and net contributions from partners ($3.9 million). This source of
cash flow from financing activities was partially offset by a distribution to a
withdrawing partner totalling $2.6 million and the repayment of $6.7 million in
long term debt. In the 1996 First Quarter, the Company generated cash from
operations of $4.7 million. Additional funds were generated from a $2.5 million
advance under the GE Credit Agreement. The Company used $1.3 million for a
deposit relating to the purchase of the Vinings Wyndham Garden Hotel and
approximately $650,000 for Offering expenses. This increase in cash was
partially offset by the repayment of $1.0 million of indebtedness.
Following consummation of the Offering the Company intends to retain any
future earnings for use in its business and does not intend to declare any cash
dividends in the foreseeable future. See "Dividend Policy." The Company
therefore anticipates that any cash provided by operations in the foreseeable
future will be available to fund the Company's liquidity and capital needs.
The Company estimates that it will receive net proceeds from the Offerings
in the aggregate amount of $139.5 million. These proceeds will be used to fund
the cash payments associated with the Formation in the approximate total amount
of $53.9 million, to repay certain mortgage and other indebtedness in the
approximate total amount of $65.0 million assumed in connection with the
Formation (including repayment of the estimated $7.5 million indebtedness of the
estimated $15.0 million indebtedness outstanding under the
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GE Credit Agreement and repayment in full of approximately $12.5 million
mortgage indebtedness that is expected to mature shortly prior to the
consummation of the Offerings), to pay approximately $5.0 million of fees and
expenses incurred in connection with the GHALP transactions and consummating the
elements of the Financing Plan other than the Offerings, to fund the cash
portion of the estimated acquisition cost of the Vinings Wyndham Garden Hotel in
the amount of $3.2 million (including estimated closing costs of $395,000) and
to fund certain improvements to the Wyndham Rose Hall Resort in the approximate
amount of $4.0 million. The Company estimates that remaining net proceeds from
the Offerings and the Bedrock Contribution of approximately $18.4 million will
remain after such proceeds are applied to the foregoing uses. See "The Formation
and the Financing Plan" and "Use of Proceeds." The Company's remaining material
capital commitments, after satisfying the commitments described above, are
estimated to be $6.6 million. Such capital will be used for normal renovation
and refurbishment of the Company's owned and leased hotels, and will be funded
from cash generated from operations.
The $100.0 million of Notes to be issued in connection with the Debt
Offering will mature on , 2006, are unsecured obligations of the
Company and are guaranteed by each of the Company's subsidiaries (except for a
number of insignificant subsidiaries). The Notes bear interest at % per annum,
and such interest will be payable semi-annually in arrears. Except in the event
of a Change of Control, there will be no principal due on the Notes prior to
final maturity.
The Indenture relating to the Notes contains certain covenants restricting
the Company's ability to incur indebtedness and otherwise limiting the Company's
activities. The ability of the Company and its Restricted Subsidiaries (as
defined in the Indenture) to incur indebtedness is limited by the Indenture
unless the Company would, after giving effect to such incurrence, have a
Consolidated Fixed Charge Coverage Ratio (as defined in the Indenture) greater
than 1.75:1 with respect to any incurrence prior to , 1997, or 2:1
with respect to any incurrence on or after , 1997, provided that
the Company and any Restricted Subsidiary will be permitted to incur (A)
indebtedness of up to $150 million under the Revolving Credit Facility or any
replacement facility, (B) indebtedness owed to the Company or a Restricted
Subsidiary, (C) refinancings of indebtedness permitted by clauses (B), (D), (F),
(H) and (I) hereof, (D) indebtedness under (x) performance or similar bonds
provided in the ordinary course of business, (y) currency or interest rate
protection agreements or (z) indemnity or purchase price adjustment obligations
entered into in connection with asset dispositions, which obligations do not
exceed the proceeds of the related disposition, (E) indebtedness under letters
of credit and bankers' acceptances issued in the ordinary course of business,
(F) acquired indebtedness if, after giving effect to such incurrence, the
Company could incur at least $1.00 of additional indebtedness (other than
pursuant to clauses (A) through (J) hereof), (G) indebtedness of up to $3
million incurred in connection with certain retirements for value of Company
securities held by employees or former employees, (H) guarantees of indebtedness
of the Company or a Restricted Subsidiary, (I) indebtedness incurred in
connection with the acquisition of the Vinings Wyndham Garden Hotel and (J)
other indebtedness of up to $25 million. The Indenture also contains covenants
limiting (A) the ability of the Company and its Restricted Subsidiaries to pay
dividends on or repurchase any capital stock (including the Common Stock) not
held by the Company or a wholly-owned Restricted Subsidiary that is a guarantor
of the Notes, (B) limiting the ability of the Company and its Restricted
Subsidiaries to voluntarily prepay or repay any indebtedness that is not senior
in right of payment to the Notes and (C) limiting the ability of the Company to
incur indebtedness that is senior in right of payment to the Notes but junior in
right of payment to the Company's senior indebtedness. For a description of
additional covenants contained in the Indenture relating to the Notes, see
"Description of Indebtedness -- Notes."
The Company has received a commitment letter from Bankers Trust pursuant to
which Bankers Trust has agreed, subject to certain conditions, to provide the
Revolving Credit Facility. The Revolving Credit Facility provides for up to
$100.0 million of revolving loan borrowings. While the Company does not expect
that it will draw any amounts under the Revolving Credit Facility at the closing
thereof, it is anticipated that approximately $49.4 million aggregate principal
amount will initially be available for borrowings. Availability under the
Revolving Credit Facility will be subject, among other things, to a borrowing
base test calculated with reference to the cash flow from the hotel properties
and management contracts pledged to secure the obligations of the Company under
the Revolving Credit Facility, the location of certain of such properties, the
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<PAGE> 63
terms of such management contracts, the relative contribution to the borrowing
base of the different values attributed to such properties and the values
attributable to both the properties taken as a whole and the management
contracts taken as a whole and other factors. Under the terms of the Revolving
Credit Facility, no further borrowings will be made available to the Company
following the third anniversary of the closing of the Revolving Credit Facility.
The Revolving Credit Facility will mature four years from its closing date.
Bankers Trust may, subject to certain limitations, assign, syndicate,
participate, place or sell its interest under the Revolving Credit Agreement to
other institutional lenders.
The Revolving Credit Facility may be used for (a) the acquisition,
renovation, management and operation of certain hotel properties, (b) the
provision of equity and debt investments in joint ventures to acquire, renovate
and manage certain hotel properties, (c) equity and debt investments in and
credit support for owners of certain hotel properties managed by the Company and
its subsidiaries which are made in connection with the acquisition, extension,
renewal or modification of management agreements and (d) other corporate
purposes of the Company. The Revolving Credit Facility will bear interest at a
rate equal to, at the election of the Company, (a) the Bankers Trust base rate
plus one percent (1.0%) per annum, or (b) one-, two-, three- or six-month LIBOR
plus two percent (2.0%) per annum, payable monthly in arrears; provided however,
subject to the Company's satisfaction of certain conditions, the aforementioned
interest rates will be subject to a reduction of 0.25% per annum. The Company
will pay customary fees in connection with structuring the Revolving Credit
Facility and will also pay Bankers Trust an unused commitment fee equal to
0.375% per annum of the unused portion of the Revolving Credit Facility, payable
quarterly in arrears. Under certain circumstances, the Company may be required
to obtain interest rate protection. The Company is permitted to use up to $15.0
million of the amount available under the Revolving Credit Facility for the
issuance of letters of credit, which will be subject to a fee of 2.0% per annum
on the maximum amount which may be drawn under each letter of credit.
The Revolving Credit Facility will contain covenants requiring the Company
to maintain certain financial ratios. The primary effect of these covenants will
be to limit the Company's ability to obtain or maintain borrowings under the
Revolving Credit Facility, as well as to limit the Company's activities in a
number of other respects. Among the covenants to be contained in the Revolving
Credit Facility, will be covenants requiring the Company to maintain a minimum
net worth of $42.0 million and to maintain the following financial ratios:
(a) the market value of the outstanding capital stock of the Company
shall not be less than 50% of the market value of such stock on the date of
the closing of the Revolving Credit Facility, unless there shall have
occurred a corresponding decrease in the market value of the capital stock
of a selected group of comparable companies;
(b) Total Consolidated Indebtedness (as defined in the Revolving
Credit Facility) and imputed indebtedness attributable to the Company's
ground lease obligations ("Imputed Debt") entered into following the
closing of the Revolving Credit Facility shall not exceed the lesser of (i)
the Adjusted Stockholders' Equity (as defined in the Revolving Credit
Facility) or (ii) 50% of Total Consolidated Indebtedness plus Imputed Debt
plus the market value of the outstanding capital stock of the Company,
unless the failure to meet the ratio with respect to clause (ii) is
attributable to a decrease in the market value of the capital stock of a
selected group of comparable companies of more than 50% since the date of
the closing of the Revolving Credit Facility;
(c) an annually increasing ratio of Consolidated EBITDA (as defined in
the Revolving Credit Facility) plus total lease payments under permitted
sale-leaseback transactions (the "Lease Payments") to Consolidated Fixed
Charges (as defined in the Revolving Credit Facility) plus the greater of
the Lease Payments or an interest factor on the Imputed Debt;
(d) an annually increasing ratio of Consolidated EBITDA minus capital
expenses incurred plus Lease Payments to Consolidated Fixed Charges plus
Lease Payments and an interest factor on the Imputed Debt;
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(e) an annually decreasing ratio of Total Consolidated Indebtedness
plus Imputed Debt to Consolidated EBITDA plus the Lease Payments; and
(f) an annually decreasing ratio of Total Consolidated Indebtedness
plus Imputed Debt to Consolidated EBITDA minus capital expenses incurred
plus Lease Payments.
The Revolving Credit Facility will also contain covenants that (a) impose
certain limitations on the right of the Company in respect of (i) the payment of
dividends and other distributions, (ii) the making of investments in, guaranties
for the benefit of or payments to subsidiaries, persons owning or leasing hotels
managed by the Company or otherwise, (iii) acquisitions of additional hotel
properties, (iv) the creation or incurrence of liens, (v) the incurrence of
indebtedness, lease obligations or contingent liabilities, (vi) the issuance of
preferred stock and (vii) sale leaseback transactions involving any of its hotel
properties, (b) require the Company to maintain a capital reserve account of
3.5% of the gross revenues for each of the hotels owned or leased by it (the
GHALP Lease will require the Company to make deposits into a capital reserve
account in amounts equal to 5% of the gross revenues for each of the GHALP
Properties and the Harbour Island Lease will require the Company to allocate
amounts equal to 4% of the gross revenues of the Harbour Island Property for
replacement and repair of furniture, fixtures, equipment and other improvements
relating to such property), (c) require the Company to make certain expenditures
in connection with deferred maintenance and (d) require the Company to undertake
certain capital expenditures for the renovation of one hotel property (the
Wyndham Rose Hall Resort) and possibly other hotel properties. See "Description
of Indebtedness -- Revolving Credit Facility" for a description of additional
covenants imposed in connection with the Revolving Credit Facility.
While the Company expects to enter into the Revolving Credit Agreement
contemporaneously with or shortly following the consummation of the Offering,
there can be no assurance that the Company will be successful in entering into
the Revolving Credit Agreement and, if so, on what terms. The Revolving Credit
Facility would be an important source of capital to fund the Company's future
growth strategy and, if the Company is not able to agree with the prospective
lender on the terms of the Revolving Credit Agreement, it would need to seek
other sources of financing to help fund its future growth strategy. See
"Description of Indebtedness -- Revolving Credit Facility."
In connection with the Company's acquisition of the Vinings Wyndham Garden
Hotel, which is anticipated to be consummated shortly following the Offering,
the Company will assume industrial revenue bond indebtedness in the amount of
$9.7 million with interest payments to be based upon a rate of 7.625% per annum.
Such industrial bond indebtedness is currently in default and has been
accelerated by the bondholders, as the credit enhancer for such indebtedness is
operating under court supervised rehabilitation. As a condition to the Company's
purchase of the hotel, the trustee for the bondholders will execute a
forebearance agreement pursuant to which it will agree not to exercise any
remedies under the documents relating to the indebtedness for a period of 15
months (which period is estimated to end in August 1997). Notwithstanding the
terms of the forebearance agreement, the Company is required under the terms of
the contract of sale to refinance the industrial revenue bond indebtedness
within nine months of the date of acquisition of the hotel. The Company may need
to obtain approval from the lenders under the Revolving Credit Facility in
connection with such refinancing. There can be no assurance as to the Company's
ability or the terms upon which it can refinance the industrial revenue bond
indebtedness. The Company has paid into escrow $1.3 million, which amount would
be forfeited in certain circumstances if the Company is unable to purchase the
Vinings Wyndham Garden Hotel.
The Company believes that cash generated by operations will be sufficient
to fund the Company's operating strategy for the foreseeable future, and that
any remaining cash generated by operations, together with the Bedrock
Contribution, capital available under the Revolving Credit Facility (subject to
the terms and covenants to be included therein) and the remaining proceeds from
the Offerings will be adequate to fund the Company's growth strategy in the near
term. The Company may seek an increase in the capital available to it under the
Revolving Credit Facility or otherwise obtain additional debt or equity
financing, depending upon the amount of capital required to pursue future growth
opportunities or address other needs. No assurance can
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be given that the amount available under the Revolving Credit Facility will be
increased, or such additional financing will be available, on acceptable terms,
if at all.
SEASONALITY
The lodging industry is affected by normally recurring seasonal patterns.
Demand in the lodging industry is traditionally higher in the second and third
calendar quarters than in the first and fourth calendar quarters. However,
higher demand at most Wyndham Resorts during the first and fourth quarters and
the recognition of incentive fees in the fourth quarter offsets the impact of
reduced demand at other Wyndham brand hotels during these quarters. See "Risk
Factors -- Quarterly Fluctuations in Operating Results."
INFLATION
The effect of inflation, as measured by fluctuations in the Consumer Price
Index, has not had a material impact on the Company's revenues or net income
during the periods under review.
BUSINESS
Wyndham Hotel Corporation is a leading national hotel company operating
upscale hotels primarily under the Wyndham brand name. Wyndham hotels are
located in 22 states and the District of Columbia as well as on 4 Caribbean
islands, and compete with national hotel chains such as Marriott, Hyatt and
Hilton. The Company offers three distinct full service hotel products under the
Wyndham brand designed to serve its core upscale customers in urban, suburban
and select resort markets. The Company's hotel Portfolio consists of 65 hotels
operated by the Company and 3 franchised hotels. In 1995, the Company generated
$139.6 million in revenues and $17.2 million in operating income on a pro forma
basis after giving effect to the Formation of the Company described elsewhere in
this Prospectus.
Wyndham has a proven track record of consistent growth. The Company has
increased the size of its Portfolio in each year since 1988. Over the last two
calendar years, Wyndham grew its brand at a faster rate than any other upscale
hotel company, as measured by the number of branded rooms added, growing from
10,660 Wyndham hotel rooms at December 31, 1993 to 16,391 at December 31, 1995.
This represents a compound annual growth rate in branded hotel rooms of 24%.
This growth was achieved through a combination of hotel management contracts,
"like new" renovations of acquired hotels, other acquisitions, new construction
and franchising. The Company's business plan emphasizes continued pursuit of its
diverse growth strategy.
THE LODGING INDUSTRY
The lodging industry as a whole has shown significant improvement in recent
years. According to Coopers & Lybrand Hospitality Directions, 1995 marked the
lodging industry's third consecutive year of profitability. Such report
estimates that the lodging industry earned pre-tax profits of $7.6 billion in
1995, which is an increase of 38% over the amount of pre-tax profit earned
during 1994.
The key elements underlying the industry's strong operating performance are
increased overall economic activity, which has resulted in growth in demand for
hotel rooms, coupled with growth in new room supply that has been consistently
lower than the growth in demand. The percentage growth in room demand exceeded
the percentage growth of new room supply by 2.0%, 1.6%, 2.7% and 1.4% in 1992,
1993, 1994 and 1995, respectively. Coopers & Lybrand Hospitality Directions
estimates that the percentage growth in demand will exceed the percentage growth
in supply by .7% and .5% in 1996 and 1997, respectively. Demand historically has
been sensitive to shifts in economic activity, which has resulted in cyclical
sales and occupancy rates. See "Risk Factors -- Risks Associated with the
Lodging Industry."
While no assurance can be given as to future conditions in the lodging
industry, the Company believes the industry outlook is positive in the near term
based on its expectation that the percentage growth in room demand will continue
to exceed the percentage growth in room supply.
The excess of demand growth over supply growth has given the lodging
industry a significant and increasing degree of "pricing power," which describes
a hotel's ability to increase ADR without affecting
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occupancy percentages. This pricing power has resulted in significant
industry-wide growth in ADR from 1992 through the first quarter of 1996. In
1995, industry-wide ADR increased 4.8% over 1994, and industry-wide occupancy
percentages increased 1.2% over 1994. In the 1996 First Quarter, industry-wide
ADR increased 6.2% and industry-wide occupancy percentages increased 1.2% over
the 1995 First Quarter. ADR increases exceeded the rate of inflation in 1995 by
1.7%, the third consecutive year of real rate growth. Coopers & Lybrand
Hospitality Directions estimates that occupancy will continue to increase in
1996 and 1997 to 66.3% and 66.7%, respectively, and that ADR will increase 4.5%
in 1996 over 1995 levels and 4.4% in 1997 over 1996 levels. Historical industry
performance, however, may not be indicative of future results, and there can be
no assurance that such projections will be realized.
The Company believes that within the near term, pricing power within the
lodging industry is likely to be particularly strong in the upscale segment in
which the Company's properties operate. Two primary factors underlying this
projected strength are the lower consumer price sensitivity in the upscale
segment and an expectation by industry experts that there will be no significant
additions to the upscale room base over the next few years. The lack of a
significant increase in the upscale segment room base is projected because (i)
the cost of constructing hotels in the upscale segment is substantially higher
than in other industry segments, (ii) financing available for upscale hotel
construction projects is generally higher in cost and more limited in nature,
(iii) construction of upscale hotels involves longer lead times and (iv) upscale
hotel chains likely will seek to achieve growth through acquisition rather than
construction, as construction costs for most new hotels remain substantially
higher than the costs of acquiring existing full service hotels.
UPSCALE HOTELS:
DEMAND GROWTH OUTPACES
SUPPLY GROWTH(1)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) SUPPLY GROWTH DEMAND GROWTH
<S> <C> <C>
1993 1.19 1.25
1994 1.42 3.27
1995 1.92 3.60
</TABLE>
UPSCALE HOTELS:
REVPAR GROWTH(1)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) REVPAR GROWTH
<S> <C>
1993 2.77
1994 4.69
1995 6.82
</TABLE>
(1) Upscale segment of the lodging industry, excluding Orlando and Las Vegas.
Orlando and Las Vegas are excluded because the Company's hotels generally
do not compete in such markets, and the growth in supply in these markets
is significantly in excess of the growth in supply in the upscale segment
of the lodging industry as a whole.
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OPERATING STRATEGY
The Company's goal is to continue the expansion of Wyndham Hotels, Wyndham
Garden Hotels and Wyndham Resorts in order to become one of the largest brand
hotel companies operating in North America while continuing to maintain the
quality of the Wyndham brand. To achieve this goal, the Company has developed an
operating strategy designed to achieve high levels of satisfaction and loyalty
from both hotel guests and owners of managed hotels. The Company believes that
the successful implementation of this strategy will facilitate the expansion of
its Portfolio of owned, leased, managed and franchised hotels. The principal
elements of the Company's strategy are as follows:
Capitalize on Strong Brand Image. Wyndham has focused on developing a
clear brand name that is nationally recognized as being synonymous with
high quality, full service lodging in the upscale hotel market. Because
Wyndham has operating control over more than 95% of the hotels operated
under the Wyndham brand name, it is able to deliver consistently high
quality hotel products and services throughout its hotel system and support
the marketing programs necessary to maintain the quality associated with
the Wyndham name. By developing the Wyndham brand through upscale hotel
products, the Company is able to focus on earning the loyalty of its core
upscale customers: individual business travelers, business groups and other
group customers, and leisure travelers. According to written guest surveys
conducted by Wyndham at its hotels during 1995, 91% of Wyndham guests
surveyed rated the overall quality of Wyndham hotel products and services
good or excellent, and 94% of the guests surveyed indicated that they would
return to that Wyndham hotel on their next trip to the same city. The
Company believes that hotel owners and investors have come to associate the
Wyndham brand name with cost efficient operations and the delivery of
exceptional value to hotel properties. The Company also believes that
growing national recognition of the Wyndham brand, together with the
quality and efficiency of its hotel operations, has facilitated the
Company's historical growth and will enhance its ability to realize its
future growth objectives.
Multiple Upscale Hotel Products. Wyndham offers three distinct full
service hotel products under a single brand name that are tailored to
urban, suburban and select resort markets, the primary markets that serve
its core upscale customers.
- Wyndham Hotels. In urban markets, the Company operates or franchises
20 Wyndham Hotels, which contain an average of approximately 400 hotel
rooms, generally between 15,000 and 250,000 square feet of meeting
space, and a full range of guest services and amenities. Wyndham
Hotels are targeted principally at business groups and other group
customers, as well as individual business travelers.
- Wyndham Garden Hotels. In suburban markets, Wyndham operates 38
Wyndham Garden Hotels, which were created by the Company to cater to
individual business travelers and small business groups. With guest
services, hotel finishings and landscaping comparable to Wyndham
Hotels, Wyndham Garden Hotels are designed to provide a guest
experience similar to that enjoyed at Wyndham Hotels, but at a price
that is competitive in suburban markets. The Company locates Wyndham
Garden Hotels primarily near suburban business centers and airports
and, where possible, seeks to cluster these hotels in a
"hub-and-spoke" distribution pattern around one or more Wyndham Hotels
in order to achieve operating and marketing efficiencies and enhance
local name recognition. Wyndham Garden Hotels are mid-size full
service upscale hotels containing between approximately 150 and 225
hotel rooms that offer a package of services and amenities focused on
the needs of the business traveler, including generally between 1,500
and 5,000 square feet of meeting space, restaurants that serve three
meals a day, exercise rooms, and laundry and room service.
- Wyndham Resorts. Wyndham's Portfolio also includes six Wyndham Resorts
that are full service destination resorts targeted at upscale leisure
and incentive travelers and are located both domestically and on four
Caribbean islands. Through Wyndham Resorts, the Company is able to
offer guest rewards and other cross-promotional benefits to its
domestic customers, thus improving Wyndham's competitiveness and brand
loyalty.
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The Company believes that its strategy of offering multiple hotel products
under a single brand name enables it to achieve, through efficient hotel
distribution, strong penetration of the primary markets that serve its core
upscale customers. The Company also believes that this strategy enables it to
compete effectively for expansion opportunities covering a wide variety of
upscale hotel properties, thereby providing a competitive advantage over hotel
companies with fewer products. The Company expects to continue evaluating
opportunities for new hotel products that it may offer under the Wyndham brand
or operate under a different brand. See "-- Growth Strategy -- II. Additional
Growth Opportunities -- New Lodging Products."
Operating and Financial Performance. The Company seeks to maximize revenues
through its comprehensive marketing strategy and the delivery of high quality
accommodations and hotel services that result in satisfied, loyal hotel guests.
The Company believes that its experience as a hotel owner makes it a better
hotel manager by keeping it focused on controlling each element of operating
expenses, which is essential for achieving attractive returns for both the
Company's hotels and managed hotels. In addition, through yield management of
its room inventory, the Company seeks to maximize REVPAR during periods of high
occupancy by giving first priority for available rooms to Wyndham guests that
will pay the full amount of the applicable room rate.
The Company has a proven track record of achieving strong operating and
financial results. During 1995, average occupancy rates, ADR and REVPAR for
Portfolio hotels were 69%, $88.79 and $60.96, respectively, compared with an
average during this period of 68%, $80.36 and $54.97, respectively, in the
upscale segment of the lodging industry. During the 1996 First Quarter, average
occupancy rates, ADR and REVPAR for Portfolio hotels were 67%, $96.04 and
$64.51, respectively, compared with an average during this period of 64%, $85.06
and $54.69, respectively, in the upscale segment of the lodging industry. In
1995 and the 1996 First Quarter, respectively, REVPAR for Portfolio hotels
outperformed the upscale full service segment of the lodging industry by 11% and
18%, respectively. The Company believes that it has the opportunity to improve
its REVPAR performance through, among other things, the continued maturation of
10 Wyndham Garden Hotels opened in 1995.
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The following table compares certain historical operating and financial
data of the Company's Comparable Hotels with the lodging industry. The Company
has chosen a Comparable Hotel data set based on Wyndham brand hotel properties
operated by the Company since January 1, 1993 because the Company believes that
these 30 hotels have been operated by the Company for a sufficient period of
time to provide meaningful period-to-period comparisons and that these hotels
more fully reflect the Company's operating capabilities. The Company's Portfolio
contains a significant number of newly opened or renovated Wyndham brand hotels,
which typically begin operations with lower occupancy rates, ADR, REVPAR and
margins than mature hotels. While the period of time required to achieve
improved operating results from the application of Wyndham's operating standards
and integration into Wyndham's programs varies depending on the unique
characteristics of a given hotel and the market in which it operates, the
Company has found that during the third full year under Wyndham management a
hotel will fully reflect the Company's operating capabilities. In addition, the
Company believes that Comparable Hotel data provide a more meaningful comparison
to the lodging industry, which the Company believes has a significantly smaller
percentage of newly opened or renovated hotels than the Company. There can be no
assurance that the Company's hotels opened or renovated subsequent to January 1,
1993 will achieve occupancy rates, ADR, REVPAR or operating results comparable
to the Comparable Hotels. For a presentation of certain operating and financial
data for the Company's entire Portfolio, see "Prospectus Summary -- Summary
Combined Financial and Other Data."
<TABLE>
<CAPTION>
UPSCALE SEGMENT
COMPARABLE OF THE
HOTELS(1) LODGING INDUSTRY(2)
---------- -------------------
<S> <C> <C>
Occupancy percentage:(3)
1993................................................. 67% 67%
1994................................................. 70% 68%
1995................................................. 72% 68%
1996 First Quarter................................... 72% 64%
ADR:(4)
1993................................................. $ 76.39 $ 74.19
1994................................................. 80.16 77.17
1995................................................. 84.38 80.36
1996 First Quarter................................... 95.92 85.06
REVPAR:(5)
1993................................................. 51.31 49.71
1994................................................. 56.09 52.48
1995................................................. 60.99 54.97
1996 First Quarter................................... 69.03 54.69
Gross operating profit margin:(6)
1993................................................. 32% 30%
1994................................................. 34% 31%
1995................................................. 36% 33%
1996 First Quarter................................... 37% *
Food and beverage margin:(7)
1993................................................. 29% 17%
1994................................................. 31% 18%
1995................................................. 31% 23%
1996 First Quarter................................... 28% *
Gross operating profit per available room:(8)
1993................................................. $ 9,612 $ 8,397
1994................................................. 11,417 9,364
1995................................................. 12,547 12,478
1996 First Quarter................................... 3,570 *
</TABLE>
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- ---------------
* 1996 First Quarter lodging industry statistics are not available for gross
operating profit margin, food and beverage margin and gross operating profit
per available room.
(1) Comparable hotels consists of the 30 Wyndham brand hotels that have been
operated by the Company since January 1, 1993.
(2) Occupancy percentage, ADR and REVPAR comparisons are to the upscale segment
of the lodging industry, which the Company believes is the appropriate
segment for comparing operating data based on the competitive set for the
Company's hotels, as measured by ADR. Gross operating profit and margin
comparisons are to the upscale full service segment of the lodging industry,
which consists of upscale hotels with restaurants, because the Company
believes that the higher costs associated with restaurant operations provide
the most appropriate comparison of gross operating profits and margins.
(3) Occupancy percentage represents total rooms occupied divided by total
available rooms. Total available rooms represents the number of rooms
available for rent multiplied by the number of days in the reported period.
(4) ADR represents total room revenues divided by the total number of rooms
occupied.
(5) REVPAR represents total room revenues divided by total available rooms.
(6) Gross operating profit margin represents gross operating profit as a
percentage of total revenues. "Gross operating profit" represents gross
revenues less department expenses and undistributed operating expenses.
Gross operating profit margins are included herein because management uses
them as a measurement of hotel operating performance and because management
believes that these items are useful in making industry comparisons.
(7) Food and beverage margin represents food and beverage operating profit as a
percentage of food and beverage revenues.
(8) Gross operating profit per available room represents gross operating profit
divided by total available rooms for the period.
Fully Integrated, Full Service Hospitality Company. The Company owns,
manages, leases and franchises hotels under the Wyndham brand name. In addition,
the Company is experienced in all aspects of hotel operations, including
purchasing, accounting and asset and risk management, as well as hotel
construction and design. The Company believes that operating as a fully
integrated, full service hospitality company enhances its performance by
enabling it to provide a full range of hotel services in an efficient,
cost-effective manner. In addition, the breadth of the Company's experience
enables it to compete effectively for multiple opportunities in the hospitality
industry. The Company also believes that the Wyndham brand name provides it with
a competitive advantage in its management business over companies without their
own brand because hotel owners might otherwise be required to pay a third party
franchise fee in addition to a management fee, which generally results in a
higher fee than Wyndham's overall fee structure.
Experienced, High Quality Management Personnel. The Company believes that
it has highly qualified, experienced executives in each of its key senior
management positions. The Senior Executive Officers, who have an average tenure
of 7 years with the Company and approximately 14 years of experience within the
lodging industry, have worked together to successfully develop, operate and
manage hotel properties in various phases of the industry cycle. The Company was
able to attract executives with a variety of strong incentives, including an
equity sharing program. See "Management." Following the Offering, the Company's
Senior Executive Officers, together with WEL, will beneficially own an aggregate
of approximately 18.5% of the Company's Common Stock. The Company has not lost a
participant in WEL, its equity participation program, to a competing hotel
company since the inception of the program seven years ago.
Based upon the Company's commitment to promoting managers from within the
system, Wyndham has developed a Managers in Development program that trains over
150 participants each year. Over 70% of the Company's hotel general managers
have been promoted from another position within the Company. The Company also
provides formal training programs for managers and sales personnel. The Company
believes that by establishing uniform productivity standards and skill
requirements for its personnel, it is able to measure employee performance
effectively and reward high productivity. The Company also believes that the
quality and experience of its key executives and hotel personnel are important
components of its ability to consistently provide strong financial results to
its stockholders and third party hotel owners as well as outstanding service to
hotel guests.
"The Right Way -- The Wyndham Way." The Company's service signature, "The
Right Way -- The Wyndham Way," embodies its commitment to designing and
implementing the innovative practices and programs required to be a successful
hotel operating company. In addition to written guest surveys, Wyndham conducts
frequent personal interviews of its guests and employees. Wyndham responds to
their comments by shaping its products and services to meet or exceed the needs
and expectations of its guests, focusing specifically on the services and
amenities that drive the purchase decision or affect the Company's ability to
adjust room rates. For example, Wyndham has become well-known for its American
Airlines and Avis Rent-A-Car "Triple Upgrade" program and was the first upscale
hotel chain to provide free in-room coffee makers in every domestic Wyndham
brand hotel room. See "-- Customers and Marketing." The Company
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emphasizes building the Wyndham brand image by delivering the highest quality
guest services, resulting in strong loyalty from its core upscale customers:
individual business travelers, business groups and other group customers, and
leisure travelers.
GROWTH STRATEGY
Since the beginning of 1990, the number of hotels in the Company's
Portfolio has increased from 25 hotels to 68 hotels. In addition to generating
internal growth through the improved performance of existing hotels, the Company
has developed a flexible external growth strategy that it believes will enable
it to take advantage of attractive growth opportunities arising in the lodging
industry. While no assurance can be given as to future conditions in the lodging
industry, the Company believes the industry outlook is positive in the near term
based on its expectation that growth in room demand will continue to outstrip
growth in room supply, providing favorable conditions for continued growth. See
"-- The Lodging Industry."
I. PRIMARY GROWTH OPPORTUNITIES
The near-term focus of the Company's growth strategy is as follows:
Growth from Existing Hotels. The Company expects improvements in the
financial performance of the existing hotels in its Portfolio to account
for a substantial portion of its financial growth in the near future. The
Company believes that the primary factors contributing to internal growth
include (i) revenue increases resulting from continuing improvements in the
lodging industry overall and continuing maturation of 23 hotels opened in
the past two years (including 12 Wyndham Garden Hotels), and (ii) improved
operating margins resulting from operating leverage and Wyndham's continued
emphasis on controlling operating expenses. For example, the Company
anticipates that attractive management incentive fees, which escalate with
increased operating performance at the Company's managed hotels, will
contribute to internal growth. During 1995, the Company earned incentive
fees on 28% of its managed properties, and 14% of the Company's management
fee revenues were derived from incentive fees. The Company's internal
growth strategy has produced Comparable Hotel room revenue increases of 9%
in both 1994 and 1995 and has produced an increase in Comparable Hotel
gross operating profit margins from 32% in 1993 to 36% in 1995. These
improvements have led to significant increases in gross operating profit
per available room of 19% and 10% in 1994 and 1995, respectively, compared
to the prior year period. While Comparable Hotel gross operating profit
margins were 37% in both the 1995 First Quarter and the 1996 First Quarter,
gross operating profit per available room increased by 8.0% in the 1996
First Quarter over the 1995 First Quarter. The Company believes that its
demonstrated ability to achieve both internal and external growth will help
attract third party debt and equity capital to help fund the growth of the
Company's Portfolio.
Wyndham Garden Hotel Redevelopment and Conversion Program. The Company
believes that the continued growth of its Wyndham Garden Hotel product will
provide significant opportunities for increasing the number of Wyndham
brand hotels in its Portfolio. Since the beginning of 1990, the Company has
added 32 Wyndham Garden Hotels to its Portfolio, 3 of which were developed
through new construction and 29 of which were existing hotels converted to
the Wyndham brand. In 1994, the Company accelerated the expansion of
Wyndham Garden Hotels through an investment program developed in
conjunction with Bedrock and other strategic partners. Together with
certain lenders, Bedrock organized a development fund (the "Investment
Program") totalling approximately $335 million, of which approximately
$150.0 million was available as of April 15, 1996 for projects approved by
the Company and Bedrock for the purpose of acquiring existing hotel
properties for redevelopment and conversion to Wyndham Garden Hotels and/or
to make related hotel investments. Bedrock is not required to invest a
minimum amount of capital through the Investment Program, but the Company
is entitled to manage any Investment Program hotel properties for a term of
15 years. The Company and Bedrock have agreed that the Company will be
permitted to manage any hotel containing 250 or fewer rooms that is
financed by Bedrock. See "Certain Relationships and Transactions -- Bedrock
Investment Program." The Investment Program facilitated the redevelopment
of 10 Wyndham Garden Hotels in the period 1994 to 1995, and an eleventh
Wyndham Garden Hotel was developed in 1995 with financing provided by
another Wyndham strategic partner. Of the 29 Wyndham Garden Hotels
converted to the
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Wyndham brand since the beginning of 1990, 13 are owned by Bedrock, 12 are
owned or leased by the Company and 4 are owned by Wyndham's other strategic
partners. See "Certain Relationships and Transactions." Bedrock also has
provided assistance with the development, design and construction phase of
the redevelopment process.
Because many acquired hotels require extensive redevelopment in
connection with their conversion to the Wyndham Garden Hotel brand, the
Company has instituted a program to redevelop these properties to a quality
level consistent with Wyndham's high standards (the "Redevelopment
Program"). For these hotels, the redevelopment process begins by
identifying hotel properties in prime suburban business centers and airport
locations that can be reconfigured to meet the operating model for Wyndham
Garden Hotels. Once the property is acquired, it is typically completely
closed to permit extensive exterior renovation (which often consists of a
substantially renovated facade) and total renovation of guest room, dining
and common areas. Upon completion, the hotel is reopened under the Wyndham
Garden Hotel brand and competes in a strong, visible location as if it were
a newly constructed property. The Company estimates that redeveloping
Wyndham Garden Hotels currently costs about 65% of the cost of new
construction and takes substantially less time (an average of approximately
nine months from the date of acquisition to the date that the hotel is
reopened). The Company has the complete in-house design, development and
operating expertise necessary to manage the entire redevelopment process
and believes that the completion of these Offerings will enhance its growth
opportunities by increasing its ability to finance additional Wyndham
Garden Hotel projects either through a portion of the net proceeds of these
Offerings, cash from operations, joint ventures or borrowings under the
Revolving Credit Facility. Notwithstanding the foregoing, there can be no
assurance that the Company will have adequate capital resources to fund its
growth. See "Risk Factors -- Risks Associated with Expansion," "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
Wyndham intends to continue the Redevelopment Program with Bedrock and
other strategic partners, through direct investment by the Company, or some
combination thereof. The Company has executed a management contract for a
non-Bedrock hotel at La Guardia Airport in New York City, which is
currently in the renovation stage and is scheduled to reopen in the Fall of
1996. The Company also has executed management contracts for two Wyndham
Garden Hotels that will be owned by Bedrock and located in Lexington,
Kentucky and Kansas City, Missouri. The Lexington, Kentucky hotel is
currently being managed by the Company as a Ramada Inn and is scheduled to
become a Wyndham Garden Hotel in the Fall of 1996 following renovations
that are currently under way. The Kansas City hotel, which is currently
closed for renovations, is schedule to open in the Fall of 1996. See
"-- The Company's Hotels -- Hotels Under Renovation and Construction"
below.
Addition of Management Contracts. The Company believes that a
significant source of potential future growth will be through the addition
of new management contracts for Wyndham Hotels, Wyndham Garden Hotels and
Wyndham Resorts at strategic locations. Since the beginning of 1990, the
Company has added an average of ten new management contracts per year,
while the Company has lost an average of two management contracts per year
generally as a result of changes in ownership of managed hotels and
attrition resulting from scheduled termination of short-term non-Wyndham
brand management contracts. The Company believes that management contracts
provide stable growth opportunities through a variety of business
environments because of the relatively low capital requirements and short
lead times necessary for conversion to the Wyndham brand. Wyndham believes
that it is able to compete effectively for additional management contracts
because of its strong reputation in the upscale hotel industry, its track
record of delivering strong financial returns for hotel owners and
investors and its willingness to structure key terms of management
contracts to satisfy hotel owner objectives. In particular, the Company
believes that its history of achieving strong operating results for managed
properties has led to a significant number of owner referrals. In addition,
by operating multiple upscale products, the Company increases its
opportunities to compete for new contracts. The Company's improved capital
structure following the Offerings also should enhance its ability to make
selective capital investments that often must be made in connection with
competing for management contracts. While the Company anticipates that most
new management contracts will be for Wyndham brand hotels, the
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Company may enter into contracts to manage non-branded hotels or to manage
hotels under a different hotel brand.
Hotel Acquisitions and Joint Ventures. The Company anticipates that it
will be able to grow through the acquisition of hotels with attractive
economic prospects that are suitable for application of the Company's
operating strategy. In particular, the Company expects to focus on the
selective acquisition of Wyndham Hotels offering a full range of meeting
and conference capabilities that are located in new strategic markets or in
existing urban markets capable of supporting multiple Wyndham brand hotels.
The Company also will continue to assess the acquisition of other hotel
chains that operate hotel properties suitable to integrate into the
Company's Portfolio as well as the possible acquisition of resort hotels.
The Company anticipates that it also may make partial investments in hotel
properties through joint ventures with strategic business partners or
through equity contributions or secured loans. The Company may make such
investments solely as an investor or in connection with entering into a
management contract. The Company believes that its capital structure and
access to capital markets following the Offerings will improve its ability
to compete for acquisition and investment opportunities by enabling it to
arrange financing more quickly and at a lower cost. The Company also may
issue equity securities to finance future acquisitions in whole or in part.
Notwithstanding the foregoing, there can be no assurance that the Company
will have adequate capital resources to fund its growth. In addition, there
can be no assurance that the Company will be able to identify suitable
acquisition or investment opportunities or successfully integrate acquired
properties. See "Risk Factors -- Risks Associated with Expansion" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
II. ADDITIONAL GROWTH OPPORTUNITIES
Depending on market conditions in the lodging industry, the Company also
may pursue the following expansion opportunities:
Franchise Program. The Company currently franchises three Wyndham
brand hotels, which are operated by third parties. Each of these franchises
was granted to take advantage of a unique opportunity to extend the Wyndham
brand name into an attractive market. The Company is in the process of
developing a full franchise program that it expects to have complete in
advance of the next hotel construction cycle in the upscale full service
segment of the lodging industry, which the Company believes is a few years
away. The Company anticipates that at such time, it will be in a position
to pursue selective franchise opportunities given appropriate market
conditions. The Company believes that newly constructed properties present
the most attractive franchising opportunities because the Company can
control the quality and appearance of the hotel property through up-front
construction and performance criteria. By imposing standard design
requirements, the Company is able to influence strongly the guest
experience, which is crucial to maintaining the quality and identity of the
Wyndham brand. The Company believes that growth through selective franchise
opportunities will add revenues through royalties and increased brand
awareness, without requiring significant capital investment by the Company.
For additional information with respect to two of the Company's franchised
hotels, see "-- Franchising Program."
New Lodging Products. The Company intends to continue evaluating new
lodging products that it may offer under the Wyndham brand. These products
may include both new products within the full service upscale hotel
segment, as well as new products in other segments of the lodging industry.
In particular, the Company will seek to introduce new lodging products
where, in the judgment of management, the product can benefit from, and
further enhance, the Wyndham brand, as well as benefit from the Company's
operating experience and business strengths.
The Company also may add lodging products that would benefit from the
Company's operating programs, but that would be more appropriately operated
under a brand name separate from Wyndham. The Company expects that in 1996
it will enter into an agreement to provide hotel management, purchasing and
technical services to "extended-stay" hotel properties that will be
targeted at corporate
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travelers who typically spend a week or more in one location. These hotel
properties are currently under development by a partnership owned by Crow
Family Members, Trammell Crow Residential, one of the country's largest
apartment builders, and Greystar, Inc., a developer, manager and owner of
apartment properties, and will not be operated under the Wyndham name. It
is anticipated that each hotel property will contain approximately 120
hotel rooms, which will be designed like small apartment units and will be
equipped with a kitchen. The Company believes that these hotels will be
limited service hotels that will not provide in-house restaurant, cocktail,
banquet center or other typical full service amenities and, consequently,
will not compete with the Company's full service hotels. It is expected
that room rates will range between approximately $200 and $400 per week,
depending on the location and seasonality.
The Company believes that the extended-stay program will provide an
opportunity to generate revenues by extending its management expertise and
operating programs into a new segment of the lodging industry without
requiring significant investment of the Company's capital. The Company also
believes that the program will provide the Company with management and
operational experience in the extended-stay market without requiring the
Company to commit the Wyndham brand. The Company expects that it will hire
additional hotel managers to manage the extended-stay properties. The
Company anticipates that the first extended-stay hotel properties will
commence operations in the last quarter of 1996.
New Construction. Depending on market conditions, the Company will
continue to review opportunities to construct new Wyndham Hotels, Wyndham
Garden Hotels and possibly Wyndham Resorts in those strategic markets where
acquisition and conversion of existing properties at a substantial discount
to replacement cost is not possible. Currently, however, construction costs
for new hotels generally remain substantially higher than the costs of
acquiring and converting existing hotels.
III. ABILITY TO EXECUTE GROWTH STRATEGY
The Company believes that it has the in-house capabilities and strategic
business relationships with which to implement each aspect of its growth
strategy. These capabilities and relationships include the following:
In-House Development Expertise. The Company has a full in-house
development staff of seven professionals dedicated to identifying,
evaluating and pursuing growth opportunities. The senior members of this
staff have an average of nine years of development experience in the hotel
industry. The development staff generally works in teams consisting of a
vice president of development, a development manager and an analyst. The
Company's in-house capabilities enable it to make an in-depth assessment of
a potential management, acquisition or other opportunity, including an
analysis of the surrounding market, the potential for increasing hotel
performance and value through the implementation of the Company's operating
strategy, the condition of the hotel property and the estimated renovation
costs of achieving Wyndham's standards for a fresh appearance and updated
accommodations. The Company's development staff also underwrites
redevelopment and new construction projects by analyzing estimated project
costs and preparing market studies and long-term projections of revenues
and profitability. Each opportunity is also assessed in terms of the
contribution that the potential hotel will make to the Wyndham brand
identity.
The Company also maintains a highly qualified in-house construction
and design department, which enables it to manage all phases of
redevelopment and new construction projects. In 1994 and 1995, the Company
managed more than $135 million in redevelopment, remodeling and new
construction projects. The Company believes that its in-house capabilities
provide a competitive advantage by providing a strong network for
identifying potential growth opportunities and maintaining tight control
over hotel quality standards.
Relationships with Hotel Investors. Wyndham believes that its strong
business relationships with various strategic partners will continue to
facilitate growth by providing hotel acquisition, renovation and
development opportunities as well as potential new management contract and
franchise opportunities. Currently, Crow Family Members, who, following the
Offering, will own an aggregate of approximately
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48.9% of the Company's outstanding Common Stock, have interests in 15
Wyndham brand hotels that are managed by the Company. Sixteen additional
Wyndham brand hotels that are managed by the Company are owned by Bedrock,
which will own approximately 12.3% of the Company's Common Stock following
the Offering. See "The Formation and the Financing Plan -- The Formation"
and "Principal Stockholders." As of April 15, 1996, Wyndham has entered
into management contracts for four additional hotels involving these
entities, three of which the Company anticipates will open in 1996, and one
of which the Company anticipates will be open by the first quarter of 1997.
See "-- The Company's Hotels -- Hotels Under Renovation and Construction"
below. In addition, the Company expects that in 1996 it will enter into an
agreement with a partnership owned by Crow Family Members, Trammell Crow
Residential and Greystar, Inc. to provide hotel management, purchasing and
technical services to extended-stay hotel properties currently under
development by such partnership. See "-- II. Additional Growth
Opportunities -- New Lodging Products." The Company also expects to
continue the Redevelopment Program with Bedrock. See "Certain Relationships
and Transactions."
The Company, various Crow Family Members and Patriot American
Hospitality, Inc., a publicly traded REIT ("Patriot American"), recently
entered into a non-binding letter of intent providing for the sale by
various Crow Family Members to Patriot American of five Wyndham brand
hotels. Such hotels will be leased back to a new partnership controlled by
various Crow Family Members pursuant to a lease having a term of ten years,
with two extensions of five years each. The Company expects that it will
continue to manage these hotels on economic terms substantially identical
to the terms upon which they are currently being managed. In addition,
pursuant to the letter of intent, the Company and Patriot American
contemplate a future arrangement whereby proposed additions to the
Company's Portfolio of Wyndham brand hotels will be presented to Patriot
American on a preferred basis. There can be no assurance that any of the
transactions or arrangements contemplated by the letter of intent will be
consummated or otherwise definitively determined.
In addition to providing potential growth opportunities, the Company
believes that its successful track record with these and other hotel owners
and investors provides stability to the Company's management contracts with
hotels owned by such entities. The Company also believes that its
relationship with the Trammell Crow Company, one of the largest national
real estate companies, will continue to facilitate the Company's ability to
identify and evaluate potential acquisition, renovation and development
opportunities.
Sales of Mature Hotels; Long-Term Leases. The Company has developed
business relationships with certain publicly traded REITs. Generally, a
REIT cannot operate hotels because 75% of the gross income of a REIT must
be derived from certain defined categories of qualifying income derived
directly or indirectly from investments relating to real property or
mortgages on real property. Certain REITs, however, have purchased hotel
properties that they lease to a hotel management company because the income
stream from leases is generally regarded as qualifying income.
GHALP has historically owned 11 Wyndham Garden Hotels managed by the
Company (the "GHALP Properties"). A 30% interest in GHALP was owned by a
partnership owned by certain Crow Family Members and the Senior Executive
Officers and the remaining 70% was held by an unaffiliated third party. On
May 2, 1996, Crow Family Members and the Senior Executive Officers acquired
the remaining 70% ownership interest from the third party for a purchase
price of approximately $29.5 million. The $29.5 million purchase price was
funded from the proceeds of the sale of the GHALP Properties to HPT, a
publicly traded REIT, for $135.3 million, which properties were leased back
pursuant to the GHALP Lease to GHALP II, the ownership of which mirrors the
ownership of GHALP. See "Pro Forma Combined Financial Data." As part of the
Formation, the Company will succeed to GHALP II's interest in the GHALP
Lease and continue to manage the hotels. The Company anticipates that in
the future, it may enter into similar transactions whereby it would sell
mature hotel properties to REITs, lease the hotels back and manage them as
Wyndham brand hotels. The Company believes that this strategy permits it to
participate in the initial growth phase of the hotel properties that it
acquires, while eventually freeing the Company's balance sheet of real
property upon disposition of the related hotels. Pursuant to a long-term
lease arrangement, the Company can retain long-term operating control
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over the property and continue to benefit from any increases in the
operating performance of the hotel. The Company anticipates that it also
may enter into long-term leases with REITs with respect to hotel properties
that such REITs may acquire from unaffiliated third parties.
THE COMPANY'S HOTELS
General
Over 95% of the Company's hotels are operated under the Wyndham brand name,
which is synonymous with high quality lodging facilities and excellent service.
The Wyndham name represents the high standards of the Company's hotels, which
present a casually elegant decor and emphasize fresh, updated accommodations.
Wyndham places great emphasis on maintaining hotel properties in first-rate
condition and providing consistently high quality guest services at all of its
hotels, and has designed numerous programs to ensure that Wyndham guests receive
the highest quality lodging experience possible.
Amenities common to almost all Wyndham brand hotels include restaurants,
exercise rooms, swimming pools and cable television channels. Services common to
all Wyndham brand hotels include room service, laundry and valet service and
safe deposit boxes. Wyndham believes that by focusing attention on guest room
details it creates an attractive room package that is appreciated by its upscale
guests, particularly business travelers. Therefore, all domestic Wyndham brand
hotels provide in-room coffee makers with complimentary coffee, comfortable and
efficient workspace, generous guest room lighting, a shower massager and a
"Toiletries You Forgot" program, which provides frequently forgotten travel
items, such as toothpaste, deodorant and razors, at no cost. During 1995,
Wyndham Hotels, Wyndham Garden Hotels and Wyndham Resorts generated 50.2%, 34.5%
and 15.3%, respectively, of room revenues from Wyndham brand hotels.
Wyndham Hotels
Wyndham Hotels are typically large, architecturally distinctive properties
located primarily in major urban locations. These hotels are targeted
principally at upscale business groups and other group customers, as well as
upscale business travelers. Total guest room revenues for Wyndham Hotels in 1995
by customer mix consisted of 54.6% group meetings, 32.6% individual business
travelers and 12.8% leisure travelers.
The Company operates or franchises 20 Wyndham Hotels containing an
aggregate of 8,237 guest rooms. Wyndham Hotels contain an average of
approximately 400 hotel rooms and generally between 15,000 and 250,000 square
feet of meeting space. The considerable meeting and catering capabilities of
Wyndham Hotels attract major corporate groups and numerous national, regional
and local associations for business conventions, sales meetings, conferences,
banquets, receptions, training sessions and private celebrations. Meeting
services offered at most Wyndham Hotels include comprehensive business centers
with private offices, a library, state-of-the-art audiovisual equipment and
secretarial and telecopy services.
Mid-week room rates at Wyndham Hotels range from $99 to $259 per night,
depending on location and season. Guests at these hotels are offered a variety
of services and amenities, including room and concierge service, same day
laundry and dry cleaning, valet parking, individual room climate control,
voice-mail, in-room minibars and often a spa and choice of restaurants. Four
hotels offer elegant four-star dining, and the restaurants at the remaining
Wyndham Hotels feature similar menus containing high quality food selections at
affordable prices that are updated frequently to maintain freshness and to
reflect the identity of the hotel and the surrounding region. The Company has
invested significant time, talent and capital in its hotel restaurants, and
believes that the quality of its restaurants makes a substantial contribution to
its hotel guests' total lodging experience.
Wyndham Garden Hotels
The Company created and designed Wyndham Garden Hotels to cater primarily
to upscale individual business travelers and small business groups in suburban
markets. Wyndham Garden Hotels are mid-size, full service hotels located
primarily near suburban business centers and airports. The Company generally
seeks to cluster Wyndham Garden Hotels in a "hub-and-spoke" distribution pattern
around one or more Wyndham
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Hotels in order to achieve operating and marketing efficiencies and enhance
local name recognition. Through market studies, the Company has determined that
its target business customer generally selects a hotel within an approximate
five mile radius of his or her business destination. Therefore, the Company
selects individual Wyndham Garden Hotel sites based on its evaluation of the
local business market surrounding a potential hotel location.
Through its Wyndham Garden Hotels, the Company strives to provide upscale
individual business travelers and small business groups with a first class guest
experience in a suburban setting. The Company believes that the business
travelers who stay at Wyndham Garden Hotels are similar to the business
travelers at Wyndham Hotels and that their business destination is the primary
factor that draws them to a Wyndham Garden Hotel. Accordingly, with guest
services, hotel finishings and landscaping comparable to Wyndham Hotels, Wyndham
Garden Hotels are designed to provide a guest experience similar to that enjoyed
at Wyndham Hotels, but at a price that is competitive in suburban markets.
Mid-week room rates range between $79 and $129 at Wyndham Garden Hotels,
depending on location. Total guest room revenues for Wyndham Garden Hotels in
1995 by customer mix consisted of 64.6% individual business travelers, 19.2%
small group meetings and 16.2% leisure travelers. In 1995, gross operating
profit margins for all Wyndham Garden Hotels were 36%, which is higher than the
gross operating profit margins for Wyndham Hotels or Wyndham Resorts.
The Company operates 38 Wyndham Garden Hotels containing an aggregate of
6,878 guest rooms. (The Company operates an additional hotel as a Ramada Inn
that is scheduled to become a Wyndham Garden Hotel in the Fall of 1996 following
renovations that are currently under way.) Each Wyndham Garden Hotel contains
between approximately 150 and 225 rooms and generally between 1,500 to 5,000
square feet of meeting space. The amenities and services provided in Wyndham
Garden Hotels are designed to meet the needs of the upscale business traveler.
Amenities and services in each room include desks large enough to accommodate
personal computers, longer phone cords, high wattage light bulbs for reading,
room service and access to 24-hour telecopy and mail/package service. The
meeting facilities at Wyndham Garden Hotels generally can accommodate groups of
between 10 and 200 people and include a flexible meeting room design, exterior
views, additional phone lines and audiovisual equipment. Wyndham Garden Hotels
also feature a lobby lounge, most of which are appointed with a fireplace, a
library typically overlooking a beautifully landscaped garden, and a swimming
pool. In addition, many Wyndham Garden Hotels contain a whirlpool and an
exercise facility.
Dining services at Wyndham Garden Hotels are an important feature. Unlike
many mid-priced hotels, each Wyndham Garden Hotel contains a cafe restaurant
that serves a full breakfast, lunch and dinner daily. Wyndham has designed a
uniform food program that features delicious, healthful meals with minimum
delay. By implementing the same menus, preparation process and purchasing
program throughout the Wyndham Garden Hotel system, the Company has achieved
significant operating efficiencies. The Company believes that the breadth and
quality of the dining services offered at Wyndham Garden Hotels distinguish
these hotels from other hotel chains that target the upscale individual business
traveler in suburban markets.
Wyndham Resorts
Wyndham Resorts are full service destination resorts that are located both
domestically and on four Caribbean islands. Wyndham Resorts are targeted at
upscale leisure travelers and incentive travelers. Total guest room revenue for
Comparable Wyndham Resorts in 1995 by customer mix consisted of 73.0% individual
leisure travelers and 22.0% group travelers and 5.0% individual business
travelers.
The Company operates or franchises six resort hotels containing an
aggregate of 1,904 guest rooms. Each Wyndham Resort contains between
approximately 200 and 500 hotel rooms and, with the exception of the Wyndham
Morgan Bay Resort, generally between 6,000 and 20,000 square feet of meeting
space. Room rates at Wyndham Resorts range between $135 and $210, depending on
location and season.
Wyndham Resorts are designed to provide a memorable guest experience. They
feature spacious, luxurious guest rooms that are air conditioned and typically
contain private balconies. Most resorts have swimming pools, health and fitness
centers and tennis courts. In addition, two resorts offer golf and two resorts
(one of which is under construction) contain casinos. Guest amenities include
room service, concierge and
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valet service and tour information. Guests can choose from a variety of
restaurants and menus, and most resorts provide a variety of live nightly
entertainment. In addition, Wyndham Resorts offer or arrange a full range of
activities, including sailing, snorkeling, windsurfing, waterskiing,
parasailing, horseback riding, scuba diving, deep-sea fishing and cruises.
Wyndham Resorts seek to capitalize on national recognition of the Wyndham
brand name. Through its resort division, the Company is able to offer guest
rewards and other cross-promotional benefits to its domestic customers, thus
improving Wyndham's competitiveness and brand loyalty. The Company's national
sales team targets Wyndham customers as well as travel agents and meeting
planners for leisure and group sales in an effort to take advantage of their
familiarity with the Wyndham hotel system.
Management Service Hotels
The Company provides hotel management services pursuant to management
contracts relating to three hotels that are owned by third parties and operated
under unaffiliated hotel brands. Each of these hotels is an upscale hotel
offering services and amenities consistent with Wyndham's quality standards. The
Company entered into these management contracts in order to take advantage of
opportunities to develop relationships with third party hotel owners, as well as
to generate revenues in circumstances that would not permit conversion of the
hotels to the Wyndham brand. See "-- Growth Strategy -- I. Primary Growth
Opportunities."
Hotels Under Renovation and Construction
The Company has entered into management contracts to operate two additional
hotels that are scheduled to open in 1996. The first hotel, Wyndham Garden
Hotel -- Kansas City, will be located in Kansas City, Missouri and will contain
240 rooms and approximately 4,400 square feet of meeting space. This hotel,
which is currently in the renovation stage, is scheduled to open in the Fall of
1996. The second hotel will be located at La Guardia Airport in New York City
and will contain 225 hotel rooms and approximately 4,000 square feet of meeting
space. This hotel is also under renovation, and the Company anticipates that it
will open in the Fall of 1996.
The Company currently is subject to a temporary restraining order that
prevents it from operating Wyndham brand hotels or advertising the Wyndham name
in connection with the operation of any hotel within a 50 mile radius (within
the State of New York) of the "Mados Wyndham Hotel" (as defined below under
"-- Legal Proceedings") pending resolution of a lawsuit concerning the Company's
use of the Wyndham name within such area. (See "-- Legal Proceedings.") An
adverse decision in such lawsuit or a delay in the resolution of the litigation
beyond the anticipated opening date of the La Guardia hotel would require the
Company to open such hotel under a brand name other than Wyndham or Wyndham
Garden.
The Company also has entered into management contracts to operate two new
Wyndham brand hotels that are currently under construction. The first hotel,
Wyndham New Orleans Riverfront Hotel (the "Riverfront Hotel"), will be a Wyndham
Hotel located in New Orleans, Louisiana that will contain 202 hotel rooms and
approximately 1,800 square feet of meeting space. The Company anticipates that
this hotel will open in May 1996. The second hotel, Wyndham Old San Juan Hotel &
Casino (the "San Juan Hotel"), will be a Wyndham Resort located in San Juan,
Puerto Rico that will contain 242 hotel rooms and approximately 6,200 feet of
meeting space. The Company anticipates that this hotel will open by the first
quarter of 1997. There can be no assurance, however, that these hotels will be
completed as scheduled. Pursuant to the terms of these management contracts, the
Company made certain commitments to provide furniture, fixtures and equipment
for the Riverfront and San Juan Hotels at fixed prices of $2.1 million and $6.0
million, respectively. In addition, with respect to the Riverfront Hotel, the
Company has agreed to provide certain pre-opening services at a fixed price of
$420,000 and has entered into an operating deficit guaranty that requires the
Company to fund up to $230,000 in working capital per year for three years after
the hotel is opened in the event that the hotel generates inadequate cash flow.
In addition, the Company has guaranteed $875,000 in indebtedness relating to the
Riverfront Hotel.
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SUMMARY OF HOTELS
The following table sets forth, as of April 15, 1996, certain information
with respect to the Company's hotels.
<TABLE>
<CAPTION>
OWNED, LEASED,
MANAGED OR NUMBER OF
HOTELS HOTEL LOCATION FRANCHISED(1) ROOMS
- ------------------------------------------- -------------------------- -------------- ---------
<S> <C> <C> <C>
WYNDHAM HOTELS
Wyndham Anatole............................ Dallas, TX Managed 1,620
Wyndham Austin............................. Austin, TX Franchised (2) 313
Wyndham Bel Age............................ West Hollywood, CA Managed 199
Wyndham Bristol............................ Washington, DC Managed 239
Wyndham Checkers Hotel..................... Los Angeles, CA Managed 188
Copley Plaza -- A Wyndham Hotel............ Boston, MA Managed 373
Wyndham Emerald Plaza...................... San Diego, CA Managed 436
The Wyndham Five Seasons................... Cedar Rapids, IA Managed 283
Wyndham Franklin Plaza..................... Philadelphia, PA Managed 758
Wyndham Greenspoint........................ Houston, TX Managed 472
Wyndham Harbour Island..................... Tampa, FL Leased (3) 300
Wyndham Kingston........................... Kingston, Jamaica Managed 303
Wyndham Hotel at Los Angeles
International Airport.................... Los Angeles, CA Managed 591
Wyndham Hotel at Metrocenter............... Phoenix, AZ Managed 284
Wyndham Milwaukee Center................... Milwaukee, WI Managed 221
Wyndham Northwest Chicago.................. Itasca, IL Managed 408
Wyndham Palm Springs....................... Palm Springs, CA Managed 410
Wyndham Playhouse Square................... Cleveland, OH Managed 205
Wyndham San Antonio........................ San Antonio, TX Franchised (2) 326
Wyndham Warwick............................ Houston, TX Managed 308
--------
TOTAL WYNDHAM HOTELS....................... 20
TOTAL WYNDHAM HOTEL ROOMS.................. 8,237
========
WYNDHAM GARDEN HOTELS
Albuquerque................................ Albuquerque, NM Managed 150
Annapolis.................................. Annapolis, MD Managed 197
Atlanta Perimeter Center................... Atlanta, GA Leased 143
Bloomington................................ Minneapolis, MN Leased 209
Bothell.................................... Seattle, WA Leased 166
Brookfield Lakes........................... Milwaukee, WI Owned 178
Buckhead................................... Atlanta, GA Managed 221
Burlington................................. Burlington, MA Managed 180
Chandler................................... Phoenix, AZ Leased 159
Charlotte.................................. Charlotte, NC Owned 173
Commerce................................... Los Angeles, CA Owned (3) 201
Culver City................................ Culver City, CA Managed 199
Denver..................................... Denver, CO Managed 240
Detroit Metro.............................. Romulus, MI Managed 153
Indianapolis............................... Indianapolis, IN Owned 171
Lake Buena Vista........................... Orlando, FL Managed 167
Las Colinas................................ Dallas, TX Managed 168
Lexington.................................. Lexington, KY Managed (4) 177
Marin/San Rafael........................... Marin County, CA Managed 235
Midtown Atlanta............................ Atlanta, GA Managed 191
Monrovia................................... Monrovia, CA Managed 148
Naperville................................. Chicago, IL Leased 143
Nashville Airport.......................... Nashville, TN Leased 180
North Phoenix.............................. Phoenix, AZ Leased 166
North San Diego............................ San Diego, CA Leased 180
</TABLE>
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<PAGE> 80
<TABLE>
<CAPTION>
OWNED, LEASED,
MANAGED OR NUMBER OF
HOTELS HOTEL LOCATION FRANCHISED(1) ROOMS
- ------------------------------------------- -------------------------- -------------- ---------
<S> <C> <C> <C>
Novi....................................... Detroit, MI Managed 148
Oakbrook................................... Oakbrook Terrace, IL Managed 222
O'Hare..................................... Chicago, IL Managed 225
Orange County Airport...................... Costa Mesa, CA Managed 238
Phoenix Airport............................ Phoenix, AZ Leased 210
Piscataway/Somerset........................ Piscataway, NJ Managed 165
Pittsburgh................................. Pittsburgh, PA Managed 140
Pleasanton................................. Pleasanton, CA Managed 171
Schaumburg................................. Schaumburg, IL Owned 188
Seattle-Tacoma Airport..................... Seattle, WA Leased (3) 204
Sunnyvale.................................. San Jose, CA Leased 180
Vinings.................................... Atlanta, GA Managed (5) 159
Waltham.................................... Waltham, MA Managed 148
Wood Dale.................................. Chicago, IL Managed 162
--------
TOTAL WYNDHAM GARDEN HOTELS................ 39
TOTAL WYNDHAM GARDEN HOTEL ROOMS........... 7,055
========
WYNDHAM RESORTS
Inn at Semi-Ah-Moo -- A Wyndham Resort..... Blaine, WA Managed 198
The Village at Breckenridge -- A Wyndham
Resort................................... Breckenridge, CO Franchised 235(6)
Wyndham Aruba Beach Resort & Casino........ Palm Beach, Aruba Managed 444
Wyndham Morgan Bay Resort.................. Choc Bay, St. Lucia Managed 238
Wyndham Rose Hall Resort................... Montego Bay, Jamaica Owned (3) 489
Wyndham Sugar Bay.......................... St. Thomas, U.S.V.I. Managed (7) 300
--------
TOTAL WYNDHAM RESORTS...................... 6
TOTAL WYNDHAM RESORT HOTEL ROOMS........... 1,904
========
MANAGEMENT SERVICE HOTELS
Dedham Hilton.............................. Dedham, MA Managed 247
Pruneyard Inn.............................. Campbell, CA Managed 117
Sheraton Valley Forge...................... King of Prussia, PA Managed (7) 315
--------
TOTAL MANAGEMENT SERVICE HOTELS............ 3
TOTAL MANAGEMENT SERVICE HOTEL ROOMS....... 679
--------
TOTAL PORTFOLIO.......................... 68
TOTAL PORTFOLIO HOTEL ROOMS.............. 17,875
========
HOTELS UNDER RENOVATION OR CONSTRUCTION(8)
Wyndham Garden Hotel -- Kansas City........ Kansas City, MO Managed 240
La Guardia Airport......................... New York, NY Managed 225
Wyndham Riverfront (Wyndham Hotel)......... New Orleans, LA Managed 202
Wyndham San Juan (Wyndham Resort).......... San Juan, Puerto Rico Managed 242
TOTAL HOTELS UNDER RENOVATION OR
CONSTRUCTION............................. 4
TOTAL HOTEL ROOMS UNDER RENOVATION OR
CONSTRUCTION............................. 909
--------
TOTAL HOTELS............................. 72
TOTAL HOTEL ROOMS........................ 18,784
========
</TABLE>
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- ---------------
(1) Ownership Interest Key:
Owned = Wholly owned (100%) and managed by the Company.
Leased = Long-term lease with unaffiliated third party and managed by the
Company. See "-- Long-Term Hotel Leases."
Managed = Operated under management contracts. See "-- Management
Contracts."
Franchised = Franchised to a third party. See "-- Franchising Program."
(2) The Company is aware that the owners (or their affiliates) of the Wyndham
Austin and Wyndham San Antonio have acquired the Omni Hotel Company. The
franchise agreements for the Wyndham Austin and the Wyndham San Antonio are
terminable upon 30 days written notice. While the Company has not received
written notice of termination, there can be no assurance that such franchise
agreements will not be terminated.
(3) The Company's interests in these hotel properties (and in the case of the
Wyndham Rose Hall Resort, the golf course adjacent to the hotel property)
are subject to ground leases which, including renewal options, expire
between 2018 and 2077.
(4) This property was acquired by Bedrock in March 1996 and is currently managed
by Wyndham as a Ramada Inn. Following renovations that are currently under
way, the property will be converted to a Wyndham Garden Hotel, which is
scheduled to occur in the Fall of 1996.
(5) The Company has entered into a contract with an unaffiliated third party to
purchase this hotel. See "Prospectus Summary -- The Company -- Planned
Portfolio Additions."
(6) The actual room inventory at The Village at Breckenridge fluctuates because
approximately 70 rooms at such hotel are owned privately, and the
availability of such rooms to the general public depends upon the election
of the private owners thereof as to the use of such rooms.
(7) Pursuant to the terms of the management contracts relating to the Wyndham
Sugar Bay Resort and the Sheraton Valley Forge, the Company has been
notified that the owners of such hotels have elected to terminate such
contracts effective in June 1996 and on May 31, 1996, respectively, as a
result of the sale of such hotels by such owners.
(8) The anticipated dates of operation for the Kansas City, La Guardia,
Riverfront and San Juan hotels are Fall 1996, Fall 1996, May 1996 and first
quarter 1997, respectively.
The following table presents certain comparative information with respect
to the Company's hotels:
<TABLE>
<CAPTION>
TOTAL HOTELS
WYNDHAM MANAGEMENT EXCLUDING
WYNDHAM GARDEN WYNDHAM SERVICE TOTAL HOTELS OPENED
HOTELS HOTELS(1) RESORTS HOTELS HOTELS IN 1995(2)
------- --------- ------- ---------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Total number of properties(3)..... 20 39 6 3 68 N/A
Total number of rooms(3).......... 8,237 7,055 1,904 679 17,875 N/A
Average number of rooms per
hotel(3)........................ 412 181 317 226 263 N/A
Percentage of hotels to
total(3)........................ 30% 57% 9% 4% 100% N/A
Percentage of rooms to total(3)... 46% 39% 11% 4% 100% N/A
1995 Occupancy percentage(4)...... 68% 70% 65% 73% 69% 71%
1995 ADR(5)....................... $94.58 $ 73.67 $122.75 $85.24 $88.79 $ 90.29
1995 REVPAR(6).................... $64.01 $ 52.75 $79.76 $62.45 $60.96 $ 64.38
</TABLE>
- ---------------
(1) Number of properties and rooms include one hotel (Lexington) that is
currently being managed by the Company as a Ramada Inn and that is scheduled
to become a Wyndham Garden Hotel in the Fall of 1996 following renovations
that are currently under way. Operating data includes one hotel (Wyndham
Garden Hotel -- Denver) that was managed by the Company as a Ramada Inn
while being converted to the Wyndham Garden Hotel brand.
(2) The operating data presented in this column is for total hotels excluding
hotels opened in 1995. This data has been included to demonstrate the
significant negative impact on 1995 occupancy rates, ADR and REVPAR of the 9
Wyndham Garden Hotels added or converted pursuant to the Redevelopment
Program in 1995, which properties required substantial renovations prior to
conversion to the Wyndham brand. There can be no assurance, however, that
these properties will achieve occupancy rates, ADR, REVPAR or operating
results comparable to the Company's mature hotel properties.
(3) As of April 15, 1996.
(4) Occupancy percentage represents total rooms occupied divided by total
available rooms. Total available rooms represents the number of rooms
available for rent multiplied by the number of days in the reported period.
(5) ADR represents total room revenues divided by the total number of rooms
occupied.
(6) REVPAR represents total room revenues divided by total available rooms.
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Sixteen of the Company's 18 owned and leased hotels are Wyndham Garden
Hotels. The following table presents comparative operating data between the
Company's owned and leased Wyndham Garden Hotels and third party Wyndham Garden
Hotels that are managed by the Company.
<TABLE>
<CAPTION>
OWNED OR LEASED MANAGED
WYNDHAM WYNDHAM
GARDEN HOTELS GARDEN HOTELS(1)
--------------- ----------------
<S> <C> <C>
Number of properties(2).............................. 16 23
Average number of rooms per hotel(2)................. 178 182
Occupancy percentage:(3)
1993............................................... 71% 70%
1994............................................... 73% 72%
1995............................................... 75% 66%(4)
1996 First Quarter................................. 73% 59%(4)
ADR:(5)
1993............................................... $ 64.16 $66.09
1994............................................... $ 69.10 $70.11
1995............................................... $ 75.21 $72.56(4)
1996 First Quarter................................. $ 87.02 $77.22(4)
REVPAR:(6)
1993............................................... $ 45.21 $46.08
1994............................................... $ 50.35 $50.55
1995............................................... $ 56.72 $47.70(4)
1996 First Quarter................................. $ 63.15 $45.84(4)
</TABLE>
- ---------------
(1) Number of properties and rooms include one hotel (Lexington) that is
currently being managed by the Company as a Ramada Inn and that is scheduled
to become a Wyndham Garden Hotel in the Fall of 1996 following renovations
that are currently under way. Operating data excludes hotels not operated as
Wyndham Garden Hotels at the end of the period presented.
(2) As of April 15, 1996.
(3) Occupancy percentage represents total rooms occupied divided by total
available rooms. Total available rooms represents the number of rooms
available for rent multiplied by the number of days in the reported period.
(4) This data reflects the significant negative impact on 1995 and the 1996
First Quarter occupancy rates, ADR and REVPAR of the 9 Wyndham Garden
Hotels, all of which are managed hotels, added or converted pursuant to the
Redevelopment Program in 1995, which properties required substantial
renovations prior to conversion to the Wyndham brand. There can be no
assurance, however, that these properties will achieve occupancy rates, ADR,
REVPAR or operating results comparable to the Company's mature hotel
properties.
(5) ADR represents total room revenues divided by the total number of rooms
occupied.
(6) REVPAR represents total room revenues divided by total available rooms.
CUSTOMERS AND MARKETING
The Company's target core customers are upscale business travelers and
business groups, as well as upscale leisure travelers. Total guest room revenue
for Wyndham brand hotels in 1995 by customer mix consisted of 39.5% individual
business travelers, 36.9% group customers, 11.6% resort leisure travelers and
12.0% leisure travelers. To increase revenues at its hotels, the Company has
developed a "push-pull" sales and marketing program as well as various other
promotional, guest service and advertising programs. The key components of these
programs are as follows:
Direct Local Sales Efforts
Wyndham started in 1982 as a hotel management company for a small group of
hotels without a recognized brand name and a very limited marketing budget.
Consequently, Wyndham developed a "backyard" marketing program designed to
"pull" revenues into these hotels from surrounding businesses. Wyndham has
continued to develop and refine its direct local marketing programs and
currently employs a direct sales force of almost 500 highly trained
representatives (an average of 7 per hotel) who generally are assigned to
individual hotels and who focus their sales efforts primarily on the local
businesses and organizations surrounding each hotel. The Company motivates its
sales force with an aggressive incentive
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<PAGE> 83
based compensation structure that ties compensation to hotel performance at all
levels of the hotel sales and management structure.
In 1995, the Company's direct sales program accounted for over 60% of room
revenues at Wyndham brand hotels. The direct sales efforts at Wyndham Hotels
focus primarily on group business. The direct sales efforts at Wyndham Garden
Hotels focus primarily on the market within a three-to-five mile radius of the
hotel because the Company has determined through market research that most of
its guests do business within this area. The Company's local sales programs
include direct solicitation of local businesses, special programs, such as its
Wyn Club program, which provides certain incentives for repeat bookings at
Wyndham brand hotels, participation in local and regional trade shows, and local
promotional and advertising campaigns.
National Sales Efforts
The Company's national sales program, which is split into a national group
sales force and a national negotiated rate team, is designed to "push" revenues
into Wyndham Hotels on a chain-wide basis. The national group sales force
consists of 15 national account managers assigned to four national sales offices
located in New York City, Washington, D.C., Chicago and Los Angeles. The purpose
of this sales force is to develop national group and association business
primarily for Wyndham Hotels and Wyndham Resorts. The national sales team
consists of five national account managers and focuses on identifying, obtaining
and maintaining major corporate accounts whose employees do business across the
nation. The Company has developed its corporate clientele by offering special
rate programs applicable to all Wyndham brand hotels. The Company currently has
national rate programs with approximately 400 different companies as well as the
nation's top 20 travel agencies.
Wyndham Service Programs
Wyndham's service signature, "The Right Way -- The Wyndham Way,"
characterizes Wyndham's entire approach to doing business and embodies Wyndham's
commitment to designing and implementing the innovative practices and programs
required to be a successful hotel operating company. The Right Way -- The
Wyndham Way also embodies the Company's focus on understanding and providing the
guest services and amenities that are most important to its core customers.
Wyndham conducts frequent guest surveys and personal interviews in an effort to
identify the services and amenities valued by upscale business travelers and
responds with various programs designed to meet or exceed such travelers'
expectations. For example, Wyndham has established a unique training program for
its hotel personnel, entitled "ACE" (Attentive, Courteous, Efficient), which
stresses the importance of a great service attitude at its hotels. Wyndham
recognizes that beyond training its personnel to provide the standard services
required by its discerning guests, it is necessary to cater to special guest
needs, and, accordingly, Wyndham provides its employees with the authority to
address guest complaints and requests on the spot.
Through its business traveler research, Wyndham also seeks to identify
those guest room amenities that most affect the purchase decision of its
customers. For example, in response to frequent business traveler surveys,
Wyndham was the first upscale hotel chain to provide a coffee maker and
complimentary coffee or tea in every domestic Wyndham brand hotel room. Wyndham
also has added larger desks, extra long phone cords, high wattage light bulbs
for reading, real hook hangers, comfortable pillows and a shower massager as
standard features of each room. To accommodate the desire of its business
customers to be able to obtain quickly a healthful breakfast or lunch, Wyndham
implemented a breakfast bar and a luncheon pasta bar at all Wyndham Garden
Hotels and most Wyndham Hotels, which is designed to provide delicious meals
efficiently at a value price. Wyndham also has implemented similar guest room
amenities and quality standards in all Wyndham brand hotels. Wyndham believes
that its commitment to providing an outstanding guest experience throughout its
hotel system has contributed greatly to the development and clarity of the
Wyndham brand while earning strong loyalty from its core customers, upscale
business travelers and business groups. For example, according to written guest
surveys conducted by Wyndham at its hotels in 1995, 91% of Wyndham guests
surveyed rated the overall quality of Wyndham hotel products and services good
or excellent, and 94% of the guests surveyed indicated that they would return to
that Wyndham hotel on their next trip to the same city.
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Guest Rewards and Other Programs
The Company participates in both the American Airlines AAdvantage program,
the largest airline mileage program, and the Midwest Express frequent flier
program. These programs provide the Company with ongoing promotional access to
over 28 million members and enable the Company to target frequent business
travelers and increase name recognition. Through an alliance with American
Airlines and Avis Rent-A-Car, Wyndham developed its popular "Triple Upgrade"(TM)
program, which provides American Airlines AAdvantage members that are Wyndham
guests with an airline upgrade, a room upgrade and a rental car upgrade, plus up
to 1,500 AAdvantage miles. The rewards are given at checkout and are provided
for each stay at any Wyndham hotel for guests that pay a regular or corporate
room rate. Wyndham designed the program to provide guests with meaningful
rewards for each hotel visit. Wyndham's Triple Upgrade program is currently in
effect during six months of each calendar year.
Wyndham developed the first "Rate Integrity Guarantee" program in the hotel
industry, which is a corporate travel program designed to ensure that corporate
travel planners and travel agents receive the lowest available Wyndham room
rates for their individual business travelers. The program enables travel
planners and agents to obtain each rate in every category for Wyndham brand
hotels through the major airline reservation systems and provides a
complimentary night stay if a better rate was available. The Company also runs
other promotional programs periodically for individual business travelers,
weekend leisure customers and resort customers. In addition to providing
incentives for its guests to select Wyndham, the Company believes that its
promotional programs increase national recognition of the Wyndham brand.
Advertising
Wyndham's national advertisements, which have been featured on CNN, CNN
"Headline News," ESPN and in major inflight magazines, primarily target the
upscale business customer and are designed to enhance the consumer's awareness
of Wyndham as an upscale, full service, national hotel chain. These
advertisements promote "The Right Way -- The Wyndham Way" and emphasize
attitude, comfort and location. The Company also promotes its services, programs
and individual hotel locations in the major hotel reference directories used by
travel and meeting planners, and in major trade magazines and major metropolitan
newspapers.
Central Reservations System
In 1995, over 35% of all Wyndham brand hotel room revenues were booked
through Wyndham's central reservations system. The Company uses a single central
reservation number (800-WYNDHAM) for all Wyndham brand hotels, which is
accessible to customers throughout the United States and Canada. The reservation
system provides Wyndham's reservation agents with information about hotel
locations, available rooms and rates in order to assist customers in booking
rooms. In addition, the Company uses special marketing programs in conjunction
with its central reservations system in order to target the individual upscale
business traveler, who the Company believes is strongly influenced by brand
recognition and preference.
In 1995, approximately 50% of all Wyndham reservations made through its
central reservations system were received electronically by means of airline
reservation systems. In 1994, the last year for which comparative industry
information is available, according to an industry report in which the Company
participated, the Company's percentage of automated reservations was among the
highest in the industry. The Company believes that its volume of electronic
reservations reflects the Company's commitment to investing in technology in
order to create cost-effective, efficient operations.
ISIS 2000, a limited partnership currently owned by Crow Family Members and
the Senior Executive Officers, is developing an integrated real time central
reservations and property management system (the "Central Reservations System")
designed to handle all of the Company's central reservations and hotel property
management requirements. ISIS 2000 will provide such central reservations and
hotel property management services to Wyndham and Wyndham brand hotels pursuant
to a five-year service contract (which services will be provided to Wyndham on
an exclusive basis for a two-year period). The services will be provided for a
fee comprised of an initial link-up charge plus a per reservation fee and a per
hotel charge for
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the property management system. In addition, the Company expects that it will
guarantee operating leases on behalf of ISIS 2000 in the approximate amount of
$3.5 million. The Company may in the future invest in ISIS 2000. The Company
must obtain the consent of the lenders under the Revolving Credit Facility prior
to entering into certain arrangements relating to ISIS 2000. See "Certain
Relationships and Transactions" and "Risk Factors -- Conflicts of
Interest -- Future Dealings with Affiliates of the Company."
The Central Reservations System will include, among other enhancements,
complete connectivity with all Wyndham brand hotels, a single data base for all
hotel information, a direct interface with airlines and real time/last available
room inventory. Wyndham believes that the new system will improve substantially
the Company's ability to manage the yield from its room inventory. In addition,
the Company believes the new system will significantly enhance the Company's
direct marketing, guest recognition and revenue forecasting capabilities, as
well as its ability to monitor its corporate rate programs. The Central
Reservations System also will provide point of sale information for all Wyndham
brand hotels. The Company expects to begin implementation of the Central
Reservations System during the third quarter of 1996.
Wyndham also participates in all four of the major airline reservation
systems, "SABRE," "APOLLO," "WORLDSPAN" and "SYSTEM ONE." These airline
reservation systems have an aggregate of approximately 190,000 computer
terminals on line at approximately 41,000 locations, allowing travel agents to
book Wyndham hotel reservations when guests are making other travel
arrangements.
HOTEL OPERATIONS
Wyndham's corporate management structure and centralized support services
are designed to permit the Company to control operations and costs, as well as
allocate departmental expertise efficiently among operating divisions. The
Company's organizational structure emphasizes direct accountability through
vertical integration in order to maintain Wyndham's high standards for guest
services and hotel operations throughout its hotel system. The Company has
established certain uniform productivity standards and skill requirements for
hotel employees, which the Company believes increase operating efficiencies by
enhancing the Company's ability to measure performance and interchange certain
employees within the hotel system.
Hotel Management. Each Wyndham brand hotel is managed by a general manager
and supported by a regional and corporate management organization. The size of
each management team and its hourly staff varies, depending on the type of
hotel, its size and its business volume.
General Managers; Hotel Management Personnel. Wyndham's general managers
have an average of over 17 years of experience in the lodging industry, and over
70% of these managers have been promoted from an existing position within the
Company. Each general manager is responsible for supervising the day-to-day
operations of a single hotel. Because of the Company's emphasis on taking an
owner's approach to the hotel business, each general manager also has been
specially trained to understand the financial side of hotel operations,
including cash flow, gross operating margins, debt service and return on
investment. Each general manager can receive up to 75% of his or her base salary
in the form of cash bonuses and equity participation based largely on the
financial performance and quality of hotel operations at the hotel he or she
manages. The Company believes that by emphasizing financial accountability and
performance-based compensation at the general manager level, it is able to
achieve the appropriate balance between providing high quality guest services
and strong returns, to both the Company and owners of managed hotels. Each
Wyndham Hotel and Wyndham Resort is run by an executive committee that oversees
a management team of approximately 16 managers. The executive committees
typically consist of a general manager, a director of sales and marketing, a
controller, a director of food and beverage operations, a director of rooms
operations, a human resources director and a director of engineering. A typical
Wyndham Garden Hotel management committee consists of a general manager, a
director of sales, two sales managers, a guest services manager, a food and
beverage manager, a catering manager, a food production manager and a
housekeeping manager.
Regional Operations. Wyndham's general managers report directly to a
regional director of operations, who, in turn, reports to one of five vice
presidents of operations. These vice presidents of operations report to the
president of either the Wyndham Hotel and Resort Division or the Wyndham Garden
Division. The two operating division presidents have an average of 25 years
experience in the lodging industry and an average of
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6 years of experience in their current positions with the Company, and the five
vice presidents of operations have an average of 23 years experience in the
lodging industry and an average of 7 years of experience with the Company. The
regional management teams provide management support and direction to the
general managers and their staff, coordinate communications between the
properties and the Company's centralized corporate departments and assist in
establishing and administering corporate policies, procedures and standards.
Centralized Corporate Services. The Company's hotel operations are divided
into two operating divisions, consisting of a Wyndham Hotel and Resort Division
and a Wyndham Garden Division. Each operating division has its own president,
who reports to the Company's Chief Executive Officer. The Company believes that
it has highly qualified, experienced executives in each of its key senior
management positions. The Senior Executive Officers, who have an average of 7
years with the Company and approximately 14 years in the lodging industry, have
worked together to successfully operate, manage and develop the Company's hotels
in various phases of the industry cycle. The Company also has a centralized
corporate staff located in Dallas, Texas, which provides a variety of managerial
and support services to both hotel divisions. The Company believes that the
experience of its corporate management team enables it to provide strong,
central leadership in all areas of operations, including marketing, development,
design and construction, purchasing, finance, accounting, legal and human
resources. The Company believes that the quality and experience of management
are important components of its ability to provide consistently strong financial
results to owners and outstanding service to hotel guests. In addition to the
foregoing areas of operations, the Company's centralized corporate staff
provides technical assistance and training to each hotel's employees for
administrative operations, room and guest services, reservations, maintenance
and engineering, retail services, and human resources and benefits.
Recruiting and Training. The Company is strongly committed to developing
and promoting its management personnel from within the Wyndham system. Wyndham
believes that it has developed one of the largest and most visible college
recruiting programs in the industry. Over the past five years, the Company has
hired over 400 new college graduates through its on-campus recruiting program at
15 universities with four-year hotel management programs. The Company believes
that is has been quite successful at recruiting top college graduates and
providing them with outstanding training and experience. The Company will
continue to emphasize college recruiting as an important source of management
talent. In 1995, the Company recruited 90 new college graduates. New campus
recruits receive up to 12 months training and are then generally assigned to the
sales or operations departments at a Wyndham operated hotel.
The Company has developed a Managers in Development program that trains
over 150 participants each year and contains ten separate training modules. The
Company also provides formal training programs for general managers and sales
personnel. Wyndham believes that by creating meaningful, measurable goals for
each key position within the Company, it is able to track individual
performance, reward productivity and assist in developing the careers of its
personnel. Wyndham believes that this approach has contributed significantly to
high labor productivity and employee retention, as evidenced by the fact that
70% of the Company's existing general managers were promoted from within the
Company.
MANAGEMENT CONTRACTS
Wyndham operates 47 hotels for third parties pursuant to management
contracts under which it is responsible for the day-to-day operations of the
hotels. These operations include managing hotel accommodations, meeting rooms
and food and beverage services as well as hiring and training each hotel's
staff, planning and providing sales and marketing services, purchasing operating
supplies, inventories and furniture, fixtures and equipment, providing routine
repairs and maintenance and performing hotel accounting functions, including the
preparation of monthly financial statements and budgeting.
The hotel owner generally is responsible for all costs and expenses
incurred in connection with operating the hotel, including reimbursing the
Company for the expenses associated with salaries and benefits of all hotel
employees. The hotel owner also generally is required to contribute an amount
equal to a specified percentage of gross revenues to a reserve fund on a monthly
basis to fund replacement and substitution of
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furniture, fixtures and equipment and the costs of certain non-routine repairs
and maintenance. Under certain management contracts, Wyndham has agreed to make
loans for the benefit of the hotel to cover shortfalls in operating cash flow
and also has agreed under certain management contracts to make loans or capital
contributions for hotel renovations, conversion costs and other purposes.
Under nearly all management contracts, the hotel owner has agreed to
indemnify the Company against liabilities arising from the management and
operation of the hotel, typically including environmental and general tort
liabilities. These indemnities generally exclude various degrees of negligent
conduct by the Company as well as the Company's willful misconduct or willful
violation of legal requirements. Under most management contracts, the Company
generally has agreed to indemnify the hotel owner against liabilities caused by
the Company's negligence, willful misconduct, willful violation of legal
requirements or breach of the management contract. A few management contracts,
however, give broader protection to the hotel owner with regard to liabilities
arising from the operation of the hotel, and one management contract provides
protection to the hotel owner from claims that the hotel owner is the employer
of certain hotel employees when the management contract provides otherwise.
As compensation for its management services, Wyndham receives a base
management fee under each management contract. Wyndham also may receive an
incentive fee, as well as a trade name fee, for hotels operated under the
Wyndham brand name. The average base management fee for the Company's management
contracts is in excess of 3% of gross revenues from hotel operations, and the
average trade name fee is in excess of 1% of gross room revenues. The average
base management fee for the Company's management contracts entered into after
January 1, 1994 is in excess of 3% of gross revenues from hotel operations, and
the average trade name fee is in excess of 1.6% of gross room revenues. The
Company believes that the increase in trade name fees since January 1, 1994
generally reflects increased recognition in the past two years of the Wyndham
brand name and the Company's operating capabilities. The actual percentage of
base fees and trade name fees for any given contract may vary from these
averages depending on the size and location of a particular hotel, the market in
which it competes and other factors. The Company also receives an incentive
management fee under most management contracts. The calculation of incentive
management fees varies from management contract to contract, but is generally
based on a percentage of a hotel's operating profit or the amount by which the
hotel's operating profit exceeds specified performance targets.
In addition to property-specific marketing and promotional services that
Wyndham provides at the hotel owner's expense for each hotel that it operates,
Wyndham also provides marketing services to Wyndham brand hotels consisting of
chain-wide and/or division level marketing programs, research services,
advertising and public relations efforts. The costs of these marketing services
are paid by the hotel owners pursuant to a marketing contribution made to
Wyndham in an amount generally equal to a specified percentage of gross room
revenues. In addition to marketing services, owners of Wyndham brand hotels
receive group and/or individual traveler sales services provided by Wyndham's
national and/or local sales offices. The cost of national sales and marketing
services generally are allocated among all hotels for which the services are
provided. The cost of local sales services generally are allocated directly to
each individual hotel. Wyndham also provides centralized reservations services
to Wyndham brand hotels, with the costs being allocated to each hotel generally
based on reservations made at that hotel. For Wyndham Garden Hotels and smaller
Wyndham Hotels, Wyndham also typically provides off-site accounting services at
the hotel owner's expense.
In addition to the services described above that are provided pursuant to
management contracts, Wyndham also makes available to hotel owners design,
construction, purchasing and technical services for an additional fee. These
services generally are provided pursuant to separate technical services
management contracts and purchasing agreements.
The terms of Wyndham's management contracts vary from hotel to hotel. The
terms of the management contracts for the 43 Wyndham brand hotels managed by the
Company generally range between 10 and 20 years. The terms for the non-Wyndham
brand hotels range from one month to fifteen years. At April 15, 1996, the
average remaining term for Wyndham brand hotel management contracts was 13.6
years (including renewals that the Company may elect to exercise). Each
management agreement is subject to early termination in connection with a
default by either party. In addition, the management contracts generally are
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subject to termination by the hotel owner for Wyndham's failure to achieve
certain performance standards, in connection with the owner's sale of the hotel
to a third party, upon the owner's default on indebtedness encumbering the
property and/or upon a foreclosure of the property. Other grounds for
termination include the hotel owner's election to close the hotel and certain
business combinations involving the Company in which the Wyndham name or its
current management team does not survive. In the event a management contract is
terminated for certain reasons, most management contracts require the owner to
pay a termination fee that is generally based upon a multiple of the average
monthly management fees under the contract depending on the remaining term of
the contract, hotel performance and other factors.
A majority of the management contracts include a provision restricting the
Company from managing, operating or investing in other hotels within a
competitive geographical region, usually within a five mile radius of the hotel
subject to the management contract. While some of these non-competition clauses
restrict the Company's involvement in any hotel within the covered region, many
of the clauses limit competition only with respect to hotels similar to the
hotel subject to the restriction.
Pursuant to the terms of the management contracts relating to the Wyndham
Sugar Bay Resort and the Sheraton Valley Forge, the Company has been notified
that the owners of such hotels have elected to terminate such contracts
effective in June 1996 and on May 31, 1996, respectively, as a result of the
sale of such hotels by such owners.
LONG-TERM HOTEL LEASES
Following the Offering, the Company will lease and operate 12 hotels. See
"The Formation and the Financing Plan." GHALP has historically owned 11 Wyndham
Garden Hotels (the "GHALP Properties"). A 30% interest in GHALP was owned by a
partnership owned by certain Crow Family Members and the Senior Executive
Officers, and the remaining 70% was held by an unaffiliated third party. On May
2, 1996, Crow Family Members and the Senior Executive Officers acquired the
remaining 70% ownership interest from the third party for a purchase price of
approximately $29.5 million. The $29.5 million purchase price was funded from
the proceeds of the sale of the GHALP Properties to HPT, a publicly traded REIT,
for $135.3 million, which properties were leased back pursuant to one or more
long-term leases (the "GHALP Lease") to GHALP II, the ownership of which mirrors
the ownership of GHALP. See "Pro Form Combined Financial Data." As part of the
Formation, the Company will succeed to GHALP II's leasehold interest in the
GHALP Lease and continue to manage the hotels. The Company also will succeed to
GHALP II's interest in $13.6 million of the purchase price that was deferred to
secure HPT's rights under the GHALP Lease (the "Retained Fund"). The initial
term of the GHALP Lease is approximately 17 years with renewals for four
consecutive 12 year terms exercisable at the Company's option for all, but not
less than all, 11 hotels. While HPT has retained the right to sell one or more
of these leased hotels to third parties (subject to the GHALP Lease), the
Company has a right of first refusal to acquire such property, which terms are
set forth in the GHALP Lease.
Rental payments under the GHALP Lease consist of minimum rent (the "Minimum
Rent"), payable monthly, and, commencing January 1997, additional rent (the
"Additional Rent"), which is based upon growth in revenues at the leased hotels.
The Minimum Rent for all of the leased hotels is $1,133,334 per month. The
Additional Rent will be equal to 8% of the amount, if any, by which the
consolidated total hotel sales (as defined in the GHALP Lease) for the 11 leased
hotels for the then current year to date exceeds the consolidated total hotel
sales for the corresponding period in 1996. The GHALP Lease allows the Company
to retain all of the benefit from any increase in operating income from these
properties during the term of the GHALP Lease, subject to the payment of
Additional Rent. All management fees due to the Company from these hotels are
subordinated to rent due to HPT.
The GHALP Lease is a triple net lease that will require the Company to
maintain the leased hotels in good condition and repair and in conformity with
all applicable legal requirements and to make or cause to be made all items of
maintenance, repair, replacement and alteration to the leased hotels as
necessary for such purposes. The Company has established a reserve account (the
"FF&E Reserve") and, throughout the lease term, the Company must add to the FF&E
Reserve at the end of each month an amount equal to 5% of total
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hotel sales during such month to be used for maintenance, repair, replacements
and alterations that are proposed by the Company and approved by HPT. Under
certain circumstances, HPT may be required to fund major repairs, in which event
the Minimum Rent will be increased by at least 10% of the amount funded. In
addition, the Company will be required to pay substantially all expenses
associated with the operation of the leased hotels, including all ground rent,
if applicable, real estate taxes and insurance. All personal property (except
motor vehicles and liquor licenses and permits) owned by the Company and used in
connection with the operation of the leased hotels, including personal property
purchased with funds from the FF&E Reserve, will be pledged to HPT to secure the
Company's obligations under the GHALP Lease. At the termination of the GHALP
Lease, any funds remaining in the FF&E Reserve and property purchased with funds
from the FF&E Reserve will be paid and title delivered to HPT as additional
charges. In addition, HPT has the option to purchase any personal property of
the Company located at, or used in connection with, the leased hotels at its
then net market value.
The Company's interest in the Retained Fund will be subject to offset if
the Company fails to perform its obligations under the GHALP Lease. The Retained
Fund, which will earn no interest on the Company's behalf, will be paid upon the
end of the GHALP Lease term provided that the Company has not defaulted under
the GHALP Lease. In addition, the Company has pledged to HPT a security interest
that will be subordinate to that of the lenders under the Revolving Credit
Facility of all of the capital stock of its subsidiary that is the lessee under
the GHALP Lease to secure the obligations under the GHALP Lease.
Under the GHALP Lease, the Company has agreed to indemnify HPT, the hotel
mortgagees and their agents and assigns against costs resulting from the
presence during the lease term of any hazardous substances in, upon or under the
soil or groundwater of the leased property or any properties surrounding the
leased property in violation of any law or regulation, provided that the costs
arise due to the failure by the Company to perform or comply in accordance with
all laws and orders applicable to the storage, use, maintenance, spillage,
disposition or transfer of hazardous substances or certain lease provisions
requiring notice of environmental-related events and activities to be given to
HPT, except to the extent such costs arise from the acts or omissions of HPT or
any other indemnified party or during any period that HPT is in possession of
the leased property. The Company also has agreed to indemnify HPT against
liabilities due to the Company's failure to perform or comply with the lease
agreement, any claims relating to the use, misuse or condition of the property
caused by the Company, the imposition of any taxes or assessments, or claims
arising from accidents, death or personal injury occurring at the leased
premises. HPT may terminate the lease upon an event of default, which includes:
the failure to pay rent; failure to maintain required insurance; an uncured
default by the Company of any of the terms of the lease agreement; an uncured
default under any of the leases constituting the GHALP Lease, the management
contracts relating to the properties and certain other related documents; the
loss of any material license or permit; any false or misleading material
representation or warranty made by the Company contained in the GHALP Lease or
certain other related documents; the Company not paying debts as they become due
or making a general assignment for the benefit of creditors; filings under any
federal or state bankruptcy or insolvency laws with respect to the Company; levy
upon or attachment of the Company's interest in the leased property; or the
tenant under the GHALP Lease at any time ceasing to be a wholly owned direct or
indirect subsidiary of the Company. HPT may cancel the Company's management
agreements related to these hotels in the event the GHALP Lease is in default.
Upon a termination due to an event of default, the Company is liable for the
rental payments that would have been payable for the remainder of the unexpired
term. If HPT re-lets the properties, however, the Company is liable for only the
difference between the proceeds from re-letting and proceeds that would have
been payable had the GHALP Lease remained in effect for the duration of the
term. In addition to damages that HPT may receive pursuant to the preceding
sentence as a result of the Company's default, HPT may elect to require the
Company to pay as final liquidated damages the amount of the excess of the lease
payments that would have been payable from the date of termination through the
unexpired term over the fair rental value of the properties for the same period.
Under the purchase contract relating to the sale of the GHALP Properties to
HPT, GHALP undertook to indemnify HPT against any liabilities arising out of
GHALP's actions in connection with the ownership or operation of the GHALP
Properties and any third party claims in connection with such properties
occurring
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prior to the consummation of the sale. In addition, HPT undertook to indemnify
GHALP against any liabilities arising out of HPT's actions in connection with
the ownership or operation of the GHALP Properties and any third party claims in
connection with such properties occurring after the sale. In connection with the
Formation, the Company will assume GHALP's rights and obligations under the
purchase contract. The Company also will assume the representations and
warranties made by GHALP under the purchase contract, including that, to GHALP's
knowledge, at the time of the agreement: no undisclosed conditions, agreements,
litigation or environmental liabilities existed that would materially and
adversely affect the properties or result in the imposition of a lien upon any
of the GHALP Properties; no taxes were delinquent; the properties had access to
sufficient utilities and services; the properties and the use and operation
thereof did not violate any material law; all material licenses and permits
necessary to the operation of the GHALP Properties were in effect; and the
copies of the ground leases delivered to HPT were true, valid and not in
default. Liability with respect to the representations and warranties will
survive for one year period following the closing of the sale.
The GHALP Lease restricts the Company from owning, building, franchising,
managing or operating any Wyndham Garden Hotel within a designated area
surrounding each respective GHALP Property during the lease term. Hotel products
other than Wyndham Garden Hotels are expressly excluded from this restriction.
The remaining leased hotel is leased to the Company from an unaffiliated
third party pursuant to a capitalized lease with a remaining term of 22 years.
The lease requires payment of base rent of $2,300,000 per year plus contingent
rent through 1999 of 20% of the amount net operating income before management
fees exceeds base rent plus the management fee and thereafter, 50% of such
amount.
FRANCHISING PROGRAM
The Company currently has three franchised Wyndham hotels operated by third
parties. See "-- The Company's Hotels." These franchises were each granted to
take advantage of a unique opportunity to extend the Wyndham brand name into an
attractive market.
The Company is in the process of developing a comprehensive franchise
program that it expects to complete in advance of the next hotel construction
cycle in the upscale full service segment of the lodging industry, which the
Company believes is a few years away. The Company anticipates that at such time,
it will be in a position to pursue selective franchise opportunities given
appropriate market conditions. The Company believes that newly constructed hotel
properties present the most attractive franchising opportunities because the
Company can control the quality and appearance of the hotel property through
up-front construction and performance criteria. By imposing standard design
requirements, the Company is able to influence strongly the guest experience,
which is crucial to maintaining the quality and identity of a Wyndham brand
hotel. The Company expects that its franchise program also would emphasize
strong control over hotel operations, as well as marketing and advertising, in
order to ensure that franchised hotels achieve the same high standards as
Wyndham brand hotels managed by the Company.
The Company is aware that the owners (or their affiliates) of two of the
Company's franchised hotels (Wyndham Austin and Wyndham San Antonio) have
acquired the Omni Hotel Company. The franchise agreements for the Wyndham Austin
and the Wyndham San Antonio are terminable upon 30 days written notice. While
the Company has not received written notice of termination, there can be no
assurance that such franchise agreements will not be terminated.
COMPETITION
The lodging industry is highly competitive. Wyndham competes in the upscale
segment of the lodging industry. The Company's hotels compete with other
national limited and full service hotel companies, as well as with various
regional and local hotels. Some of the larger hotel chains with which the
Company competes include Marriott, Sheraton, Hyatt, Hilton and Embassy Suites. A
number of the Company's competitors are larger, operate more hotels and have
substantially greater financial and other resources than the Company. In
addition, some of the Company's competitors operate hotel properties that have
locations superior to those of the Company's hotels. Competitive factors in the
lodging industry include room rates, quality of accommoda-
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tions, name recognition, service levels and convenience of location. There can
be no assurance that demographic, geographic or other changes in markets in
which the Company's hotels are located will not adversely affect the convenience
or desirability of certain of the Company's hotels. Furthermore, there can be no
assurance that new or existing competitors will not significantly lower rates or
offer greater conveniences, services or amenities or significantly expand or
improve facilities in a market in which the Company's hotels compete, thereby
adversely affecting the Company's results of operations. See "Risk
Factors -- Competition in the Lodging Industry."
The Company also competes for management contract, acquisition,
development, lease, franchise and other expansion opportunities. The Company
competes for these expansion opportunities with national and regional hotel
companies, some of which have greater financial and other resources than the
Company. Competitive factors for expansion opportunities include relationships
with hotel owners and investors, the availability of capital, financial
performance, management fees, lease payments, brand name recognition, marketing
support, reservation system capacity, and the willingness to provide funds in
connection with new management and lease arrangements. The Company's failure to
compete successfully for expansion opportunities or to attract and maintain
relationships with hotel owners and investors could adversely affect the
Company's results of operations. See "Risk Factors -- Risks Associated with
Expansion -- Competition for Expansion Opportunities."
EMPLOYEES
At December 31, 1995, Wyndham had approximately 190 employees at the
corporate level and approximately 11,210 employees (including part-time and
seasonal employees) at hotel properties managed by the Company.
Employees at five of the Company's managed hotels currently are represented
by a labor union. Management believes its ongoing labor relations to be good.
The collective bargaining agreement with employees at the Wyndham Kingston Hotel
expired in July 1995, and the Company is currently negotiating to extend that
agreement. The collective bargaining agreement with hotel employees at the
Wyndham Aruba Beach Resort and Casino expires in May 1996, and the Company is
beginning negotiations to extend the agreement.
TRADEMARKS
The service marks "Wyndham" and "Wyndham Garden" are material to the
Company's business. The Company has filed an application with the United States
Patent and Trademark Office (the "USPTO") for registration of each of the
Wyndham service marks. The Company also has filed an application with the USPTO
for registration of the Wyndham "W" logo, the "The Right Way. The Wyndham Way"
slogan, the Company's 800-WYNDHAM reservation number and certain other marks as
service marks. In addition, the Company has registered "Wyndham Garden" and
"Triple Upgrade" as service marks with the USPTO. The Company also claims common
law service mark rights in the foregoing marks as well as certain other marks.
The Company has registered "Wyndham" and "Wyndham Garden" as service marks in
various states and "Wyndham" and "Wyndham Garden" as service marks in Puerto
Rico and various foreign countries.
The Company's application to register "Wyndham" also claims exclusive use
of this mark with the exception of two areas in which the Company is aware of
prior uses of the "Wyndham" mark by hotel operators that have no existing or
historical relationship with the Company. One of these hotels is located in
Ambler, Pennsylvania, and the other is located in Manhattan (the "Mados Wyndham
Hotel"). The Company has not used the Wyndham name in connection with the
operation of a Wyndham hotel in either of these areas.
In June 1992, the managers and lessees of the Mados Wyndham Hotel, John and
Suzanne Mados (the "Madoses"), registered the name "Wyndham Hotel" with the New
York Secretary of State pursuant to a New York State statute which provides that
the owner or operator of a hotel in the State of New York may register the name
of a hotel and such registration grants the exclusive right to use the name in
the State of New York. No reported cases to date indicate how New York courts
will interpret the scope of the rights
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created by the New York statute, and, therefore, it is not currently known
whether the Madoses' registration pursuant to the statute could prevent the
Company from operating a Wyndham brand hotel anywhere in the State of New York.
In February 1993 and June 1995, respectively, the current owners of the
Mados Wyndham Hotel, Yassky-Wyndham Partnership ("Yassky"), filed Notices of
Opposition to the Company's applications with the USPTO for registration of
"Wyndham" and "Wyndham Garden," as service marks, claiming prior use of the
"Wyndham" mark and requesting that Wyndham's registrations be denied. The
Company subsequently entered into a settlement agreement with Yassky pursuant to
which Yassky assigned to the Company all of its rights in the "Wyndham" mark
throughout the world with the exception of 11 New York State counties
surrounding the Mados Wyndham Hotel, including New York County. In addition,
Yassky withdrew its Notices of Opposition to the Company's federal applications
for registration of the "Wyndham" and "Wyndham Garden" marks. Pursuant to the
settlement agreement, the Company must pay a royalty to Yassky if it undertakes
the operation of a Wyndham brand hotel in any of the 11 counties identified in
the agreement.
In June 1995, the Madoses filed a late Notice of Opposition to the
Company's application for federal registration of the "Wyndham" mark, also
claiming prior use of the "Wyndham" mark and requesting that Wyndham's
registration be denied. There has been no determination as to whether the
Trademark Trial and Appeal Board will accept the untimely Notice of Opposition,
and, if accepted, what the resulting impact would be on the Company's
application for registration.
The Company does not believe that the Madoses' federal and common law
rights to use the Wyndham name will prevent the Company's application for
registration of exclusive use of the "Wyndham" mark throughout the country with
the exception of the area surrounding the Mados Wyndham Hotel. In addition,
because of national recognition of the Wyndham name as a result of the Company's
operations, the Company believes that it has substantial common law rights to
the "Wyndham" marks in many areas throughout the country. It is likely, however,
that the Madoses' prior operation of the Mados Wyndham Hotel will prevent the
Company from operating Wyndham brand hotels or advertising the Wyndham brand
name in connection with the operation of a Wyndham brand hotel within a
geographic area within the borough of Manhattan or possibly within a 50 mile
radius of the Mados Wyndham Hotel. For further information relating to disputes
involving the "Wyndham" mark, see "-- Legal Proceedings" below.
LEGAL PROCEEDINGS
On June 29, 1992, the Madoses, who lease and manage the Mados Wyndham
Hotel, filed a lawsuit in the New York Supreme Court, County of New York,
against Wyndham Hotel Company, Wyndham Hotel Company, Ltd., Wyndham Hotel
Management Corporation d/b/a Wyndham Hotels & Resorts (referred to herein as
"Old Wyndham") and Yassky. The lawsuit seeks a declaratory judgment that, based
on their prior use of the Wyndham name, the Madoses possess the exclusive right
to use the Wyndham name and mark in connection with the operation of a hotel in
New York City or within a 50 mile radius thereof. Old Wyndham acknowledges that
use of the Wyndham name in connection with the operation of the Mados Wyndham
Hotel has created certain service mark rights in a geographic area within the
borough of Manhattan, but denies the Madoses' claim to exclusive use of the
Wyndham name within a 50 mile radius of the Mados Wyndham Hotel. The suit also
seeks an injunction enjoining Old Wyndham from using the "Wyndham" mark in
connection with the advertisement, promotion, management or operation of a hotel
in New York City or within a 50 mile radius thereof.
On January 29, 1996, the court issued a temporary restraining order, which,
as modified in a subsequent opinion, prohibits the Company from operating a
Wyndham brand hotel or advertising the Wyndham name in connection with the
operation of a Wyndham brand hotel in the borough of Manhattan or within a 50
mile radius (within the State of New York) of the Mados Wyndham Hotel pending
the outcome of the lawsuit. The court also granted Old Wyndham's motion for an
accelerated trial date.
It is possible that the Company could be named as a defendant in this
litigation or that additional proceedings could be instituted against the
Company. An adverse decision in the litigation could prevent the
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Company from operating Wyndham brand hotels or advertising the Wyndham name in
connection with the operation of a Wyndham brand hotel within a geographic area
within the borough of Manhattan or possibly within a 50 mile radius of the Mados
Wyndham Hotel. In addition, an adverse decision in the litigation or a delay in
the resolution of the lawsuit beyond the anticipated Fall 1996 opening date for
the Company's La Guardia hotel would require the Company to open such hotel
under a brand name other than Wyndham or Wyndham Garden. It is management's
opinion, based on legal counsel, that the losses resulting from the ultimate
resolution of the aforementioned claim are not estimable. For further
information relating to disputes involving the "Wyndham" mark, see
"-- Trademarks" above.
The Tampa Region of the Florida Department of Revenue (the "FDR") has
asserted that the Company may be liable for sales and use tax as a result of the
Company's management of the Wyndham Harbour Island Hotel ("Harbour Island") in
Tampa, Florida. The FDR recently performed an audit of Harbour Island covering
the period from August 1990 through June 1995. On the basis of the audit, the
FDR made a determination that the Company owed approximately $1 million
(including penalties and interest) in taxes for such period. The Company
believes that it has meritorious defenses with respect to the amount claimed by
the FDR and is providing information with respect to the FDR's assertion for the
audit period. The owners of Harbour Island have agreed to indemnify the Company
with respect to any additional sales and use tax paid by the Company for the
audit period. The Company does not believe that the outcome of this matter will
have a material adverse effect on its financial condition. See Note 13 to the
Company's Combined Financial Statements.
On February 29, 1996, CHMC, certain predecessors in interest to the Company
and certain Crow Family Members were served with a complaint filed on November
22, 1995, by Allen-Williams V.I., Inc. ("Allen-Williams") in the District Court
of the Virgin Islands, Division of St. Croix. The claim involves collection on a
$1.0 million promissory note issued by a predecessor in interest to CHMC (the
"Promissory Note") and relates to earlier litigation between Allen-Williams and
CHMC. Allen-Williams alleges that a transfer of certain management contracts by
CHMC to the Old Management Company was a fraudulent conveyance that rendered
CHMC insolvent or unable to pay its liabilities under the Promissory Note and
that CHMC and the other named defendants engaged in certain misrepresentations,
including those resulting in certain violations of the Racketeer Influenced and
Corrupt Organizations Act ("RICO"). Allen-Williams seeks to set aside the
alleged fraudulent conveyance to the extent necessary to pay the indebtedness
owed by CHMC, plus damages (including punitive and treble damages). Liability
for payment of the Promissory Note was not transferred to or assumed by
predecessors to the Company. CHMC has agreed to indemnify the Company's
predecessors (and hence the Company) with respect to this litigation. The
Company does not believe that the outcome of this matter will have a material
adverse effect on its financial condition.
In addition to the above proceedings, the Company is involved in various
lawsuits arising in the normal course of business. The Company believes that the
ultimate outcome of such lawsuits and proceedings will not, individually or in
the aggregate, 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.
INSURANCE
Each of the Company's hotels is covered by comprehensive insurance
policies, including liability, fire and extended coverage and, where applicable,
flood and earthquake coverage. The Company believes that such coverage is of the
type and amount customarily obtained by hotel owners. In addition, the Company
has the types of insurance coverage, including comprehensive general liability
and excess umbrella liability insurance, that it believes are appropriate for a
company in the hotel management business. Subject to the requirements of any
management contracts and the Revolving Credit Agreement to maintain certain
levels of insurance, the Board of Directors will use its discretion in
determining the amounts, coverage limits and deductibility provisions of
insurance, with a view to maintaining appropriate insurance coverage on the
Company's hotel properties at a reasonable cost and on suitable terms. This
might result in insurance coverage that, in the event of a substantial loss,
would not be sufficient to pay the full current market value or current
replacement cost of a damaged property.
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The Company operates seven Wyndham brand hotel properties (six managed and
one leased) in the Los Angeles, California area that are currently insured
against earthquake damage under an insurance policy maintained by the Company.
The Company has been advised by its insurance underwriters, however, that if the
Company were to add an additional hotel in the Los Angeles area, it is possible
that the Company would not be able to obtain earthquake insurance for such hotel
under the Company's current policy. In such event, the Company would seek to
obtain separate earthquake coverage for the additional hotel, which may not be
economically feasible.
ENVIRONMENTAL MATTERS
Under various federal, state, local and foreign environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be liable for the cost of removal or remediation of hazardous or
toxic substances on, under or in such property. Such laws often impose liability
without regard to whether the owner or operator knew of, or was responsible for,
the release of such hazardous or toxic substances. The presence of contamination
from hazardous or toxic substances, or the failure to remediate such
contaminated property properly, may adversely affect the owner's ability to sell
or rent such real property or to borrow using such real property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances also may be liable for the cost of removal or remediation of such
substances at the disposal or treatment facility, whether or not such facility
is or ever was owned or operated by such person. The operation and removal of
certain underground storage tanks also are regulated by federal and state laws.
In connection with the ownership and operation of its hotel properties,
including properties owned, as well as leased, managed, or franchised by the
Company, the Company could be held liable for the cost of remedial action with
respect to such regulated substances and storage tanks and claims related
thereto. In addition to clean-up actions brought by federal, state and local
agencies, the presence of hazardous or toxic substances on a hotel property also
could result in personal injury or similar claims by private plaintiffs. As the
current owner or long-term lessee of 18 hotel properties, as the manager of 47
hotel properties and as the franchisor of 3 hotel properties Wyndham, and any
subsidiary involved in the ownership, leasing, management or franchising of
hotel properties, will be subject to this full range of environmental issues and
potential liability.
To manage some of these risks, Wyndham provides in nearly all of its
management contracts that the owner of the hotel indemnifies Wyndham against any
environmental liabilities, except any caused by varying degrees of Wyndham's
negligence or by Wyndham's willful misconduct or willful violation of legal
requirements. See "-- Management Contracts."
Under the GHALP Lease, the Company has agreed to indemnify HPT, the hotel
mortgagees and their agents and assigns against costs resulting from the
presence during the lease term of any hazardous substances in, upon or under the
soil or groundwater of the leased property or any properties surrounding the
leased property in violation of any law or regulation, provided that the costs
arise due to the failure by the Company to perform or comply in accordance with
all laws and orders applicable to the storage, use, maintenance, spillage,
disposition or transfer of hazardous substances or certain lease provisions
requiring notice of environmental-related events and activities to be given to
HPT, except to the extent such costs arise from the acts or omissions of HPT or
any other indemnified party or during any period that HPT is in possession of
the leased property.
Periodically, the Company may agree to indemnify lenders of non-recourse
indebtedness secured by certain hotel properties against liabilities arising
from violations of environmental laws or regulations.
The Company recently received environmental site assessments, which
generally include a physical inspection, but in most instances no soil or
groundwater analyses, on 18 hotel properties owned or leased by the Company (the
"Recent Environmental Assessments").
In addition to the 18 Recent Environmental Assessments, the Company
previously received other environmental information with respect to some but not
all of the 18 hotel properties owned or leased by it prior to acquiring an
interest in the property and the Company also received environmental information
concerning some, but not all, of the managed or franchised properties prior to
entering into management or franchising contracts with respect to these
properties. (collectively, the "Prior Environmental Information").
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Asbestos-containing building materials ("ACM") are present in several of
the hotel buildings owned, operated, or managed by the Company. The Company has
an operations and maintenance plan in place, or is in the process of
implementing a plan, establishing operating procedures with respect to such
ACMs. The Company believes that these materials are currently adequately managed
and contained and that any cost related to managing or disposing of ACM will not
have a material adverse effect on the Company.
Some of the properties owned, operated or managed by the Company are on,
adjacent to or near properties that have contained in the past or currently
contain underground and/or above-ground storage tanks used to store regulated
substances such as petroleum products or other hazardous or toxic substances.
Some of the properties owned, operated or managed by the Company are in the
vicinity of properties which are currently or have been subject to releases of
regulated substances and remediation activity, and the Company is currently
aware of several properties owned, operated or managed by the Company which may
be impacted by regulated substances which may have migrated from adjacent or
nearby properties or which may be within the borders of areas suspected to be
impacted by regional groundwater contamination. In addition, the Company is
aware of the presence or the potential presence of regulated substances in the
soil or groundwater at several properties owned, operated or managed by it which
may have resulted from historical or ongoing activities on those properties.
Based on the information available to date, the Company believes that the
environmental issues described above will not have a material adverse effect on
the Company.
The Recent Environmental Assessments and the Prior Environmental
Information do not constitute an assurance or guarantee by the Company or any
other person as to the presence or absence of any type of environmental problem
in, on, under or around the hotel properties. Also, on many of the managed and
franchised properties, the Company has not performed or received the results
from any environmental investigations. Given the specific nature and limited
scope of the environmental information obtained by the Company to date, the
environmental issues described above may be more severe than indicated and
environmental problems may exist that have not been uncovered.
As a result of the foregoing limitations on performing environmental
investigation and due to the fact that Environmental Laws and conditions are
subject to frequent change, there can be no assurance that environmental
liabilities or claims will not adversely affect the Company in the future.
GOVERNMENT REGULATION
The hotel industry is subject to numerous federal, state and local
government regulations, including those relating to the preparation and sale of
food and beverages (such as health and liquor license laws) and building and
zoning requirements. The Company also is subject to laws governing its
relationship with employees, including minimum wage requirements, overtime,
working conditions and work permit requirements. In addition, the Company is
subject to federal regulations and certain state laws that govern the offer and
sale of franchises. The Company believes that it has the necessary permits and
approvals to operate each of its hotels and their respective businesses.
Under the Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. While the Company believes that its hotels
are substantially in compliance with these requirements, a determination that
the Company is not in compliance with the ADA could result in the imposition of
fines or an award of damages to private litigants. While the Company may be
required to incur additional costs of complying with the ADA in the future, the
Company does not expect such costs to have a material adverse effect on the
Company's financial condition or results of operations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information concerning the directors, director nominees
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ------------------------------ --- -----------------------------------------------
<S> <C> <C>
James D. Carreker............. 48 President, Chief Executive Officer and Director
Leslie V. Bentley............. 45 Executive Vice President and Wyndham Garden
Division President
Eric A. Danziger.............. 44 Executive Vice President and Wyndham Hotels and
Resorts Division President
Anne L. Raymond............... 38 Executive Vice President, Chief Financial
Officer and Director
Stanley M. Koonce, Jr......... 47 Executive Vice President -- Marketing, Planning
and Technical Services
Carla S. Moreland............. 36 Vice President -- General Counsel and Secretary
Glen H. Griffith.............. 61 Vice President -- Chief Information Officer
John vanHartesvelt............ 43 Vice President -- Development
Edward L. Stahl............... 52 Vice President -- Marketing
Susan R. Bolger............... 42 Vice President -- Human Resources
John P. Klumph................ 40 Vice President -- Corporate Controller
John J. Kelly................. 47 Vice President -- Technical Services
Harlan R. Crow................ 46 Director
Daniel A. Decker.............. 45 Director
Susan T. Groenteman........... 41 Director
Robert A. Whitman............. 42 Director
</TABLE>
JAMES D. CARREKER has served as President and Chief Executive Officer of
the Company since May 1988 and as a director of the Company since February 1996.
He also served as Chief Executive Officer of Trammell Crow Company, an
affiliated entity and national real estate company, from August 1994 to December
1995. Prior to 1988, Mr. Carreker served as President of Burdine's, the Miami
based division of Federated Department Stores.
LESLIE V. BENTLEY has been employed by the Company since March 1985 and has
served as Executive Vice President and Wyndham Garden Division President of the
Company since May 1990. From January 1987 to June 1988, Mr. Bentley served as
Regional Vice President of the Company. From June 1988 to December 1988, Mr.
Bentley served as Vice President of Operations of the Company, and from December
1988 to May 1990, he served as Senior Vice President of Operations of the
Company. Prior to joining the Company, Mr. Bentley was employed by Marriott
Hotels for eight years.
ERIC A. DANZIGER has served as Executive Vice President and Wyndham Hotels
and Resorts Division President of the Company since August 1990. Prior to
joining the Company, Mr. Danziger served as Senior Vice President of Operations
of MetHotels, Inc. from December 1979 to August 1990, where he oversaw
operations of all Doubletree and Compri hotels. Prior to his 11 years with
Doubletree, Mr. Danziger held various management positions with several hotel
companies, including the Opryland Hotel in Nashville, Tennessee, Sheraton
Hotels, Adams Mark and Fairmont Hotels.
ANNE L. RAYMOND joined the Company in 1983 as Controller and served in that
and other financial capacities through September 1987. From September 1987 to
July 1994, she served as Investment Manager for Crow Family Holdings, an
affiliated entity, where her responsibilities included managing and overseeing
Crow Family Holdings' interests in the Trammell Crow Company, an affiliated
entity, and Wyndham. Upon the formation of the Crow Investment Trust in August
1994, Ms. Raymond was named Director -- Capital Markets thereof and had
responsibility for developing and maintaining investment relationships with real
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estate capital sources. In March 1995, Ms. Raymond officially rejoined the
Company as Executive Vice President and Chief Financial Officer, and was elected
a director of the Company in April 1996.
STANLEY M. KOONCE, JR. has served as Executive Vice President -- Marketing,
Planning and Technical Services of the Company since October 1994 and served as
Senior Vice President of Sales and Marketing of the Company from October 1989 to
October 1994. Mr. Koonce served as President of CUC Travel Services, a division
of CUC International, in Stamford, Connecticut from 1986 to 1989, as Vice
President of the Marketing Department with American Express from 1979 to 1986
and as a Director of Finance and Planning for American Airlines from 1976 to
1979.
CARLA S. MORELAND has served as Vice President -- General Counsel of the
Company since April 1994 and as Secretary since March 1996. From 1988 to 1994,
Ms. Moreland practiced law with Weil, Gotshal & Manges in Dallas, Texas, and
from 1984 through 1987, she practiced law with Freytag, Perry, LaForce,
Rubinstein & Teofan in Dallas, Texas.
GLEN H. GRIFFITH has served as Vice President -- Chief Information Officer
of the Company since March 1995. He has also served as Chief Information Officer
of Trammell Crow Company, an affiliated entity, and national real estate
company, since March 1995. From 1985 to March 1994, Mr. Griffith served as Chief
Executive Officer of Federated Systems Group, a division of Federated Department
Stores. From 1983 to 1985, Mr. Griffith served as Senior Vice President -- MIS
for both Sanger Harris Department Stores in Dallas, Texas and Burdine's
Department Stores in Miami, Florida, and from 1974 to 1983, he served as Senior
Vice President of Sanger Harris Department Stores in Dallas, Texas.
JOHN VANHARTESVELT has served as Corporate Vice President in charge of
Development of the Company since July 1990. Mr. vanHartesvelt served as Vice
President -- Development of the Company from February 1989 to July 1990, as Vice
President of Planning and Development of Residence Inn from 1982 to 1984, as
founder and President of Hawthorn Suites from 1984 to 1986, and as President of
Eagle Hotel Group, Inc. from 1986 to 1989. Mr. vanHartesvelt also served as a
consultant for Laventhol & Horwath in Dallas, Texas for five years.
EDWARD L. STAHL has served as Vice President -- Marketing of the Company
since December 1995. From 1986 to 1995, Mr. Stahl served as Vice President of
Advertising and Marketing Programs for the Sheraton Corporation, where he
directed Sheraton's corporate advertising, Frequent Traveler and Partner
Marketing Programs. From 1979 to 1986, Mr. Stahl served as Vice President of
Consumer Marketing for Epsilon Data Management in Burlington, Massachusetts.
From 1975 to 1979, Mr. Stahl held several marketing management positions with
both Holiday Inns, Inc. and United Airlines.
SUSAN R. BOLGER has served as Vice President -- Human Resources of the
Company since November 1994. From 1992 to 1994, Ms. Bolger served as Vice
President of Human Resources for Arrow Industries, a Con Agra Subsidiary. From
1986 to 1992, Ms. Bolger served as Vice President of Human Resources and
Corporate Services for Aetna and Partners National Health Plans, a managed care
health services organization. From 1979 to 1986, Ms. Bolger served as Director
and Vice President of Human Resources of Pearle Vision, Inc., a division of G.
D. Searle.
JOHN P. KLUMPH has been employed by the Company since February 1988 and has
served as Vice President -- Corporate Controller of the Company since 1989.
Prior to joining the Company, Mr. Klumph served as Director of Hotel Accounting
for Lincoln Hotel Company in Dallas, Texas from 1986 to 1988 and as Controller
and Assistant Controller for the Sheraton Corporation in Washington D.C. from
1982 to 1986.
JOHN J. KELLY has served as Vice President -- Technical Services since
February 1996. From 1992 to January 1996, Mr. Kelly was Vice President of
Marketing for the Orlando office of McDevitt Street Bovis, Inc., a national
construction company, where he had responsibility for managing the marketing and
operations of the hospitality group. Mr. Kelly served as Director of
Construction for ITT Sheraton Corporation from 1989 to 1992, and as Vice
President of Design & Construction for Ramada International from 1987 until
1989. Mr. Kelly served in a variety of positions within Holiday Corporation from
1973 until 1987, and was the Vice President of Construction Management for
Holiday Corporation from 1983 to 1987.
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HARLAN R. CROW is a director of the Company. Mr. Crow is the chief
executive officer of Crow Family Holdings, an investment company managing
investments in a variety of real estate related and other businesses, a position
he has held since 1986. Prior to 1986, Mr. Crow was a Regional Partner in the
office building unit of Trammell Crow Company, a commercial real estate
management and development company. Mr. Crow is a former member of the Board of
Directors of Texas Commerce Bancshares, a banking institution. In any given year
within the past five years, Mr. Crow has indirectly owned interests in over
1,000 partnerships (or affiliates of partnerships) or corporations. In the past
five years, Mr. Crow was a general partner, officer or director in approximately
75 partnerships or corporations, or affiliates of such partnerships or
corporations, that filed for protection under federal bankruptcy laws. In
addition, in the past five years, Mr. Crow was a general partner, executive
officer or director in approximately 15 partnerships or corporations, or
affiliates of such partnerships or corporations, that were placed in
receivership.
DANIEL A. DECKER is a director of the Company. Mr. Decker has been a
partner of Hampstead since 1990. Prior to 1990, Mr. Decker was a partner in the
Dallas law firm of Decker, Hardt, Kopf, Harr, Munsch & Dinan, P.C. Mr. Decker
was a director of Forum Group from June of 1993 until March of 1996. Mr. Decker
has been a director of Bristol since February 1995 and will resign from that
position immediately prior to the consummation of the Offerings.
SUSAN T. GROENTEMAN is a director of the Company. Ms. Groenteman is the
Director (chief operating officer) of Crow Family Holdings, an investment
company managing investments in a variety of real estate related businesses,
along with other industries, a position she has held since 1988. From 1986
through 1988, Ms. Groenteman was Controller of Crow Family Holdings. Ms.
Groenteman served in a variety of positions for Crow Hotel Company, a
predecessor to the Company. In any given year within the past five years, Ms.
Groenteman has served as an executive officer or director in over 1,000
partnerships (or affiliates of partnerships) or corporations. In the past five
years, Ms. Groenteman has served as an executive officer or director of
approximately 75 partnerships or corporations, or for affiliates of such
entities, that filed for protection under federal bankruptcy laws. In addition,
in the past five years, Ms. Groenteman served as an executive officer or
director in approximately 15 partnerships or corporations, or affiliates of such
partnerships or corporations, that were placed in receivership.
ROBERT A. WHITMAN is a director of the Company. Mr. Whitman has since 1991
been President and Co-Chief Executive Officer of Hampstead, an investment firm,
which indirectly through Bedrock is a significant stockholder of the Company, as
well as being a stockholder of Bristol Hotel Company, a company listed on the
New York Stock Exchange ("Bristol"), and other companies not involved in the
lodging business. See "Risk Factors -- Conflicts of Interest,"
"Business -- Growth Strategy," "Certain Relationships and Transactions" and
"Principal Stockholders." Prior to 1991, Mr. Whitman served as the Managing
Partner and Chief Executive Officer of Trammell Crow Ventures, the real estate
investment, banking and investment management unit of Trammell Crow Company,
and, from 1988 to 1992, Mr. Whitman also served as Chief Financial Officer for
Trammell Crow Company, an affiliated entity. Mr. Whitman is a director of Forum
Group, Inc., a company traded on the Nasdaq Stock Market that is engaged in the
ownership and operation of senior living facilities. Mr. Whitman has been a
Director and Vice Chairman of the Board of Bristol since February 1995 and will
resign from that position immediately prior to the consummation of the
Offerings.
Pursuant to the terms of the Stockholders' Agreement, the Crow Family
Members, Senior Executive Officers, WEL and Ms. Groenteman on the one hand, and
Bedrock on the other hand, agree to allocate between themselves the right to
nominate directors to serve on the Company's Board of Directors (and its
constituent committees) based on their proportionate ownership of shares of
Common Stock. See "Description of Capital Stock -- Stockholders' Agreement."
The Company's Certificate of Incorporation and By-laws provide for three
classes of directors. Messrs. Crow and Carreker are the Class I directors and
will serve until the meeting of stockholders in 1997; Ms. Groenteman and Mr.
Whitman are the Class II directors and will serve until the meeting of
stockholders in 1998; and Ms. Raymond and Mr. Decker are the Class III directors
and will serve until the meeting of stockholders in 1999. One Independent
Director will be appointed to each Class of the Board of Directors.
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After these directors' initial terms expire, newly elected directors shall serve
for a three year term or until their successors are duly elected and qualified.
The Company's Board of Directors intends to appoint three additional
directors that will be Independent Directors. Pursuant to the terms of the
Stockholders' Agreement, the Board members originally nominated by Crow Family
Members, Senior Executive Officers, WEL and Ms. Groenteman are entitled to
appoint two Independent Directors, and the Board members originally nominated by
Bedrock will be entitled to appoint one Independent Director. See "Description
of Capital Stock -- Stockholders' Agreement." The Company expects that at least
one of these directors will be appointed within 90 days following the Offering,
and that the remaining two directors will be appointed within one year of the
Offering. Immediately following the appointment of the second Independent
Director, the Board of Directors will establish an Audit Committee.
COMPENSATION AND OTHER COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the Company had no Compensation Committee or other committee
of the Board of Directors performing similar functions. Decisions concerning the
compensation of executive officers, including that of Mr. Carreker, were
collectively made by Messrs. Carreker and Crow. The Board of Directors intends
to establish a Compensation Committee shortly following completion of the
Offering.
Certain directors or director nominees are parties to transactions with the
Company, as described under the caption "Certain Relationships and Transactions"
below.
EXECUTIVE COMPENSATION
The following table sets forth summary information for 1995 regarding the
compensation awarded to, earned by, or paid to the Chief Executive Officer of
the Company and the four other most highly compensated executive officers of the
Company whose total annual salary and bonus earned during such period exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
NAME AND ----------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2)
- ------------------------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
James D. Carreker.......................... 1995 $200,000(3) $ 90,000(4) $ 385
President, Chief Executive Officer
and Director
Leslie V. Bentley.......................... 1995 $200,000 $120,000 $ 3,000
Executive Vice President and Wyndham
Garden Division President
Eric A. Danziger........................... 1995 $200,000 $ 90,000 $ 609,967(5)
Executive Vice President and Wyndham
Hotels and Resorts
Division President
Stanley M. Koonce, Jr...................... 1995 $175,000 $ 68,250 $ 3,000
Executive Vice President -- Marketing,
Planning and Technical Services
Anne L. Raymond............................ 1995 $161,827(6) $ 75,000 $ 678,748(5)
Executive Vice President,
Chief Financial
Officer and Director
</TABLE>
- ---------------
(1) None of the named executive officers received any perquisites or other
personal benefits in 1995 that in the aggregate exceeded the lesser of
$50,000 or 10% of such named executive officer's salary and bonus for such
year.
(2) Consists of contributions by the Company to the Company's 401(k) plan.
(3) Mr. Carreker also served throughout 1995 as Chief Executive Officer of
Trammell Crow Company, an affiliated entity and national real estate
company, and was compensated separately by Trammell Crow Company for such
services.
(4) Mr. Carreker has voluntarily elected to return to the Company $12,000 of
such bonus through equal monthly reductions to his 1996 salary.
(5) Non-cash compensation was reported and recorded for Mr. Danziger and Ms.
Raymond in the amounts of $606,967 and $678,748, respectively, reflecting
compensation relating to equity participation in the Old Management Company
and other affiliated entities, which equity was purchased at fair market
value. In accordance with generally accepted accounting principles, in 1995
no equity participation compensation expense was required to be reported or
recorded for Messrs. Carreker, Bentley or Koonce.
(6) Ms. Raymond rejoined the Company on March 1, 1995 and her 1995 compensation
therefore reflects only 10 months of service to the Company.
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1996 LONG TERM INCENTIVE PLAN
Scope. The Board of Directors and stockholders of the Company have approved
the Wyndham Hotel Corporation 1996 Long Term Incentive Plan (the "Incentive
Plan"). The Incentive Plan authorizes the granting of incentive stock options
and non-qualified stock options to purchase Common Stock, stock appreciation
rights, restricted stock and performance units, to key executives and other key
employees of the Company, including officers of the Company and its
subsidiaries. The purpose of the Incentive Plan is to attract and retain key
employees, to motivate key employees to achieve long-range goals and to further
identify the interests of key employees with those of the other stockholders of
the Company.
The Incentive Plan authorizes the award of 2,133,811 shares of Common Stock
to be used for stock options, stock appreciation rights or restricted stock. If
an award made under the Incentive Plan expires, terminates or is forfeited,
cancelled or settled in cash, without issuance of shares of Common Stock covered
by the award, those shares will be available for future awards under the
Incentive Plan. The Incentive Plan will terminate on December 31, 2005.
Administration. The Incentive Plan will be administered by the Board of
Directors or, if directed by the Board of Directors, the Compensation Committee
or any successor thereto of the Board of Directors of the Company (the Board of
Directors or, if applicable, the Compensation Committee is referred to herein as
the "Compensation Committee"). Subject to the provisions of the Incentive Plan,
the Compensation Committee will have the authority to select employees to
receive awards, to determine the time or times of receipt, to determine the
types of awards and the number of shares covered by the awards, to establish the
terms, conditions and provisions of such awards, to determine the value of
performance units, and to cancel or suspend awards. In making such award
determinations, the Compensation Committee may take into account the nature of
services rendered by the employee, his or her present and potential contribution
to the Company's growth and success and such other factors as the Compensation
Committee deems relevant. The Compensation Committee is authorized to interpret
the Incentive Plan, to establish, amend and rescind any rules and regulations
relating to the Incentive Plan, to determine the terms and provisions of any
agreements made pursuant to the Incentive Plan and to make all other
determinations that may be necessary or advisable for the administration of the
Incentive Plan.
Eligibility. Executive and other key full-time employees of the Company and
its subsidiaries may be selected by the Compensation Committee to receive awards
under the Incentive Plan. The Incentive Plan provides that no more than 500,000
shares of Common Stock may be subject to awards granted per year to any one
employee participating in the Incentive Plan. In the discretion of the
Compensation Committee, an eligible employee may receive an award in the form of
a stock option, stock appreciation right, restricted stock award or performance
unit or any combination thereof, and more than one award may be granted to an
eligible employee.
Stock Options. The Incentive Plan authorizes the award of both incentive
stock options ("ISOs") and nonqualified stock options. Under the Incentive Plan,
an option may be exercised at any time during the exercise period established by
the Compensation Committee, except that: (i) no option may be exercised prior to
the expiration of six months from the date of grant; (ii) no option may be
exercised more than three months after employment with the Company or any of its
subsidiaries terminates by reason other than death, disability or authorized
leave of absence for military or government service; and (iii) no option may be
exercised more than one year after employment with the Company or any of its
subsidiaries terminates by reason of death or disability. The aggregate fair
market value (determined at the time of the award) of the Common Stock with
respect to which ISOs are exercisable for the first time by any employee during
any calendar year may not exceed $100,000. The term of each option is determined
by the Compensation Committee, but in no event may such term exceed 10 years
from the date of grant (or 5 years in the case of ISOs granted to stockholders
owning 10% or more of the Company's outstanding shares of Common Stock). The
exercise price of options is determined by the Compensation Committee, but the
exercise price of ISOs cannot be less than the fair market value of the Common
Stock on the date of the grant (or 110% of the fair market value of the Common
Stock on the date of grant in the case of ISOs granted to stockholders owning
10% or more of the Company's outstanding shares of Common Stock). The exercise
price of options may be paid in cash or, with the
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Compensation Committee's approval, in shares of Common Stock. Grants of options
do not entitle any optionee to any rights as a stockholder, and such rights will
accrue only as to shares actually purchased through the exercise of an option.
The Company's Board of Directors expects to grant options to purchase an
aggregate of 797,700 shares of Common Stock under the Incentive Plan to certain
key personnel prior to the date of this Prospectus. The exercise price of all
such options will be equal to the initial public offering price set forth on the
cover page of this Prospectus. The Board of Directors expects to grant options
covering 130,000 shares of Common Stock to Mr. Carreker, and options covering
60,000 shares of Common Stock to each of Messrs. Bentley, Danziger and Koonce,
and Ms. Raymond, as part of the foregoing grant of options. All such options
will vest 20% on the third anniversary of the date of grant, 50% on the fourth
anniversary of the date of grant and 100% on the fifth anniversary of the date
of grant.
Stock Appreciation Rights. The Incentive Plan authorizes the grant of both
primary stock appreciation rights ("SARs") and additional SARs. Primary SARs may
be granted either separately or in tandem with options. Primary SARs entitle the
holder to receive an amount equal to the difference between the fair market
value of a share of Common Stock at the time of exercise of the SAR and the
option price (or deemed option price in the event of an SAR that is not granted
in tandem with an option), multiplied by the number of shares of Common Stock
subject to the option or deemed option as to which the SAR is being exercised
(subject to the terms and conditions of the option or deemed option). An SAR may
be exercised at any time when the option to which it related may be exercised
and will terminate no later than the date on which the right to exercise the
tandem option (or deemed option) terminates (or is deemed to terminate). The
participating employee has the discretion to determine whether the exercise of
an SAR will be settled in cash, in Common Stock (valued at its fair market value
at the time of exercise) or in a combination of the two, subject to the approval
of the Compensation Committee in certain circumstances. The exercise of an SAR
requires the surrender of the tandem option, if any, and the exercise of a stock
option requires the surrender of the tandem SAR, if any.
Additional SARs may be granted only in tandem with stock options and
entitle the holder to receive an amount equal to the difference between the fair
market value of a share of Common Stock on the date of exercise of the related
option and the option price, multiplied by the number of shares of Common Stock
subject to the option as to which the SAR is being exercised (subject to the
terms and conditions of the option), multiplied by a percentage factor ranging
from 10% to 100% (as determined either by the Compensation Committee at the date
of grant or by the formula established by the Compensation Committee at the date
of grant).
If an SAR, or the corresponding option with which the SAR was awarded, is
not exercised prior to the date that it ceases to be exercisable, then such SAR
generally shall be deemed exercised as of such date and shall be paid to the
employee in cash. No SAR may be exercised more than three months after
employment with the Company or any of its subsidiaries terminates by reason
other than death, disability or authorized leave of absence for military or
government service. No SAR may be exercised more than 12 months after the
holder's employment with the Company and its subsidiaries terminates by reason
of death or disability.
Restricted Stock. Restricted stock awards are grants of Common Stock made
to employees subject to a required period of employment following the award (the
"Restricted Period") and any other conditions established by the Compensation
Committee. An employee will become the holder of shares of restricted stock free
of all restrictions if he or she completes the Restricted Period and satisfies
any other conditions; otherwise, the shares will be forfeited. Under the
Incentive Plan, the Restricted Period may not be more than ten years. The
employee will have the right to vote the shares of restricted stock and, unless
the Compensation Committee determines otherwise, will have the right to receive
dividends on the shares during the Restricted Period. The employee may not sell,
pledge or otherwise encumber or dispose of restricted stock until the conditions
imposed by the Compensation Committee have been satisfied. The Compensation
Committee may accelerate the termination of the Restricted Period or waive any
other conditions with respect to any restricted stock.
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<PAGE> 102
Performance Units. Performance units are awards that entitle the holder to
receive a specified value for the units at the end of a performance period
established by the Compensation Committee if performance measures established by
the Compensation Committee at the beginning of the performance period are met.
Although the performance measures and performance period will be determined by
the Compensation Committee at the time of the award of performance units, they
may be subject to such later revision as the Compensation Committee deems
appropriate to reflect significant events or changes. If the employment of a
holder of a performance unit with the Company or a subsidiary terminates by
reason of death, disability or retirement, then the Company will pay the
employee or his or her beneficiary or estate the amount of the performance unit
earned as of the date of termination. If the employment of a holder of a
performance unit with the Company or a subsidiary terminates for any other
reason, then the performance units held by such holder will automatically be
forfeited.
Adjustments. In the event of any change in the outstanding shares of Common
Stock by reason of any stock dividend, split, spinoff, recapitalization, merger,
consolidation, combination, exchange of shares or other similar change, the
aggregate number of shares with respect to which awards may be made under the
Incentive Plan, and the terms and the number of shares of any outstanding
option, SAR, performance unit or restricted stock, may be equitably adjusted by
the Compensation Committee in its sole discretion.
Business Combinations. Unless provision is otherwise made in the terms of
the award granted by the Compensation Committee, or by the terms of the
agreement with respect to the business combination, in the event of a change in
control of the Company (as defined), all outstanding stock options, SARs,
restricted stock and performance units shall terminate, provided that the
holders of any options or SARs may exercise such awards to the extent then
vested immediately prior to any such event and the holders of any performance
units shall be entitled to the then vested values of such units as of such date.
Termination and Amendment. The Incentive Plan may be suspended, terminated
or amended by the Board of Directors, provided that, in the absence of
stockholder approval, no amendment of the Incentive Plan or action of the Board
of Directors may materially increase the total number of shares of Common Stock
with respect to which awards may be made under the Incentive Plan (except as
discussed in "Adjustments" above), change the exercise price of a stock option
or the base price of an SAR, materially modify the requirements as to
eligibility for participation in the Incentive Plan or materially increase the
benefits accruing to participants under the Incentive Plan. No amendment,
suspension or termination of the Incentive Plan may alter or impair any option,
SAR, share of restricted stock or performance unit previously awarded under the
Incentive Plan without the consent of the holder thereof.
Estimation of Benefits. The amounts that will be paid pursuant to the
Incentive Plan during fiscal 1996, as stock option awards to individuals and
groups are reflected in the following table.
<TABLE>
<CAPTION>
NAME AND POSITION STOCK OPTIONS
------------------------------------------------------------------------ -------------
<S> <C>
James D. Carreker (1)................................................... 130,000
President, Chief Executive Officer and Director
Leslie V. Bentley....................................................... 60,000
Executive Vice President and Wyndham Garden Division President
Eric A. Danziger........................................................ 60,000
Executive Vice President and Wyndham Hotels and Resorts Division
President
Anne L. Raymond (1)..................................................... 60,000
Executive Vice President, Chief Financial Officer and Director
Stanley M. Koonce, Jr................................................... 60,000
Executive Vice President -- Marketing, Planning and Technical Services
Executive Officer Group................................................. 370,000
Non-Executive Officer Employee Group.................................... 427,700
</TABLE>
- ---------------
(1) Mr. Carreker and Ms. Raymond are directors.
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Federal Income Tax Consequences. The following summary of the federal
income tax consequences of the Incentive Plan is not comprehensive and is based
on current income tax laws, regulations and rulings. Optionees are urged to
consult their own tax advisors concerning the federal income tax consequences of
the Incentive Plan.
Incentive Stock Options. An optionee does not recognize income on the
grant of an incentive stock option. Subject to the effect of the
alternative minimum tax, discussed below, if an optionee exercises an ISO
stock option in accordance with the terms of the ISO and does not dispose
of the shares acquired within two years from the date of the grant of the
ISO nor within one year from the date of exercise, the optionee will not
realize any income by reason of the exercise and the Company will be
allowed no deduction by reason of the grant or exercise. The optionee's
basis in the shares acquired upon exercise will be the amount paid upon
exercise. Provided the optionee holds the shares as a capital asset, at the
time of sale or other disposition of the shares, his gain or loss, if any,
recognized on the sale or other disposition will be capital gain or loss.
The amount of his gain or loss will be the difference between the amount
realized on the disposition of the shares and his basis in the shares.
If an optionee disposes of the shares within two years from the date
of grant of the option or within one year from the date of exercise (an
"Early Disposition"), the optionee will realize ordinary income at the time
of such Early Disposition, which will equal the excess, if any, of the
lesser of (1) the amount realized on the Early Disposition or (2) the fair
market value of the shares on the date of exercise, over the optionee's
basis in the shares. The Company will be entitled to a deduction in an
amount equal to such income. The excess, if any, of the amount realized on
the Early Disposition of such shares over the fair market value of the
shares on the date of exercise will be long-term or short-term capital
gain, depending upon the holding period of the shares, provided the
optionee holds the shares as a capital asset at the time of Early
Disposition. If an optionee disposes of such shares for less than his basis
in the shares, the difference between the amount realized and his basis
will be a long-term or short-term capital loss, depending upon the holding
period of the shares, provided the optionee holds the shares as a capital
asset at the time of disposition.
The excess of the fair market value of the shares at the time the
incentive stock option is exercised over the exercise price for the shares
is an item of "tax preference" as such term is used in the Code (the "Stock
Option Preference").
Nonqualified Stock Options. Nonqualified stock options do not qualify
for the special tax treatment accorded to incentive stock options under the
Code. Although an optionee does not recognize income at the time of the
grant of the option, he recognizes ordinary income upon the exercise of a
nonqualified option in an amount equal to the difference between the fair
market value of the stock on the date of exercise of the option and the
amount of the exercise price. The optionee's basis in the shares acquired
will be the amount paid upon exercise. When the optionee disposes of such
shares, his gain or loss, if any, will be long-term or short-term capital
gain or loss, depending on the holding period of his shares. The amount of
his gain or loss will be the difference between the amount realized on the
disposition of the shares and his basis in the shares.
As a result of the optionee's exercise of a nonqualified stock option,
the Company will be entitled to deduct as compensation an amount equal to
the amount included in the optionee's gross income. The Company's deduction
will be taken in the Company's taxable year in which the option is
exercised.
The excess of the fair market value of the stock on the date of
exercise of a nonqualified stock option over the exercise price is not an
item of tax preference.
Appreciation Rights. Recipients of SARs do not recognize income upon
the grant of such an award. When a participant elects to receive payment
under an SAR, he recognizes ordinary income in an amount equal to the cash
and/or fair market value of shares received, and the Company is entitled to
a deduction equal to such amount.
Restricted Stock; Performance Units. Grantees of restricted stock and
performance units do not recognize income at the time of the grant of such
stock or units. However, when shares of restricted stock
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<PAGE> 104
become free from any restrictions or when performance units are paid,
grantees recognize ordinary income in an amount equal to the cash and the
fair market value of the stock on the date all restrictions are satisfied.
Alternatively, the grantee of restricted stock may elect to recognize
income upon the grant of the stock and not at the time the restrictions
lapse.
Taxation of Preference Items. Section 55 of the Code imposes an
alternative minimum tax equal to the excess, if any, of (1) 26% of the
optionee's "alternative minimum taxable income" that does not exceed
$175,000, plus 28% of his "alternative minimum taxable income" in excess of
$175,000, over (2) his "regular" federal income tax. Alternative minimum
taxable income is determined by adding the optionee's Stock Option
Preference and any other items of tax preference to the optionee's adjusted
gross income and then subtracting certain allowable deductions and an
exemption amount. The current exemption amount is $33,750 for single
taxpayers, $45,000 for married taxpayers filing jointly, and $22,500 for
married taxpayers filing separately. However, these exemption amounts are
phased out beginning at certain levels of alternative minimum taxable
income.
Change of Control. If there is an acceleration of the vesting of
benefits and/or an acceleration of the exercisability of stock options upon
a change of control (as defined in the Incentive Plan), all or a portion of
the accelerated benefits may constitute "excess parachute payments" under
Section 280G of the Code. The employee receiving an excess parachute
payment incurs an excise tax of 20% of the amount of the payment in excess
of the employee's average annual compensation over the five calendar years
preceding the year of the change of control, and the Company is not
entitled to a deduction for such payment.
401(K) SAVINGS PLAN
The Company sponsors a retirement plan called the Wyndham Employee Savings
& Retirement Plan (the "401(k) Plan"). The total 401(k) Plan assets as of
December 31, 1995 were valued at $8,356,808. The trustee for the 401(k) Plan is
CG Trust Company. The 401(k) Plan permits employees to direct investments of
their accounts among a selection of 6 mutual funds. The Company intends to amend
the 401(k) Plan in the near future to also permit employees to direct the
investment of some or all of their accounts to purchase shares of Common Stock,
and to permit the Company to make any contributions to the 401(k) Plan in the
form of Common Stock. Employees (including members of management) are eligible
to make voluntary contributions of up to fifteen percent (15%) of their
compensation under the 401(k) Plan. The Company is permitted to make a
discretionary contribution to the 401(k) Plan each fiscal quarter which will be
allocated among participants as a matching contribution based on their
contributions under the 401(k) Plan. The 401(k) Plan is intended to qualify as a
profit sharing plan under Sections 401(a) and 401(k) of the Code.
WYNDHAM EMPLOYEES LTD. EQUITY PARTICIPATION PLAN
Scope. The Company established WEL to provide equity participation for
certain key employees. The Company believes that participation in WEL motivates
these employees to achieve long-range goals and identifies the interests of
these employees with those of the other stockholders of the Company. WEL holds
interests in WEL Properties. As a result of the Formation, a portion of WEL's
interests in certain of the WEL Properties will be exchanged for shares of the
Company's Common Stock, resulting in WEL owning 642,588 shares of the Company's
outstanding Common Stock after the Offering.
Administration. The Company's Senior Executive Officers administer WEL,
subject to certain restrictions contained in the Amended and Restated Agreement
of Limited Partnership of Wyndham Employees Ltd., dated December 31, 1993 (the
"WEL Agreement").
Eligibility. The WEL Agreement permits the Company to grant WEL limited
partnership interest units ("WEL Units") to eligible employees. The Company's
Senior Executive Officers may designate "eligible employees" from among the
executives, officers, directors, shareholders, and other key employees of the
Company. The Company may make more than one grant of WEL Units to an employee.
In making such grants, the Company may take into account the nature of the
services rendered by the employee, his present and potential contribution to the
Company's growth and success, and such other factors as the Company deems
relevant. As of April 15, 1996, 97 Wyndham employees had WEL Units. The Company
does not anticipate admitting any additional participants to WEL.
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Limited Partnership Units. A participant's interest in WEL equals the
product determined by multiplying ninety-nine percent (99%) by a fraction, the
numerator of which is the number of WEL Units owned by the participant and the
denominator of which is the total number of WEL Units held by all participants.
A participant's WEL Units have no value on the date they are granted. From time
to time, the value of WEL's interests in the WEL Partnerships and, after the
Offering, Common Stock are revalued, which results in the revaluation of the WEL
Units. The increase in value obtained by each participant in WEL by virtue of
this revaluation process is treated as an equity participation plan compensation
expense for purposes of the Company's results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."
Vesting. Each participant's grant is subject to a "vesting period,"
commencing on the date that he first acquires a WEL Unit and ending on the fifth
anniversary of such commencement date. The Company, in its sole discretion, may
shorten or waive the vesting period for a participant without affecting the
vesting period for any other participant. If an individual ceases to be a
participant during his vesting period, other than by reason of death or
permanent disability, the amount payable to him shall be $10 per WEL Unit held
on his termination date. If a participant's employment terminates during the
vesting period by reason of death or permanent disability, then the Company will
pay to the participant, or his beneficiary or estate, the value of his WEL Units
computed in accordance with the WEL Agreement. A participant's WEL Units are
subject to a mandatory buy-out provision that requires WEL to reacquire a
participant's WEL Units, for their value computed in accordance with the WEL
Agreement, under certain circumstances (unless waived by the Company). The
circumstances requiring a mandatory buy-out include: (i) a participant's
withdrawal from WEL; (ii) voluntary or involuntary termination of a
participant's employment or agency relationship with the Company; (iii) a
participant's death, bankruptcy or legal incompetence or (iv) a participant's
material breach of the WEL Agreement's terms.
DIRECTOR COMPENSATION
Each member of the Company's Board of Directors who is not an employee of
the Company (a "Non-Employee Director") will be paid an annual retainer of
$25,000, plus $1,000 for each committee meeting attended ($1,200 for each
committee meeting attended as a committee chairman). As described below, a
Non-Employee Director may elect to receive the annual retainer fee in cash or in
the form of shares of Common Stock, or to defer receipt of all or a portion of
such fee and have the deferred amount treated as if it were invested in shares
of Common Stock.
The Board of Directors and stockholders of the Company have adopted the
Wyndham Hotel Corporation Non-Employee Directors' Retainer Stock Plan (the
"Retainer Plan") for its Non-Employee Directors, and 50,000 shares of Common
Stock have been reserved for use under the Retainer Plan. The purpose of the
Retainer Plan is to provide to Non-Employee Directors of the Company the
opportunity to elect to receive all or a portion of their annual retainer fees
in the form of shares of Common Stock, or to defer receipt of all or a portion
of such fees and have the deferred amounts treated as if invested in shares of
Common Stock. Only a Non-Employee Director who on January 1 of any calendar year
or such later date as such director is first elected or appointed to the Board
of Directors is eligible to participate in the Retainer Plan. Participation in
the Retainer Plan is voluntary. To participate in the Retainer Plan, a
Non-Employee Director must file an irrevocable election with the Company no
later than the last day of the calendar year prior to the calendar year for
which an election is made to either receive shares of Common Stock in lieu of
cash for part or all of such Non-Employee Director's annual retainer or to defer
receipt of all or a portion of such retainer; provided, however, that a director
also may file such election within 30 days after the date that such director is
elected or appointed to the Board of Directors. Elections may be made by a
Non-Employee Director no more than once in any 12-month period.
The Board of Directors will from time to time appoint two or more persons
who are members of the Board of Directors to administer the Retainer Plan (the
"Retainer Plan Committee") who are not eligible to participate in the Retainer
Plan. The Retainer Plan Committee will administer the Retainer Plan in
accordance with its terms.
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Each Non-Employee Director who elects to participate in the Retainer Plan
for any year must irrevocably elect, until such time as a subsequent election is
made, (i) whether to receive payment of 0, 50% or 100% of his or her annual
retainer in the form of shares of Common Stock under the Retainer Plan, (ii)
whether to defer payment of any whole percentage up to 100% of his or her annual
retainer, to be credited to the participant's account, to be deemed to be
invested in shares of Common Stock and paid in accordance with the Retainer
Plan, and (iii) whether dividend equivalents, if any, on any amounts credited to
such account will be paid directly to the participant or credited to the
participant's account to be reinvested in shares of Common Stock. The combined
percentage of the annual retainer to be paid in shares of Common Stock and
deferred under the Retainer Plan must not exceed 100% of the annual retainer for
any Retainer Plan year. In the event the annual retainer is increased during any
year, a participant's elections in effect for such year will apply to the amount
of such increase. The annual retainer consists of amounts paid to Non-Employee
Directors as a retainer for services as a director, but does not include meeting
fees, discretionary bonuses or reimbursement for expenses.
In compliance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), neither the Retainer Plan Committee nor any other person (other
than a participant acting in conformity with the terms of the Retainer Plan) has
any discretionary authority to make determinations regarding (i) eligibility to
become a participant, (ii) the times when elections can be made, when shares of
Common Stock will be issued or its equivalents credited to the participants'
accounts, or when distributions will be made, (iii) the portion of a
participant's annual retainer that may be allocated to the acquisition of shares
of Common Stock or its equivalents by participants under the Retainer Plan, the
calculation of the number of shares of Common Stock or its equivalents by
participants under the Retainer Plan, the calculation of the number of shares of
Common Stock or its equivalents to be acquired thereby, and the payment or
deemed reinvestment of dividend equivalents, or (iv) any other decisions under
the Retainer Plan required by Rule 16b-3(b) under the Exchange Act to be
afforded exclusively to "disinterested persons" as defined thereunder.
The Company will transfer to a participant who elects to receive all or a
portion of the annual retainer in the form of shares of Common Stock a number of
shares of Common Stock having a fair market value equal to such portion of the
annual retainer on the last trading day prior to the date or dates on which the
cash portion of the participant's annual retainer is due. No fractional shares
will be issued; however, in lieu thereof, the cash fair market value of any
fractional share will be paid to participants.
Non-Employee Directors will receive payment in shares of Common Stock in an
amount equal to the number of Common Stock equivalents credited to their
accounts under the Retainer Plan upon the date that is three years following the
date that the annual retainer would have been paid to such Directors in cash
absent their election. Such payment will be made in a lump sum. Upon a change of
control of the Company, the Company will pay to the participating Non-Employee
Directors in cash a lump sum equal to the fair market value of the Common Stock
equivalents credited to all accounts under the Retainer Plan.
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
GENERAL
Wyndham Hotel Corporation was formed on February 16, 1996, to succeed to
the business of the Old Management Company, ownership of 6 Wyndham brand hotels
and leasehold interests relating to 12 additional Wyndham brand hotels acquired
in connection with the Formation. The following discussion of certain
relationships and transactions assumes that the Formation occurred on January 1,
1993 and includes (i) hotel management and related fees paid to the Company by
certain affiliates, (ii) capital contributions, loans and other payments made by
the Company to certain affiliates in connection with the Company's entry into
hotel management contracts with related parties, (iii) transactions between the
Company (which includes its predecessors and combined subsidiaries) on the one
hand, and Crow Family Members, the Senior Executive Officers (James D. Carreker,
Leslie V. Bentley, Eric A. Danziger, Anne L. Raymond and Stanley M. Koonce, Jr.)
or Bedrock, on the other hand, relating to the transactions comprising the
Formation and (iv) loans made to the Senior Executive Officers of the Company
that the Company purchased in the Formation. For a discussion of the assets
contributed to the Company in connection with the Formation, see "The Formation
and the Financing Plan."
RELATED PARTY TRANSACTIONS
During 1993, 1994 and 1995, the Company received hotel management fees in
the aggregate amounts of $4,444,151, $4,972,921 and $6,797,761, respectively,
from the partnerships owning Wyndham hotels ("Hotel Partnerships") listed below,
in which Crow Family Members (which includes Harlan R. Crow, a director of the
Company) have an interest. Some or all of the Senior Executive Officers of the
Company have an ownership interest in six of such Hotel Partnerships. The terms
of the agreements pursuant to which the Company provides hotel management
services to Wyndham hotels are described generally under "Business -- Management
Contracts."
During 1993, 1994 and 1995, the Company received payments in the aggregate
amounts of $1,682,787, $2,926,786, $3,803,162, respectively, from the Hotel
Partnerships listed below, in which Crow Family Members have an interest. Some
or all of the Senior Executive Officers have an ownership interest in six of
such Hotel Partnerships. The payments were received as reimbursements for
certain administrative, tax, legal, accounting, finance, risk management, sales
and marketing services provided by the Company to such entities.
<TABLE>
<CAPTION>
HOTEL PARTNERSHIP(1) HOTEL
-------------------------------------------------- ---------------------------------
<S> <C>
Anatole Hotel Investors, L.P...................... Wyndham Anatole
Hotel Bel Age Associates, L.P..................... Wyndham Bel Age
Bristol Hotel Associates, Ltd..................... Wyndham Bristol
Playhouse Square Hotel Limited Partnership........ Wyndham Playhouse Square
Franklin Plaza Associates......................... Wyndham Franklin Plaza
Houston Greenspoint Hotel Associates.............. Wyndham Greenspoint
MTD Associates.................................... Wyndham Milwaukee Center
Itasca Hotel Company.............................. Wyndham Northwest Chicago
Hotel and Convention Center Partners I-XI, Ltd.... Wyndham Palm Springs
CLC Limited Partnership........................... Wyndham Las Colinas
Atlanta Midtown Associates........................ Wyndham Garden Hotel-Midtown
Atlanta
Novi Garden Hotel Associates...................... Wyndham Garden Hotel-Novi
Amgreen-Heritage Hotel Partnership, Ltd. Wyndham Garden Hotel-Orange
County Airport
Pleasanton Hotel Associates, Ltd.................. Wyndham Garden Hotel-Pleasanton
Wood Dale Garden Hotel Partnership................ Wyndham Garden Hotel-Wood Dale
</TABLE>
- ---------------
(1) Management fees, reimbursements and design and construction fees were not
received from all of the Hotel Partnerships in all three years.
100
<PAGE> 108
During 1993, 1994 and 1995, the Company received payments in the aggregate
amounts of $191,696, $211,321, $759,895, respectively, from the Hotel
Partnerships listed above, as well as Convention Center Boulevard Hotel Limited,
in which Crow Family Members have an interest. Some or all of the Senior
Executive Officers have an ownership interest in six of such Hotel Partnerships.
The payments were received as fees for certain design and construction services
provided by the Company to such entities.
During 1993, 1994 and 1995, the Senior Executive Officers incurred
indebtedness to Wyndham Finance Limited Partnership ("WFLP"), a partnership
owned by Crow Family Members. In addition, WEL, an equity participation program
in which certain executive officers of the Company have an interest, incurred
indebtedness to WFLP. The purpose of the loans was to finance such officers' and
WEL's capital contributions to the Old Management Company and various Hotel
Partnerships in which the officers have an ownership interest. In addition, two
Senior Executive Officers used a portion of the indebtedness to finance housing
expenses, and one of such Senior Executive Officers also used a portion to
finance education expenses. Notes representing such loans will be purchased by
the Company in connection with the Formation for a cash payment to WFLP in the
amount of $18,575,648, which is equivalent to the aggregate outstanding
principal and accrued interest severally owing by the Senior Executive Officers
and WEL to WFLP, and will be evidenced by promissory notes made payable to the
Company. Such notes will accrue interest at 6% per annum and are fully secured
by the pledge of shares of Common Stock held by the note obligors, and the
outstanding principal and accrued interest (compounded quarterly) will be
payable in a single lump sum in May 2001. The aggregate principal amounts of
such loans made to each Senior Executive Officer and WEL in 1993, 1994 and 1995,
and the aggregate balance of the notes representing such loans to be purchased
by the Company in the Formation, are as follows:
<TABLE>
<CAPTION>
AGGREGATE
1993 1994 1995 BALANCE(1)
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
James D. Carreker.................... $425,388 $669,634 $1,867,627 $4,904,573
Leslie V. Bentley.................... $219,153 $218,594 $ 767,104 $1,805,133
Eric A. Danziger..................... $120,013 $178,142 $1,115,775 $2,702,187
Anne L. Raymond...................... $ 0 $ 0 $4,417,588 $4,417,588
Stanley M. Koonce, Jr................ $161,805 $207,995 $ 547,207 $1,839,006
WEL.................................. $181,639 $323,405 $ 881,488 $2,907,161
</TABLE>
- ---------------
(1) The aggregate balances are as of December 31, 1995, and include indebtedness
incurred prior to January 1, 1993.
In 1995, the Company made loans to WHC-LG Hotel Partners L.P., Pleasanton
Hotel Partners, L.P. and New Orleans Hotel I, L.P., each of which is owned
directly or indirectly by Crow Family Members, the Senior Executive Officers and
WEL (the "Investing Partnerships"). The purpose of the loans was to finance such
Investing Partnerships' acquisition, construction and renovation of hotels owned
by the following three Hotel Partnerships: WHC-LG Hotel Associates, L.P. (La
Guardia Airport), Pleasanton Hotel Associates, Ltd. (Pleasanton Garden) and
Convention Center Boulevard Hotel Limited (Wyndham Riverfront). The aggregate
amount of such loans was $6,395,690, all of which is outstanding as of December
31, 1995. The loans are secured by the Investing Partnerships' partnership
interests in the Hotel Partnerships. The loans accrue interest at 9%, are
payable in May, October and December of 2005 and are reduced by any cash
distributions by such Hotel Partnerships to the Investing Partnerships.
During 1995, WFLP incurred indebtedness to the Company in the amount of
$1,278,000 for the purpose of acquiring or developing hotel properties, to be
managed by the Company, in which the Senior Executive Officers have ownership
interests. The loan is evidenced by a promissory note, bears an adjustable rate
of interest based on the prime rate and is due and payable on April 15, 2000. It
is anticipated that such loan will be repaid to the Company prior to the closing
of the Offering.
During 1994 and 1995, the Company received hotel management fees in the
aggregate amounts of $514,472 and $2,043,087, respectively, from the Hotel
Partnerships listed below (other than Bedrock Kingsway Investment Partners Level
I, L.P.), in which Bedrock has an ownership interest (Messrs. Whitman and
Decker, directors of the Company, have ownership interests in Bedrock).
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<PAGE> 109
During 1994 and 1995, the Company made cash advances in the aggregate
amounts of $1,092,537 and $1,380,702 respectively, to the Hotel Partnerships
listed below, in which Bedrock has an ownership interest. The advances were used
to pay certain renovations costs for Wyndham Garden Hotels that were redeveloped
by Bedrock. The advances are repaid through Bedrock's redevelopment fund. At
December 31, 1995, the aggregate amount outstanding of such advances was
$686,749.
During 1994 and 1995, the Company received payments in the aggregate
amounts of $798,503 and $976,980, respectively, from the Hotel Partnerships
listed below, in which Bedrock has an ownership interest. The payments were
received as fees for certain design and construction services provided by the
Company to such entities.
During 1994 and 1995, the Company received payments in the aggregate
amounts of $170,669 and $831,553, respectively, from the Hotel Partnerships
listed below, in which Bedrock has an ownership interest. The payments were
received as reimbursements for certain administrative, tax, legal, accounting,
finance, risk management, sales and marketing services provided by the Company
to such entities.
<TABLE>
<CAPTION>
HOTEL PARTNERSHIPS(1) HOTELS
- ---------------------------------------------------- --------------------------------------
<S> <C>
Grand Avenue Partners L.P........................... Wyndham Checkers Hotel
Bedrock Metrolux Investment Partners
Level I, L.P...................................... Wyndham Hotel at Metrocenter
Bedrock Annapolis Investment Partners
Level I, L.P...................................... Wyndham Garden Hotel-Annapolis
Burlington Garden Partners Level I, L.P............. Wyndham Garden Hotel-Burlington
CC Bedrock Investment Partners Level I, L.P......... Wyndham Garden Hotel-Culver City
BRP Denver Garden Partners Level I, L.P............. Wyndham Garden Hotel-Denver
Detroit Metro Partners Level I, L.P................. Wyndham Garden Hotel-Detroit Airport
Bedrock Marin Investment Partners
Level I, L.P...................................... Wyndham Garden Hotel-Marin/San Rafael
BR Partners -- Monrovia Level I, L.P................ Wyndham Garden Hotel-Monrovia
Bedrock Oakbrook Investment Partners
Level I, L.P...................................... Wyndham Garden Hotel-Oakbrook
O'Hare Garden Partners Level I, L.P................. Wyndham Garden Hotel-O'Hare
Garden LBV Investment Partners I, L.P............... Wyndham Garden Hotel-Lake Buena Vista
Bedrock Kingsway Investment Partners
Level I, L.P...................................... Wyndham Garden Hotel-Piscataway
BR Pittsburgh Airport Level I, L.P.................. Wyndham Garden Hotel-Pittsburgh
BRP Waltham Investment Partners
Level I, L.P...................................... Wyndham Garden Hotel-Waltham
</TABLE>
- ---------------
(1) Management fees, reimbursements and design and construction fees were not
received from all of the Hotel Partnerships in all three years. In addition,
cash advances were not made by the Company to all of the Hotel Partnerships
in all three years.
During 1993, 1994 and 1995, the Company made payments in the aggregate
amounts of $1,098,270, $1,352,468, $1,739,804, respectively, to Wyndham Travel
Management Ltd., an entity owned by Lucy Billingsley (the daughter of Trammell
Crow), for travel services provided to the Company.
During 1993, 1994 and 1995, the Company made payments in the aggregate
amounts of $698,468, $701,203 and $830,164, respectively, to CHMC, which is
owned by Crow Family Members, pursuant to the CHMC Agreement pursuant to which
the Company acquired in 1988 a number of management agreements relating to
Wyndham brand hotels then in operation. The Company's payment obligations under
the CHMC Agreement will be released and discharged in the Formation in exchange
for a cash payment to be paid by the Company to CHMC. See "The Formation and the
Financing Plan -- The Formation."
During 1993, 1994 and 1995, the Company made payments in the aggregate
amounts of $638,039, $743,922, $875,122, respectively, as lease payments for its
corporate office space to Tower 2001 Limited Partnership, a partnership in which
Crow Family Members have an ownership interest. The Company's
102
<PAGE> 110
current lease on its corporate office space expires in November 1996. Crow
Family Members have inquired of the Company concerning the Company's willingness
to enter into an extended lease arrangement for the space in the context of a
transaction whereby the ownership of the building in which the space is located
would be restructured and the building refinanced, with Crow Family Members
retaining, directly or indirectly, a significant interest in the building. The
Company has indicated an interest in considering an extended lease arrangement
on market terms, but no agreements or understandings have yet been reached in
this regard, as preliminary discussions between Crow Family Members and
potential third party financing sources have only recently begun.
During 1993, 1994 and 1995, the owners of hotels owned or leased by the
Company made contributions to a loss prevention fund in the amounts of $396,911,
$620,006 and $624,422, which funds were deposited to WFLP pending the use of
such contributions by the loss prevention fund. The contributions were used to
cover a portion of the deductible on insurance policies for such hotels in
connection with insured claims made against the hotels.
In 1995, the Company made payments in connection with entering into a
management contract for the Wyndham Anatole Hotel, in which Crow Family Members
have an ownership interest. The amount of such payment was $523,360 and the
purpose was to pay costs associated with converting the property to the Wyndham
brand.
During 1993, 1994 and 1995, the Company received payments in the aggregate
amounts of $220,447, $175,366 and $176,210, respectively, from Crow-Los Patios
Limited, a senior assisted living facility in which certain Crow Family Members
have an ownership interest. The payments were received as management fees.
During 1993, 1994 and 1995, the Company made payments in the aggregate
amounts of $310,402, $321,333 and $332,113, respectively, to GHMB, Inc., an
entity owned by Mr. Bentley for the operation of liquor concessions at the
Wyndham Garden Commerce.
In 1994, the Company paid $155,000 to Rochelle Charter, Inc. ("Rochelle"),
an entity in which Trammell Crow, his spouse and Harlan R. Crow have an
interest. The payment was made to charter a boat that was operated by Rochelle
and used by the Company to entertain business associates.
During 1995, the Company received payments in the aggregate amount of
$72,593 from Convention Center Boulevard Hotel Limited, Waterfront Hotel
Associates, S.E. and WHC-LG Hotel Associates, L.P., Hotel Partnerships in which
Crow Family Members and some or all of the Senior Executive Officers have an
interest. The payments were received as construction and renovation fees for the
Wyndham Riverfront and Wyndham San Juan Hotels and for the Company's La Guardia
Airport hotel.
The Company is a guarantor of the obligations of Playhouse Square Hotel
Limited Partnership (the owners of which include Crow Family Members and the
Senior Executive Officers, except for Ms. Raymond) to fund operating deficits
relating to such Hotel Partnership. The guarantee requires the guarantors
(including the Company) to advance up to $600,000 per year to the extent the
Hotel Partnership experiences operating deficits, with maximum required advances
of $2.3 million over the term of the guarantee extending from 1995 to 2000.
Playhouse Square Hotel Limited Partnership has caused to be deposited the sum of
$1,000,000 as a reserve to secure the payment of the guaranteed obligations and
to fund operating deficits. The Company has not to date been required to make
any advance under the guarantee.
On February 1, 1996, the Company entered into a franchise agreement with
Breckenridge Resort Group, a partnership in which Mark vanHartesvelt, the
brother of John vanHartesvelt, an officer of the Company, has an interest. The
Company expects that in April 1996, the franchisee's rights and obligations
under the franchise agreement will be transferred to an unaffiliated third
party. In order to qualify for relevant franchise law exemptions, fees and
payments due and payable during the first six months following the conversion of
the hotel to the Wyndham brand are deferred until the seventh month following
the opening date of the hotel. The Company does not anticipate receiving any
fees under the franchise agreement during 1996.
The Company has entered into management contracts pursuant to which it
expects to provide hotel management services to the following Hotel Partnerships
owning Wyndham hotels in which Crow Family
103
<PAGE> 111
Members, Bedrock or some or all of the Senior Executive Officers have an
interest. The aggregate amount of such management fees are anticipated to be
approximately $884,000 in 1996. The terms of the agreements pursuant to which
the Company provides hotel management services to Wyndham hotels are described
generally under "Business -- Management Contracts."
<TABLE>
<CAPTION>
HOTEL PARTNERSHIPS HOTELS
----------------------------------------------- ---------------------------
<S> <C>
KC Plaza Investment Partners, Level I L.P. .... Wyndham Garden-Kansas City
WHC-LG Hotel Associates, L.P. ................. La Guardia Airport
Bed Lex Investment Partners, Level I, L.P. .... Wyndham Garden-Lexington
Convention Center Boulevard Hotel, Limited..... Wyndham Riverfront
Waterfront Hotel Associates, S.E. ............. Wyndham San Juan
</TABLE>
Pursuant to the terms of the management contracts for the Riverfront and San
Juan hotels, the Company has made commitments to provide furniture, fixtures and
equipment at fixed prices of $2.1 million and $6.0 million, respectively. In
addition, with respect to the Riverfront Hotel, the Company has agreed to
provide certain pre-opening services at a fixed price of $420,000 and has
entered into an operating deficit guaranty, which requires the Company to fund
up to $230,000 in working capital per year for three years after the hotel is
opened in the event that the hotel generates inadequate cash flow. In addition,
the Company has guaranteed $875,000 in indebtedness relating to the Riverfront
Hotel.
Pursuant to the terms of its management agreement relating to the Wyndham
Hotel at Los Angeles Airport (the "LAX"), Wyndham agreed to loan $4,560,000 to
be applied to costs of refurbishment of the LAX. The refurbishment loan is
evidenced by a promissory note (the "Note Receivable"), which has been partially
funded in the amount of $2,344,974 as of April 15, 1996. The Company's
obligation to make the remaining advances under the refurbishment loan is
secured by a letter of credit, which, in turn, is collateralized by $2,637,045
in cash. Prior to the Formation, WHC LAX Associates, L.P. ("WHC LAX"), a limited
partnership owned by Crow Family Members, the Senior Executive Officers and WEL,
will pay to Wyndham $4,560,000 in return for Wyndham's agreement to pay to WHC
LAX all payments that Wyndham receives under the Note Receivable. Wyndham also
agreed that, insofar as the WHC LAX's $4,560,000 payment to the Company exceeds
advances that Wyndham is obligated to make, but has not yet made, under the Note
Receivable, it would pay to WHC LAX interest at a variable rate that has ranged
from 5.25% to 5.81% per annum on the unfunded amounts.
In 1996, James D. Carreker anticipates receiving a $100,000 consulting fee
for services provided as a consultant to Trammell Crow Company, an entity in
which Crow Family Members have an interest.
The Company anticipates that in 1996, it will enter into a five year
service agreement with ISIS 2000, an entity owned by Crow Family Members and the
Senior Executive Officers, whereby ISIS 2000 will provide centralized
reservations and property management services to all Wyndham brand hotels. The
services will be provided for a fee comprised of an initial link-up charge plus
a per reservation fee and a per hotel charge for the property management system.
The service fee payable by the Company is anticipated to be approximately
$1,300,000 in 1996. The Company also will enter into an asset management
agreement with ISIS 2000 providing for human resource, finance, accounting,
payroll, legal and tax services. The Company anticipates receiving approximately
$175,000 in 1996 for such services. In addition, the Company expects that it
will guarantee operating leases on behalf of ISIS 2000 in the approximate amount
of $3.5 million.
In 1995, the Company made payments to Trammell Crow Company in the amount
of $386,759 for contract labor (including related costs) provided to the Company
for management information services. The Company anticipates that in 1996, it
will pay approximately $810,000 to Trammell Crow Company for these contract
labor services (including related costs).
The Company anticipates that in 1996, it will enter into a service
agreement with CW Synergistech, L.P. ("CWS"), an entity owned by Trammell Crow
Company and an entity owned by Crow Family Members and the Senior Executive
Officers, whereby CWS will provide the Company's management information
services. The service fee payable by the Company to CWS for such management
information services is anticipated to be approximately $1,135,000 in 1996. The
Company also will enter into an asset management agreement with CWS providing
for human resource and legal services. The Company anticipates receiving
approximately $20,000 in 1996 for such services.
104
<PAGE> 112
The Company anticipates that in 1996, it will make insurance premium
payments to Wynright Insurance ("Wynright"), an entity owned by Crow Family
Members and the Senior Executive Officers, with respect to certain insurance
policies maintained for the benefit of the Company and hotels owned or leased by
the Company. The Company anticipates that such payments will be approximately
$555,800 in 1996. The Company also will enter into an asset management agreement
with Wynright providing for human resource, finance, accounting, payroll, legal
and tax services. The Company anticipates receiving approximately $12,500 in
1996 for such services.
The Company anticipates that in 1996, it will enter into management
agreements pursuant to which it expects to receive management, technical service
and purchasing fees in connection with the Company's management of certain
extended-stay hotels, a new concept being developed by a partnership in which
Crow Family Members own an interest. See "Business -- Growth Strategy -- II.
Additional Growth Opportunities -- New Lodging Products." The amount of such
management, technical service and purchasing fees are anticipated to be
approximately $50,000 in 1996.
BEDROCK INVESTMENT PROGRAM
In May 1994, the Company entered into an Investment Agreement and an Option
Agreement (collectively, the "Bedrock Agreements") with Bedrock pursuant to
which, as amended, Bedrock agreed to provide up to $335 million in capital (the
"Investment Program") to acquire hotels or hotel management companies and to
make hotel related investments that are approved by both the Company and
Bedrock. Pursuant to the terms of the Investment Agreement, Bedrock is not
required to invest a minimum amount of capital through the Investment Program,
but the Company is entitled to manage any Investment Program hotel properties
for a term of 15 years. Pursuant to the Investment Agreement, as amended, the
Company and Bedrock have agreed that the Company will be permitted to manage any
hotel with 250 or fewer rooms that is financed by Bedrock. In addition, subject
to certain limitations, certain Crow Family Members have the right to co-invest
with Bedrock in the Investment Program. The Company also has certain limited
rights to co-invest with Bedrock in the Investment Program; provided, however,
that once the Company elects to co-invest in Investment Program projects, it
must co-invest in each subsequent project or it would forfeit additional rights
to co-invest. At December 31, 1994 and December 31, 1995, the Company had
executed management contracts with Bedrock for 11 Wyndham brand hotels and 15
Wyndham brand hotels, respectively, through the Investment Program. At April 15,
1996, approximately $150.0 million of the initial $335 million in the Investment
Program was available for investment.
Pursuant to the Option Agreement, the Company granted to Bedrock options
(the "Bedrock Options") to purchase up to a 37.5% limited partnership interest
in the Old Management Company at a price equal to the percentage interest
purchased multiplied by the strike price set forth in Section 2.1 of the Option
Agreement for the year in which the option is exercised. A copy of the Option
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. (Under the terms of the Bedrock Agreements, Bedrock
is entitled to purchase a 1% interest in Wyndham for each $320,000 of projected
annual management fees generated by the management contracts relating to hotels
owned by Bedrock. At December 31, 1994 and December 31, 1995, Bedrock was
entitled to purchase a 17.4% and 24.3% interest in Wyndham, respectively.) As
additional consideration for the grant of the Bedrock Options, Bedrock granted
to the Company the right to require Bedrock to invest up to $20 million from the
Investment Program in the amount of a $10 million contribution to the Company
(the "Direct Contribution") in exchange for a percentage interest therein (not
to exceed the 37.5% ownership limitation) and a $10 million contribution to
affiliated partnerships (the "Indirect Contribution") in which some or all of
the Company, Crow Family Members and the Senior Executive Officers invest. The
Direct Contribution will take the form of the Bedrock Contribution. The Indirect
Contribution was eliminated in connection with the Bedrock Exchange Agreement.
As part of the Formation, the Company entered into the Bedrock Exchange
Agreement with various affiliates of Bedrock pursuant to which Bedrock will
transfer the Bedrock Options and the Bedrock Contribution (in the amount of $10
million) in exchange for 2,367,890 shares of Common Stock. See "The Formation
and the Financing Plan -- The Formation." Bedrock will have certain registration
rights with
105
<PAGE> 113
respect to such shares of Common Stock. See "Description of Capital
Stock -- Registration Rights." Bedrock will also enter into the Stockholders'
Agreement with the Company, Crow Family Members, the Senior Executive Officers
and WEL, which provides for, among other things, representation on the Company's
Board of Directors. See "Management -- Directors and Executive Officers" and
"Description of Capital Stock -- Stockholders' Agreement."
The Option Agreement also provides for a contingent payment (the
"Contingent Option Payment") to the Old Management Company, for distribution to
the non-Bedrock owners of the Old Management Company, at such time as all hotels
financed by the Investment Program achieve an investment return target of 15% on
all equity capital invested through such program plus certain overhead costs.
The amount of the Contingent Option Payment is 10% of all cash proceeds realized
in excess of the investment return target. The Contingent Option Payment is due
70% upon the achievement of the investment target return and 30% upon Bedrock's
disposition of its entire interest in Wyndham. A separate entity owned by Crow
Family Members, the Senior Executive Officers and WEL has purchased the right to
the Contingent Option Payment for $10,000 from the owners of the Old Management
Company (Crow Family Members, the Senior Executive Officers and WEL).
POLICY WITH RESPECT TO RELATED PARTY TRANSACTIONS
With respect to future material transactions (or series of related
transactions) between the Company and related parties, the Company has
implemented a policy requiring any such transaction to be approved by a majority
of the Independent Directors, if any, upon such directors' determination that
the terms of the transaction are no less favorable to the Company than those
that could be obtained from unrelated third parties. The policy defines a
material related party transaction (or series of related transactions) as one
involving a purchase, sale, lease or exchange of property or assets or the
making of any investment with a value to the Company in excess of $1.0 million
or a service agreement (or series of related agreements) with a value in excess
of $1.0 million in any fiscal year. There can be no assurance that this policy
always will be successful in eliminating the influence of conflicts of interest.
BENEFITS OF THE FORMATION AND THE FINANCING PLAN TO RELATED PARTIES
In connection with their participation in the transactions related to the
Formation of the Company, certain major stockholders, directors and executive
officers of the Company will receive the following benefits.
Crow Family Members will receive, collectively, 9,386,135 shares of Common
Stock and $19.1 million in cash in exchange for their interests in the Assigned
Businesses. In addition, Crow Family Members will receive $4.0 million in cash
as a result of the repayment of certain loans that they made to certain of the
Assigned Businesses. In addition, WFLP, a partnership owned by Crow Family
Members, will receive $18.6 million in cash for the sale of the DAB Notes, which
represent obligations of the Senior Executive Officers and WEL. CHMC, which is
owned by certain Crow Family Members, will receive $6.0 million, in cash, as
consideration for the release and discharge of the Company's payment obligations
under the CHMC Agreement.
The Senior Executive Officers of the Company will receive the following
number of shares of Common Stock in exchange for their respective interests in
the Assigned Businesses:
-- James D. Carreker: 1,167,970 shares;
-- Leslie V. Bentley: 329,180 shares;
-- Eric A. Danziger: 377,964 shares;
-- Anne L. Raymond: 376,906 shares; and
-- Stanley M. Koonce, Jr.: 385,553 shares.
Bedrock (in which Messrs. Whitman and Decker have ownership interests) will
receive 2,367,890 shares of Common Stock in consideration of Bedrock's transfer
to the Company of the Bedrock Options and the Bedrock Contribution in the amount
of $10.0 million.
106
<PAGE> 114
WEL (in which certain executive officers and employees of the Company
participate) will receive 642,588 shares of Common Stock in exchange for its
interests in the Assigned Businesses.
TCI, which is owned by certain Crow Family Members and the Senior Executive
Officers, will receive a payment of approximately $250,000 from the Company as a
commission to be paid to an employee of TCI for his efforts in facilitating the
sale of the 11 Wyndham Garden Hotels to HPT. See "Business -- Long-Term Hotel
Leases."
107
<PAGE> 115
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock and as adjusted to reflect the sale of
shares of Common Stock in the Offering for (i) each director of the Company,
(ii) each executive officer named in the Summary Compensation Table set forth
under the heading "Management," (iii) all directors and executive officers of
the Company as a group and (iv) each person or group who was on such date the
beneficial owner of more than five percent of the outstanding Common Stock.
<TABLE>
<CAPTION>
SHARES OWNED
SHARES OWNED AFTER THE
BEFORE THE OFFERING(2) OFFERING(2)(3)
---------------------- ----------------------
NAME(1) NUMBER PERCENT NUMBER PERCENT
---------------------------------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
CF Securities, L.P.(4)(5)............... 9,407,108 61.42% 9,373,775 48.81%
Harlan R. Crow(5)(6)
James D. Carreker(7).................... 1,356,515 8.86% 1,356,515 7.06%
Wyndham Employees, Ltd.(8)............ 642,588 4.20% 642,588 3.35%
Leslie V. Bentley(9).................... 389,783 2.54% 389,783 2.03%
Eric A. Danziger........................ 377,964 2.47% 377,964 1.97%
Anne L. Raymond......................... 376,906 2.46% 376,906 1.96%
Stanley M. Koonce, Jr................... 385,553 2.52% 385,553 2.01%
Bedrock(10)............................. 2,367,890 15.46% 2,367,890 12.33%
Daniel A. Decker(11)..................
Robert A. Whitman(11).................
Susan T. Groenteman(12)................. -- -- 33,333 *
Directors and executive officers as a
group (16 persons)(13)................ 15,304,307 99.92% 15,304,307 79.70%
</TABLE>
- ---------------
* Less than 1%.
(1) The address of each beneficial owner, with the exception of CF Securities,
L.P., Bedrock and Susan T. Groenteman, is 2001 Bryan Street, Suite 2300,
Dallas, TX 75201.
(2) The indicated share numbers assume an initial public offering price of
$15.00 per share. Pursuant to the terms of the Formation Agreements, a
higher or lower initial public offering price would result in immaterial
adjustments in the number of shares of Common Stock beneficially owned by
the parties listed in the table, other than Bedrock.
(3) The information in the table assumes the exercise of the GE Option and no
exercise of the U.S. Underwriters' overallotment option. In the event the
overallotment option is exercised in full, Bedrock would own 2,301,754
shares of Common Stock (11.68% of the outstanding Common Stock), CF
Securities, L.P. would own 9,421,717 shares of Common Stock (47.81% of the
outstanding Common Stock), Messrs. Carreker, Bentley, Danziger and Koonce
and Ms. Raymond (the "Senior Executive Officers") would collectively
beneficially own 2,901,608 shares of Common Stock (14.72% of the
outstanding Common Stock) and Wyndham Employees, Ltd. ("WEL") would own
645,895 shares of Common Stock (3.28% of the outstanding Common Stock).
(4) Assuming the exercise of the GE Option and no exercise of the U.S.
Underwriters' overallotment option, when the shares held by CF Securities,
L.P. are aggregated with the shares held separately by a single Crow Family
Member, the total number of shares held by Crow Family Members would be
9,386,135 shares (48.87% of the outstanding Common Stock). If the
overallotment option is exercised in full, the total number of shares held
by Crow Family Members would be 9,434,077 shares (47.87% of the outstanding
Common Stock). The address of CF Securities, L.P. is 2001 Ross Avenue,
Dallas, TX 75201.
(5) Harlan R. Crow directly holds no shares of Common Stock. Mill Springs
Holdings, Inc. ("Mill Springs") is the general partner of CF Securities,
L.P. Mr. Crow is a principal stockholder of Mill Springs and its sole
director. Mr. Crow disclaims beneficial ownership of all Common Stock held
by CF Securities, L.P.
(6) Mr. Crow is a director of Wyndham Hotel Management Corporation ("WHMC"),
which holds 112,229 shares of Common Stock. WHMC is the corporate general
partner of WEL, which holds 642,588 shares of Common Stock. Mr. Crow
disclaims beneficial ownership of all shares of Common Stock held by WHMC
or WEL.
(7) James D. Carreker will directly hold 1,167,970 shares of Common Stock.
Shares listed in the table include 76,316 shares held in a trust for which
Mr. Carreker is the special trustee and has full voting rights. Mr.
Carreker disclaims beneficial ownership of all Common Stock held in the
trust. Shares listed also include 112,229 shares held by WHMC, but exclude
642,588 shares held by WEL. Mr. Carreker is a director and principal
stockholder of WHMC, which is the corporate general partner of WEL. Mr.
Carreker disclaims beneficial ownership of all Common Stock held by WHMC
beyond his percentage ownership therein and disclaims beneficial ownership
of all Common Stock held by WEL.
(8) Mr. Carreker is a director and principal stockholder of WHMC, which is the
corporate general partner of WEL. Mr. Crow is a director of WHMC. Both
Messrs. Carreker and Crow disclaim beneficial ownership of all Common Stock
held by WEL.
(9) Includes 60,604 shares held in trusts for which Mr. Bentley is the special
trustee and has full voting rights. Mr. Bentley disclaims beneficial
ownership of all Common Stock held in the trusts.
(10) The address of Bedrock is 2200 Ross Avenue, Suite 4200 West, Dallas, Texas
75201.
(11) Robert A. Whitman and Daniel A. Decker directly hold no shares of Common
Stock. Messrs. Whitman and Decker are principals of Hampstead, an affiliate
of Bedrock. Messrs. Whitman and Decker disclaim beneficial ownership of all
Common Stock held by Bedrock.
(12) Shortly following the Offering, C.F. Securities, L.P. will sell 33,333
shares of Common Stock to Mill Creek Holdings, Ltd. ("Mill Creek") for
$500,000. Such shares, in turn, will be transferred by Mill Creek to Ms.
Groenteman for services rendered by Ms. Groenteman to Mill Creek. It is
expected that a compensation expense of $500,000 will be recognized by an
affiliate of Mill Creek in connection with such transfer. Ms. Groenteman's
address is 2001 Ross Avenue, Dallas, TX 75201.
(13) Includes shares held by WEL. WHMC is the corporate general partner of WEL.
Mr. Carreker is a director and a principal stockholder of WHMC, and Mr.
Crow is a director of WHMC, but each disclaims beneficial ownership of all
Common Stock held by WEL.
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Pursuant to the terms of the GE Credit Agreement, General Electric holds an
option to purchase up to an estimated 537,634 shares of Common Stock
(representing up to an estimated 2.8% of the Company's outstanding shares of
Common Stock following the exercise of the option), assuming an initial public
offering price of $15.00 per share and underwriting discounts and commissions of
seven percent (the "GE Option"). The GE Credit Agreement entitles General
Electric to purchase from the Company up to the number of shares of Common Stock
that is the quotient of an amount estimated by the Company to be $7.5 million
(one-half of the estimated $15.0 million of indebtedness that will be
outstanding under the GE Credit Agreement at the closing of the Offering)
divided by the initial public offering price per share of the Common Stock (less
underwriting discounts and commissions). Under a letter agreement between the
Company and General Electric, General Electric has committed to exercise the GE
Option to purchase an estimated 537,634 shares of Common Stock for a purchase
price of approximately $7.5 million contemporaneously with the closing of the
Offering. Such letter agreement provides, however, that in the event the actual
public offering price per share of Common Stock is lower than $13.00 or higher
than $17.00, the GE Option will be terminated and the Company will be required
to repay the entire estimated $15.0 million of indebtedness outstanding under
the GE Credit Agreement at the closing of the Offering (unless such price
limitation is waived by General Electric). Pursuant to the terms of the GE
Credit Agreement, the Company and General Electric also have entered into a
registration rights agreement pursuant to which the Company has granted General
Electric certain registration rights. See "Description of Capital
Stock -- Registration Rights."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
19,204,301 shares of Common Stock. Of these shares, the 3,350,000 shares sold in
the Offering will be freely tradeable without restriction under the Securities
Act unless purchased by "affiliates" of the Company.
Immediately following completion of the Offering, the 15,854,301 shares of
Common Stock not sold by the current stockholders of the Company in the Offering
will be "restricted securities" under the Securities Act. These shares may not
be sold unless they are registered under the Securities Act or unless an
exemption from registration, such as the exemption provided by Rule 144 under
the Securities Act, is available. The Company has granted certain registration
rights to Crow Family Members, the Senior Executive Officers, WEL, Bedrock and
Ms. Groenteman covering the 15,316,667 restricted shares of Common Stock issued
in the Formation of the Company. In addition, the Company has granted certain
registration rights to General Electric with respect to the estimated 537,634
restricted shares underlying the GE Option. See "Description of Capital
Stock -- Registration Rights."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, who has
beneficially owned restricted shares for at least two years, will be entitled to
sell in any three-month period a number of shares that does not exceed the
greater of (i) 1% of the then outstanding shares of the Common Stock
(approximately 192,000 shares immediately after the Offering) or (ii) the
average weekly trading volume of the Common Stock on the New York Stock Exchange
during the four calendar weeks immediately preceding the date on which notice of
the sale is filed with the Commission. Sales pursuant to Rule 144 are also
subject to certain other requirements relating to manner of sale, notice and
availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not deemed to have been an affiliate
of the Company at any time during the three months immediately preceding the
sale is entitled to sell restricted shares pursuant to Rule 144(k) without
regard to the limitations described above, provided that three years have
expired since the later of the date on which such restricted shares were
acquired from the Company or the date they were acquired from an affiliate of
the Company.
The Company has adopted the Incentive Plan and the Retainer Plan for the
purpose of attracting, retaining and motivating executive officers of the
Company, other key employees and directors. The Company has reserved 2,133,811
shares of Common Stock for future issuance under the Incentive Plan and 50,000
shares of Common Stock for future interest under the Retainer Plan. The
Company's Board of Directors expects to grant options to purchase an aggregate
of 797,700 shares of Common Stock under the
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Incentive Plan to certain key personnel prior to the date of this Prospectus at
the initial public offering price. The Company intends to file a registration
statement under the Securities Act to register shares of Common Stock issuable
upon the exercise of stock options granted under the Incentive Plan or shares of
Common Stock issuable under the Retainer Plan. See "Management -- 1996 Long Term
Incentive Plan" and "-- Director Compensation." Shares issued upon the exercise
of stock options after the effective date of such registration statement
generally will be available for sale in the open market.
Prior to the Offering, there was no public market for the Common Stock of
the Company. See "Risk Factors -- Absence of Public Market." Trading of the
Common Stock is expected to commence following the completion of the Offering.
Sales of substantial amounts of Common Stock in the public market could
adversely affect the market price of the Common Stock.
The Company and all existing stockholders have agreed that, subject to
certain exceptions, for a period of 180 days from the date of this Prospectus,
they will not, without the prior written consent of Smith Barney Inc., offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into, or exercisable or exchangeable for, shares of
Common Stock. However, the Senior Executive Officers will be permitted to pledge
Common Stock owned by them within such 180 day period to Smith Barney in
connection with margin loan transactions into which Smith Barney and certain
Senior Executive Officers may enter subsequent to the completion of the
Offerings. The proceeds of such loans would be used by such Senior Executive
Officers to repay to the Company all or a part of their outstanding indebtedness
under the DAB Notes. There can be no assurance that such margin loans will be
made. In the event that Smith Barney were to foreclose on the shares of Common
Stock securing any such loans within such 180 day period, Smith Barney would
attempt to resell such Common Stock, and any such resale would not be subject to
such lock-up provisions. In addition, the Senior Executive Officers may enter
into margin loan transactions with financial institutions other than Smith
Barney within such 180 day period. In such case, it is expected that the Senior
Executive Officers would request the consent of Smith Barney to pledge Common
Stock in connection with such margin loans, and the Company has been informed
that Smith Barney expects that it would grant its consent in such case. While
Smith Barney has not agreed that any consent to any other sale or other
disposition by the Company or any of its stockholders would not be unreasonably
withheld, the Company has been informed that Smith Barney expects that it would
not unreasonably withhold any such consent.
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DESCRIPTION OF INDEBTEDNESS
The following is a summary of the terms of the Notes and the Revolving
Credit Facility, which summary is qualified in its entirety by reference to the
documents establishing such terms, copies of which will be filed as exhibits to
the Registration Statement of which this Prospectus forms a part, including the
definitions of certain terms included in the Indenture and those terms made a
part thereof by the Trust Indenture Act of 1939, as amended. For purposes of
this summary, the term "Company" refers only to Wyndham Hotel Corporation.
NOTES
Concurrently with the Offering and as part of its Financing Plan, the
Company is offering $100 million aggregate principal amount of Notes in the Debt
Offering. The consummation of each of the Offerings is conditioned upon the
consummation of the other, and will occur simultaneously.
The Notes are to be issued under an Indenture, dated as of ,
1996 (the "Indenture"), among the Company, certain subsidiaries of the Company
(as guarantors), and Bank One, Columbus, N.A., as Trustee (the "Trustee").
The Notes are general, unsecured obligations of the Company. The Notes are
subordinated in right of payment to certain other debt obligations of the
Company. Each Note bears interest at the rate of % per annum and will
mature on , 2006. Pursuant to the Indenture, each of the
Company's subsidiaries (except for a number of insignificant subsidiaries) has,
jointly and severally, guaranteed the Company's obligations under the Notes on
an unsecured senior subordinated basis. In addition, the Indenture contains
restrictions on the Company's ability to make investments in subsidiaries (or
persons who become subsidiaries as a result of such investments) that are not
(or do not become) guarantors of the Notes.
The Notes are redeemable, at the Company's option, in whole or in part, at
any time on or after , 2001 and prior to maturity, at redemption
prices starting at 10 . % of their principal amount and declining to 100% of
their principal amount after , 2004, plus accrued and unpaid
interest. In addition, the Indenture provides that, upon the occurrence of (i)
the sale of a majority of the fair market value of the assets of the Company, on
a consolidated basis, (ii) any person or group not affiliated with the Company's
current stockholders becoming the beneficial owner of more than 45% of the total
voting power of the Company or (iii) certain changes in a majority of the Board
of Directors of the Company during a two-year period, the holders of the Notes
will have the right to require the Company to repurchase their Notes at a price
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest. See "Risk Factors -- Anti-Takeover Matters."
The Indenture contains certain restrictive covenants, including:
(i) a limitation on the ability of the Company and its Restricted
Subsidiaries (as defined in the Indenture) to incur indebtedness unless the
Company would, after giving effect to such incurrence, have a Consolidated
Fixed Charge Coverage Ratio (as defined in the Indenture) greater than
1.75:1 with respect to any incurrence prior to , 1997, or 2:1
with respect to any incurrence on or after , 1997, provided
that the Company and any Restricted Subsidiary will be permitted to incur
(A) indebtedness of up to $150 million under the Revolving Credit Facility
or any replacement facility, (B) indebtedness owed to the Company or a
Restricted Subsidiary, (C) refinancings of indebtedness permitted by
clauses (B), (D), (F), (H) and (I) hereof, (D) indebtedness under (x)
performance or similar bonds provided in the ordinary course of business,
(y) currency or interest rate protection agreements or (z) indemnity or
purchase price adjustment obligations entered into in connection with asset
dispositions, which obligations do not exceed the proceeds of the related
disposition, (E) indebtedness under letters of credit and bankers'
acceptances issued in the ordinary course of business, (F) acquired
indebtedness if, after giving effect to such incurrence, the Company could
incur at least $1.00 of additional indebtedness (other than pursuant to
clauses (A) through (J) hereof), (G) indebtedness of up to $3 million
incurred in connection with certain retirements for value of Company
securities held by employees or former employees, (H) guarantees of
indebtedness of the
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Company or a Restricted Subsidiary, (I) indebtedness incurred in connection
with the acquisition of the Vinings Wyndham Garden Hotel and (J) other
indebtedness of up to $25 million;
(ii) a limitation on the ability of the Company and its Restricted
Subsidiaries to (A) pay dividends on or repurchase any capital stock
(including the Common Stock) not held by the Company or a wholly-owned
Restricted Subsidiary that is a guarantor of the Notes, (B) voluntarily
prepay or repay any indebtedness that is not senior in right of payment to
the Notes or (C) make any investment other than (x) an investment in cash
or cash equivalents, (y) loans or advances of up to $3 million to employees
in the ordinary course of business or (z) other investments of up to $10
million, unless, in any of cases (A), (B) or (C), at the time of such
payment and after giving effect thereto, (I) no default or event of default
shall have occurred and be continuing, (II) the Company could incur at
least $1.00 of indebtedness (other than pursuant to clauses (A) through (J)
of paragraph (i) above) and (III) the aggregate amount of all such payments
shall not exceed the sum of (a) 50% of the aggregate amount of the Adjusted
Consolidated Net Income (as defined in the Indenture) (or, if the Adjusted
Consolidated Net Income is a loss, minus 100% of such amount) (determined
by excluding income created by transfers of assets received by the Company
or a Restricted Subsidiary from an Unrestricted Subsidiary (as defined in
the Indenture)) accrued on a cumulative basis during the period beginning
on April 1, 1996 and ending on the last day of the Company's last fiscal
quarter ended before the date of such payment plus (b) the aggregate net
proceeds received by the Company from the issuance and sale permitted by
the Indenture of its capital stock (other than redeemable stock) to a
person that is not a Subsidiary (as defined in the Indenture) of the
Company, or from the issuance of any options, warrants or other rights to
acquire capital stock of the Company (in each case, exclusive of any
redeemable stock or any options, warrants or other rights that are
redeemable at the option of the holder, or are required to be redeemed,
prior to the stated maturity of the Notes) plus (c) an amount equal to the
net reduction in investments in persons that are not Restricted
Subsidiaries resulting from payments of interest on indebtedness,
dividends, repayments of loans or advances, or other transfers of assets,
in each case to the Company or any Restricted Subsidiary from persons that
are not Restricted Subsidiaries, or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries, not to exceed, in the case of any
person that is not a Restricted Subsidiary, the amount of investments
previously made by the Company and any Restricted Subsidiary in such
person, plus (d) $15 million;
(iii) a limitation on the ability of the Company to suffer to exist
certain dividend and other payment restrictions affecting its subsidiaries;
(iv) a limitation on the ability of the Company to permit any
Restricted Subsidiary to issue capital stock;
(v) a limitation on the ability of the Company to permit any
Restricted Subsidiary to guarantee indebtedness of the Company (other than
indebtedness under the Revolving Credit Facility) unless such Restricted
Subsidiary also guarantees the Notes;
(vi) a limitation on the ability of the Company and its Restricted
Subsidiaries to enter into transactions with affiliates of the Company or
stockholders of the Company holding 5% or more of any class of capital
stock of the Company;
(vii) a limitation on the ability of the Company to engage in sales of
assets other than (A) sales by a Restricted Subsidiary to the Company or a
Restricted Subsidiary that is a guarantor of the Notes, (B) sales of assets
held for resale in the ordinary course of business, (C) sales in connection
with a permitted merger, consolidation or sale of all or substantially all
of the assets of the Company, (D) sales of damaged, worn out or obsolete
property, (E) abandonment of useless and unsalable assets or (F) sales of
capital stock of a Restricted Subsidiary to the Company or a Restricted
Subsidiary that is a guarantor of the Notes, in all cases unless the
proceeds therefrom are used to repurchase the Notes at 100% of their
principal amount, to permanently repay senior indebtedness or to purchase
assets to be used in a Hospitality-Related Business (as defined in the
Indenture);
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(viii) a limitation on the ability of the Company to incur
indebtedness that is senior in right of payment to the Notes but junior in
right of payment to the Company's senior indebtedness; and
(ix) a limitation on the ability of the Company to engage in a
business other than a Hospitality-Related Business.
In addition, the Indenture limits the ability of the Company to merge with
or into or transfer all or substantially all of its assets to another person.
Except as set forth above, the Indenture does not contain any material
quantitative financial requirements. The Notes provide for acceleration upon
customary events of default.
REVOLVING CREDIT FACILITY
General. The Company has received a commitment letter from Bankers Trust
pursuant to which Bankers Trust has agreed, subject to certain conditions, to
provide the Revolving Credit Facility. The Revolving Credit Facility provides
for up to $100.0 million of revolving loan borrowings. While the Company does
not expect that it will draw any amounts under the Revolving Credit Facility at
the closing thereof, it is anticipated that approximately $49.4 million
aggregate principal amount will initially be available for borrowings at such
time. Availability under the Revolving Credit Facility will be subject to, among
other things, a borrowing base test calculated with reference to the cash flow
from the hotel properties and management contracts pledged to secure the
obligations of the Company under the Revolving Credit Facility, the location of
certain of such properties, the terms of such management contracts, the relative
contribution to the borrowing base of the different values attributed to such
properties and the values attributable to both the properties taken as a whole
and the management contracts taken as a whole and other factors. Under the terms
of the Revolving Credit Facility, no further borrowings will be made available
to the Company following the third anniversary of the closing of the Revolving
Credit Facility. The Revolving Credit Facility will mature four years from its
closing date. Subject to certain limitations, Bankers Trust may assign,
syndicate, participate, place or sell its interest under the Revolving Credit
Agreement to other institutional lenders.
The Revolving Credit Facility may be used for (a) the acquisition,
renovation, management and operation of certain hotel properties, (b) the
provision of equity and debt investments in joint ventures to acquire, renovate
and manage certain hotel properties, (c) equity and debt investments in and
credit support for owners of certain hotel properties managed by the Company and
its subsidiaries which are made in connection with the acquisition, extension,
renewal or modification of management agreements and (d) other corporate
purposes of the Company. The Revolving Credit Facility will bear interest at a
rate equal to, at the election of the Company, (a) the Bankers Trust base rate
plus one percent (1.0%) per annum, or (b) one-, two-, three- or six-month LIBOR
plus two percent (2.0%) per annum, payable monthly in arrears; provided however,
subject to the Company's satisfaction of certain conditions, the aforementioned
interest rates will be subject to a reduction of 0.25% per annum. The Company
will pay customary fees in connection with structuring the Revolving Credit
Facility and will also pay Bankers Trust an unused commitment fee equal to
0.375% per annum of the unused portion of the Revolving Credit Facility, payable
quarterly in arrears. Under certain circumstances, the Company may be required
to obtain interest rate protection. The Company is permitted to use up to $15.0
million of the amount available under the Revolving Credit Facility for the
issuance of letters of credit, which will be subject to a fee of 2.0% per annum
on the maximum amount which may be drawn under each letter of credit.
Amortization and Prepayment. The Revolving Credit Facility will not have
any scheduled amortization of principal during the first three years of the
term. On the 39th, 42nd and 45th months following the closing of the Revolving
Credit Facility, the Company will be required to amortize principal in an
aggregate amount equal to 20% of the amount outstanding under the Revolving
Credit Facility on the third anniversary of the closing of the Revolving Credit
Facility. Amounts outstanding under the Revolving Credit Facility must be
mandatorily prepaid in amounts equal to specified release prices upon (a) the
disposition or condemnation of, or casualty to, any hotel properties which are
mortgaged to secure indebtedness under the Revolving Credit Facility, or (b) the
termination of certain management agreements pledged to secure indebtedness
under the
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Revolving Credit Facility. The Company will be permitted to make voluntary
prepayments of amounts outstanding under the Revolving Credit Facility at any
time without penalty or premium.
Security and Guarantees. The Company's obligations under the Revolving
Credit Facility will be secured principally by (a) first priority mortgages on
the six hotels owned by the Company and additional hotel properties acquired by
the Company and approved by the lenders under the Revolving Credit Facility (the
"Pool A Properties"), (b) first priority mortgages on the twelve hotels in which
the Company has a leasehold interest and certain additional hotels that may be
acquired by the Company (the "Pool B Properties"), (c) a first priority
assignment of the rights of the Company in management agreements with respect to
certain hotels managed by the Company, (d) a first priority pledge by the
Company of all of the outstanding capital stock and partnership interests owned
by it in each of its subsidiaries, and (e) a first priority assignment and
pledge of the Company's interests in substantially all its other real and
personal property, including its bank accounts. The foregoing mortgages may be
released as to an individual hotel property or management agreement upon the
Company's compliance with certain conditions, including mandatory prepayment of
the Revolving Credit Facility, in an amount equal to the applicable release
price. The applicable release price with respect to a Pool A Property will be
the greater of (a) 125% of the outstanding principal amount allocated to the
property, (b) 85% of the sales price of the property, after deduction of certain
closing expenses, (c) the amount necessary for the Company to maintain
compliance with specific financial covenants under the Revolving Credit Facility
or (d) in the case of a release as a result of a casualty or condemnation, the
insurance proceeds or condemnation award resulting therefrom (provided the
partial release of an individual property will be permitted in any case of
casualty or condemnation). The applicable release price with respect to an
individual property which is a Pool B Property will be the greatest of (a) the
amount necessary for the Company to maintain compliance with specific financial
covenants under the Revolving Credit Facility, or (b) in the case of a release
as a result of a casualty or condemnation, the insurance proceeds or
condemnation award resulting therefrom (provided the partial release of an
individual property will be permitted in any case of casualty or condemnation).
Upon the termination of a management agreement which has been pledged by the
Company to secure the indebtedness under the Revolving Credit Facility, the
related security interest will be released upon the Company's compliance with
certain conditions, including, in some circumstances, mandatory prepayment of
the Revolving Credit Facility, in an amount equal to the applicable release
price. The applicable release price, if any, with respect to an individual
management agreement will be the greater of (a) 100% of the outstanding
principal amount allocated to the management agreement, (b) the amount necessary
for the Company to maintain compliance with specific financial covenants under
the Revolving Credit Facility, (c) in the case of a sale or other disposition of
the management agreement, 85% of the sale price of the management agreement
after deduction of certain closing expenses or (d) the termination fees, if any,
paid in connection with such termination. Certain other mandatory prepayments
are required in the event of a disposition of a hotel property that is not
mortgaged to secure the indebtedness under the Revolving Credit Facility. The
Company's obligations under the Revolving Credit Facility will be guaranteed,
with full recourse, by each of the Company's subsidiaries.
Covenants. The Revolving Credit Facility will contain covenants requiring
the Company to maintain a minimum net worth of $42.0 million and to maintain the
following financial ratios:
(a) the market value of the outstanding capital stock of the Company
shall not be less than 50% of the market value of such stock on the date of
the closing of the Revolving Credit Facility, unless there shall have
occurred a corresponding decrease in the market value of the capital stock
of a selected group of comparable companies;
(b) Total Consolidated Indebtedness (as defined in the Revolving
Credit Facility) and imputed indebtedness attributable to the Company's
ground lease obligations ("Imputed Debt") entered into following the
closing of the Revolving Credit Facility shall not exceed the lesser of (i)
the Adjusted Stockholders' Equity (as defined in the Revolving Credit
Facility) or (ii) 50% of Total Consolidated Indebtedness plus Imputed Debt
plus the market value of the outstanding capital stock of the Company,
unless the failure to meet the ratio with respect to clause (ii) is
attributable to a decrease in the market value of the capital stock of a
selected group of comparable companies of more than 50% since the date of
the closing of the Revolving Credit Facility;
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(c) an annually increasing ratio of Consolidated EBITDA (as defined in
the Revolving Credit Facility) plus total lease payments under permitted
sale-leaseback transactions (the "Lease Payments") to Consolidated Fixed
Charges (as defined in the Revolving Credit Facility) plus the greater of
the Lease Payments or an interest factor on the Imputed Debt;
(d) an annually increasing ratio of Consolidated EBITDA minus capital
expenses incurred plus Lease Payments to Consolidated Fixed Charges plus
Lease Payments and an interest factor on the Imputed Debt;
(e) an annually decreasing ratio of Total Consolidated Indebtedness
plus Imputed Debt to Consolidated EBITDA plus the Lease Payments; and
(f) an annually decreasing ratio of Total Consolidated Indebtedness
plus Imputed Debt to Consolidated EBITDA minus capital expenses incurred
plus Lease Payments.
The Revolving Credit Facility will also contain covenants that (a) impose
certain limitations on the right of the Company in respect of (i) the payment of
dividends and other distributions, (ii) the making of investments in, guaranties
for the benefit of or payments to subsidiaries, persons owning or leasing hotels
managed by the Company or otherwise, (iii) acquisitions of additional hotel
properties, (iv) the creation or incurrence of liens, (v) transactions with
affiliates, (vi) management or similar agreements delegating to another person
substantial authority over the operation or maintenance of hotel properties of
the Company and its subsidiaries, (vii) the incurrence of indebtedness, lease
obligations or contingent liabilities, (viii) mergers, acquisitions, joint
ventures, partnerships, divestures or reorganizations, (ix) the issuance of
preferred stock and (x) sale leaseback transactions involving any of its hotel
properties, (b) require the Company to maintain a capital reserve account of
3.5% of the gross revenues for each of the hotels owned or leased by it (the
GHALP Lease will require the Company to make deposits into a capital reserve
account in amounts equal to 5% of the gross revenues for each of the GHALP
Properties and the Harbour Island Lease will require the Company to allocate
amounts equal to 4% of the gross revenues of the Harbour Island Property for
replacement and repair of furniture, fixtures, equipment and other improvements
relating to such property), (c) require the Company to make certain expenditures
in connection with deferred maintenance, (d) require the Company to undertake
certain capital expenditures for the renovation of one hotel property (the
Wyndham Rose Hall Resort) and possibly other hotel properties, (e) require the
Company to obtain the lenders' consent prior to the Company entering into
certain arrangements relating to ISIS 2000 (see "Business -- Customers and
Marketing -- Central Reservations System" for further information relating to
ISIS 2000) and (f) require the Company to obtain the lenders' consent to the
refinancing of the $9.7 million principal amount of industrial revenue bond
indebtedness assumed in connection with the acquisition of the Vinings Wyndham
Garden Hotel. In addition, the Revolving Credit Facility will require the
Company to establish a cash management system for the Company's hotels that will
require all receipts to be swept daily into an account under the control of
Bankers Trust and will restrict distributions to subsidiaries and affiliates
under certain circumstances.
Events of Default. The Revolving Credit Facility will contain events of
default customary for transactions similar to those contemplated by the
Revolving Credit Facility, including (a) the nonpayment of principal, interest
or other amounts due under the Revolving Credit Facility when due, (b) the
failure to observe certain covenants under the Revolving Credit Facility,
subject to applicable grace and cure periods, (c) a material adverse change in
the business, operations or conditions, financial or otherwise, of the Company
(together with a material impairment of the ability of the Company and its
subsidiaries to perform their respective obligations under the Revolving Credit
Facility documents or a material impairment of the lenders' ability to enforce
such obligations), (d) breaches of representations and warranties, subject to
applicable cure periods, (e) the occurrence of a default in the payment of
principal, interest or other amounts due under the Notes or other indebtedness
of the Company and its subsidiaries, or any other event which would allow for
the acceleration of the maturity of any such indebtedness, (f) the default by
the Company or any of its subsidiaries under any ground lease obligation with
respect to a hotel property, (g) money judgments, not adequately insured, in
excess of $1.0 million against the Company or any of its subsidiaries and not
discharged, bonded, vacated or stayed within 60 days, (h) the occurrence of
certain events of bankruptcy of insolvency, (i) certain transactions resulting
in a "change of control" (as defined below) of the Company, (j) certain
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executive officers ceasing to be employed by the Company in a senior position by
reason of their death or disability, (k) any subsidiary of the Company ceasing
to be wholly owned by the Company or its other wholly owned subsidiaries, and
(l) payments by the Company or its subsidiaries with respect to certain
contingent liabilities in amounts in excess of those estimated on the date of
the closing. With respect to the Revolving Credit Facility, a "change of
control" means the occurrence of any of the following: (a) Bedrock, the Crow
Family Members and the Senior Executive Officers of the Company, collectively,
or the Senior Executive Officers of the Company, collectively, shall cease for
any reason to maintain legal and beneficial ownership of at least 50% of the
outstanding number of shares of Common Stock of the Company (excluding all
shares owned by WEL) owned by them as of the closing date of the Revolving
Credit Facility (provided that if certain principals of Bedrock cease to control
the business and affairs of Bedrock, then Bedrock shall be deemed to no longer
own any shares of Common Stock of the Company), (b) any person or group, other
than Bedrock, the Crow Family Members or the Senior Executive Officers of the
Company, is or becomes the beneficial owner of more than 35% of the total voting
power in the aggregate of all classes of capital stock of the Company normally
entitled to vote in the election of the Board of Directors, (c) a majority of
the Board of Directors of the Company shall not consist of nominees of Bedrock
or Crow Family Members or (d) there shall occur a Change of Control (as defined
in the Indenture for the Notes).
No Assurance. While the Company expects to enter into the Revolving Credit
Agreement contemporaneously with or shortly following the consummation of the
Offering, there can be no assurance that the Company will be successful in
entering into the Revolving Credit Agreement and, if so, on what terms. The
Revolving Credit Facility would be an important source of capital to fund the
Company's future growth strategy and, if the Company is not able to agree with
Bankers Trust on the terms of the Revolving Credit Agreement, it would need to
seek other sources of financing to help fund its future growth strategy. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED SHARES
The authorized capital stock of the Company consists of 45,000,000 shares
of Common Stock and 5,000,000 shares of Preferred Stock, $.01 par value per
share ("Preferred Stock"), issuable in series.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. Accordingly, holders of a majority of
shares of Common Stock entitled to vote in any election of directors may elect
all of the directors standing for election. Holders of Common Stock are entitled
to receive dividends and other distributions when, as and if declared from time
to time by the Board of Directors out of funds legally available therefor
subject to any preferential rights of, and sinking fund or redemption or
purchase rights with respect to, any Preferred Stock that may be issued. In the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities subject to prior distribution rights of
any Preferred Stock then outstanding. Holders of the Common Stock have no
preemptive or conversion rights and the Common Stock is not subject to further
calls or assessment by the Company. There are no redemption or sinking fund
provisions applicable to the Common Stock.
PREFERRED STOCK
The Company's Certificate of Incorporation ("Certificate") authorizes
5,000,000 shares of Preferred Stock, none of which is outstanding. The Board of
Directors has the authority, without any further vote or action by the
stockholders, to issue Preferred Stock in one or more series and to fix the
number of shares, designations, relative rights (including voting rights),
preferences and limitations of such series to the full
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extent now or hereinafter permitted by Delaware law. The Company has no present
intention to issue shares of Preferred Stock.
DIRECTORS' LIABILITY
As authorized by the Delaware General Corporation Law ("DGCL"), the
Certificate limits the liability of Directors to the Company for monetary
damages. The effect of this provision in the Certificate is to eliminate the
rights of the Company and its stockholders (through stockholders' derivative
suits on behalf of the Company) to recover monetary damages against a Director
for breach of fiduciary duty as a Director (including breaches resulting from
negligent behavior), except in certain limited situations. This provision does
not limit or eliminate the rights of the Company or any stockholder to seek
non-monetary relief such as an injunction or rescission in the event of a breach
of a Director's fiduciary duty. These provisions will not alter the liability of
Directors under federal securities law.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the DGCL. That
section provides, with certain exceptions, that a Delaware corporation may not
engage in any of a broad range of business combinations with a person or an
affiliate or associate of such person who is an "Interested Stockholder" (as
defined below) for a period of three years from the date that such person became
an Interested Stockholder unless: (i) the business combination or the
transaction resulting in a person's becoming an Interested Stockholder is
approved by the board of directors of the corporation before the person becomes
an Interested Stockholder, (ii) upon consummation of the transaction which
resulted in the person becoming an Interested Stockholder, the Interested
Stockholder owned 85% or more of the voting stock of the corporation outstanding
at the time the transaction commenced (excluding shares owned by persons who are
both officers and directors of the corporation and shares held by certain
employee stock ownership plans) or (iii) on or after the date the person became
an Interested Stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66 2/3% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the Interested Stockholder. An "Interested
Stockholder" is defined as any person that is (i) the owner of 15% or more of
the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within the three-year period
immediately prior to the date on which it is sought to be determined whether
such person is an Interested Stockholder. The Company believes that by its
terms, Section 203 does not restrict transactions with CF Securities, L.P.,
which will become an Interested Stockholder as a result of the Formation, or any
other party to the Stockholders' Agreement that becomes an Interested
Stockholder (for purposes of Section 203) as a result of the exercise of the
right of first offer described under "-- Stockholders' Agreement." In such
cases, the Company's Board of Directors has approved the transactions pursuant
to which such parties will or may become Interested Stockholders.
ANTI-TAKEOVER PROVISIONS
Certain provisions of the Certificate could have an anti-takeover effect.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors of the Company and in the
policies formulated by the Board of Directors and to discourage certain types of
transactions, described below, which may involve an actual or threatened change
in control of the Company. The provisions are designed to reduce the
vulnerability of the Company to an unsolicited proposal for a takeover of the
Company that does not contemplate the acquisition of all of its outstanding
shares, or an unsolicited proposal for the restructuring or sale of all or part
of the Company. The provisions are also intended to discourage certain tactics
that may be used in proxy fights. The Board of Directors believes that, as a
general rule, such takeover proposals would not be in the best interests of the
Company and its stockholders. See "Risk Factors -- Anti-Takeover Matters."
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Classified Board of Directors The Certificate provides for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected each year.
The Board of Directors believes that a classified Board of Directors will
help to assure the continuity and stability of the Board of Directors and the
business strategies and policies of the Company as determined by the Board of
Directors, because the likelihood of continuity and stability in the composition
of the Company's Board of Directors and in the policies formulated by the Board
will be enhanced by staggered three-year terms.
The classified board provision could have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain control
of the Company, even through such an attempt might be beneficial to the Company
and its stockholders. In addition, the classified board provision could delay
stockholders who do not agree with the policies of the Board of Directors from
removing a majority of the Board for two years. See "-- Number of Directors;
Removal; Filling Vacancies."
Number of Directors; Removal; Filling Vacancies. The Certificate will
provide that the Board of Directors will consist of between 5 and 13 members,
the exact number to be fixed from time to time by resolution adopted by a
majority of the directors then in office. The Company will have 6 directors
prior to the Offering, and subsequent to the closing of the Offering expects to
add 3 Independent Directors. Further, subject to the Stockholders' Agreement and
the rights of the holders of any series of Preferred Stock then outstanding, the
Certificate authorizes only the Board of Directors to fill vacancies, including
newly created directorships. Accordingly, this provision could prevent a
stockholder from obtaining majority representation on the Board of Directors by
enlarging the Board of Directors and filling the new directorships with its own
nominees. Subject to the Stockholders' Agreement and the rights of the holders
of any series of Preferred Stock then outstanding, the Certificate also provides
that directors of the Company may be removed only for cause and only by the
affirmative vote of holders of a majority of the outstanding shares of voting
stock.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Certificate establishes an advance notice procedure for the
nomination, other than by or at the discretion of the Board of Directors or a
committee thereof, of candidates for election as director as well as for other
stockholder proposals to be considered at annual stockholders' meetings.
Notice of stockholder proposals and director nominations must be timely
given in writing to the Secretary of the Company prior to the meeting at which
the matters are to be acted upon or the directors are to be elected. To be
timely, notice must be received at the principal offices of the Company not less
than 60, nor more than 90, days prior to the meeting of stockholders; provided,
that in the event that less than 70 days' notice or prior public disclosure of
the date of the meeting is given or made, notice by the stockholder in order to
be timely must be so received not later than the close of business on the 10th
day following the day on which notice of the date of the meeting was mailed or
the day on which public disclosure was made, whichever first occurs.
The purpose of requiring advance notice is to afford the Board of Directors
an opportunity to consider the qualifications of the proposed nominees or the
merits of other stockholder proposals and, to the extent deemed necessary or
desirable by the Board of Directors, to inform stockholders about those matters.
Written Consent; Special Meetings of Stockholders. The Certificate
prohibits the taking of stockholder action by written consent without a meeting.
The Certificate provides that special meetings of the stockholders of the
Company may be called only by the Chairman, or a majority of the members of the
Board of Directors. These provisions will make it more difficult for
stockholders to take action opposed by the Board of Directors.
Amendment of Certain Provisions of the Certificate. The Certificate
generally requires the affirmative vote of the holders of at least 66 2/3% of
the outstanding voting stock in order to amend any provisions of the Certificate
concerning (i) the classified board, (ii) the amendment of Bylaws, (iii) any
proposed compromise or arrangement between the Company and its creditors, (iv)
the authority of stockholders to act by written consent, (v) the liability of
directors, (vi) certain mergers, consolidations and sales, leases and exchanges
of all or substantially of the Company's property and assets, (vii) the required
vote to amend the Certificate,
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(viii) the call of a special meeting of stockholders, (ix) stockholder proposals
concerning business to be conducted at an annual meeting of stockholders, (x)
director nominations by stockholders, (xi) what considerations the Board, a
committee of the Board and each director may take into account when discharging
their respective duties, (xii) indemnification of directors and (xiii)
authorization of the Board to pursue or take action with respect to transactions
that would result in a change of control of the Company. These voting
requirements will make it more difficult for minority stockholders to make
changes in the Certificate which could be designed to facilitate the exercise of
control over the Company. In addition, the requirement for approval by at least
a 66 2/3% stockholder vote will enable the holders of a minority of the voting
stock of the Company to prevent the holders of a majority or more of such
securities from amending such provisions of the Certificate.
In addition, the Stockholders' Agreement described below may have the
effect of delaying, deterring or preventing a takeover of the Company. See
"-- Stockholders' Agreement."
STOCKHOLDERS' AGREEMENT
Contemporaneously with the transactions comprising the Formation, the
Company will enter a stockholders' agreement (the "Stockholders' Agreement")
with various affiliates of Bedrock (for purposes of this section of the
Prospectus, the "Bedrock Stockholders") and certain Crow Family Members, the
Senior Executive Officers, WEL and Ms. Groenteman (the "Crow/Wyndham
Stockholders"), which imposes certain restrictions on the transfer of Common
Stock held by such stockholders (the "Stockholders") and entitles such
Stockholders to certain rights regarding corporate governance.
Pursuant to the Stockholders' Agreement, each of the Stockholders agree not
to sell, transfer, pledge or otherwise dispose of ("Transfer") its Common Stock
otherwise than as permitted by the provisions of the Stockholders' Agreement.
The Stockholders' Agreement permits the following Transfers: (i) open-market
sales not exceeding the volume limitations imposed by Rule 144 under the Act,
(ii) sales in the Offering and (iii) Transfers of Common Stock by WEL to the
direct or indirect owners of equity interests in WEL. The Stockholders'
Agreement also provides that any Stockholder may Transfer any Common Stock,
provided that the transferee agrees to be bound by the Stockholders' Agreement,
(a) to any wholly-owned affiliate of the selling Stockholder, (b) to certain
selling Stockholder family members, trusts or, if the selling stockholder is a
corporation, partnership or other entity, its equity owners, (c) to certain Crow
Family Members or their lineal descendants (the "Crow Interests"), (d) to the
Company or to any then-existing Crow/Wyndham Stockholder or to any full time
senior executive officer of the Company, (e) as a pledge to secure indebtedness,
provided that the pledgee agrees to offer a right of purchase, in the event of
any foreclosure of the pledge, to the other Stockholders in accordance with the
Stockholders' Agreement, and (f) to the owners of equity interests in a
Stockholder upon a partial or complete liquidation or dissolution of such
Stockholder.
The Stockholders' Agreement further provides that except with respect to a
permitted Transfer described above, the proposed Transfer by a Stockholder to a
third party of Common Stock shall be subject to a first right of purchase in
favor of the Stockholders in the other Stockholder Group (as defined below) at
the price and on the other terms of the proposed third-party sale. Wyndham has a
prior right to purchase Common Stock subject to a proposed Transfer if the
offered Common Stock represents all of the Common Stock held by the Crow
Interests, but only to the extent the purchase by the Bedrock Stockholders of
the Common Stock would cause the Bedrock Stockholders to own more than 40% of
the outstanding Common Stock. A similar first right of purchase requirement
applies in the event of third-party sales in connection with a shelf
registration or an underwritten public offering in which Stockholders propose to
sell Common Stock.
Under the Stockholders' Agreement, the Bedrock Stockholders and the
Crow/Wyndham Stockholders (each, a "Stockholder Group") are each entitled to
nominate a portion of the Company's Board of Directors, such portion to be based
upon the proportionate number of shares of Common Stock held by each Stockholder
Group and to be allocated as proportionately as practicable between Independent
Directors and other directors. Each Stockholder Group is also entitled to
nominate directors to serve on each of the Board's Committees on a similar
proportionate basis. Subject to certain conditions set forth in the
Stockholders' Agreement, each Stockholder Group agrees to use its best efforts
to elect the directors nominated in
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accordance with the Stockholders' Agreement and to remove directors under
certain circumstances. The Stockholders' Agreement further provides that as long
as the Crow Interests own at least 30% of the outstanding Common Stock
(excluding any shares acquired from a third party after the date of the
Stockholders' Agreement), the Chairman of the Board of Wyndham shall be a person
designated by the Crow Interests. In the event the Bedrock Stockholders own at
least 30% of the outstanding Common Stock (excluding any shares acquired from a
third party after the date of the Stockholders' Agreement ) and the Crow
Interests no longer own at least such percentage, the Chairman of the Board
shall be a person designated by the Bedrock Stockholders.
The Stockholders' Agreement terminates upon the earliest to occur of (a)
the sixth anniversary of the date of the Stockholders' Agreement, (b) the
Bedrock Stockholders and the Crow/Wyndham Stockholders collectively owning less
than 37.5% of the outstanding Common Stock of the Company, (c) the termination
of management contracts under the Investment Program below a specified level,
(d) certain changes in control of the Bedrock Stockholders, (e) the Bedrock
Stockholders owning less than 50% of the number of shares of Common Stock held
by them immediately following the Offering and (f) any distribution of Common
Stock by the Bedrock Stockholders to direct or indirect owners of equity
interests in the Bedrock Stockholders that results in such Common Stock being
held by anyone other than a Bedrock principal or an entity controlled by such a
principal.
REGISTRATION RIGHTS
Contemporaneously with the Formation (see "The Formation and the Financing
Plan -- The Formation"), the Company will enter into a registration rights
agreement with Crow Family Members, the Senior Executive Officers, WEL, Ms.
Groenteman and Bedrock (the "Registration Rights Agreement"), pursuant to which
the Company will agree, subject to certain limitations and under certain
circumstances, to register for sale any shares of Common Stock of the Company
(and other securities of the Company that are exercisable to purchase,
convertible into or exchangeable for shares of capital stock of the Company)
that are held by the parties thereto (collectively, the "Registrable
Securities"). All of the 15,316,667 shares of Common Stock issued in the
Formation of the Company will be Registrable Securities. The Registration Rights
Agreement provides that any holder of Registrable Securities may require the
Company upon written notice to register for sale such Registrable Securities (a
"Demand Registration"), provided that the total amount of Registrable Securities
to be included in the Demand Registration has a market value of at least $20
million and provided that notice is not given prior to six months after the
effective date of the previous Demand Registration. If Registrable Securities
are going to be registered by the Company pursuant to a Demand Registration, the
Company must provide written notice to the other holders of Registrable
Securities and permit them to include any or all Registrable Securities that
they hold in the Demand Registration, provided that the amount of Registrable
Securities requested to be registered may be limited by the underwriters in an
underwritten offering based on such underwriters' determination that inclusion
of the total amount of Registrable Securities requested for registration would
materially and adversely affect the success of the offering. Upon notice of a
Demand Registration, the Company is required to file a Registration Statement
within 60 days of the date on which notice is given, although the Company may
postpone the filing for up to 90 days under certain circumstances. Subject to
the conditions stated or referred to above, the holders of Registrable
Securities may request an unlimited number of Demand Registrations. Crow Family
Members, the Senior Executive Officers, Ms. Groenteman and Bedrock agree not to
exercise any Demand Registration rights for a period of six months from the date
of execution of the Registration Rights Agreement. WEL has a one time right to
require the Company to register the Registrable Securities that it holds in
connection with the distribution of the Registrable Securities to the WEL
participants (the "WEL Registration"). Other holders of Registrable Securities
may not join the WEL Registration. A WEL Registration is not a Demand
Registration and it is not subject to the restrictions on a Demand Registration,
including the $20 million market value requirement.
The Registration Rights Agreement also provides that, subject to certain
exceptions, in the event the Company proposes to file a registration statement
with respect to an offering of any class of equity securities, other than a WEL
Registration and certain other types of registrations, the Company will offer
the holders of Registrable Securities the opportunity to register the number of
Registrable Securities they request to include
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(the "Piggyback Registration"), provided that the amount of Registrable
Securities requested to be registered may be limited by the underwriters in an
underwritten offering based on such underwriters' determination that inclusion
of the total amount of Registrable Securities requested for registration would
materially and adversely affect the success of the offering. The Company is
generally required to pay all of the expenses of Demand Registrations, the WEL
Registration and Piggyback Registrations, other than underwriting discounts and
commissions. In the event of a Demand Registration within one year of the date
of the Registration Rights Agreement, the holders of the Registrable Securities
being registered must pay up to $250,000 ($125,000 in the case of a shelf
registration) of such expenses. Crow Family Members, the Senior Executive
Officers, WEL and Bedrock agree to waive their rights to include shares of
Common Stock in the Offering.
As required by the terms of the GE Credit Agreement, the Company has
entered into a registration rights agreement with General Electric based
generally on the terms specified in Section 10.5 of the GE Credit Agreement (the
"GE Registration Rights Agreement"). The GE Registration Rights Agreement
provides General Electric with a one time right, exercisable during the
eighteen-month period starting upon the expiration of the six-month period
immediately following the effective date of the Offering, to effect a demand
registration of the estimated 537,634 shares of Common Stock of the Company that
it holds. The GE Registration Rights Agreement also provides General Electric
with certain piggyback registration rights during the 18 month period, although
the securities requested to be registered may be limited or excluded by the
underwriters in an underwritten offering based on such underwriters'
determination that the inclusion of such securities (or a portion thereof) would
adversely affect the marketing of the securities to be sold by the Company. The
demand registration rights will be exercisable only if the shares of Common
Stock to be registered have a market value of at least $1.0 million.
Registration expenses (other than underwriting discounts and commissions)
relating to a piggyback registration will be borne solely by the Company and
one-half of the registration expenses relating to a demand registration will be
paid by General Electric, up to $25,000.
TRADING MARKET AND TRANSFER AGENT
No established trading market for the Common Stock existed prior to the
Offering. The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "WYN," subject to official notice of issuance. The
Company's registrar and transfer agent is Chemical Mellon Shareholder Services
L.L.C.
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CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. STOCKHOLDERS
The following is a general discussion of certain U.S. federal tax
consequences of the ownership and disposition of a share of Common Stock by a
non-U.S. holder. For purposes of this discussion, a non-U.S. holder is a person
or entity that, for U.S. federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership, or a non-resident
fiduciary of a foreign estate or trust. This discussion does not consider any
specific facts or circumstances that may apply to a particular non-U.S. holder
and does not address state, local or non-U.S. tax considerations. Furthermore,
the following discussion is based on current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), the regulations promulgated thereunder
("Treasury Regulations") and public administrative and judicial interpretations
of the Code and Treasury Regulations as of the date hereof, all of which are
subject to change, which changes could be applied retroactively.
Proposed Treasury Regulations were issued on April 15, 1996 (the "Proposed
Regulations") which, if adopted, would affect the United States taxation of
dividends paid to a non-U.S. holder of Common Stock. The Proposed Regulations
are generally proposed to be effective with respect to dividends paid after
December 31, 1997, subject to certain transition rules. The discussion below is
not intended to be a complete discussion of the provisions of the Proposed
Regulations.
Each prospective investor is urged to consult its own tax adviser with
respect to the U.S. federal (including the effect of the Proposed Regulations if
adopted), state and local tax consequences of owning and disposing of a share of
Common Stock, as well as any tax consequences arising under the laws of any
other taxing jurisdiction.
U.S. INCOME AND ESTATE TAX CONSEQUENCES
Dividends. It is not currently contemplated that the Company will pay
dividends on the Common Stock in the foreseeable future. However, in the event a
dividend is paid by the Company, such dividend will be subject to a U.S.
withholding tax at a rate of 30% ("Withholding Tax") as reduced or eliminated by
applicable U.S. income tax treaty, unless the dividend is effectively connected
with the conduct of a trade or business in the United States by the non-U.S.
holder.
A dividend that is effectively connected with the conduct of a trade or
business in the United States by the non-U.S. holder of Common Stock or, if a
tax treaty applies, is attributable to a United States permanent establishment
maintained by such non-U.S. holder, will be exempt from the Withholding Tax
provided certain certification and disclosure requirements are met. Instead, the
non-U.S. holder will be subject to U.S. federal income tax in the same manner as
a comparable United States holder on such holder's net income which is
effectively connected with its trade or business in the United States, or if a
tax treaty applies, is attributable to a United States permanent establishment.
Additionally, non-U.S. holders which are corporations may be subject to the
branch profits tax at a rate of 30% of the non-U.S. corporation's effectively
connected earnings and profits (subject to certain adjustments) ("Branch Profits
Tax") as reduced or eliminated by applicable U.S. income tax treaty.
According to Treasury Regulations and administrative interpretations
thereof, for purposes of the Withholding Tax and application of any reduction or
elimination of the Withholding Tax pursuant to applicable treaty, dividends paid
to an address outside the United States are considered paid to a non-U.S. holder
who is a resident of the country of address, unless the Company has definite or
actual knowledge to the contrary.
Conversely, under the Proposed Regulations, to obtain a reduced rate of
withholding under a treaty, a non-U.S. holder would generally be required to
provide a valid Internal Revenue Service Form W-8 certifying such non-U.S.
holder's entitlement to benefits under a treaty. The Proposed Regulations also
provide special rules to determine whether, for purposes of determining the
applicability of a tax treaty, dividends paid to a non-U.S. holder that is an
entity should be treated as paid to the entity or those persons holding an
interest in that entity.
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Gain on Disposition of Common Stock. A non-U.S. holder of Common Stock
generally will not be subject to U.S. federal income tax on any gain recognized
on the disposition of Common Stock unless: (i) subject to the exception
discussed below, the Company is or has been a "United States real property
holding corporation" (a "USRPHC") within the meaning of Section 897(c)(2) of the
Code at any time within the shorter of the five-year period preceding such
disposition or such holder's holding period (the "Required Holding Period");
(ii) the gain is effectively connected with the conduct of a trade or business
within the United States by the non-U.S. holder or, if a United States income
tax treaty applies, is attributable to a United States permanent establishment
maintained by the non-U.S. holder; (iii) the non-U.S. holder is either (a) an
individual who holds the Common Stock as a capital asset, is present in the
United States for 183 days or more in the taxable year of the disposition and
has a "tax home" (within the meaning of Section 911(d)(3) of the Code) in the
United States or (b) the gain is attributable to an office or other fixed place
of business maintained in the United States by such non-U.S. holder; or (iv) the
non-U.S. holder is subject to U.S. federal income tax pursuant to Code
provisions applicable to certain expatriates.
If a non-U.S. holder falls under clause (ii) above, such holder will be
subject to U.S. federal income tax on its taxable income effectively connected
with its trade or business in the United States in the same manner as a
comparable United States holder. In addition, if the non-U.S. holder is a
corporation, it may under certain circumstances be subject to the Branch Profits
Tax, as reduced or eliminated by a United States income tax treaty. If the
non-U.S. holder falls under clause (iii) above, he or she will be subject to a
flat 30% tax on the gain derived from the sale which may be offset by U.S.
capital losses (notwithstanding the fact that he or she is not considered a
resident of the United States). If the non-U.S. holder falls under clause (iv)
above, he or she will be subject to U.S. federal income tax on his or her U.S.
sourced income in the same manner as a United States individual, unless the U.S.
federal income tax liability of such individual would be greater if computed as
if the individual was not a resident of the United States.
A domestic corporation will generally be classified as a USRPHC if the fair
market value of its United States real property interests equals or exceeds 50%
of the sum of the fair market value of its worldwide real property interests and
its other assets used or held for use in a trade or business. Although not
entirely free from doubt, it is anticipated that the Company will be a USRPHC.
However, if the Common Stock is considered to be regularly traded on an
established securities market, then non-U.S. holders of Common Stock will not be
subject to U.S. federal income tax, or withholding in respect of such tax, on
gain from a sale or other disposition of Common Stock by reason of the Company's
USRPHC status if such holder does not own, actually or constructively, more than
5% of the Common Stock outstanding at any time during the Required Holding
Period. Under one interpretation of the temporary Treasury Regulations defining
what it means to be regularly traded on an established securities market, it is
expected that the Common Stock will be considered to be regularly traded on an
established securities market.
Under this interpretation, if the Company is or has been a USRPHC within
the Required Holding Period and if a non-U.S. holder owned more than 5% of the
Common Stock during such period, such non-U.S. holder will be subject to U.S.
federal income tax on the gain recognized on the sale or other disposition of
the Common Stock in the same manner as a comparable United States person (the
"FIRPTA Tax"). Generally, as a means of collecting the FIRPTA Tax, the Code
requires any transferee of stock in a USRPHC to deduct and withhold an amount
equal to 10% of the amount realized from the sale or other disposition. The
amount withheld is credited against the U.S. federal income tax liability of the
non-U.S. holder.
However, it is possible to read these temporary Treasury Regulations as
providing that the Common Stock will not be "regularly traded" for any calendar
quarter during which 100 or fewer persons (treating related persons as one
person) in the aggregate own 50% or more of the Common Stock. In the event that
this interpretation is determined to be correct and if the Company is a USRPHC
during the Required Holding Period, a non-U.S. Holder (without regard to its
ownership percentage of Common Stock) will be subject to the FIRPTA Tax with
respect to gain realized (subject to certain adjustments) on any sale or other
disposition of Common Stock that occurs within a calendar quarter during which
50% or more of the Common Stock is so owned as well as to the 10% withholding
tax described above.
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<PAGE> 131
NON-U.S. HOLDERS OF COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNING COMMON STOCK.
Federal Estate Tax. Shares of Common Stock owned or treated as owned by an
individual non-U.S. holder at the time of his or her death will be includible in
his or her estate for United States estate tax purposes unless an applicable
United States estate tax treaty provides otherwise.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Dividends. The Company must report annually to the Internal Revenue Service
and to each non-U.S. holder the amount of dividends paid to and the U.S. federal
income tax withheld, if any, with respect to such holder. These information
reporting requirements apply regardless of whether withholding was reduced by an
applicable tax treaty. Under certain circumstances, copies of these information
returns may be made available under the provisions of a specific treaty or
agreement with the tax authorities in the country in which the non-U.S. holder
resides. Dividends that are subject to the Withholding Tax and dividends that
are effectively connected with the conduct of a trade or business in the United
States by a non-U.S. holder (provided certain certification and disclosure
requirements are met) are exempt from backup withholding of U.S. federal income
tax. Therefore, backup withholding generally will not apply to dividends paid on
shares of Common Stock to a non-U.S. holder at an address outside the United
States.
The Proposed Regulations will, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations provide certain
presumptions under which non-U.S. holders may be subject to backup withholding
in the absence of required certifications.
Disposition of Common Stock. Information reporting and backup withholding
imposed at a rate of 31% will apply to the proceeds of a disposition of Common
Stock paid to or through a United States office of a broker unless the disposing
holder certifies that: (i) it is neither a citizen or resident of the U.S.; (ii)
it has not been and, at the time the certification is made, does not reasonably
expect to be present in the U.S. for 183 or more days during the calendar year;
and (iii) it is not and, at the time the certification is made, does not
reasonably expect to be engaged in a trade or business in the U.S. with respect
to which any gain derived from transactions effected through the broker during
the calendar year will be effectively connected. In lieu of certifying (ii) and
(iii), the non-U.S. holder may certify that it is the beneficiary of a United
States income tax treaty under which the gain derived from transactions effected
through the broker are exempt from U.S. federal income tax.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the Internal
Revenue Service.
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<PAGE> 132
UNDERWRITING
Under the terms and subject to the conditions contained in the U.S.
Underwriting Agreement dated the date hereof, each of the underwriters for the
United States and Canadian offering of Common Stock named below (the "U.S.
Underwriters"), for whom Smith Barney Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, Montgomery Securities and BT Securities Corporation are
acting as the Representatives (the "Representatives"), has severally agreed to
purchase, and the Company has agreed to sell to each U.S. Underwriter, shares of
Common Stock which equal the number of shares set forth opposite the name of
such U.S. Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Smith Barney Inc..........................................................
Donaldson, Lufkin & Jenrette Securities Corporation.......................
Montgomery Securities.....................................................
BT Securities Corporation.................................................
---------
Total........................................................... 2,680,000
=========
</TABLE>
Under the terms and subject to the conditions contained in the
International Underwriting Agreement dated the date hereof, each of the managers
of the concurrent international offering of Common Stock named below (the
"Managers"), for whom Smith Barney Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, Montgomery Securities and Bankers Trust International PLC are
acting as lead managers (the "Lead Managers"), has severally agreed to purchase,
and the Company has agreed to sell to each Manager, shares of Common Stock which
equal the number of shares set forth opposite the name of such Manager below:
<TABLE>
<CAPTION>
NUMBER OF
MANAGER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Smith Barney Inc..........................................................
Donaldson, Lufkin & Jenrette Securities Corporation.......................
Montgomery Securities.....................................................
Bankers Trust International PLC...........................................
-------
Total........................................................... 670,000
=======
</TABLE>
The U.S. Underwriting Agreement and the International Underwriting
Agreement provide that the obligations of the several U.S. Underwriters and the
several Managers, respectively, to pay for and accept delivery of the shares are
subject to approval of certain legal matters by counsel and to certain other
conditions. The U.S. Underwriters and the Managers are obligated to take and pay
for all shares of Common Stock offered in the Offering (other than those covered
by the over-allotment option described below) if any such shares are taken.
The U.S. Underwriters and the Managers initially propose to offer part of
the Common Stock directly to the public at the initial public offering price set
forth on the cover page of this Prospectus and part to certain dealers at a
price that represents a concession not in excess of $ per share below
the initial public offering price. The U.S. Underwriters and the Managers may
allow, and such dealers may reallow, a concession not in excess of $
per share to the other U.S. Underwriters or Managers, respectively, or to
certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed by the U.S. Underwriters and the
Managers.
The Company has granted an option, exercisable for 30 days from the date of
this Prospectus, to purchase up to an additional 502,500 shares of Common Stock
to the U.S. Underwriters at the initial public offering price set forth on the
cover page of this Prospectus less underwriting discounts and commissions. The
U.S. Underwriters may exercise such option to purchase additional shares solely
for the purpose of covering over-allotments, if any, incurred in connection with
the sale of the shares offered hereby. To the extent such option is exercised,
each U.S. Underwriter will become obligated, subject to certain conditions, to
purchase
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<PAGE> 133
approximately the same percentage of such additional shares as the number of
shares set forth opposite such U.S. Underwriter's name in the second preceding
table bears to the total number of shares in such table.
The Company and certain owners of the Assigned Businesses have agreed to
indemnify the U.S. Underwriters and Managers, and the U.S. Underwriters and
Managers have agreed to indemnify the Company, against certain liabilities,
including liabilities under the Securities Act.
The Company and all of its existing stockholders have agreed that, subject
to certain exceptions, for a period of 180 days from the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock or any securities convertible into, or exercisable or exchangeable for,
shares of Common Stock. However, the Senior Executive Officers will be permitted
to pledge Common Stock owned by them within such 180 day period to Smith Barney
in connection with margin loan transactions into which Smith Barney and certain
Senior Executive Officers may enter subsequent to the completion of the
Offerings. The proceeds of such loans would be used by such Senior Executive
Officers to repay to the Company all or a part of their outstanding indebtedness
under the DAB Notes. There can be no assurance that such margin loans will be
made. In the event that Smith Barney were to foreclose on the shares of Common
Stock securing any such loans within such 180 day period, Smith Barney would
attempt to resell such Common Stock, and any such resale would not be subject to
such lock-up provisions.
The U.S. Underwriters and the Managers have entered into an Agreement
Between U.S. Underwriters and Managers pursuant to which each U.S. Underwriter
has agreed that, as part of the distribution of the 2,680,000 shares offered in
the United States and Canadian offering, (i) it is not purchasing any such
shares for the account of anyone other than a United States or Canadian Person
(as defined below) and (ii) it has not offered or sold, and will not offer,
sell, resell or deliver, directly or indirectly, any of such shares or
distribute any prospectus relating to the United States and Canadian offering
outside the United States or Canada or to anyone other than a United States or
Canadian Person. In addition, each Manager has agreed that as part of the
distribution of the 670,000 shares offered in the international offering, (i) it
is not purchasing any such shares for the account of any United States or
Canadian Person and (ii) it has not offered or sold, and will not offer, sell,
resell or deliver, directly or indirectly, any of such shares or distribute any
prospectus relating to the international offering in the United States or Canada
or to any United States or Canadian Person. Each Manager has also agreed that it
will offer to sell shares only in compliance with all relevant requirements of
any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the U.S. Underwriting Agreement, the
International Underwriting Agreement and the Agreement Between U.S. Underwriters
and Managers, including: (i) certain purchases and sales between the U.S.
Underwriters and the Managers, (ii) certain offers, sales, resales, deliveries
or distributions to or through investment advisors or other persons exercising
investment discretion, (iii) purchases, offers or sales by a U.S. Underwriter
who is also acting as Manager or by a Manager who is also acting as a U.S.
Underwriter and (iv) other transactions specifically approved by the
Representatives and the Lead Managers. As used herein, "United States or
Canadian Person" means any resident or national of the United States or Canada,
any corporation, partnership or other entity created or organized in or under
the laws of the United States or Canada or any estate or trust the income of
which is subject to United States or Canadian income taxation regardless of the
source of its income (other than the foreign branch of any U.S. or Canadian
Person), and includes any United States or Canadian branch of a person other
than a U.S. or Canadian Person.
Any offer of shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the relevant province of Canada in
which such offer is made.
Each Manager has agreed that (i) it has not offered or sold and during the
period of six months from the date hereof will not offer or sell any shares to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995 (the "Regulations"); (ii) it has complied and will
comply with all applicable provisions of the Financial
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<PAGE> 134
Services Act 1986 and the Regulations with respect to anything done by it in
relation to the shares in, from or otherwise involving the United Kingdom; and
(iii) it has only issued or passed on and will only issue or pass on to any
person in the United Kingdom any document received by it in connection with the
offer of the shares if that person is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom such document may otherwise lawfully be issued or
passed on.
No action has been or will be taken in any jurisdiction by the Company or
the Managers that would permit an offering to the general public of the shares
offered in the Offering in any jurisdiction other than the United States.
Purchasers of the shares offered in the Offering may be required to pay
stamp taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the offering price set forth on the cover
page hereof.
Pursuant to the Agreement Between U.S. Underwriters and Managers, sales may
be made between the U.S. Underwriters and the Managers of such number of shares
as may be mutually agreed. The price of any shares so sold shall be the public
offering price as then in effect for shares being sold by the U.S. Underwriters
and the Managers, less all or any part of the selling concession, unless
otherwise determined by mutual agreement. To the extent that there are sales
between the U.S. Underwriters and the Managers pursuant to the Agreement between
U.S. Underwriters and Managers, the number of shares initially available for
sale by the U.S. Underwriters and by the Managers may be more or less than the
number of shares appearing on the front cover of this Prospectus.
Prior to the Offering, there has not been any public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
shares of Common Stock included in the Offering has been determined by
negotiations between the Company and the Representatives. Among the factors
considered in determining such price were the history of and prospects for the
Company's business and the industry in which it competes, an assessment of the
Company's management and the present state of the Company's development, the
past and present revenues and earnings of the Company, the prospects for growth
of the Company's revenues and earnings, the current state of the economy in the
United States and the current level of economic activity in the industry in
which the Company competes and in related or comparable industries, and
currently prevailing conditions in the securities markets, including current
market valuations of publicly traded companies which are comparable to the
Company.
The Common Stock has been approved for listing on the New York Stock
Exchange, subject to official notice of issuance. In order to meet one of the
requirements for listing the Common Stock on the New York Stock Exchange, the
U.S. Underwriters and Managers have undertaken to sell lots of 100 or more
shares to a minimum of 2,000 beneficial holders.
BT Securities Corporation and Bankers Trust International PLC are
affiliates of Bankers Trust, from which the Company has received a commitment
(subject to certain conditions) to provide or arrange for the Revolving Credit
Facility, and with respect to which Bankers Trust has received and will receive
customary compensation. See "Description of Indebtedness -- Revolving Credit
Facility."
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Locke Purnell Rain Harrell (A
Professional Corporation), Dallas, Texas. Davis Polk & Wardwell, New York, New
York, will pass upon certain legal matters for the U.S. Underwriters and
Managers.
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<PAGE> 135
EXPERTS
The financial statements and schedules included in this Prospectus and
elsewhere in the registration statement to the extent and for the periods
indicated in their reports have been audited by Coopers & Lybrand L.L.P.
independent accountants, and are included in this Prospectus in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form
S-1 (as amended and together with all exhibits and schedules thereto, the
"Registration Statement") under the Securities Act of 1933 with respect to the
shares of Common Stock offered in the Offering. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement. For further information
with respect to the Company and the Common Stock, reference is made to the
Registration Statement. Statements contained in this Prospectus concerning the
provisions of any contract, agreement, or other documents are not necessarily
complete. With respect to each contract, agreement, or other document filed as
an exhibit to the Registration Statement, reference is made to the exhibit for
the complete contents of the exhibit, and each statement concerning its
provisions is qualified in its entirety by such reference. The Registration
Statement may be inspected and copied at the offices of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at its regional offices at 7
World Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, 14th Floor, Chicago, Illinois 60661-2551. Copies of such
materials may also be obtained by mail at prescribed rates from the Public
Reference Section of the Commission at its principal office at 450 Fifth Street,
N.W., Washington, D.C. 20549.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year.
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<PAGE> 136
GLOSSARY
Unless the context otherwise requires, the following capitalized terms
shall have the meanings set forth below for the purposes of this Prospectus:
"Act" means the Securities Act of 1933, as amended.
"ADR" means total room revenues divided by the total number of rooms
occupied.
"Assigned Businesses" means, collectively, the old Management Company, six
Wyndham brand hotels, leasehold interests relating to the GHALP Lease and an
additional leased hotel and a contract to purchase a single additional hotel,
each of which will be transferred to the Company pursuant to the Formation.
"Assigned Real Property" means, collectively, (i) the six Wyndham brand
hotels to be transferred to the Company in the Formation, (ii) leasehold
interests in the GHALP Properties and (iii) an additional leasehold interest to
be transferred to the Company.
"Bankers Trust" means Bankers Trust Company, the agent bank and lender
under the Revolving Credit Facility.
"Bedrock" means Hampstead affiliates that own 16 hotels managed by the
Company, together with certain affiliates.
"Bedrock Agreements" means, collectively, the Investment Agreement and the
Option Agreement entered into by the Company and Bedrock in May 1994 pursuant to
which, as amended, the Investment Program was established.
"Bedrock Contribution" means the $10.0 million contribution to the Company
from Bedrock pursuant to the Bedrock Exchange Agreement.
"Bedrock Exchange Agreement" means the agreement entered into on March 10,
1996 among the Company and Bedrock, pursuant to which Bedrock will transfer to
the Company the Bedrock Contribution and the Bedrock Options in exchange for
2,367,890 shares of Common Stock.
"Bedrock Options" means the options to purchase up to a 37.5% limited
partnership interest in the Old Management Company granted by the Company to
Bedrock under the Option Agreement.
"CF Securities" means CF Securities, L.P., a Texas limited partnership
owned by Crow Family Members.
"Change of Control" means, for purposes of the Notes, the occurrence of (i)
the sale of a majority of the fair market value of the assets of the Company, on
a consolidated basis, (ii) any person or group not affiliated with the Company's
current stockholders becoming the beneficial owner of more than 45% of the total
voting power of the Company or (iii) certain changes in a majority of the Board
of Directors of the Company during a two-year period.
"CHMC" means Caribbean Hotel Management Company.
"CHMC Agreement" means the agreement between CHMC and the Company pursuant
to which the Company acquired in 1988 from CHMC a number of management
agreements relating to certain Wyndham brand hotels then in operation and, in
partial consideration therefor, the Company agreed to pay CHMC 16% of the
revenues derived from such management agreements.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Company" means, except where the context otherwise requires, Wyndham Hotel
Corporation, a Delaware corporation, and its predecessors and combined
subsidiaries.
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<PAGE> 137
"Comparable Hotels" means the 30 Wyndham brand hotels that have been
operated by the Company since January 1, 1993.
"Crow Family Members" means Mr. and Mrs. Trammell Crow, various descendants
of Mr. and Mrs. Trammell Crow, and various corporations, partnerships, trusts
and other entities beneficially owned or controlled by such persons.
"DAB Notes" means the outstanding principal and accrued interest severally
owing by the Senior Executive Officers and WEL to WFLP.
"Debt Offering" means the public offering of $100,000,000 aggregate
principal amount of % Senior Subordinated Notes due 2006.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financing Plan" means the financing plan the Company will implement as set
forth under "The Formation and the Financing Plan -- The Financing Plan."
"Formation" means the series of transactions related to the formation of
the Company as set forth under "The Formation and the Financing Plan -- The
Formation -- Formation Transactions."
"Formation Agreements" means certain agreements entered into in March 1996
among the Company and the current owners of direct and indirect interests in the
Assigned Businesses, which collectively provide for the transactions related to
the Formation.
"GE Credit Agreement" means the credit agreement between the Company and
General Electric relating to the Company's current revolving credit facility.
"GE Option" means General Electric's option to purchase from the Company at
the initial public offering price (less underwriting discounts and commissions)
up to the number of shares of Common Stock that is the quotient of an amount
estimated by the Company to be $7.5 million (one-half of the estimated $15.0
million of indebtedness that will be outstanding under the GE Credit Agreement
at the closing of the Offering) divided by the initial public offering price
(less underwriting discounts and commissions).
"General Electric" means General Electric Pension Trust.
"GHALP" means Garden Hotel Associates LP.
"GHALP Lease" means one or more long-term leases that will be entered by
GHALP II and HPT with respect to the GHALP Properties.
"GHALP Properties" means the 11 Wyndham Garden Hotels owned by GHALP that
will be sold by their current owners to HPT prior to the consummation of the
Offering.
"Hampstead" means the Hampstead Group L.L.C.
"Hotel Partnership" means any partnership owning a Wyndham hotel in which
Crow Family Members, Bedrock or the Senior Executive Officers have an interest.
"HPT" means Hospitality Properties Trust (including its subsidiaries), a
publicly traded REIT.
"Incentive Plan" means the Company's 1996 Long Term Incentive Plan pursuant
to which 2,133,811 shares of Common Stock have been reserved for issuance in
connection with stock options, stock appreciation rights and restricted stock
that may be granted thereunder.
"Indenture" means the indenture dated as of , 1996 among the
Company, certain subsidiaries of the Company (as guarantors) and the Trustee,
under which the Notes will be issued.
"Independent Directors" means directors of the Company who are not
affiliated with the Company.
"Investment Program" means the development fund organized by Bedrock and
certain lenders totalling approximately $335 million to acquire hotels or hotel
management companies and to make related hotel
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<PAGE> 138
investments that are approved by both the Company and Bedrock as set forth under
"Certain Relationships and Transactions -- Bedrock Investment Program."
"Mados Wyndham Hotel" means the hotel operated by the Madoses in Manhattan,
using the "Wyndham" mark.
"Madoses" means John and Suzanne Mados, the managers and lessees of the
Mados Wyndham Hotel.
"Notes" means the $100.0 million of % Senior Subordinated Notes due
2006 that the Company intends to offer through the Debt Offering.
"Offering" means the public offering of 3,350,000 shares of Common Stock of
the Company contemplated hereby.
"Offerings" means the Offering and the Debt Offering.
"Old Management Company" means Wyndham Hotel Company Ltd., which, directly
and through its subsidiaries, currently manages and franchises the Company's
Portfolio of hotels.
"Option Agreement" means the Option Agreement entered into May 1994 by the
Company and Bedrock pursuant to which the Company granted the Bedrock Options.
"Portfolio" means the 65 hotels operated by the Company and the 3 hotels
franchised by the Company as of April 15, 1996.
"Redevelopment Program" means the program instituted by the Company to
redevelop certain acquired hotels in connection with their conversion to the
Wyndham Garden Hotel brand as set forth under "Business -- Growth Strategy -- I.
Primary Growth Opportunities -- Wyndham Garden Hotel Redevelopment and
Conversion Program."
"Registration Rights Agreement" means the registration rights agreement
that will be entered into contemporaneously with the Formation among the
Company, certain Crow Family Members that will own Common Stock, the Senior
Executive Officers, WEL, Susan T. Groenteman and Bedrock, pursuant to which the
Company will agree, subject to certain limitations and under certain
circumstances, to register for sale shares of Common Stock held by such persons
and entities.
"Registration Statement" means the registration statement on Form S-1 of
which this Prospectus forms a part, as amended and together with all exhibits
and schedules thereto, filed by the Company with the Commission.
"REIT" means a real estate investment trust as defined in the Code.
"Revolving Credit Facility" means the $100.0 million revolving credit
facility the Company intends to enter into with Bankers Trust, as such may be
amended, supplemented, extended, renewed or modified from time to time
including, without limitation, by adding parties thereto or increasing the
commitment thereunder.
"REVPAR" means room revenues derived by total available rooms.
"Senior Executive Officers" means James D. Carreker, Leslie V. Bentley,
Eric A. Danziger, Anne L. Raymond and Stanley M. Koonce, Jr.
"Stockholders' Agreement" means the stockholders' agreement that will be
entered into contemporaneously with the Formation among the Company, certain
Crow Family Members that will own Common Stock, the Senior Executive Officers,
WEL, Susan T. Groenteman and Bedrock which imposes certain restrictions on the
transfer of Common Stock held by such persons and entities and entitles them to
certain rights regarding corporate governance as set forth under "Description of
Capital Stock -- Stockholders' Agreement.
"Trustee" means Bank One, Columbus, N.A., the trustee under the Indenture.
"Upscale" means the segment of the lodging industry classified as such by
Smith Travel Research in its industry reports, which consists of hotels with
average daily room rates (total revenues divided by the total
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<PAGE> 139
number of rooms occupied) between the 70th and 85th percentile of the average
daily room rates of all hotels in the U.S. markets in which the Company's
Portfolio hotels operate.
"Vinings Wyndham Garden Hotel" means the Wyndham Garden Hotel - Vinings,
located in the Atlanta metropolitan area.
"WEL" means Wyndham Employees Ltd., an equity participation plan
established by the Company for certain key employees.
"WFLP" means Wyndham Finance Limited Partnership, a Texas limited
partnership that prior to the Formation owned the DAB Notes.
"Wyndham" means, except where the context otherwise requires, Wyndham Hotel
Corporation, a Delaware corporation, and its predecessors and combined
subsidiaries.
"Wyndham Garden Hotels" means mid-size hotels operated by Wyndham in
suburban markets under the name "Wyndham Garden(R)."
"Wyndham Hotels" means large upscale hotels operated or franchised by the
Company in urban markets under the Wyndham brand.
"Wyndham Resorts" means the six Wyndham brand resort hotels included in the
Portfolio.
"1995 First Quarter" means the three months ended March 31, 1995.
"1996 First Quarter" means the three months ended March 31, 1996.
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<PAGE> 140
WYNDHAM HOTEL CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WYNDHAM HOTEL CORPORATION -- COMBINED FINANCIAL STATEMENTS:
Report of Independent Accountants................................................... F-2
Combined Balance Sheets at December 31, 1994, 1995 and March 31, 1996 (unaudited)... F-3
Combined Statements of Income for the years ended December 31, 1993, 1994 and 1995
and the three months ended March 31, 1995 and 1996 (unaudited)................... F-4
Combined Statements of Partners' Capital for the years ended December 31, 1993, 1994
and 1995 and the three months ended March 31, 1996 (unaudited)................... F-5
Combined Statements of Cash Flows for the years ended December 31, 1993, 1994 and
1995 and the three months ended March 31, 1995 and 1996 (unaudited).............. F-6
Notes to Combined Financial Statements.............................................. F-7
GARDEN HOTELS ASSOCIATES LIMITED PARTNERSHIP
Report of Independent Accountants................................................... F-22
Balance Sheets at December 31, 1994, 1995 and March 31, 1996 (unaudited)............ F-23
Statements of Income for the years ended December 31, 1993, 1994 and 1995 and the
three months ended March 31, 1995 and 1996 (unaudited)........................... F-24
Statements of Partners' Capital for the years ended December 31, 1993, 1994 and 1995
and the three months ended March 31, 1996 (unaudited)............................ F-25
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and
the three months ended March 31, 1995 and 1996 (unaudited)....................... F-26
Notes to Financial Statements....................................................... F-27
</TABLE>
F-1
<PAGE> 141
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners and Shareholders
Wyndham Hotel Corporation:
We have audited the accompanying combined balance sheets of Wyndham Hotel
Corporation (as identified in Note 1) (collectively the "Company") as of
December 31, 1994 and 1995 and the related combined statements of income,
partners' capital and cash flows for each of the three years in the period ended
December 31, 1995. 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Company
as of December 31, 1994 and 1995 and the combined results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
March 8, 1996
F-2
<PAGE> 142
WYNDHAM HOTEL CORPORATION
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1994 1995 1996
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 3,619,481 $ 4,159,617 $ 6,084,420
Cash, restricted................................. 271,233 3,052,920 2,932,921
Accounts receivable, less allowance of $146,000
in 1994, $267,000 in 1995 and $368,000 at
March 31, 1996 (unaudited).................... 9,261,314 10,838,061 13,623,182
Due from affiliates.............................. 3,447,379 3,584,196 2,438,362
Inventories...................................... 1,043,055 1,020,185 1,062,044
Other............................................ 730,231 769,147 529,892
------------ ------------ ------------
Total current assets..................... 18,372,693 23,424,126 26,670,821
Investment in an affiliate's hotel partnership..... 2,968,710 2,596,954 3,052,355
Notes and other receivables from affiliates........ -- 7,673,690 7,709,262
Notes receivable................................... -- 2,450,587 2,450,587
Property and equipment, net........................ 89,425,811 87,603,850 86,846,677
Management contract costs, net..................... 1,181,274 7,578,968 7,299,226
Other.............................................. 1,327,866 2,074,898 4,541,630
------------ ------------ ------------
Total assets............................. $113,276,354 $133,403,073 $138,570,558
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses............ $ 8,921,991 $ 8,453,755 $ 9,210,678
Accounts payable and accrued expenses due to
affiliates.................................... 4,036,286 1,578,095 900,363
Deposits......................................... 1,314,767 1,666,892 952,415
Deposits from affiliates......................... 253,000 354,000 316,000
Current portion of long-term debt and capital
lease obligation.............................. 4,938,966 16,035,630 15,966,306
Due to affiliates................................ 1,036,662 2,591,676 2,337,876
------------ ------------ ------------
Total current liabilities................ 20,501,672 30,680,048 29,683,638
------------ ------------ ------------
Payable to affiliate............................... 4,979,664 2,626,656 1,767,985
Payable to minority interest....................... 202,920 218,052 222,052
Long-term debt and capital lease obligation........ 79,222,084 74,942,688 76,461,229
------------ ------------ ------------
84,404,668 77,787,396 78,451,266
------------ ------------ ------------
Minority interest.................................. 6,653,971 7,378,386 7,971,623
Commitments and contingencies
Partners' capital:
Receivables from affiliates...................... (2,205,288) (2,303,350) (2,374,601)
Partners' capital................................ 3,921,331 19,860,593 24,838,632
------------ ------------ ------------
Total partners' capital.................. 1,716,043 17,557,243 22,464,031
------------ ------------ ------------
Total liabilities and partners'
capital............................. $113,276,354 $133,403,073 $138,570,558
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-3
<PAGE> 143
WYNDHAM HOTEL CORPORATION
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Hotel revenues..................... $43,920,770 $51,798,932 $54,673,322 $15,359,045 $16,828,688
Management fees.................... 4,414,435 5,929,852 7,392,515 1,784,134 2,610,954
Management fees -- affiliates...... 6,316,897 7,371,893 9,528,374 1,620,094 2,590,628
Service fees....................... 1,058,150 1,670,894 2,191,816 398,883 410,370
Service fees -- affiliates......... 1,069,443 1,233,641 1,927,669 307,763 554,283
Reimbursements..................... 1,214,999 3,109,956 4,377,626 932,591 1,626,521
Reimbursements -- affiliates....... 2,948,704 4,893,584 6,458,554 1,424,249 1,955,878
Other.............................. 333,983 257,046 1,339,832 92,109 32,724
----------- ----------- ----------- ----------- -----------
Total revenues............. 61,277,381 76,265,798 87,889,708 21,918,868 26,610,046
----------- ----------- ----------- ----------- -----------
Operating costs and expenses:
Hotel expenses..................... 31,339,349 35,963,759 36,851,511 9,171,015 10,175,947
Hotel expenses -- affiliates....... 403,556 612,556 125,556 31,389 31,389
Selling, general and administrative
expenses........................ 9,342,292 10,202,372 14,526,732 2,809,581 4,153,321
Selling, general and administrative
expenses -- affiliates.......... 570,550 442,105 473,920 111,781 119,902
Equity participation
compensation.................... 2,709,770 2,802,387 3,992,143 998,035 --
Reimbursable expenses.............. 1,214,999 3,109,956 4,377,626 932,591 1,626,521
Reimbursable
expenses -- affiliates.......... 2,948,704 4,893,584 6,458,554 1,424,249 1,955,878
Depreciation and amortization...... 5,269,326 5,735,355 6,310,730 1,469,117 1,661,200
Other.............................. 384,685 167,393 147,584 (6,235) 143,994
----------- ----------- ----------- ----------- -----------
Total operating costs and
expenses................. 54,183,231 63,929,467 73,264,356 16,941,523 19,868,152
----------- ----------- ----------- ----------- -----------
Operating income..................... 7,094,150 12,336,331 14,625,352 4,977,345 6,741,894
Interest income...................... 140,306 178,495 344,124 56,360 126,036
Interest income -- affiliate......... -- -- 100,377 -- 178,003
Interest expense..................... (7,215,589) (7,704,538) (8,465,239) (2,101,080) (2,114,357)
Equity in earnings of affiliate's
hotel partnership.................. 777,255 1,236,716 1,664,187 556,245 828,853
Foreign currency gain................ 647,143 403,842 405,096 37,301 --
----------- ----------- ----------- ----------- -----------
Income before minority interests..... 1,443,265 6,450,846 8,673,897 3,526,171 5,760,429
Income (loss) attributable to
minority interests................. (210,638) 186,134 724,415 508,062 593,237
----------- ----------- ----------- ----------- -----------
Net income........................... $ 1,653,903 $ 6,264,712 $ 7,949,482 $ 3,018,109 $ 5,167,192
=========== =========== =========== =========== ===========
Pro forma income tax adjustment
(unaudited)..................... 3,140,045 1,192,153 2,041,040
Historical net income as adjusted
for pro forma income tax
(unaudited)..................... 4,809,437 1,825,956 3,126,151
Historical income as adjusted per
common share (unaudited)........ $ .30 $ .12 $ .20
=========== =========== ===========
Common shares outstanding
before the offerings
(unaudited).............. 15,854,301 15,854,301 15,854,301
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-4
<PAGE> 144
WYNDHAM HOTEL CORPORATION
COMBINED STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
PARTNERS' CAPITAL
-----------------
<S> <C>
Balance January 1, 1993....................................................... $ (6,038,928)
Capital contributions....................................................... 6,798,884
Capital distributions....................................................... (4,662,068)
Equity participation compensation........................................... 2,709,770
Net income.................................................................. 1,653,903
------------
Balance December 31, 1993..................................................... 461,561
Capital contributions....................................................... 2,120,412
Capital distributions....................................................... (7,727,741)
Equity participation compensation........................................... 2,802,387
Net income.................................................................. 6,264,712
------------
Balance December 31, 1994..................................................... 3,921,331
Capital contributions....................................................... 14,278,185
Capital distributions....................................................... (10,414,534)
Distribution made to withdrawing Partner.................................... (2,577,483)
Bedrock Options............................................................. 2,711,469
Equity participation compensation........................................... 3,992,143
Net income.................................................................. 7,949,482
------------
Balance December 31, 1995..................................................... 19,860,593
Capital contributions....................................................... 691,955
Capital distributions....................................................... (881,107)
Net income.................................................................. 5,167,192
------------
Balance March 31, 1996 (unaudited)............................................ $ 24,838,632
============
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-5
<PAGE> 145
WYNDHAM HOTEL CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
----------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 1,653,903 $ 6,264,712 $ 7,949,482 $ 3,018,109 $ 5,167,192
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 5,269,326 5,735,355 6,310,730 1,469,117 1,661,200
Provision for bad debt.......................... 49,879 84,213 265,004 23,026 25,298
Equity in earnings (loss) of affiliate's hotel
partnership................................... 922,465 (36,240) 371,756 79,594 (455,401)
Foreign currency translation gain............... (647,143) (403,842) (405,096) (37,301) --
Equity participation compensation............... 2,709,770 2,802,387 3,992,143 998,035 --
Minority interest............................... (210,638) 186,134 724,415 508,062 593,237
Net (deposits to)/withdrawals from restricted
cash.......................................... 74,227 359,570 (485,253) 64,805 87,960
Changes to operating assets and liabilities:
Accounts receivable............................. (1,302,338) (1,486,909) (1,841,751) (3,233,611) (2,810,419)
Due from affiliates............................. (36,163) (850,302) (136,817) (755,454) 1,145,834
Inventories..................................... 59,157 (39,889) 22,870 (11,235) (41,859)
Other........................................... 48,621 (168,630) (38,916) 93,910 239,255
Accounts payable and accrued expenses........... (941,493) (758,561) (63,140) 1,759,920 756,923
Accounts payable and accrued expenses due to
affiliate..................................... -- 4,036,286 (2,458,191) (2,932,813) (677,732)
Deposits........................................ 199,770 70,319 352,125 (253,675) (714,477)
Deposits from affiliates........................ 85,000 (25,000) 101,000 -- (38,000)
Due to affiliates............................... 330,267 (684,724) 1,555,014 1,301,214 (253,800)
----------- ------------ ------------ ----------- -----------
Net cash provided by operating activities... 8,264,610 15,084,879 16,215,375 2,091,703 4,685,211
----------- ------------ ------------ ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment................ (8,901,426) (2,100,507) (3,556,126) (329,269) (562,139)
Investments in management contracts............... (687,707) (285,357) (4,346,391) -- (23,035)
Notes and other receivables from affiliates....... -- -- (7,673,690) (3,818,883) (35,572)
Notes receivable.................................. -- -- (2,450,587) -- --
Other............................................. (168,663) 1,770,166 (3,315,943) (340,722) (2,473,804)
----------- ------------ ------------ ----------- -----------
Net cash used in investing activities:...... (9,757,796) (615,698) (21,342,737) (4,488,874) (3,094,550)
----------- ------------ ------------ ----------- -----------
Cash flows from financing activities:
Partners' contributed capital..................... 6,798,884 2,120,412 14,278,185 8,842,117 691,955
Partners' capital distributions................... (4,662,068) (7,727,741) (10,414,534) (1,355,316) (881,108)
Distribution made to withdrawing partner.......... -- -- (2,577,483) -- --
Increase in receivables from affiliates........... (678,822) (254,970) (98,062) (7,105) (71,251)
Decrease in payable to affiliate.................. (681,590) (597,331) (2,353,008) (1,249,930) (858,671)
Increase in payable to minority interest.......... -- 23,960 15,132 3,783 4,000
Proceeds from long-term borrowings................ 5,400,000 50,738 13,600,000 -- 2,539,883
Repayments on long-term debt...................... (4,515,574) (5,011,921) (6,656,896) (1,412,247) (1,036,955)
Repayments on capital lease obligations........... (22,410) (279,594) (125,836) 41,606 (53,711)
----------- ------------ ------------ ----------- -----------
Net cash provided by (used in) financing.... 1,638,420 (11,676,447) 5,667,498 4,862,908 334,142
----------- ------------ ------------ ----------- -----------
Increase in cash and cash equivalents............... 145,234 2,792,734 540,136 2,465,737 1,924,803
Cash and cash equivalents at beginning of period.... 681,513 826,747 3,619,481 3,619,481 4,159,617
----------- ------------ ------------ ----------- -----------
Cash and cash equivalents at end of period.......... $ 826,747 $ 3,619,481 $ 4,159,617 $ 6,085,218 $ 6,084,420
=========== ============ ============ =========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest............................ $ 7,221,329 $ 7,693,702 $ 8,154,159
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-6
<PAGE> 146
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
1. COMPANY DESCRIPTION AND BASIS OF PRESENTATION:
Wyndham Hotel Corporation ("WHC") was incorporated in Delaware in February
1996 and intends to enter into the Formation Agreement in 1996 with Wyndham
Hotel Company, Ltd. and four related management entities ("Wyndham" or the "Old
Management Company"), six wholly owned, one 62.5% owned and one 30% owned
related hotel entities (the "Hotel Entities") and seven related general and
limited partner entities of the hotel entities ("Partner Entities")
(collectively, the "Assigned Businesses"), (the Assigned Businesses and WHC will
be referred to collectively as the "Company"). The Company will effect certain
exchanges, a merger and other transactions (collectively the "Formation"). The
Formation will accomplish the exchange of all the Assigned Businesses' equity
interest held by their partners, including the five Senior Executive Officers,
who are promoters of the Company, and stockholders to the Company for
consideration of common stock and the payment of cash. The Formation transaction
will be accounted for in a manner similar to that of a pooling of interests. As
a result, the combination has been accounted for using the historical cost for
the Assigned Businesses. Concurrent with the Formation, the Company intends to
offer approximately $150,000,000 of equity and debt in an initial public
offering.
The accompanying combined financial statements include the accounts of the
Company which consist of the following majority owned entities (except Garden
Hotel Associates LP which is 30% owned):
Management Entities:
Wyndham Hotel Company, Ltd. (a Texas limited partnership)
Pleasanton Hotel Management Ltd. (a Texas limited partnership)
Wyndham Hotels and Resorts Ltd. (a Bermuda corporation)
Wyndham Hotel Canada II, Inc. (a Texas S-corporation)
Old San Juan Management, Ltd. (a Texas limited partnership)
Hotel Entities:
Brookfield Lakes Partners Limited (a Texas limited partnership)
Commerce Hotel Partners Ltd. (a Texas limited partnership)
Indianapolis Partners Ltd. (a Texas limited partnership)
Rose Hall Associates (a Texas limited partnership)
Schaumburg Hotel Partners LP (a Texas limited partnership)
WHI Limited Partnership (a Texas limited partnership)
Wyndham Charlotte Garden Hotel Limited Partnership (a Texas limited
partnership)
Garden Hotel Associates L P (a Texas limited partnership)
Partner Entities:
Garden Hotel Corp. No. 1 (a Texas S-corporation)
Garden Hotel Corp. No. 2 (a Texas S-corporation)
Garden Hotel Partners L P (a Texas limited partnership)
Schaumburg Hotel, Inc. (a Texas S-corporation)
Schaumburg Hotel Partners L P (a Texas limited partnership)
WH Interest, Inc. (a Texas S-corporation)
WHC Caribbean Limited (a Jamaican corporation)
A controlling interest in each of the above entities, with the exception of
Garden Hotel Associates LP, is owned by Crow Family Members. In addition, these
entities are all managed by Wyndham. As a result, the Company has both voting
and operational control over these entities. All significant intercompany
balances and transactions have been eliminated in combination. The stockholders'
equity balances of Wyndham Hotel Canada II, Inc. and Wyndham Hotels and Resorts
Ltd. have been included with Partners' Capital.
F-7
<PAGE> 147
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has a 30% investment in an affiliate, Garden Hotel Associates
LP ("GHALP") which owns eleven Wyndham Garden Hotels located throughout the
United States. The Company does not have voting or operational control over
GHALP; therefore, the entity is accounted for using the equity method in the
accompanying financial statements. Profits and losses of GHALP are allocated to
the partners in accordance with its partnership agreement. (See Note 17)
At December 31, 1995, minority interest represented the 37.50% interest in
Rose Hall Associates held by two unaffiliated entities.
Wyndham, which was formed effective January 1, 1988, provides management
and development services to hotel property owners. As of December 31, 1995, 70
properties, located in 22 states, the District of Columbia and five Caribbean
islands were under management or franchise contracts.
Wyndham operates 19 Wyndham Hotels, 38 Wyndham Garden Hotels and six
Wyndham Resort hotels. The Company provides management services to four
non-Wyndham brand hotels and provides construction and development services for
three hotels under renovation or construction.
The Hotel Entities, which own 17 hotels and lease one hotel, were formed
for the purpose of acquiring, owning, leasing and operating hotels throughout
the United States, and the Caribbean. Hotel revenues are primarily dependent
upon the individual business traveler and small business groups.
The Partner Entities, which are comprised of five corporate general
partners and three limited partner partnerships, were formed for the purpose of
managing and investing in certain Hotel Entities.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Interim Financial Information
The combined balance sheet as of March 31, 1996, the combined statement of
partners' capital for the three months then ended, and the combined statements
of operations and cash flows for the three months ended March 31, 1995 and 1996,
have been prepared by the Company without audit. In the opinion of management,
all adjustments (which included only normal, recurring adjustments) necessary to
present fairly the financial position at March 31, 1996, and the results of
operations and cash flows for all periods presented have been made. The results
of operations for the interim periods are not necessarily indicative of the
operating results for the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash
For purposes of reporting cash flows, all highly liquid debt instruments
with original maturities of three months or less are considered to be cash
equivalents.
Restricted cash consists of reserves for quarterly cash flow payments and
property tax escrows at hotels under management. As of December 31, 1995,
restricted cash also includes a depository account balance of $2,595,112 which
collateralizes a letter of credit. Management anticipates the deposit will be
reduced concurrent with reductions in the letter of credit commitment.
F-8
<PAGE> 148
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company participates in a centralized cash management system with
affiliates who are excluded from these financial statements. A portion of net
cash flow of the Company is held in a central bank account from which operating
expenses and other disbursements are paid. Each entity's share of pooled cash
has been properly reflected on the individual entity's financial statements.
The Company maintains cash and cash equivalents in accounts with various
financial institutions in excess of the amount insured by the Federal Deposit
Insurance Corporation. The Company has not experienced any losses in such
accounts.
Inventories
Inventories consist of food, beverages, china, linen, glassware,
silverware, uniforms, and supplies and are stated at cost which approximates
market, with cost determined using the first-in, first-out method.
Property and Equipment
Buildings are carried at cost and depreciated over forty years using the
straight-line method. Furniture and equipment are recorded at cost and
depreciated using the straight-line method over the estimated useful lives,
which range from three to nine years. Assets recorded under capital leases and
leasehold improvements are amortized over the shorter of the lives of the assets
or the terms of the related leases. Normal repairs and maintenance are charged
to expense as incurred.
In 1995, the Company adopted Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." Impairment losses are recognized in operating income as they
are determined. The Company periodically reviews its property and equipment to
determine if its carrying cost will be recovered from future operating cash
flows. In cases when the Company does not expect to recover its carrying cost,
the Company recognizes an impairment loss. No such losses have been recognized
to date.
Management Contracts
Wyndham has entered into management agreements which required payment of
certain costs associated with the change in the management of hotels. These
costs have been recorded as deferred management contract costs and are being
amortized on a straight-line basis over the terms of the agreements. The Company
periodically evaluates the recoverability of management contract costs to
determine whether such costs will be recovered from future operations.
Certain management agreements include repayment provisions if termination
occurs prior to the term of the agreement. During 1995, the Company received
$1,000,000 for a terminated agreement that is included in other revenues.
Other Assets
Other assets consist primarily of loan costs totaling approximately
$491,450 and $745,951 and restricted cash of $317,181 and $615,919 at December
31, 1994 and 1995, respectively. Amortization of loan costs is computed using
the level yield method over the lives of the related loans. Restricted cash
consists of amounts reserved for replacement of fixed assets on several of the
hotel entities.
Deposits
Deposits represent cash received from guests for future hotel reservations
for the Hotel Entities and cash received from the owners of certain hotels
managed by Wyndham for various operating expenses paid by
F-9
<PAGE> 149
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Wyndham on behalf of managed properties. Upon termination of the management
contracts, the excess, if any, of the deposits over the actual operating
expenses owed to Wyndham would be refunded to the owners.
Income Taxes
Each of the combined companies is either a partnership, an S corporation or
a nontaxable Bermuda corporation, and consequently, is not subject to federal
income taxes. Thus, taxable income or loss is allocated directly to the taxable
income of the individual partners and stockholders. The Company's tax returns
and the amount of allocable income or loss are subject to examination by federal
and state taxing authorities. If such examinations result in changes to income
or loss, the tax liability of the partners and stockholders could be changed
accordingly.
Revenue Recognition
Hotel revenue, management fees, service fees, reimbursements and other
income are recognized when earned.
Foreign Currency Translation
The books of record of one of the Hotel Entities are maintained using the
U.S. dollar as the functional currency. Assets and liabilities of non-U.S.
operations are translated into U.S. dollars at the exchange rate in effect as of
the balance sheet date. Revenues and expenses on non-U.S. operations are
translated at the weighted average exchange rate during the year. Realized
foreign currency gains and losses are included in results of operations.
Self Insurance
The Company is self insured for various levels of general liability,
workers' compensation and employee medical coverages. Accrued expenses include
the estimated cost from unpaid incurred claims.
Income per share
Historical pro forma income per share is based on the number of shares of
common stock outstanding immediately prior to the offering. Proceeds from the
exercise of dilutive stock options are assumed to be used to repurchase
outstanding shares of the Company's common stock at the average fair market
value during the period. Historical pro forma income per common share is based
on net income per share as adjusted for a pro forma provision for income taxes
based on an assumed tax rate of 39.5%.
3. ACQUISITIONS:
During 1993, the Company purchased substantially all the assets of one
hotel from an unrelated party for a cash purchase price of $6,750,000. The
acquisition was accounted for using the purchase method and, accordingly, the
acquired assets, which consisted primarily of property and equipment, were
recorded based on their estimated fair values at the date of acquisition.
F-10
<PAGE> 150
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. INVESTMENT IN AN AFFILIATE'S HOTEL PARTNERSHIP:
The summary of the significant financial information of GHALP is as
follows:
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1994 1995
------------ ------------
<S> <C> <C>
Total current assets..................................... $ 6,208,801 $ 6,769,585
Property and equipment, net.............................. 105,947,174 103,797,559
Other.................................................... 2,736,544 1,947,631
------------ ------------
$114,892,519 $112,514,775
============ ============
LIABILITIES AND PARTNERS' EQUITY
Total current liabilities................................ $ 4,372,790 $ 5,049,001
Long-term debt, excluding current portion................ 93,000,000 93,000,000
Partners' equity......................................... 17,519,729 14,465,774
------------ ------------
$114,892,519 $112,514,775
============ ============
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues...................................... $45,299,429 $50,916,822 $56,976,113
Expenses...................................... 42,708,577 46,794,437 51,428,824
----------- ----------- -----------
Net income.......................... $ 2,590,852 $ 4,122,385 $ 5,547,289
=========== =========== ===========
</TABLE>
A reconciliation of the investment in GHALP to the underlying assets is as
follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Investment in an affiliate
Hotel partnership.......................................... $2,968,710 $2,596,954
========== ==========
Initial capital contributions................................ $7,000,000 $7,000,000
Contributions.............................................. 149,400 149,400
Distributions.............................................. (3,052,269) (5,088,119)
Net income (loss).......................................... (1,128,421) 535,673
---------- ----------
$2,968,710 $2,596,954
========== ==========
</TABLE>
The Company's initial contribution upon formation of GHALP was $7,000,000
of the total initial aggregate contributions of $36,000,000. Pursuant to the
Partnership agreement, the Company has a 30% ownership interest in the
Partnership.
5. NOTES AND OTHER RECEIVABLES FROM AFFILIATES:
As of December 31, 1994 and 1995, notes and other receivables from
affiliates consist of the following:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Promissory notes bearing interest at 9% per annum, payable in
2005....................................................... $ -- $6,395,690
Promissory note bearing interest at 9% per annum, payable
2000....................................................... -- 1,278,000
---------- ----------
$ -- $7,673,690
========== ==========
</TABLE>
F-11
<PAGE> 151
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The promissory notes represent loans made to affiliated entities to acquire
hotels which then have executed management agreements with the Company. The
loans are collateralized by the partnership interests in the respective
entities. Interest income of $100,377 was earned for the year ended December 31,
1995.
6. NOTES RECEIVABLE
Pursuant to the terms of a management agreement obtained during 1995,
Wyndham is obligated to provide $4,560,000 for renovation of this hotel. As of
December 31, 1995, $2,344,974 of this obligation, classified as a note
receivable, has been funded. The note bears interest at prime plus .5% and is
due March 15, 2005. The payment of interest associated with this note receivable
is subject to payment priorities including a cumulative preferred priority
return to the owner.
7. MANAGEMENT SERVICES AND RELATED REVENUES:
Wyndham has entered into management agreements for hotels. The owners of
certain hotels Wyndham manages are affiliates related by common ownership or
control. Management fees earned for hotels owned by affiliates in 1993, 1994 and
1995 were $6,316,897, $7,371,893 and $9,528,374, respectively.
Various operating expenses have been paid by Wyndham on behalf of managed
properties. As of December 31, 1993, 1994 and 1995, accounts receivable from
hotels owned by affiliates were $1,825,419, $2,519,881 and $3,002,315,
respectively.
Wyndham provides centralized accounting services such as accounts payable,
payroll and financial statement preparation for certain managed hotels. Wyndham
charges an accounting fee to these hotels for such services. Design fees are
additional service fees paid to Wyndham for the development, design and
construction of new hotels as well as for the refurbishment of existing hotels.
In addition, Wyndham receives purchasing fees based on a percentage of cost of
goods ordered for purchasing various items. Service fees earned for hotels owned
by affiliates in 1993, 1994 and 1995 were $1,069,443, $1,233,641 and $1,927,669,
respectively.
Reimbursements represent revenues recognized for the reimbursement of
expenses associated with providing sales and marketing, centralized
reservations, partnership accounting and other support services. Included in
reimbursable expenses are advertising and promotional expenses of $3,654,929 and
$4,905,191 for the years ended December 31, 1994 and 1995. Advertising and
promotional expenses were not included in reimbursable expenses in 1993, since
the expenses were incurred by each hotel. Reimbursable revenues recognized for
hotels owned by affiliates in 1993, 1994 and 1995 were $2,948,704, $4,893,584
and $6,458,554, respectively.
8. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1994 1995
------------ ------------
<S> <C> <C>
Property and equipment, at cost:
Land.................................................. $ 9,954,574 $ 9,954,574
Buildings and improvements............................ 76,802,173 77,108,307
Furniture, fixtures and equipment..................... 24,807,467 28,056,836
Leasehold improvements................................ 246,874 247,497
------------ ------------
111,811,088 115,367,214
Less accumulated depreciation and amortization........ (22,385,277) (27,763,364)
------------ ------------
$ 89,425,811 $ 87,603,850
============ ============
</TABLE>
F-12
<PAGE> 152
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1995
---------- ----------
<S> <C> <C>
Accounts payable............................................ $4,449,306 $3,648,298
Taxes....................................................... 1,509,026 1,485,388
Payroll and related costs................................... 1,649,959 2,054,622
Accrued interest............................................ 569,050 880,130
Other....................................................... 744,650 385,317
---------- ----------
$8,921,991 $8,453,755
========== ==========
</TABLE>
10. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
Mortgage loan, a hotel property is pledged as collateral, interest
payable monthly at prime (8.50% at December 31, 1995) plus .5%
and principal due in installments based on cash flow maturing
May 2, 1996..................................................... $13,425,000 $12,606,867
Mortgage loan, a hotel property is pledged as collateral, interest
payable monthly at LIBOR (5.44% at December 31, 1995) plus 1.75%
and principal due in installments based on cash flow maturing
December 31, 1999............................................... 10,600,000 10,034,064
Mortgage loan, a hotel property is pledged as collateral, interest
payable monthly at LIBOR plus 1.5% and principal due in
installments based on cash flow maturing December 31, 1999...... 10,275,000 10,115,609
Mortgage loan, a hotel property is pledged as collateral, interest
payable monthly at LIBOR plus 3.25%, and principal maturing May
21, 2000........................................................ 5,400,000 5,400,000
Mortgage loan, a hotel property is pledged as collateral, interest
payable monthly at prime plus 1.25%, and principal due in
installments based on cash flow maturing August 28, 1997........ 8,958,723 8,733,852
Mortgage loan, a hotel property is pledged as collateral, interest
payable quarterly at 86% of LIBID, and principal payable
quarterly and maturing November 15, 1999........................ 6,902,000 5,870,000
Revolving credit agreement, substantially all of the assets of
Wyndham are pledged as collateral, interest payable quarterly at
9%, and principal maturing June 30, 2002........................ -- 12,500,000
Note payable to seller of a hotel, partnership interest pledged as
collateral, interest payable quarterly at 8%, principal payable
quarterly and maturing May 21, 1997............................. 3,845,418 2,391,690
Development loan, a hotel property is pledged as collateral,
interest payable monthly at 7%, principal matured April 28,
1995............................................................ 813,806 --
Note payable to seller of a hotel, interest payable quarterly at
11.5%, principal due quarterly and maturing November 15, 1999... 2,760,800 2,348,000
Note payable to bank interest payable quarterly at Jamaican prime
plus 1.5%, principal payable quarterly and maturing November 15,
1999............................................................ 271,895 195,664
----------- -----------
63,252,642 70,195,746
Current portion of long-term debt................................. 4,612,648 15,653,362
----------- -----------
Long-term debt, excluding current portion......................... $58,639,994 $54,542,384
=========== ===========
</TABLE>
F-13
<PAGE> 153
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The annual principal requirements for the five years subsequent to December
31, 1995 are as follows:
<TABLE>
<S> <C>
1996............................................ $15,653,362
1997............................................ 11,037,453
1998............................................ 1,479,200
1999............................................ 24,125,731
2000............................................ 5,400,000
Thereafter...................................... 12,500,000
-----------
$70,195,746
===========
</TABLE>
The revolving credit agreement which has an unfunded commitment of $7.5
million contains various covenants including limitations on distributions and
fixed charge ratios. The lender has 20 business days, in the event of a public
offering, to exercise an option to convert 50% of the debt to restricted common
stock at the Option Price, as defined in the agreement as the initial public
offering price per share less the underwriting discounts and commissions per
share. The option also contains a provision to effect a registration of the
restricted common stock for a 24 month period following the registration.
The Company has an outstanding letter of credit of $2,595,112
collateralized by a depository account balance of $2,595,112.
11. LEASES:
The Company leases various types of property including land and buildings
of hotel properties, office facilities and equipment under agreements ranging
from 1 to 30 years. Leased capital assets included in property and equipment at
December 31, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
Property................................................... $14,529,648 $14,529,648
Equipment.................................................. 3,150,726 3,434,286
----------- -----------
17,680,374 17,963,934
Accumulated amortization................................... (4,731,623) (5,721,171)
----------- -----------
$12,948,751 $12,242,763
=========== ===========
</TABLE>
F-14
<PAGE> 154
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The future minimum lease payments required under the capital lease
(together with the present value of net minimum lease payments) and future
minimum lease payments required under operating leases that have an initial term
or remaining noncancelable lease term in excess of one year at December 31, 1995
are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
----------- ----------
<S> <C> <C>
Year ending December 31:
1996..................................................... $ 2,431,636 $ 904,392
1997..................................................... 2,437,778 251,697
1998..................................................... 2,375,755 110,571
1999..................................................... 2,300,000 63,264
2000..................................................... 2,300,000 24,361
Thereafter............................................... 40,250,000 --
----------- ----------
Total minimum lease payments............................... 52,095,169 $1,354,285
==========
Less imputed interest...................................... 31,312,597
-----------
Present value of net minimum lease payments................ 20,782,572
Less current portion....................................... 382,268
-----------
Long term portion of net minimum lease payments............ $20,400,304
===========
</TABLE>
WHI Limited Partnership ("WHI") has a lease agreement for the property
which is accounted for as a capital lease. This agreement provides for payments
of contingent rent based on a percentage of net operating income, as defined,
less basic rent and the management fee (base amount). For lease years 1990
through 1999, contingent rent payable to the landlord is 20% of the excess of
net operating income, as defined, over the base amount and 50% of the excess for
lease years thereafter. Contingent rent expense for the years ended December 31,
1993, 1994 and 1995 was $119,609, $107,735 and $58,789, respectively.
This capital lease agreement provides for a reserve for capital
expenditures equal to 4% of the gross income of the respective hotel. At the end
of the lease term, WHI is required to refund to Wyndham the excess of amounts
reserved over actual capital expenditures. At December 31, 1994 and 1995, the
reserved amount exceeded expenditures by $973,051 and $1,038,577, respectively.
The lease requires WHI to meet a minimum net worth requirement. The initial
net worth requirement was $5,000,000 and is reduced upon achievement of certain
operating results. WHI demonstrated the initial net worth requirements by
obtaining a letter of credit in the amount of $4,000,000 and a personal
guarantee from one of the partners in the amount of $1,000,000. The letter of
credit was collateralized by a $2,000,000 certificate of deposit and a
$2,000,000 personal guarantee of one of the partners.
The lease agreement provides for a reduction of the $5,000,000 required net
worth upon achievement of certain operating results. If net operating income
exceeds $2,875,000 per year for two consecutive years, the net worth requirement
is reduced to $2,500,000. If net operating income exceeds $2,875,000 per year
for three consecutive years, the net worth requirement is reduced to zero.
During 1993, 1994 and 1995, WHI's net operating income, as defined, exceeded
$2,875,000.
12. RECEIVABLES FROM AFFILIATES:
Management fees for one managed hotel, owned by a partner of the Company,
are deferred until certain operating criteria, as defined in the partnership's
management agreement and loan agreement, are met. As of December 31, 1994 and
1995, this deferred balance, a receivable from an affiliate included in
partners' capital, was $1,125,240 and $1,223,302, respectively. These management
fees will be collected upon meeting the operating criteria as defined in the
agreement.
F-15
<PAGE> 155
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, included in partners' capital are receivables from affiliates
which include certain partner capital contributions and accrued interest of
$1,080,046 and $1,080,046 as of December 31, 1994 and 1995, respectively.
13. COMMITMENTS AND CONTINGENCIES:
Litigation has been initiated against the Company pertaining to the right
to use the Wyndham name for hotel service in the New York metropolitan area. On
January 29, 1996, a temporary restraining order was issued by the Supreme Court
of the State of New York which, pending the outcome of a trial, prevents the
Company from using the Wyndham name in the New York area. An adverse decision in
the litigation could prevent the Company from operating Wyndham brand hotels or
advertising the Wyndham name in connection with the operation of a Wyndham brand
hotel within a 50 mile radius of the Mados Wyndham Hotel, which owns the right
to use the Wyndham name in the New York area. It is management's opinion, based
on legal counsel, that the losses resulting from the ultimate resolution of the
aforementioned claim are not estimable.
The Company received a Notice of Intent to make Sales and Use Tax audit
changes from the Tampa Region of the Florida Department of Revenue for the
period from July 31, 1990 through June 30, 1995. The audit assessed additional
taxes of $584,399, penalty of $223,494 and interest of $201,024 for a total
assessment of $1,008,917. Management, after review and consultation with
counsel, believes the Company has meritorious defenses to this matter and that
any potential liability in excess of the $189,000 recorded would not materially
effect the Company's combined financial statements.
On February 29, 1996, an affiliate and the Company were served with a
complaint filed on November 22, 1995 by an owner of a hotel managed by the
affiliate. The claim involves the collection of a promissory note relating to an
earlier litigation between the affiliate and the owner. The owner alleges that
the transfer of certain management contracts by the affiliate to the Company was
a fraudulent conveyance that rendered the affiliate insolvent. Liability for
payment of that Note was not transferred to or assumed by the Company. The
affiliate has agreed to indemnify the Company with respect to this litigation.
The Company has pending several other claims incurred in the normal course
of business which, in the opinion of management, based on the advice of legal
counsel, will not have a material effect on the combined financial statements.
In May 1994, the Company entered into an Investment Agreement and an Option
Agreement (collectively, the "Bedrock Agreements") with Bedrock pursuant to
which, as amended, Bedrock agreed to provide up to $335 million in capital (the
"Investment Program") to acquire hotels or hotel management companies and to
make hotel related investments that are approved by both the Company and
Bedrock. Pursuant to the terms of the Investment Agreement, Bedrock is not
required to invest a minimum amount of capital through the Investment Program,
but the Company is entitled to manage any Investment Program hotel properties
for a term of 15 years and for a market-based management fee. At December 31,
1994 and December 31, 1995, the Company had executed management contracts with
Bedrock for 11 Wyndham brand hotels and 15 Wyndham brand hotels, respectively,
through the Investment Program.
Pursuant to the Option Agreement, the Company granted to Bedrock options
(the "Bedrock Options") to purchase up to a 37.5% limited partnership interest
in Wyndham at a price equal to the percentage interest purchased multiplied by
the applicable strike price defined for each year of the option period, as
determined pursuant to the Bedrock Agreements. (Under the terms of the Bedrock
Agreements, Bedrock is entitled to purchase a 1% interest in Wyndham for each
$320,000 of projected annual management fees generated by the management
contracts relating to hotels owned by Bedrock, and at December 31, 1994 and
December 31, 1995, Bedrock was entitled to purchase a 17.4% and 24.3% interest
in Wyndham, respectively.) As additional consideration for the grant of the
Bedrock Options, Bedrock granted to the Company the right to require
F-16
<PAGE> 156
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Bedrock to invest up to $20 million from the Investment Program in the amount of
a $10 million contribution to the Company (the "Direct Contribution") in
exchange for a percentage interest therein (not to exceed the 37.5% ownership
limitation) and a $10 million contribution to affiliated partnerships the
"Indirect Contribution" in which some or all of the Company, Crow Family Members
and the Senior Executive Officers invest. The Direct Contribution will take the
form of the Bedrock Contribution. The Indirect Contribution was eliminated in
connection with the Bedrock Exchange Agreement.
Wyndham performed a valuation analysis of the Option Agreement. Wyndham
used the Black Scholes method and the Intrinsic Value method to calculate the
value of the Option Agreement and the Direct Contribution, respectively. The
calculations were adjusted for subsequent changes in the expected or actual
outcome of the contingent condition that determines the amount of the limited
partnership interest to be earned by Bedrock. The adjusted calculations resulted
in a net value of zero and approximately $2.7 million in 1994 and 1995,
respectively, amortized on a straight-line basis over the terms of the
management agreements of the hotels owned by Bedrock.
The Option Agreement also provides for a contingent payment (the
"Contingent Option Payment") to the Old Management Company, for distribution to
the non-Bedrock owners of the Old Management Company, at such time as all hotels
financed by the Investment Program achieve an investment return target of 15% on
all equity capital invested through such program plus certain overhead costs.
The amount of the Contingent Option Payment is 10% of all cash proceeds realized
in excess of the investment return target. The Contingent Option Payment is due
70% upon the achievement of the investment target return and 30% upon Bedrock's
disposition of its entire interest in Wyndham.
During 1994 and 1995, the Company received hotel management fees from
Bedrock of $514,472 and of $2,043,087, respectively.
During 1994 and 1995, the Company made cash advances of $1,092,532 and
$1,380,702, respectively, to certain hotel partnerships in which Bedrock has an
interest. The advances were used to pay certain renovation costs of these hotel
partnerships. At December 31, 1994 and 1995, the outstanding receivables from
the hotel partnerships were $27,842 and $686,749, respectively.
During 1994 and 1995, the Company received payments of $798,503 and
$976,980, respectively, from certain hotel partnerships in which Bedrock has an
interest for design, purchasing and construction service fees.
During 1994 and 1995, the Company received payments of $170,669 and
$831,553, respectively, from certain hotel partnerships in which Bedrock has an
interest for services and reimbursements provided by the Company.
Pursuant to the terms of the management agreements of two affiliated-owned
hotels under construction, the Company has undertaken certain commitments to
provide furniture, fixtures and equipment for each hotel at a fixed price
totaling $7.1 million. Additionally, for one of these hotels the Company has
agreed to provide certain pre-opening services at a fixed price of $420,000; the
Company has guaranteed to fund up to $230,000 in working capital per year for
three years after the hotel is opened in the event that the hotel generates
inadequate cash flow; and, the Company has guaranteed $875,000 in indebtedness.
Pursuant to the terms of a management agreement of a hotel owned by an
affiliate, the Company has guaranteed to the Hotel Partnership to fund up to
$600,000 of working capital per year to the extent the entity experiences
operating deficits, with a maximum required contribution of $2.3 million over
the term of the guarantee extending from 1995 to 2000. The Company has not to
date been required to make any capital contribution under the guarantee.
The Company is subject to environmental regulations related to the
ownership, management, development and acquisition of real estate (hotels). The
cost of complying with the environmental regulations was not
F-17
<PAGE> 157
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
material to the Company's combined statements of income for any of the years in
the three-year period ended December 31, 1995. The Company is not aware of any
environmental condition on any of its properties which is likely to have a
material adverse effect on the Company's financial statements.
14. EMPLOYEE BENEFIT PLANS:
The Company sponsors a 401(k) retirement savings plans. Employees who are
over 21 years of age and have completed one year of service are eligible to
participate in the plans. The Company matches employee contributions up to 4% of
an employee's salary. The aggregate expense under the plans amounted to
approximately $129,035, $166,415 and $202,115 for the years ended December 31,
1993, 1994 and 1995, respectively.
Wyndham maintains a self-insured group health plan through a Voluntary
Employee Benefit Association ("VEBA") for certain partnerships and corporations.
This plan is funded to the limits provided in the Internal Revenue Code, and
liabilities have been recorded for estimated incurred but unreported claims.
Aggregate and stop loss insurance exists at amounts which limit exposure to the
partnerships. The Company has recognized expenses related to the plan of
$742,814, $686,580 and $832,212 for the years ended December 31, 1993, 1994 and
1995, respectively.
Certain management employees are partners in an equity participation plan,
Wyndham Employees, Ltd. ("WEL"). The Company has accounted for WEL in a manner
similar to a formula unit incentive plan. Partners are admitted into WEL and
partnership units are awarded at the discretion of Wyndham's Senior Executive
Officers. Units vest five years after award date and are payable by WEL upon
certain events. Unit values are determined by formulas related to appreciation
in value of Wyndham and other affiliated entities. In addition, the Senior
Executive Officers own limited partner interests in Wyndham and several
affiliates of Wyndham. These limited partner interests were purchased by these
Senior Executive Officers for amounts equal to the fair value of such interests.
The Senior Executive Officers borrowed the funds used to purchase such limited
partner interests from an affiliate of Wyndham and collateralized such
borrowings with their limited partner interests. The Senior Executive Officers'
shares of the distributable cash of the limited partnerships is used to repay
such affiliate loans. For financial reporting purposes, the Company has
recognized compensation expense under WEL and the Senior Executive Officer
equity participation of $2,709,770, $2,802,387 and $3,992,143 for the years
ended December 31, 1993, 1994 and 1995, respectively.
15. FAIR VALUE:
The Company has estimated the fair value of its financial instruments at
December 31, 1995 as required by Statement of Financial Accounting Standards No.
107. The carrying values of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses are reasonable estimates of their fair
values. The carrying values of variable and fixed rate debt are reasonable
estimates of their fair values based on their discounted cash flows at discount
rates currently available to the Company for debt with similar terms and
remaining maturities.
16. TRANSACTIONS WITH RELATED PARTIES:
Effective January 1, 1988, Wyndham acquired certain hotel management
contracts previously held by an affiliate. At the date of the transfer, there
was no step-up in basis of these management contracts as a result of common
control of the entities. In exchange for the contracts, Wyndham agreed to pay an
affiliate 16% of management fees earned from the acquired contracts (exclusive
of contracts entered into during 1988). The fees became payable quarterly in
arrears beginning in 1989; however, payment is limited to 50% of net cash flows,
as defined in the agreement. Net cash flow was sufficient to make full payment
during the years ended December 31, 1993, 1994 and 1995 of $698,498, $701,203
and $830,164, respectively.
F-18
<PAGE> 158
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In 1995, the Company paid $523,360 in management contract costs in
connection with entering into a management agreement for the Wyndham Anatole
Hotel. These costs are being amortized over the management agreement term.
During 1993, 1994 and 1995, the Company made lease payments totaling
$638,039, $743,922 and $875,122, respectively, to an affiliate for the Corporate
office space.
The Company subleases land from a related party which is accounted for as
an operating lease. Contingent rent is payable to the related party at 50% of
Adjusted Net Income, as defined in the sublease agreement. Contingent rent
expense as of December 31, 1993 and 1994 was $278,000 and $487,000 respectively.
There was no contingent rent expense for the year ended December 31, 1995.
During 1993, 1994 and 1995, Wyndham made payments in the aggregate amounts
of $310,412, $321,333 and $332,113, respectively, to GHMB, Inc., an entity owned
by a senior executive officer for the operation of liquor concessions at one of
the Hotel Entities.
During 1993, 1994 and 1995, the Company made payments of $1,098,270,
$1,352,468 and $1,739,804, respectively, to an entity owned by an affiliate for
travel services provided to the Company.
In 1995, the Company made payments to Trammell Crow Company in the amount
of $386,759 for contract labor (including related costs) provided to the Company
for management information services. The Company anticipates that in 1996, it
will pay approximately $810,000 to Trammell Crow Company for these contract
labor services (including related costs).
17. SUBSEQUENT EVENTS:
It is anticipated that during 1996, GHALP will enter into a sale/leaseback
agreement with an unaffiliated real estate investment trust ("REIT"). The
sale/leaseback agreement stipulates the sale of eleven hotels containing 1,940
rooms for $135,320,000 to the REIT and eleven long-term operating leases back to
the Company each with an initial term of seventeen years and four optional
twelve-year renewals exercisable at the Company's option for all hotels. Under
terms of these leases, yearly base rent aggregates $13,600,000 plus a contingent
rent paid based on a percentage of excess revenue over base year revenues. The
leases will require the Company to pay substantially all expenses associated
with the operation of the leased hotels, real estate taxes and insurance.
As part of the Formation, the Company will enter into the Bedrock Exchange
Agreement with various affiliates of Bedrock, which replaces the Bedrock
Agreements, pursuant to which Bedrock will transfer the Bedrock Options and the
Bedrock Contribution (in the amount of $10 million) in exchange for 2,367,890
shares of Common Stock. In addition, the Bedrock Exchange Agreement eliminates
the $10 million Indirect Contribution. Prior to the Formation, a separate entity
owned by Crow Family Members, the Senior Executive Officers and WEL will
purchase the right to the Contingent Option Payment for $10,000 from the owners
of Wyndham (Crow Family Members, the Senior Executive Officers and WEL).
On February 16, 1996, the Company submitted an offer and a bid deposit of
$1,250,000 to purchase a 159 room hotel for a purchase price of $12,500,000. On
February 22, 1996, the seller verbally accepted the offer and received the
nonrefundable earnest money.
F-19
<PAGE> 159
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
18. CONDENSED COMBINED FINANCIAL INFORMATION OF GUARANTOR SUBSIDIARIES
Pursuant to the Debt Offering, the Company expects to issue $100.0 million
aggregate principal amount of % Senior Subordinated Notes due 2006. All of
the Company's subsidiaries, with the exception of a number of inconsequential
subsidiaries, will fully and unconditionally guarantee the Company's obligations
under the Notes on a joint and several basis (the "Guarantor Subsidiaries").
Accordingly, the condensed combined financial information set forth below
summarizes financial information for all of the Guarantor Subsidiaries on a
combined basis. Separate complete financial statements and other disclosure for
the Guarantor Subsidiaries have not been presented because management does not
believe that such information is material to investors.
Condensed combined financial information of the Guarantor Subsidiaries (see
note to condensed combined financial information) as of December 31, 1994 and
1995 and for the years ended December 31, 1993, 1994 and 1995 were as follows:
CONDENSED COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
Current assets
Cash and cash equivalents............................... $ 2,469,263 $ 3,707,735
Cash, restricted as to use.............................. -- 2,595,172
Accounts receivable, net................................ 8,596,452 10,095,095
Other................................................... 5,092,051 5,243,464
----------- -----------
Total current assets............................ 16,157,766 21,641,466
Investment in an affiliate's hotel partnership............ 2,968,710 2,596,954
Notes and other receivables from affiliates............... -- 7,673,690
Notes receivable.......................................... -- 2,450,587
Property and equipment, net............................... 47,594,394 47,320,281
Management contract costs, net............................ 1,181,274 7,578,968
Other..................................................... 660,660 1,067,913
----------- -----------
Total assets.................................... $68,562,804 $90,329,859
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Accounts payable and accrued liabilities................ $ 9,563,689 $ 6,599,900
Deposits................................................ 1,401,024 1,913,836
Current portion of long-term debt and capital lease
obligations.......................................... 3,525,160 3,428,763
Due to affiliates....................................... 1,035,207 1,453,800
----------- -----------
Total current liabilities....................... 15,525,080 13,396,299
----------- -----------
Payable to affiliates..................................... 3,841,788 2,626,656
Payable to minority interest.............................. 202,920 218,052
Long-term debt and capital lease obligations.............. 31,163,361 40,659,163
----------- -----------
35,208,069 43,503,871
----------- -----------
Minority interest......................................... 6,653,971 7,378,386
----------- -----------
Partners' capital:
Receivables from affiliates............................. (1,829,252) (1,927,314)
Partners' capital....................................... 13,004,936 27,978,617
----------- -----------
Total partners' capital......................... 11,175,684 26,051,303
----------- -----------
Total liabilities and partners' capital......... $68,562,804 $90,329,859
=========== ===========
</TABLE>
See note to the condensed combined financial information.
F-20
<PAGE> 160
WYNDHAM HOTEL CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues............................................ $44,069,417 $55,611,624 $65,523,432
----------- ----------- -----------
Operating costs and expenses........................ 35,426,502 42,659,540 51,210,290
Depreciation and amortization....................... 2,960,287 3,327,691 3,929,052
Other............................................... 310,583 175,047 104,612
----------- ----------- -----------
Total operating costs and expenses........ 38,697,372 46,162,278 55,243,954
----------- ----------- -----------
Operating income.................................... 5,372,045 9,449,346 10,279,478
Interest expense, net............................... (4,441,841) (4,193,713) (3,815,845)
Equity in earnings of affiliate's hotel
partnership....................................... 777,255 1,236,716 1,664,187
Foreign currency gain............................... 647,143 403,842 405,096
----------- ----------- -----------
Income before minority interests.................... 2,354,602 6,896,191 8,532,916
Income (loss) attributable to minority interests.... (210,638) 186,134 724,415
----------- ----------- -----------
Net income................................ $ 2,565,240 $ 6,710,057 $ 7,808,501
=========== =========== ===========
</TABLE>
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net cash provided by operating activities........... $ 5,022,051 $11,823,312 $13,143,427
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment................ (1,592,110) (1,819,845) (2,917,076)
Investments in management contracts............... (687,707) (285,387) (4,346,391)
Notes and other receivables from affiliates....... -- (7,673,690)
Notes receivable.................................. -- -- (2,450,587)
Other............................................. 5,390 1,902,851 (3,080,122)
----------- ----------- -----------
Net cash used in investing activities............. (2,274,427) (202,381) (20,467,866)
----------- ----------- -----------
Cash flows from financing activities:
Partners' contributed capital..................... 4,709,297 1,780,738 5,695,140
Partners' capital distributions................... (3,259,246) (6,368,330) (2,656,089)
Distribution made to withdrawing partner.......... -- (2,577,483)
Decrease in payable to affiliate.................. 253,921 (1,035,207) (1,215,132)
Proceeds from long-term borrowings................ -- -- 13,600,000
Repayments on long-term borrowings................ (4,070,916) (3,578,109) (4,074,759)
Repayments on capital lease obligations........... (22,410) (279,595) (125,836)
Other............................................. (315,159) (218,637) (82,930)
----------- ----------- -----------
Net cash provided by (used in) financing
activities..................................... (2,704,513) (9,699,140) 8,562,911
----------- ----------- -----------
Increase in cash and cash equivalents............... 43,111 1,921,791 1,238,472
Cash and cash equivalents at beginning of year...... 504,361 547,472 2,469,263
----------- ----------- -----------
Cash and cash equivalents at end of year............ $ 547,472 $ 2,469,263 $ 3,707,735
=========== =========== ===========
</TABLE>
Note to Condensed Combined Financial Information:
(1) The foregoing condensed combined financial information includes Wyndham
(100%), WHI Limited Partnership (100%) and Rose Hall Associates (62.5%).
Also reflected in this information is an investment in Garden Hotel
Associates L.P. (30%), which is being accounted for using the equity method.
F-21
<PAGE> 161
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners
Garden Hotel Associates LP:
We have audited the accompanying balance sheets of Garden Hotel Associates
LP as of December 31, 1994 and 1995 and the related statements of income,
changes in partners' capital, and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of the Partnership'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 Garden Hotel Associates LP
as of December 31, 1994 and 1995, and its results of operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
February 27, 1996
F-22
<PAGE> 162
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 4,581,620 $ 5,027,388 $ 6,538,845
Accounts receivable, less allowance of $19,000 in
1994, $31,000 in 1995 and $11,000 at March 31,
1996 (unaudited).............................. 1,276,316 1,248,115 2,232,370
Due from affiliate............................... -- 155,009 270,140
Inventories...................................... 199,543 189,658 189,754
Prepaid expense.................................. 151,322 149,415 275,550
------------ ------------ ------------
Total current assets..................... 6,208,801 6,769,585 9,506,659
Property and equipment, net........................ 105,947,174 103,797,560 103,243,475
Designated cash.................................... 816,855 605,259 611,729
Other assets, net of accumulated amortization of
$4,338,000 and $4,175,000 in 1994 and 1995,
respectively..................................... 1,919,689 1,342,372 1,330,552
------------ ------------ ------------
Total assets............................. $114,892,519 $112,514,776 $114,692,415
============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses............ $ 3,935,116 $ 4,087,035 $ 4,983,258
Due to Operator.................................. 357,940 475,200 117,750
Advance deposits................................. 79,734 486,967 608,790
------------ ------------ ------------
Total current liabilities................ 4,372,790 5,049,202 5,709,798
Long-term debt..................................... 93,000,000 93,000,000 93,000,000
------------ ------------ ------------
Total liabilities........................ 97,372,790 98,049,202 98,709,798
Commitments and contingencies
Partners' capital.................................. 17,519,729 14,465,574 15,982,617
------------ ------------ ------------
Total liabilities and partners'
capital................................ $114,892,519 $112,514,776 $114,692,415
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-23
<PAGE> 163
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rooms.................... $33,181,540 $37,024,696 $42,310,485 $10,828,856 $12,211,517
Food and beverage........ 9,610,737 11,035,165 11,532,474 2,746,488 2,998,604
Operating departments.... 2,398,859 2,666,340 2,798,687 717,822 796,074
----------- ----------- ----------- ----------- -----------
45,191,136 50,726,201 56,641,646 14,293,166 16,006,195
----------- ----------- ----------- ----------- -----------
Operating costs and
expenses:
Departmental expenses:
Rooms................. 8,137,637 8,787,104 10,088,389 2,379,840 2,744,654
Food and beverage..... 7,111,756 7,868,263 8,304,422 1,978,897 2,246,857
Operating
departments......... 1,249,043 1,224,981 1,228,868 309,955 350,786
Operating expenses:
Administrative and
general............. 4,750,200 4,940,904 5,102,092 1,208,996 1,333,360
Management fees....... 2,414,658 2,888,211 3,317,170 786,121 924,438
Sales and marketing... 3,278,057 3,816,964 3,953,177 992,496 1,056,976
Property operating
costs............... 4,035,318 4,206,628 4,576,842 1,046,142 1,150,223
Property insurance,
rent and taxes...... 2,085,483 2,310,649 2,450,743 611,138 643,023
Depreciation and
amortization........ 4,808,530 4,955,340 5,058,767 1,298,224 1,192,746
Other................. 217,441 175,619 204,026 29,375 22,858
----------- ----------- ----------- ----------- -----------
Total operating
costs and
expenses....... 38,088,123 41,174,663 44,284,496 10,641,184 11,665,921
----------- ----------- ----------- ----------- -----------
Operating
income......... 7,103,013 9,551,538 12,357,150 3,651,982 4,340,274
Interest income............ 108,293 190,621 334,467 4,313 127,557
Interest expense........... (4,613,594) (5,617,689) (7,144,673) (1,802,145) (1,704,989)
----------- ----------- ----------- ----------- -----------
Net income....... $ 2,597,712 $ 4,124,470 $ 5,546,944 $ 1,854,150 $ 2,762,842
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-24
<PAGE> 164
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<S> <C>
Balance at January 1, 1993.................................................... $25,516,448
Distributions............................................................... (8,752,000)
Net income 2,597,712
-----------
Balance at December 31, 1993.................................................. 19,362,160
Contributions............................................................... 498,000
Distributions............................................................... (6,464,901)
Net income.................................................................. 4,124,470
-----------
Balance at December 31, 1994.................................................. 17,519,729
Distributions............................................................... (8,601,099)
Net income.................................................................. 5,546,944
-----------
Balance at December 31, 1995.................................................. 14,465,574
Distributions............................................................... (1,245,799)
Net Income.................................................................. 2,762,842
-----------
Balance at March 31, 1996 (unaudited)......................................... $15,982,617
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE> 165
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- --------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 2,597,712 $ 4,124,470 $ 5,546,944 $ 1,854,150 $ 2,762,842
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of interest rate contracts....... 39,732 134,127 134,127 33,532 33,532
Depreciation and amortization................. 4,808,530 4,955,340 5,058,767 1,298,224 1,192,746
Provision for bad debt........................ 98,269 25,170 47,119 11,780 7,500
Changes to operating assets and liabilities:
Accounts receivable........................... 572,269 (211,458) (18,919) (516,557) (991,755)
Due from affiliate............................ -- -- (155,009) -- (115,131)
Inventories................................... (17,074) 11,961 9,885 9,775 (96)
Prepaid expenses.............................. (2,851) 13,508 1,907 (75,359) (126,135)
Other assets.................................. (393,478) (430,675 93,172 (236,328) (40,004)
Accounts payable and accrued expenses......... 550,318 (44,672) 151,919 295,422 896,223
Due to Operator............................... (444,488) 202,839 117,260 54,572 (357,450)
Advance deposits.............................. 41,208 (4,579) 407,233 27,969 121,823
----------- ----------- ----------- ---------- -----------
Net cash provided by operating
activities.............................. 7,850,147 8,776,031 11,394,405 2,757,180 3,384,095
----------- ----------- ----------- ---------- -----------
Cash flows from investing activities:
Purchase of property and equipment.............. (1,280,571) (1,663,612) (2,347,538) (641,297) (626,839)
Proceeds from land sale......................... 17,057 -- -- -- --
----------- ----------- ----------- ---------- -----------
Net cash used in investing activities..... (1,263,514) (1,663,612) (2,347,538) (641,297) (626,839)
Cash flows from financing activities:
Other........................................... (498,000) -- -- -- --
Partners' contributed capital................... -- 498,000 -- -- --
Partners' capital distributions................. (8,752,000) (6,464,901) (8,601,099) (2,188,239) (1,245,799)
Proceeds from long-term debt.................... 3,000,000 -- -- -- --
----------- ----------- ----------- ---------- -----------
Net cash used in financing activities..... (6,250,000) (5,966,901) (8,601,099) (2,188,239) (1,245,799)
----------- ----------- ----------- ---------- -----------
Increase (decrease) in cash and cash
equivalents..................................... 336,633 1,145,518 445,768 (72,356) 1,511,457
Cash and cash equivalents at beginning of
period.......................................... 3,099,469 3,436,102 4,581,620 4,581,620 5,027,388
----------- ----------- ----------- ---------- -----------
Cash and cash equivalents at end of period........ $ 3,436,102 $ 4,581,620 $ 5,027,388 $ 4,509,264 $ 6,538,845
=========== =========== =========== ========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.......... $ 4,568,403 $ 5,292,070 $ 6,977,768
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE> 166
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Garden Hotel Associates LP (the "Partnership") was formed May 11, 1990, for
the purpose of acquiring, owning and operating eleven Wyndham Garden Hotels
throughout the United States of which three are located in or near Phoenix,
Arizona.
The partners contributed $36,000,000 upon formation of the Partnership. The
general partner is required to and the limited partner may, at its discretion,
make additional contributions necessary to fund operating deficits as defined in
the Partnership agreement. Profits and losses are allocated to the partners in
accordance with the Partnership agreement.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
For purposes of reporting cash flows, all highly liquid debt instruments
with original maturities of three months or less are considered to be cash
equivalents.
Designated cash totaling $816,858 and $605,250 as of December 31, 1994 and
1995, respectively, consists of amounts designated for repairs and replacement
of property and equipment.
The Partnership maintains cash and cash equivalents in accounts with
various financial institutions in excess of amounts insured by the Federal
Deposit Insurance Corporation.
Inventories
Inventories consist of food, beverages, china, linen, glassware,
silverware, uniforms, and supplies and are stated at cost, which approximates
market, with cost determined using the first-in, first-out method.
Property and Equipment
Buildings are carried at cost and depreciated over forty years using the
straight-line method. Furniture and equipment are recorded at cost and
depreciated using the straight-line method over the estimated useful lives,
which range from three to seven years. Normal repairs and maintenance are
charged to expense as incurred.
In 1995, the Partnership adopted Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed of." Impairment losses are recognized in operating income as they
are determined.
The Partnership periodically reviews its property and equipment to
determine if its carrying cost will be recovered from future operating cash
flows. In cases when the Partnership does not expect to recover its carrying
cost, the Partnership recognizes an impairment loss. No such losses have been
recognized to date.
F-27
<PAGE> 167
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Other Assets
Other assets consist primarily of deferred finance costs totaling
approximately $1,387,243 and $819,759 at December 31, 1994 and 1995,
respectively, and are stated at net cost. Amortization of loan costs is computed
using the effective yield method over the lives of the related loans. The
remaining balance consists primarily of security deposits totaling approximately
$404,189 and $522,613 at December 31, 1994 and 1995, respectively, and are
stated at cost.
Preopening costs, which are classified as other assets, are recorded at
cost and amortized over twelve months using the straight-line method. Fully
amortized preopening expenses of $859,256 were written off in 1995.
Income Taxes
The Partnership is not a taxable entity and the results of its operations
are included in the tax returns of the partners. The Partnership's tax returns
and the amount of allocable income or loss are subject to examination by federal
and state taxing authorities. If such examinations result in changes to income
or loss, the tax liability of the partners could be charged accordingly.
Revenue Recognition
Room, food and beverage, telephone and other revenues are recognized when
earned.
Self-Insurance
The Partnership is self insured for various levels of general liability,
workers' compensation and employee medical coverages. Accrued expenses include
the estimated cost from unpaid incurred claims.
Interest Rate Contracts
The Partnership enters into interest rate contracts to manage its exposure
to interest rate volatility. These contracts have been interest rate caps, where
the Partnership pays a lump-sum for the right to receive future payments should
interest rates exceed an agreed upon rate. The Partnership is exposed to credit
loss in the event of nonperformance by the counterparties to its interest rate
contracts. The Partnership does not anticipate nonperformance by the
counterparties. The Partnership accounts for interest rate cap contracts by
amortizing the up-front premium to interest expense over the life of the
contract.
Advertising Costs
The Partnership participates in various advertising and marketing programs
with a related party. All costs are expensed in the period incurred. The
Partnership recognized advertising expenses of $1,003,589, $1,198,335 and
$1,148,385 for the years ended December 31, 1993, 1994 and 1995, respectively.
Reclassifications
Certain amounts previously reported have been reclassified to conform with
the current year presentation.
F-28
<PAGE> 168
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1994 1995
------------ ------------
<S> <C> <C>
Land.................................................... $ 17,428,111 $ 17,428,111
Buildings............................................... 91,467,248 91,467,248
Furniture, fixtures and equipment....................... 15,493,480 17,841,018
------------ ------------
124,388,839 126,736,377
Less accumulated depreciation........................... 18,441,665 22,938,817
------------ ------------
$105,947,174 $103,797,560
============ ============
</TABLE>
4. MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS:
On May 21, 1990, the Partnership and Wyndham Hotel Company, Ltd. (the
"Operator"), a related party, entered into a management agreement which provides
for a base management fee and chain services fee equal to 5% of gross revenues
plus an incentive fee equal to 15% of total operating cash flow. Due to Operator
includes management fees and other expenses payable to the Operator. As provided
for in the management agreement, cash in excess of amounts required for on-site
operations is held in a central account in the name of the Operator.
The Partnership receives sales and marketing, centralized reservations,
accounting and other support services from affiliates which are reimbursed as an
adjustment to management fees in the normal course of business.
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1995
---------- ----------
<S> <C> <C>
Accounts payable............................................ $1,003,836 $ 977,184
Taxes....................................................... 1,051,706 1,061,058
Payroll and related costs................................... 1,100,642 1,176,514
Accrued interest............................................ 563,862 596,640
Other....................................................... 215,070 275,639
---------- ----------
$3,935,116 $4,087,035
========== ==========
</TABLE>
6. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1994 1995
----------- -----------
<S> <C> <C>
Acquisition loan.......................................... $90,000,000 $90,000,000
Revolver loan............................................. 3,000,000 3,000,000
---------- ----------
$93,000,000 $93,000,000
========== ==========
</TABLE>
F-29
<PAGE> 169
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Acquisition and Revolver loans are payable to an affiliate. During
1993, two interest rate caps were purchased for $498,000 which fixed $60,000,000
of the acquisition loan balance at a 6% interest rate effective September 30,
1994 for the remainder of the loan. The remaining balances of these loans bear
interest at various rates which ranged from 4.63% to 6.5%, 4.5% to 9% and 7.1%
to 7.9% during the years ended December 31, 1993, 1994 and 1995, respectively.
Interest only is payable for both the Acquisition and Revolver loans until
maturity at May 21, 1997, when the principal is due.
The Partnership's debt is collateralized principally by property and
equipment.
7. EMPLOYEE BENEFIT PLANS:
The Partnership participates in a 401(k) retirement savings plans.
Employees who are over 21 years of age and have completed one year of service
are eligible to participate in the plan. The Partnership matches employee
contributions up to 4% of an employee's salary. The Partnership expensed
$31,628, $44,185, and $77,075 for the years ended December 31, 1993, 1994 and
1995, respectively, related to the plan.
The Partnership participates in a self-insured group health plan through a
Voluntary Employee Benefit Association ("VEBA") for its employees. This plan is
funded to the limits provided in the Internal Revenue Code, and liabilities have
been recorded for unpaid claims. Aggregate and stop loss insurance exists at
amounts which limit exposure to the partnerships. The Partnership has recognized
expenses under the plan of $419,817, $443,277 and $511,643 for the years ended
December 31, 1993, 1994 and 1995, respectively.
8. FAIR VALUE:
The Partnership has estimated the fair value of its financial instruments
at December 31, 1995 as required by Statement of Financial Accounting Standards
No. 107. The carrying values of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses are reasonable estimates of their fair
values. The carrying values of variable and fixed rate debt are reasonable
estimates of their fair values based on their discounted cash flows at discount
rates currently available to the Company for debt with similar terms and
remaining maturities.
9. COMMITMENTS AND CONTINGENCIES:
The Partnership has entered into a land lease for one of the Partnership's
hotels. Future minimum rental payments of $160,000 per year are required under
the operating lease. The lease which expires March 2052 includes a renewal
option of 25 years and contingent lease payments which are based on a percentage
of the hotel's gross income. The related renewal rental expense was $160,000 for
the years ended 1993, 1994 and 1995, and contingent rental expense was $75,333,
$112,464 and $153,862 for the years ended December 31, 1993, 1994 and 1995,
respectively.
The Partnership is subject to environmental regulations related to the
ownership of real estate (hotels). As part of due diligence procedures, the
Partnership has conducted Phase I environmental assessments on each property
prior to acquisition. The cost of complying with the environmental regulations
was not material to the Partnership's statements of income for any of the years
in the three-year period ended December 31, 1995. The Partnership is not aware
of any environmental condition on any of its properties which is likely to have
a material adverse effect on the Partnership's financial statements.
10. SUBSEQUENT EVENT:
It is the intent of an affiliated entity to acquire a 70% ownership
interest in the Partnership. The acquiring entity and the Operator are
affiliated through common ownership. In addition, a letter of intent has been
entered into with a third party real estate investment trust ("REIT"). This
transaction will result in a
F-30
<PAGE> 170
GARDEN HOTEL ASSOCIATES LP
(A TEXAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
sale/leaseback that provides for the sale of all eleven hotels containing 1,940
rooms for $135,320,000 to the REIT and eleven long-term operating leases back to
the Operator. Each lease has an initial term of seventeen years and four
optional twelve-year extensions exercisable at the Operator's option for all
hotels. Annual minimum base rents aggregate $13,600,000 plus a contingent rent
payment is required based on a percentage of excess revenue over base year
revenues. The leases will require the Operator to pay substantially all expenses
associated with the operation of the leased hotels, real estate taxes and
insurance.
F-31
<PAGE> 171
FULL-RANGE MANAGEMENT CAPABILITIES
Wyndham is a fully integrated hospitality company experienced in all aspects of
hotel operations, including purchasing, accounting, asset and risk management,
as well as hotel design, remodeling and constrution.
[WYNDHAM LOGO]
WYNDHAM HOTEL CORPORATION
-- FINANCING & ACQUISITIONS
-- ASSET MANAGEMENT
-- PURCHASING
-- REDEVELOPMENT
-- DESIGN & CONSTRUCTION
-- SALES & MARKETING
The Company's hotel operations are divided into two operating divisions, the
Hotel and Resort Division and the Garden Hotel Division, which are serviced by
a centralized corporate staff providing managerial and operational support.
[PHOTO OF GRAND OPENING OF WYNDHAM GARDEN HOTEL]
[CAPTION]
Wyndham's design and construction division has managed over $135 million of
renovation and construction dring the past two years.
[PHOTO OF FIVE WYNDHAM EMPLOYEES]
[CAPTION]
Wyndham operates an extensive recruitment and training program. Wyndham
believes that this approach has contributed significantly to high labor
productivity and employee retention, as evidenced by the fact that 70% of the
Company's existing general managers were promoted from within the Company.
<PAGE> 172
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT RELATES
IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 13
The Formation and the Financing
Plan................................ 21
Use of Proceeds....................... 26
Dilution.............................. 27
Dividend Policy....................... 27
Capitalization........................ 28
Pro Forma Combined Financial Data..... 29
Selected Combined Financial Data...... 43
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 45
Business.............................. 58
Management............................ 88
Certain Relationships and
Transactions........................ 99
Principal Stockholders................ 107
Shares Eligible for Future Sale....... 108
Description of Indebtedness........... 110
Description of Capital Stock.......... 115
Certain U.S. Tax Consequences to
Non-U.S. Stockholders............... 121
Underwriting.......................... 124
Legal Matters......................... 126
Experts............................... 127
Additional Information................ 127
Glossary.............................. 128
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1996 (25 CALENDAR DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
LOGO
3,350,000 SHARES
WYNDHAM HOTEL
CORPORATION
COMMON STOCK
------------
PROSPECTUS
, 1996
------------
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MONTGOMERY SECURITIES
BT SECURITIES CORPORATION
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 173
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to
buy nor shall there be any sale of these securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction.
SUBJECT TO COMPLETION, DATED MAY 14, 1996
PROSPECTUS
<TABLE>
<S> <C>
3,350,000 SHARES
LOGO WYNDHAM HOTEL CORPORATION
COMMON STOCK
</TABLE>
------------------
All of the shares of Common Stock offered hereby are being sold by Wyndham
Hotel Corporation (the "Company"). Of the 3,350,000 shares of Common Stock
offered hereby, 670,000 shares are being offered in an international offering
outside the United States and Canada by the Managers (as defined herein) and
2,680,000 shares are being offered in a concurrent offering in the United States
and Canada by the U.S. Underwriters (as defined herein) (collectively, the
"Offering").
Prior to the Offering, there has not been a public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $14.00 and $16.00 per share. See "Underwriting" for
information relating to the factors considered in determining the initial public
offering price.
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "WYN," subject to official notice of issuance.
Concurrently with the Offering and as part of its Financing Plan (as
defined herein), the Company is offering $100,000,000 aggregate principal amount
of % Senior Subordinated Notes due 2006 by a separate prospectus (the "Debt
Offering," and together with the Offering, the "Offerings"). The consummation of
each of the Offerings is conditioned upon the consummation of the other, and
will occur simultaneously. See "The Formation and the Financing Plan."
SEE "RISK FACTORS" COMMENCING ON PAGE 13 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------------
Per Share $ $ $
- ------------------------------------------------------------------------------------------------------
Total(3) $ $ $
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) For information regarding indemnification of the U.S. Underwriters and
the Managers, see "Underwriting."
(2) Before deducting expenses estimated at $ , which are payable by
the Company.
(3) The Company has granted the several U.S. Underwriters a 30-day option to
purchase up to 502,500 additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised
in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $
and $ , respectively.
------------------
These shares of Common Stock are being offered by the several Managers
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, 1996 at the offices of Smith Barney Inc., 333 West 34th Street,
New York, New York 10001.
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MONTGOMERY SECURITIES
BANKERS TRUST INTERNATIONAL PLC
, 1996
<PAGE> 174
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE MANAGERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT RELATES
IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 13
The Formation and the Financing
Plan................................ 21
Use of Proceeds....................... 26
Dilution.............................. 27
Dividend Policy....................... 27
Capitalization........................ 28
Pro Forma Combined Financial Data..... 29
Selected Combined Financial Data...... 43
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 45
Business.............................. 58
Management............................ 88
Certain Relationships and
Transactions........................ 99
Principal Stockholders................ 107
Shares Eligible for Future Sale....... 108
Description of Indebtedness........... 110
Description of Capital Stock.......... 115
Certain U.S. Tax Consequences to
Non-U.S. Stockholders............... 121
Underwriting.......................... 124
Legal Matters......................... 126
Experts............................... 127
Additional Information................ 127
Glossary.............................. 128
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1996 (25 CALENDAR DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
LOGO
3,350,000 SHARES
WYNDHAM HOTEL
CORPORATION
COMMON STOCK
------------
PROSPECTUS
, 1996
------------
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MONTGOMERY SECURITIES
BANKERS TRUST
INTERNATIONAL PLC
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 175
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the expenses the Company expects to incur in
connection with the Offering described in this Registration Statement.
<TABLE>
<S> <C>
SEC Registration Fee..................................................... $ 19,927
NASD Filing Fee.......................................................... 6,279
New York Stock Exchange Listing Fee...................................... 149,773
Transfer Agent and Registrar Fees........................................ *
Blue Sky and Related Fees (including counsel fees)....................... *
Accountants' Services and Expenses....................................... *
Legal Services and Expenses.............................................. *
Directors' and Officers' Insurance....................................... *
Printing and Engraving Fees.............................................. *
Governmental Filings..................................................... *
Real Estate Related Expenses............................................. *
Miscellaneous............................................................ *
-------
TOTAL.......................................................... $ *
=======
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides,
in effect, that any person made a party to any action by reason of the fact that
he is or was a director, officer, employee or agent of the Company may and, in
certain cases, must be indemnified by the Company against, in the case of a non-
derivative action, judgments, fines, amounts paid in settlement and reasonable
expenses (including attorney's fees) incurred by him as a result of such action,
and in the case of a derivative action, against expenses (including attorney's
fees), if in either type of action he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company. This indemnification does not apply, in a derivative action, to matters
as to which it is adjudged that the director, officer, employee or agent is
liable to the Company, unless upon court order it is determined that, despite
such adjudication of liability, but in view of all the circumstances of the
case, he is fairly and reasonably entitled to indemnity for expenses, and, in a
non-derivative action, to any criminal proceeding in which such person had
reasonable cause to believe his conduct was unlawful.
Article 15 of the Company's Amended and Restated Certificate of
Incorporation provides that no director or former director of the Company shall
be liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director to the fullest extent permitted by Delaware Law.
Article 15 of the Company's Amended and Restated Certificate of Incorporation,
which is filed as Exhibit 3.1 to this Registration Statement, is incorporated
herein by reference.
Article 16 of the Company's Amended and Restated Certificate of
Incorporation provides that the Company shall indemnify any and all of its
directors and officers, or former directors and officers, or any person who may
have served at the Company's request as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise. Article 16
of the Company's Amended and Restated Certificate of Incorporation, which is
filed as Exhibit 3.1 to this Registration Statement, is incorporated herein by
reference.
Reference is made to the underwriting agreements filed as Exhibits 1.1(a)
and 1.1(b) hereto, pursuant to which the underwriters will agree to indemnify
officers and directors of the Company against certain liabilities under the
Securities Act.
II-1
<PAGE> 176
The Company will enter into Indemnification Agreements with each director
of the Company, a draft form of which is filed as Exhibit 10.15 to this
Registration Statement. Pursuant to such agreements, the Company will, to the
extent permitted by applicable law, indemnify such directors against all
expenses, judgments, fines and penalties incurred in connection with the defense
or settlement of any actions brought against them by reason of the fact that
they were directors of the Company or assumed certain responsibilities at the
direction of the Company. The Company will also purchase directors and officers
liability insurance in order to limit its exposure to liability for
indemnification of directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On February 16, 1996, the Company issued 100 shares of Common Stock to
James D. Carreker, its Chief Executive Officer and a director, for nominal
consideration. The shares were issued without registration under the Securities
Act pursuant to the exemption from registration afforded by Section 4(2) of the
Securities Act or the rules and regulations promulgated thereunder.
Reference is made to "The Formation and the Financing Plan" and "Certain
Transactions and Relationships -- Benefits of the Formation and the Financing
Plan to Related Parties" regarding shares of Common Stock to be issued in
connection with the Formation, the purchasers thereof and the consideration
therefor. Such issuances will occur without registration under the Securities
Act pursuant to exemptions from registration afforded by Section 4(2) of the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<S> <C>
1.1(a) -- Underwriting Agreement (U.S. Version).
1.1(b) -- Underwriting Agreement (International Version).
+2.1 -- Formation Agreement dated as of March 10, 1996 among the Company and
the parties identified on the signature page thereof.
+2.2 -- Transfer Agreement among Wyndham Hotel Corporation, Bank of Nova
Scotia, Bank of Nova Scotia (Jamaica) and Caribbean Hotel Management
Company.
+3.1 -- Amended and Restated Certificate of Incorporation of the Company.
+3.2 -- Amended and Restated Bylaws of the Company.
4.1 -- Form of specimen certificate for the Common Stock.
+4.2 -- Relevant portions of Amended and Restated Certificate of
Incorporation (Reference is hereby made to Exhibit 3.1).
5.1 -- Opinion of Locke Purnell Rain Harrell (A Professional Corporation).
+10.1(a) -- Management Agreement dated as of May 10, 1995, by and between Anatole
Hotel Investors, L.P. and Wyndham Hotel Company Ltd.
+10.1(b) -- Form of Management Agreement dated as of September 27, 1994 by and
between Bedrock Annapolis Investment Partners Level I, L.P. and
Wyndham Hotel Company Ltd. (together with attachment).
+10.1(c) -- Management Agreement dated as of March 10, 1988, by and between
Franklin Plaza Associates and Wyndham Hotel Company, as amended by
First Amendment dated November 17, 1993.
+10.1(d) -- Service Agreement dated as of November 17, 1993, by and between
Franklin Plaza Realty Limited Partnership and Wyndham Hotel Company
Ltd.
+10.1(e) -- Management Agreement dated as of December 1, 1984, by and between
Houston Greenspoint Hotel Associates and Wyndham Hotel Company.
</TABLE>
II-2
<PAGE> 177
<TABLE>
<S> <C>
+10.1(f) -- Management Agreement dated as of December 4, 1991, by and between
Itasca Hotel Company and Wyndham Hotel Company Ltd., as amended by
Amendment dated March 19, 1996.
+10.1(g) -- Management Agreement dated as of June 30, 1994 by and between
Waterfront Hotel Associates, S.E. and Old San Juan Management, Ltd.
S.E.
+10.1(h) -- Management Agreement dated as of May 26, 1995 by and between
Convention Center Boulevard Hotel, Limited and Wyndham Hotel Company
Ltd.
+10.1(i) -- Management Agreement dated as of August 25, 1993 by and between
Playhouse Square Hotel Limited Partnership and Wyndham Hotel Company
Ltd.
+10.1(j) -- Management Agreement dated as of March 1, 1986 by and between CLC
Partnership and Wyndham Hotel Company, as amended by First Amendment
dated June 30, 1988.
+10.1(k) -- Management Agreement dated as of December 22, 1987 and Badger XVI
Limited Partnership, Crow Division Partners and Wyndham Hotel
Company, as amended by First Amendment dated February 26, 1988.
+10.1(l) -- Management Agreement dated as of November 20, 1987 by and between
Hotel and Convention Center Partners I, Ltd. and Wyndham Hotel
Corporation II, Inc., as amended by Amendment dated November 1, 1993.
10.1(m) -- [Intentionally Omitted]
+10.2 -- Investment Agreement dated as of May 2, 1994, among The Hampstead
Group, Inc., Wyndham Hotel Company Ltd., The Partners in Wyndham
Hotel Company Ltd., and Crow Family Partnership, L.P., as amended.
+10.3(a) -- Agreement to Lease by and between Hospitality Properties Trust and
Garden Hotel Associates II Limited Partnership dated as of April 1,
1996.
+10.3(b) -- Lease Agreement dated as of March 1, 1988, by and between Lincoln
Island Associates No. 1, Limited and WH Limited Partnership.
+10.3(c) -- Lease Agreement dated December 19, 1989 by and between Rose Hall
Hotel Limited and Rose Hall Associates Limited Partnership.
+10.3(d) -- Sublease Agreement dated as of November 17, 1989, by and between
Copley-Commerce-Telegraph #1 Associates, as assignee of
Crow-Staley-Commerce #1 Limited Partnership and Commerce Hotel
Partners Ltd.
+10.3(e) -- Ground Lease dated as of March 26, 1987, by and between Fred C.
Boysen, Dorthey Boysen, Ted Boysen and Rose Boysen and Garden Hotel
Associates Limited Partnership, as assignee of Ramada Hotel Operating
Company as amended by First Amendment dated as of May 7, 1990.
+10.3(f) -- Lease Agreement dated as of November 26, 1990, between Tower 2001
Limited Partnership and Wyndham Hotel Company Ltd, as amended by
Letter Agreement dated March 9, 1994 and Letter Agreement dated March
22, 1995, and as amended by Amendment No. 1 dated as of November 30,
1995.
+10.3(g) -- Lease Agreement dated as of January 1992, by and between 475 Park
Avenue South Co., and Wyndham Hotel Company Ltd., as amended by
Amendment of Lease dated January 30, 1995.
+10.3(h) -- Sublease dated as of May 31, 1995, between Banc One Mortgage
Corporation and Wyndham Hotels & Resorts.
+10.3(i) -- Lease Agreement dated as of May 16, 1994, by and between Wirtz Realty
Corporation, as agent for 333 Building Corporation and Wyndham Hotel
Company Ltd.
+10.3(j) -- Lease Agreement dated as of May 18, 1994 by and between Columbia
Executive Offices, Inc. and The Inn at Semiahmoo a Wyndham Resort.
10.4 -- [Intentionally Omitted]
</TABLE>
II-3
<PAGE> 178
<TABLE>
<S> <C>
10.5 -- [Intentionally Omitted]
10.5(a) -- Form of Asset Management Agreement to be entered into between the
Company and various Crow Family Real Estate Entities.
10.6 -- [Intentionally Omitted]
10.6(a) -- Form of Service Agreement to be entered into between the Company and
each of ISIS 2000, Wynright Insurance and various affiliated
entities.
10.7 -- [Intentionally Omitted]
*10.8 -- Form of Insurance Policy from Wynright Insurance to the Company.
10.9 -- [Intentionally Omitted]
10.10 -- Form of Indenture relating to the % Senior Subordinated Notes due
2006.
+10.11 -- Credit Agreement dated as of June 30, 1995 among Wyndham Hotel
Company, Ltd., Certain Financial Institutions and General Electric
Investment Corporation.
+10.12 -- Exchange Agreement dated as of March 10, 1996, among Wyndham Hotel
Company, Ltd., Wyndham Hotel Corporation, Wynopt Investment
Partnership Level II, L.P., Wynopt Investment Partnership, L.P. and
The Hampstead Group L.L.C. and joined in by Bedrock Hotel Partners,
L.L.C.
+10.13 -- Form of Stockholders' Agreement among Wyndham Hotel Corporation and
the Stockholders listed on the signature pages thereof.
+10.14 -- Form of Registration Rights Agreement among Wyndham Hotel
Corporation, and the parties identified on the signature pages
thereof.
10.15 -- Form of Indemnification Agreement by and between Wyndham Hotel
Corporation and its directors.
+10.16(a) -- 6% Promissory Note made by James D. Carreker.
+10.16(b) -- 6% Promissory Note made by Leslie V. Bentley.
+10.16(c) -- 6% Promissory Note made by Eric A. Danziger.
+10.16(d) -- 6% Promissory Note made by Anne L. Raymond.
+10.16(e) -- 6% Promissory Note made by Stanley M. Koonce, Jr.
+10.16(f) -- 6% Promissory Note made by Wyndham Employees Ltd.
*10.17 -- Form of Waiver and Contribution Agreement.
+10.18(a) -- Form of Capital Contribution Notes dated as of December 22, 1995 by
and between WHC-LG Hotel Partners L.P. and the Company.
+10.18(b) -- Form of Capital Contribution Notes dated as of October 2, 1995 by and
between Pleasanton Hotel Partners, L.P. and the Company.
+10.18(c) -- Form of Capital Contribution Notes dated as of May 26, 1995 by and
between New Orleans Hotel I, L.P. and the Company.
10.19(a) -- Wyndham Employees Savings & Retirement Plan.
+10.19(b) -- Wyndham Hotel Corporation 1996 Long Term Incentive Plan.
+10.19(c) -- Non-Employee Directors' Retainer Stock Plan.
+10.20 -- Agreement and Conveyance dated as of December 31, 1988 by and between
Caribbean Hotel Management Company and Wyndham Hotel Company Ltd.
+10.21 -- Option Agreement dated as of May 2, 1994 between Ross Investment
Partners 2, L.P. and Wyndham Hotel Company Ltd., and The Partners in
Wyndham Hotel Company Ltd.
+10.22 -- Operating Deficit Guaranty and Reserves Agreement dated as of August
25, 1993 by and among Playhouse Square Hotel Limited Partnership,
Society National Bank and the Lenders.
</TABLE>
II-4
<PAGE> 179
<TABLE>
<S> <C>
10.23 -- Letter Agreement dated as of May 9, 1996 by and between WHC LAX
Associates, L.P. and the Company.
+10.24 -- Letter Agreement dated as of April 29, 1996 by and between Certain
Financial Institutions, General Electric Investment Corporation and
the Company.
+10.25 -- Registration Rights Agreement dated as of April 29, 1996 between the
Company and General Electric Investment Corporation.
+10.26 -- Form of Promissory Note dated April 15, 1995 between the Company and
WFLP.
10.27 -- Letter of Intent from Patriot American Hospitality, Inc., dated April
10, 1996.
10.28 -- Form of Computerized Reservation Service Agreement between ISIS 2000
and the Company.
10.29 -- Form of Indemnification Agreement by and between Certain Officers,
Directors and Stockholders of Certain Liquor Corporations and Wyndham
Hotel Company Ltd.
21.1 -- List of subsidiaries of the Company.
23.1 -- Consents of Coopers & Lybrand L.L.P.
23.2 -- Consent of Locke Purnell Rain Harrell (A Professional Corporation)
(included in Exhibit 5.1).
24.1 -- Powers of Attorney.
</TABLE>
- ---------------
* To be filed by amendment.
+ Filed Previously.
(b) Financial Statement Schedules.
<TABLE>
<CAPTION>
SCHEDULE PAGE
-------------------------------------------------------------------- ----
<S> <C>
XI: Real Estate and Accumulated Depreciation....................... S-2
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned Company hereby undertakes to provide to the representatives
of the underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Company, the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer, or controlling person of
the Company in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer, or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-5
<PAGE> 180
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Dallas,
State of Texas, on the day of May, 1996.
WYNDHAM HOTEL CORPORATION
By: /s/ JAMES D. CARREKER*
----------------------------------
Name: James D. Carreker
Title: President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on May , 1996.
<TABLE>
<CAPTION>
NAME TITLE
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ JAMES D. CARREKER* President, Chief Executive Officer and
- --------------------------------------------- Director
James D. Carreker (principal executive officer)
/s/ ANNE L. RAYMOND* Chief Financial Officer,
- --------------------------------------------- Executive Vice President and Director
Anne L. Raymond (principal financial officer)
/s/ JOHN P. KLUMPH* Vice President -- Corporate Controller
- --------------------------------------------- (principal accounting officer)
John P. Klumph
/s/ HARLAN R. CROW* Director
- ---------------------------------------------
Harlan R. Crow
/s/ SUSAN T. GROENTEMAN* Director
- ---------------------------------------------
Susan T. Groenteman
/s/ ROBERT A. WHITMAN* Director
- ---------------------------------------------
Robert A. Whitman
/s/ DANIEL A. DECKER* Director
- ---------------------------------------------
Daniel A. Decker
/s/ LESLIE V. BENTLEY* Executive Vice President and Wyndham Garden
- --------------------------------------------- Division President
Leslie V. Bentley
/s/ ERIC A. DANZIGER* Executive Vice President and Wyndham Hotels
- --------------------------------------------- and Resorts Division President
Eric A. Danziger
/s/ STANLEY M. KOONCE, JR.* Executive Vice President -- Marketing,
- --------------------------------------------- Planning and Technical Services
Stanley M. Koonce, Jr.
*By: /s/ CARLA S. MORELAND
- ---------------------------------------------
Carla S. Moreland
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 181
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners and Shareholders
Wyndham Hotel Corporation
In connection with our audits of the combined financial statements of
Wyndham Hotel Corporation (as defined in Note 1 of those combined financial
statements) as of December 31, 1994 and 1995, and for each of the three years in
the period ended December 31, 1995, which financial statements are included in
the prospectus, we have also audited the financial statement schedule listed in
Item 16 herein.
In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
March 8, 1996
S-1
<PAGE> 182
SCHEDULE XI
WYNDHAM HOTEL CORPORATION
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COSTS GROSS AMOUNT
--------------------- -------------------------------
BUILDINGS & SUBSEQUENT BUILDINGS & ACCUMULATED
DESCRIPTION DEBT LAND IMPROVEMENTS COSTS LAND IMPROVEMENTS TOTAL DEPRECIATION
- ---------------------------------- ------- ------ ------------ ---------- ------ ------------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wyndham Garden Hotels
Brookfield Lakes................ $10,275 $ 985 $ 7,157 $ 70 $ 985 $ 7,227 $ 8,212 $ 1,070
Indianapolis.................... 10,600 495 6,845 262 495 7,107 7,602 962
Commerce........................ 15,000 300 11,966 409 300 12,375 12,675 1,348
Charlotte....................... 10,286 595 6,044 489 562 6,533 7,095 1,062
Schaumburg...................... 5,400 1,613 4,263 0 1,613 4,263 5,876 280
Wyndham Rose Hall Resort.......... 16,879 6,000 24,628 446 6,000 25,074 31,074 3,976
Wyndham Harbour Island............ 20,471(1) 0 14,137 392 0 14,529 14,529 3,746
------- ------ ------- ------ ------ ------- ------- -------
$88,911 $9,988 $75,040 $2,068 $9,955 $77,108 $87,063 $12,444
======= ====== ======= ====== ====== ======= ======= =======
<CAPTION>
DATE OF DEPRECIATION
ACQUISITION OR LIFE
DESCRIPTION CONSTRUCTION (IN YEARS)
- ------------------------------------ -------------- ------------
<S> <C> <C>
Wyndham Garden Hotels
Brookfield Lakes.................. June 90 20-40
Indianapolis...................... Nov 90 20-40
Commerce.......................... Dec 91 20-40
Charlotte......................... Dec 89 20-40
Schaumburg........................ May 93 40
Wyndham Rose Hall Resort............ Jan 90 20-40
Wyndham Harbour Island.............. Mar 88 30
</TABLE>
- ---------------
(1) Amount represents the capital lease obligation balance as of 12/31/95.
S-2
<PAGE> 183
INDEX TO EXHIBITS
<TABLE>
<S> <C>
1.1(a) -- Underwriting Agreement (U.S. Version).
1.1(b) -- Underwriting Agreement (International Version).
+2.1 -- Formation Agreement dated as of March 10, 1996 among the Company and
the parties identified on the signature page thereof.
+2.2 -- Transfer Agreement among Wyndham Hotel Corporation, Bank of Nova
Scotia, Bank of Nova Scotia (Jamaica) and Caribbean Hotel Management
Company.
+3.1 -- Amended and Restated Certificate of Incorporation of the Company.
+3.2 -- Amended and Restated Bylaws of the Company.
4.1 -- Form of specimen certificate for the Common Stock.
+4.2 -- Relevant portions of Amended and Restated Certificate of
Incorporation (Reference is hereby made to Exhibit 3.1).
5.1 -- Opinion of Locke Purnell Rain Harrell (A Professional Corporation).
+10.1(a) -- Management Agreement dated as of May 10, 1995, by and between Anatole
Hotel Investors, L.P. and Wyndham Hotel Company Ltd.
+10.1(b) -- Form of Management Agreement dated as of September 27, 1994 by and
between Bedrock Annapolis Investment Partners Level I, L.P. and
Wyndham Hotel Company Ltd. (together with attachment).
+10.1(c) -- Management Agreement dated as of March 10, 1988, by and between
Franklin Plaza Associates and Wyndham Hotel Company, as amended by
First Amendment dated November 17, 1993.
+10.1(d) -- Service Agreement dated as of November 17, 1993, by and between
Franklin Plaza Realty Limited Partnership and Wyndham Hotel Company
Ltd.
+10.1(e) -- Management Agreement dated as of December 1, 1984, by and between
Houston Greenspoint Hotel Associates and Wyndham Hotel Company.
+10.1(f) -- Management Agreement dated as of December 4, 1991, by and between
Itasca Hotel Company and Wyndham Hotel Company Ltd., as amended by
Amendment dated March 19, 1996.
+10.1(g) -- Management Agreement dated as of June 30, 1994 by and between
Waterfront Hotel Associates, S.E. and Old San Juan Management, Ltd.
S.E.
+10.1(h) -- Management Agreement dated as of May 26, 1995 by and between
Convention Center Boulevard Hotel, Limited and Wyndham Hotel Company
Ltd.
+10.1(i) -- Management Agreement dated as of August 25, 1993 by and between
Playhouse Square Hotel Limited Partnership and Wyndham Hotel Company
Ltd.
+10.1(j) -- Management Agreement dated as of March 1, 1986 by and between CLC
Partnership and Wyndham Hotel Company, as amended by First Amendment
dated June 30, 1988.
+10.1(k) -- Management Agreement dated as of December 22, 1987 and Badger XVI
Limited Partnership, Crow Division Partners and Wyndham Hotel
Company, as amended by First Amendment dated February 26, 1988.
+10.1(l) -- Management Agreement dated as of November 20, 1987 by and between
Hotel and Convention Center Partners I, Ltd. and Wyndham Hotel
Corporation II, Inc., as amended by Amendment dated November 1, 1993.
10.1(m) -- [Intentionally Omitted]
+10.2 -- Investment Agreement dated as of May 2, 1994, among The Hampstead
Group, Inc., Wyndham Hotel Company Ltd., The Partners in Wyndham
Hotel Company Ltd., and Crow Family Partnership, L.P., as amended.
+10.3(a) -- Agreement to Lease by and between Hospitality Properties Trust and
Garden Hotel Associates II Limited Partnership dated as of April 1,
1996.
</TABLE>
<PAGE> 184
<TABLE>
<S> <C>
+10.3(b) -- Lease Agreement dated as of March 1, 1988, by and between Lincoln
Island Associates No. 1, Limited and WH Limited Partnership.
+10.3(c) -- Lease Agreement dated December 19, 1989 by and between Rose Hall
Hotel Limited and Rose Hall Associates Limited Partnership.
+10.3(d) -- Sublease Agreement dated as of November 17, 1989, by and between
Copley-Commerce-Telegraph #1 Associates, as assignee of
Crow-Staley-Commerce #1 Limited Partnership and Commerce Hotel
Partners Ltd.
+10.3(e) -- Ground Lease dated as of March 26, 1987, by and between Fred C.
Boysen, Dorthey Boysen, Ted Boysen and Rose Boysen and Garden Hotel
Associates Limited Partnership, as assignee of Ramada Hotel Operating
Company as amended by First Amendment dated as of May 7, 1990.
+10.3(f) -- Lease Agreement dated as of November 26, 1990, between Tower 2001
Limited Partnership and Wyndham Hotel Company Ltd, as amended by
Letter Agreement dated March 9, 1994 and Letter Agreement dated March
22, 1995, and as amended by Amendment No. 1 dated as of November 30,
1995.
+10.3(g) -- Lease Agreement dated as of January 1992, by and between 475 Park
Avenue South Co., and Wyndham Hotel Company Ltd., as amended by
Amendment of Lease dated January 30, 1995.
+10.3(h) -- Sublease dated as of May 31, 1995, between Banc One Mortgage
Corporation and Wyndham Hotels & Resorts.
+10.3(i) -- Lease Agreement dated as of May 16, 1994, by and between Wirtz Realty
Corporation, as agent for 333 Building Corporation and Wyndham Hotel
Company Ltd.
+10.3(j) -- Lease Agreement dated as of May 18, 1994 by and between Columbia
Executive Offices, Inc. and The Inn at Semiahmoo a Wyndham Resort.
10.4 -- [Intentionally Omitted]
10.5 -- [Intentionally Omitted]
10.5(a) -- Form of Asset Management Agreement to be entered into between the
Company and various Crow Family Real Estate Entities.
10.6 -- [Intentionally Omitted]
10.6(a) -- Form of Service Agreement to be entered into between the Company and
each of ISIS 2000, Wynright Insurance and various affiliated
entities.
10.7 -- [Intentionally Omitted]
*10.8 -- Form of Insurance Policy from Wynright Insurance to the Company.
10.9 -- [Intentionally Omitted]
10.10 -- Form of Indenture relating to the % Senior Subordinated Notes due
2006.
+10.11 -- Credit Agreement dated as of June 30, 1995 among Wyndham Hotel
Company, Ltd., Certain Financial Institutions and General Electric
Investment Corporation.
+10.12 -- Exchange Agreement dated as of March 10, 1996, among Wyndham Hotel
Company, Ltd., Wyndham Hotel Corporation, Wynopt Investment
Partnership Level II, L.P., Wynopt Investment Partnership, L.P. and
The Hampstead Group L.L.C. and joined in by Bedrock Hotel Partners,
L.L.C.
+10.13 -- Form of Stockholders' Agreement among Wyndham Hotel Corporation and
the Stockholders listed on the signature pages thereof.
+10.14 -- Form of Registration Rights Agreement among Wyndham Hotel
Corporation, and the parties identified on the signature pages
thereof.
10.15 -- Form of Indemnification Agreement by and between Wyndham Hotel
Corporation and its directors.
+10.16(a) -- 6% Promissory Note made by James D. Carreker.
+10.16(b) -- 6% Promissory Note made by Leslie V. Bentley.
</TABLE>
<PAGE> 185
<TABLE>
<S> <C>
+10.16(c) -- 6% Promissory Note made by Eric A. Danziger.
+10.16(d) -- 6% Promissory Note made by Anne L. Raymond.
+10.16(e) -- 6% Promissory Note made by Stanley M. Koonce, Jr.
+10.16(f) -- 6% Promissory Note made by Wyndham Employees Ltd.
*10.17 -- Form of Waiver and Contribution Agreement.
+10.18(a) -- Form of Capital Contribution Notes dated as of December 22, 1995 by
and between WHC-LG Hotel Partners L.P. and the Company.
+10.18(b) -- Form of Capital Contribution Notes dated as of October 2, 1995 by and
between Pleasanton Hotel Partners, L.P. and the Company.
+10.18(c) -- Form of Capital Contribution Notes dated as of May 26, 1995 by and
between New Orleans Hotel I, L.P. and the Company.
10.19(a) -- Wyndham Employees Savings & Retirement Plan.
+10.19(b) -- Wyndham Hotel Corporation 1996 Long Term Incentive Plan.
+10.19(c) -- Non-Employee Directors' Retainer Stock Plan.
+10.20 -- Agreement and Conveyance dated as of December 31, 1988 by and between
Caribbean Hotel Management Company and Wyndham Hotel Company Ltd.
+10.21 -- Option Agreement dated as of May 2, 1994 between Ross Investment
Partners 2, L.P. and Wyndham Hotel Company Ltd., and The Partners in
Wyndham Hotel Company Ltd.
+10.22 -- Operating Deficit Guaranty and Reserves Agreement dated as of August
25, 1993 by and among Playhouse Square Hotel Limited Partnership,
Society National Bank and the Lenders.
10.23 -- Letter Agreement dated as of May 9, 1996 by and between WHC LAX
Associates, L.P. and the Company.
+10.24 -- Letter Agreement dated as of April 29, 1996 by and between Certain
Financial Institutions, General Electric Investment Corporation and
the Company.
+10.25 -- Registration Rights Agreement dated as of April 29, 1996 between the
Company and General Electric Investment Corporation.
+10.26 -- Form of Promissory Note dated April 15, 1995 between the Company and
WFLP.
10.27 -- Letter of Intent from Patriot American Hospitality, Inc., dated April
10, 1996.
10.28 -- Form of Computerized Reservation Service Agreement between ISIS 2000
and the Company.
10.29 -- Form of Indemnification Agreement by and between Certain Officers,
Directors and Stockholders of Certain Liquor Corporations and Wyndham
Hotel Company Ltd.
21.1 -- List of subsidiaries of the Company.
23.1 -- Consents of Coopers & Lybrand L.L.P.
23.2 -- Consent of Locke Purnell Rain Harrell (A Professional Corporation)
(included in Exhibit 5.1).
24.1 -- Powers of Attorney.
</TABLE>
- ---------------
* To be filed by amendment.
+ Filed Previously.
<PAGE> 1
EXHIBIT 1.1(a)
2,680,000 Shares
WYNDHAM HOTEL CORPORATION
Common Stock
U.S. UNDERWRITING AGREEMENT
__________, 1996
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MONTGOMERY SECURITIES
BT SECURITIES CORPORATION
As Representatives of the Several U.S. Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Wyndham Hotel Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell an aggregate of 2,680,000 shares (the
"Firm Shares") of its common stock, $.01 par value per share (the "Common
Stock") to the several Underwriters named in Schedule I hereto (the "U.S.
Underwriters") for whom Smith Barney Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, Montgomery Securities and BT Securities Corporation are
acting as representatives (the "Representatives"). In addition, solely for the
purpose of covering over-allotments, the Company proposes to sell to the U.S.
Underwriters, upon the terms and conditions set forth in Section 2 hereof, up
to an additional 502,500 shares (the "Additional Shares") of Common Stock. The
Firm Shares and the Additional Shares are hereinafter collectively referred to
as the "Shares".
It is understood that the Company is concurrently entering into
an International Underwriting Agreement, dated the date hereof (the
"International Underwriting Agreement"), providing for the sale of 670,000
shares of Common Stock (the "International Shares") through arrangements with
certain underwriters outside the United States and Canada (the "Managers"), for
whom Smith Barney Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Montgomery Securities and Bankers Trust International PLC
<PAGE> 2
are acting as lead Managers (the "Lead Managers"). The International Shares
and the Shares, collectively, are herein called the "Underwritten Shares".
It is further understood that, prior to the Closing Date (as
defined below), the Company and certain other parties will enter into a
transaction referred to in the Prospectuses (as defined below) as the
"Formation" and that, simultaneously with the closing hereunder, the Company
and certain other parties will enter into a series of transactions referred to
in the Prospectuses as the "Financing Plan". The Formation Agreement, the
Hampstead Exchange Agreement and the Rose Hall Transfer Agreement to be entered
into among the Company and certain partnerships, corporations and other parties
referred to therein are hereinafter collectively referred to as the
"Transaction Documents" and each singly as a "Transaction Document". Under the
terms of the Transaction Documents, the Company will succeed to the hotel
ownership, hotel management and other business operations of the entities
identified on Schedule II hereto (the "Roll-Up Entities"). TCF Hotels LP,
Caribbean Hotel Management Company and Wyndham Finance Limited Partnership
(collectively, the "Founders") and certain other parties will each receive cash
from the proceeds of the Financing Plan.
It is further understood that as described in the U.S. Prospectus
(as defined below) under the caption "The Formation and the Financing Plan",
the Company intends to publicly offer in a concurrent public offering (the
"Concurrent Debt Offering") ___% Senior Subordinated Notes due 2006.
The Company also understands that the Representatives and the
Lead Managers have entered into an agreement (the "Agreement Between U.S.
Underwriters and Managers") contemplating the coordination of certain
transactions between the U.S. Underwriters and the Managers and that, pursuant
thereto and subject to the conditions set forth therein, the U.S. Underwriters
may purchase from the Managers a portion of the International Shares or sell to
the Managers a portion of the Shares. The Company understands that any such
purchases and sales between the U.S. Underwriters and the Managers shall be
governed by the Agreement Between U.S. Underwriters and Managers and shall not
be governed by the terms of this Agreement or the International Underwriting
Agreement.
The Company wishes to confirm as follows its agreements with you
and the other several U.S. Underwriters on whose behalf you are acting, in
connection with the several purchases of the Shares by the U.S. Underwriters.
2
<PAGE> 3
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 under the Act (the "registration
statement"), including prospectuses subject to completion relating to the
Underwritten Shares. The term "Registration Statement" as used in this
Agreement means the registration statement, as amended at the time it becomes
effective or, if the registration statement became effective prior to the
execution of this Agreement, as supplemented or amended prior to the execution
of this Agreement. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the registration statement will be
filed and must be declared effective before the offering of the Underwritten
Shares may commence, the term "Registration Statement" as used in this
Agreement means the registration statement as amended by said post-effective
amendment. The term "Registration Statement" shall also include any
registration statement relating to the Shares that is filed and declared
effective pursuant to Rule 462(b) under the Act.
The term "Prospectuses" as used in this Agreement means the
prospectuses relating to the Underwritten Shares in the forms included in the
Registration Statement or, if the prospectuses included in the Registration
Statement omit information in reliance on Rule 430A under the Act and such
information is included in prospectuses filed with the Commission pursuant to
Rule 424(b) under the Act, the term "Prospectuses" as used in this Agreement
means the prospectuses relating to the Underwritten Shares in the forms
included in the Registration Statement as supplemented by the addition of the
Rule 430A information contained in the prospectuses relating to the
Underwritten Shares filed with the Commission pursuant to Rule 424(b), provided
that if prospectuses that meet the requirements of Section 10(a) of the Act are
delivered pursuant to Rule 434(b) under the Act, then (i) the term
"Prospectuses" as used in this Agreement means the prospectuses subject to
completion (as defined in Rule 434(g) under the Act) relating to the
Underwritten Shares as supplemented by the information contained in the term
sheets described in Rule 434(b)(3) under the Act, and (ii) the date of such
Prospectuses shall be deemed to be the date of such term sheets. The term
"Prepricing Prospectuses" as used in this Agreement means the prospectuses
subject to completion relating to the Underwritten Shares in the forms included
in the registration statement at the time of the initial filing of the
registration statement with the Commission, and as such
3
<PAGE> 4
prospectuses shall have been amended from time to time prior to the date of the
Prospectuses.
It is understood that two forms of Prepricing Prospectus and two
forms of Prospectus are to be used in connection with the offering and sale of
the Underwritten Shares: a Prepricing Prospectus and a Prospectus relating to
the Shares that are to be offered and sold in the United States (as defined
herein) or Canada (as defined herein) to U.S. or Canadian Persons (the "U.S.
Prepricing Prospectus" and the "U.S. Prospectus", respectively), and a
Prepricing Prospectus and a Prospectus relating to the International Shares
that are to be offered and sold outside the United States or Canada to persons
other than U.S. or Canadian Persons (the "International Prepricing Prospectus"
and the "International Prospectus", respectively). The U.S. Prospectus and the
International Prospectus are herein collectively called the "Prospectuses", and
the U.S. Prepricing Prospectus and the International Prepricing Prospectus are
herein called the "Prepricing Prospectuses". For purposes of this Agreement:
"U.S. or Canadian Person" means any resident or national of the United States
or Canada, any corporation, partnership or other entity created or organized in
or under the laws of the United States or Canada or any estate or trust the
income of which is subject to United States or Canadian income taxation
regardless of the source of its income (other than the foreign branch of any
U.S. or Canadian Person), and includes any United States or Canadian branch of
a person other than a U.S. or Canadian Person; "United States" means the United
States of America (including the states thereof and the District of Columbia)
and its territories, its possessions and other areas subject to its
jurisdiction; and "Canada" means Canada and its territories, its possessions
and other areas subject to its jurisdiction.
2. AGREEMENTS TO SELL AND PURCHASE. Upon the basis of the
representations, warranties and agreements contained herein and subject to all
the terms and conditions set forth herein and to such other adjustments as you
may determine to avoid fractional shares, the Company hereby agrees to issue
and sell to each U.S. Underwriter, and each U.S. Underwriter agrees, severally
and not jointly, to purchase from the Company, at a purchase price of $______
per share (the "purchase price per share"), the number of Firm Shares set forth
opposite the name of such U.S. Underwriter in Schedule I hereto (or such number
of Firm Shares increased as set forth in Section 11 hereof).
Upon the basis of the representations, warranties and agreements
contained herein and subject to all the terms and conditions set forth herein,
the Company also agrees to sell to the U.S. Underwriters, and the U.S.
Underwriters
4
<PAGE> 5
shall have the right to purchase from the Company, at the purchase price per
share, pursuant to an option (the "over-allotment option") that may be
exercised at any time (but not more than once) prior to 9:00 P.M., New York
City time, on the 30th day after the date of the U.S. Prospectus (or, if such
30th day shall be a Saturday or Sunday or a holiday, on the next business day
thereafter when the New York Stock Exchange is open for trading), up to an
aggregate of 502,500 Additional Shares. Upon any exercise of the
over-allotment option, each U.S. Underwriter, severally and not jointly, agrees
to purchase from the Company the number of Additional Shares (subject to such
adjustments as you may determine in order to avoid fractional shares) that
bears the same proportion to the number of Additional Shares to be purchased by
the U.S. Underwriters as the number of Firm Shares set forth opposite the name
of such U.S. Underwriter in Schedule I hereto (or such number of Firm Shares
increased as set forth in Section 11 hereof) bears to the aggregate number of
Firm Shares.
3. TERMS OF PUBLIC OFFERING. The Company has been advised by you
that the U.S. Underwriters propose to make a public offering of their
respective portions of the Shares as soon after the Registration Statement and
this Agreement have become effective as in your judgment is advisable and
initially to offer the Shares upon the terms set forth in the U.S. Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
U.S. Underwriters of and payment for the Firm Shares shall be made at the
office of Locke Purnell Rain Harrell (A Professional Corporation), 2200 Ross
Avenue, Suite 2200, Dallas, Texas 75201 at 9:00 A.M., Dallas time, on _______,
1996 (the "Closing Date"). The place of closing for the Firm Shares and the
Closing Date may be varied by agreement between you and the Company.
Delivery to the U.S. Underwriters of and payment for any
Additional Shares to be purchased by the U.S. Underwriters shall be made at
the aforementioned office of Locke Purnell Rain Harrell at such time on such
date (the "Option Closing Date"), which may be the same as the Closing Date but
shall in no event be earlier than the Closing Date nor earlier than two nor
later than five business days after the giving of the notice hereinafter
referred to, as shall be specified in a written notice from you on behalf of
the U.S. Underwriters to the Company of the U.S. Underwriters' determination to
purchase a number, specified in such notice, of Additional Shares. The place
of closing for any Additional Shares and the Option Closing Date for such
Shares may be varied by agreement between you and the Company.
5
<PAGE> 6
Certificates for the Firm Shares and for any Additional Shares to
be purchased hereunder shall be registered in such names and in such
denominations as you shall request prior to 9:30 A.M., New York City time, on
the second business day preceding the Closing Date or any Option Closing Date,
as the case may be. Such certificates shall be made available to you in New
York City for inspection and packaging not later than 9:30 A.M., New York City
time, on the business day next preceding the Closing Date or the Option Closing
Date, as the case may be. The certificates evidencing the Firm Shares and any
Additional Shares to be purchased hereunder shall be delivered to you on the
Closing Date or the Option Closing Date, as the case may be, against payment of
the purchase price therefor by wire transfer to the Company of
immediately-available funds.
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
U.S. Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it
is necessary for the Registration Statement or a post-effective
amendment thereto to be declared effective before the offering of the
Shares may commence, the Company will endeavor to cause the Registration
Statement or such post-effective amendment to become effective as soon
as possible and will advise you promptly and, if requested by you, will
confirm such advice in writing, when the Registration Statement or such
post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by
you, will confirm such advice in writing: (i) of any request by the
Commission for amendment of or a supplement to the Registration
Statement, any Prepricing Prospectuses or Prospectuses, or for
additional information; (ii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or
of the suspension of qualification of the Shares for offering or sale in
any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) within the period of time referred to in paragraph (f) below,
of any change in the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company
and its subsidiaries, taken as a whole, or of the happening of any
event, including the filing of any information, documents, or reports
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that in each case makes any statement of a material
fact made in the Registration Statement or either Prospectus (as then
amended or supplemented) untrue or that requires the making of any
additions to or changes in the
6
<PAGE> 7
Registration Statement or either Prospectus (as then amended or
supplemented) in order to state a material fact required by the Act to
be stated therein or necessary in order to make the statements therein
(with respect to either Prospectus, in the light of the circumstances
under which they were made) not misleading, or of the necessity to amend
or supplement either Prospectus (as then amended or supplemented) to
comply with the Act or any other law. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal of such order at the earliest possible time.
(c) The Company will furnish to you, without charge, five signed
copies of the registration statement as originally filed with the
Commission and of each amendment thereto, including financial statements
and all exhibits thereto, and will also furnish to you, without charge,
such number of conformed copies of the registration statement as
originally filed and of each amendment thereto, but without exhibits, as
you may reasonably request.
(d) The Company will not (i) file any amendment to the
Registration Statement or make any amendment or supplement to either
Prospectus of which you shall not previously have been advised or to
which you shall reasonably object after being so advised or (ii) so long
as, in the opinion of counsel for the U.S. Underwriters, a prospectus is
required to be delivered in connection with sales by any U.S.
Underwriter or dealer, file any information, documents or reports
pursuant to the Exchange Act, without delivering a copy of such
information, documents or reports to you, as Representatives of the U.S.
Underwriters, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you
have reasonably requested, copies of each form of the U.S. Prepricing
Prospectus. The Company consents to the use, in accordance with the
provisions of the Act and with the securities or Blue Sky laws or real
estate syndication laws of the jurisdictions in which the Shares are
offered by the several U.S. Underwriters and by dealers, prior to the
date of the U.S. Prospectus, of each U.S. Prepricing Prospectus so
furnished by the Company.
(f) As soon after the execution and delivery of this Agreement
as possible and thereafter from time to
7
<PAGE> 8
time for such period as in the opinion of counsel for the U.S.
Underwriters a prospectus is required by the Act to be delivered in
connection with sales by any U.S. Underwriter or dealer, the Company
will expeditiously deliver to each U.S. Underwriter and each dealer,
without charge, as many copies of the U.S. Prospectus (and of any
amendment or supplement thereto) as you may request. The Company
consents to the use of the U.S. Prospectus (and of any amendment or
supplement thereto) in accordance with the provisions of the Act and
with the securities or Blue Sky laws or real estate syndication laws of
the jurisdictions in which the Shares are offered by the several U.S.
Underwriters and by all dealers to whom Shares may be sold, both in
connection with the offering and sale of the Shares and for such period
of time thereafter as a prospectus is required by the Act to be
delivered in connection with sales by any U.S. Underwriter or dealer.
If during such period of time any event shall occur that in the judgment
of the Company or in the opinion of counsel for the U.S. Underwriters is
required to be set forth in the U.S. Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary to supplement or amend
the U.S. Prospectus to comply with the Act or any other law, the Company
will forthwith prepare and, subject to the provisions of paragraph (d)
above, file with the Commission an appropriate supplement or amendment
thereto, and will expeditiously furnish to the U.S. Underwriters and
dealers a reasonable number of copies thereof.
(g) The Company will cooperate with you and with counsel for the
U.S. Underwriters in connection with the registration or qualification
of the Shares for offering and sale by the several U.S. Underwriters and
by dealers under the securities or Blue Sky laws or real estate
syndication laws of such jurisdictions as you may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification;
provided that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to
take any action that would subject it to service of process in suits,
other than those arising out of the offering or sale of the Shares, in
any jurisdiction where it is not now so subject.
(h) The Company will make generally available to its security
holders a consolidated earnings statement,
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<PAGE> 9
which need not be audited, covering a twelve-month period commencing
after the effective date of the Registration Statement and ending not
later than 15 months thereafter, as soon as practicable after the end of
such period, which consolidated earnings statement shall satisfy the
provisions of Section 11(a) of the Act.
(i) During the period of three years hereafter, the Company will
furnish to you (i) as soon as available, a copy of each report of the
Company mailed to stockholders or filed with the Commission or the New
York Stock Exchange, and (ii) from time to time such other information
concerning the Company as you may request.
(j) The Company will apply the net proceeds from the sale of the
Underwritten Shares substantially in accordance with the description set
forth in the Prospectuses.
(k) If Rule 430A of the Act is employed, the Company will timely
file the Prospectuses pursuant to Rule 424(b) under the Act and will
advise you of the time and manner of such filing.
(l) For a period of 180 days after the date hereof (the "Lock-up
Period"), the Company will not, without the prior written consent of
Smith Barney Inc., (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common
Stock or (ii) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the
Common Stock, whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, except for (w) sales to the U.S.
Underwriters pursuant to this Agreement and the Managers pursuant to the
International Underwriting Agreement, (x) the issuance of shares of
Common Stock in connection with the Formation, (y) the grant of options
or other rights under the Company's 1996 Long Term Incentive Plan or
Non-Employee Directors' Retainer Stock Plan or (z) the issuance of
shares of Common Stock upon exercise of the GE Option (as defined in the
Prospectuses).
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<PAGE> 10
(m) The Company has furnished or will furnish to you "lock-up"
letters, in form and substance satisfactory to you, signed by each of
its current officers, directors, stockholders and General Electric
Pension Trust.
(n) Except as stated in this Agreement and in the International
Underwriting Agreement and in the Prepricing Prospectuses and
Prospectuses, the Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected
to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Underwritten
Shares.
(o) The Company will use its best efforts to have the Common
Stock listed, subject to notice of issuance, on the New York Stock
Exchange concurrently with the effectiveness of the registration
statement.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each U.S. Underwriter that (in each of paragraphs
(a) through (cc), after giving effect to the Formation):
(a) Each U.S. Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment
or supplement thereto, or filed pursuant to Rule 424 under the Act,
complied when so filed in all material respects with the provisions of
the Act. The Commission has not issued any order preventing or
suspending the use of any Prepricing Prospectus.
(b) The registration statement in the form in which it became or
becomes effective and also in such form as it may be when any
post-effective amendment thereto shall become effective and the
Prospectuses and any supplement or amendment thereto when filed with the
Commission under Rule 424(b) or Rule 462 under the Act, complied or will
comply in all material respects with the provisions of the Act and did
not or will not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein (with respect to
either Prospectus, in the light of the circumstances under which they
were made) not misleading, except that this representation and warranty
does not apply to statements in or omissions from the registration
statement or the Prospectuses made in reliance upon and in conformity
with information relating to any U.S. Underwriter or
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<PAGE> 11
Manager furnished to the Company in writing by a U.S. Underwriter
through the Representatives or by a Manager through the Lead Managers
expressly for use therein.
(c) All the outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable and are
free of any preemptive or similar rights; the Shares have been duly
authorized and, when issued and delivered to the U.S. Underwriters
against payment therefor in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable and free of any preemptive
or similar rights, and as of the Closing Date, the capital stock of the
Company will conform to the description thereof in the Registration
Statement and the Prospectuses.
(d) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectuses, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction where
the nature of its properties or the conduct of its business requires
such registration or qualification, except where the failure so to
register or qualify or be in good standing does not have a material
adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect").
(e) All the Company's subsidiaries that are required to be
listed in an exhibit to the Registration Statement (the "Subsidiaries")
are so listed. Each Subsidiary is a corporation duly organized and
validly existing in good standing in the jurisdiction of its
incorporation, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectuses (and any amendment or
supplement thereto), and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction where the nature
of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register
or qualify does not have a Material Adverse Effect. All the outstanding
shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable, and, as
of the Closing Date, will be owned by the Company directly or indirectly
through one of the other Subsidiaries,
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<PAGE> 12
free and clear of any lien, adverse claim, security interest, equity or
other encumbrance (other than encumbrances imposed pursuant to the
Credit Agreement and the GHALP Lease, each as defined in the
Prospectuses).
(f) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened, against the Company or any
of its Subsidiaries or to which any of their respective properties is
subject that are material to the Company and its subsidiaries, taken as
a whole, that are required to be described in the Registration Statement
or either Prospectus but are not described as required, and there are no
agreements, contracts, indentures, leases or other instruments that are
required to be described in the Registration Statement or either
Prospectus or to be filed as an exhibit to the Registration Statement
that are not described or filed as required by the Act or the Exchange
Act. The descriptions of the terms of any such contracts or documents
contained in the Registration Statement or either Prospectus are correct
in all material respects.
(g) Neither the Company nor any of its Subsidiaries is in (i)
violation of its certificate or articles of incorporation or by-laws, or
other organizational documents, (ii) in violation of any law, ordinance,
administrative or governmental rule or regulation applicable to the
Company or any of its Subsidiaries or of any decree of any court or
governmental agency or body having jurisdiction over the Company or any
of its Subsidiaries (except where any such violation or violations in
the aggregate would not have a Material Adverse Effect), or (iii) in
default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of
indebtedness or in any material agreement, indenture, lease or other
instrument to which the Company or any of its Subsidiaries is a party or
by which any of them or any of their respective properties may be bound,
and no condition or state of facts exists that, with the passage of time
or the giving of notice or both, would constitute such a default (except
where any such default or defaults, singly or in the aggregate, in the
aggregate would not have a Material Adverse Effect).
(h) None of the issuance or sale of the Underwritten Shares, the
execution, delivery, or performance of this Agreement or the
International Underwriting Agreement by the Company or the execution or
delivery of, or the performance by the Company or
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<PAGE> 13
the Roll-Up Entities of their respective obligations under, the
Transaction Documents or the consummation by the Company or the Roll-Up
Entities of the transactions contemplated hereby and thereby (i)
requires any consent, approval, authorization or order of or
registration or filing with any court, regulatory body, administrative
agency or other governmental body, agency or official (except such as
may be required for the registration of the Underwritten Shares under
the Act and the Exchange Act and compliance with the securities or Blue
Sky laws or real estate syndication laws of various jurisdictions, all
of which have been or will be effected in accordance with this
Agreement, or as may be required subsequent to the date hereof to give
effect to the transactions comprising the Formation, all of which will
be effected in a timely manner in connection with the Formation), or
conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, the certificate or articles of
incorporation or by-laws or other organizational documents of the
Company, any of its Subsidiaries or any of the Roll-Up Entities (ii)
conflicts or will conflict with or constitutes or will constitute a
breach of or a default under any agreement, indenture, lease or other
instrument to which the Company, any of its Subsidiaries or any of the
Roll-Up Entities is a party or by which any of them or any of their
respective properties may be bound (except for such conflicts, breaches
or defaults for which waivers or consents have been obtained), or
violates or will violate any statute, law, regulation or filing or
judgment, injunction, order or decree applicable to the Company, any of
its Subsidiaries, any of their respective properties or any of the
Roll-Up Entities, or will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or any of its Subsidiaries pursuant to the terms of any agreement or
instrument to which any of them or any of the Roll-Up Entities is a
party or by which any of them or any of the Roll-Up Entities may be
bound or to which any of the property or assets of any of them is
subject, in each case except for such conflicts, breaches, defaults,
violations, or encumbrances that would not singly or in the aggregate
have a Material Adverse Effect or materially adversely affect the
ability of the Company or any of the Roll-Up Entities to fulfill its
obligations hereunder or thereunder.
(i) The accountants, Coopers & Lybrand L.L.P., who have
certified or shall certify the financial statements included in the
Registration Statement or either Prospectus (or any amendment or
supplement
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<PAGE> 14
thereto) are independent public accountants as required by the Act.
(j) The historical and pro forma financial statements, together
with related schedules and notes, included in the Registration Statement
and the Prospectuses (and any amendment or supplement thereto) comply as
to form in all material respects with the requirements of the Act; such
historical financial statements, together with related schedules and
notes, present fairly the consolidated financial position, results of
operations, cash flows and changes in stockholders' equity or partners'
equity, as the case may be, of the entities to which they relate on the
basis stated in the Registration Statement at the respective dates or
for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout
the periods involved, except as disclosed therein; such pro forma
financial statements, together with related notes, have been prepared on
a basis consistent with such historical statements, except for pro forma
adjustments specified therein, and give effect to assumptions made on a
reasonable basis and present fairly the historical and proposed
transactions contemplated by the Prospectuses; and the other financial
and statistical information and data included in the Registration
Statement and the Prospectuses (and any amendment or supplement
thereto), historical and pro forma, are accurately presented and
prepared on a basis consistent with such financial statements and the
books and records of the entity to which they relate.
(k) The execution and delivery of, and the performance by the
Company of its obligations under, each of this Agreement and the
International Underwriting Agreement have been duly and validly
authorized by the Company, and each of this Agreement and the
International Underwriting Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except (i) the enforceability hereof or thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally, (ii) the remedy of specific performance and other forms of
equitable relief may be subject to certain equitable defenses and to the
discretion of the court before which the proceedings may be brought and
(iii) rights to indemnity and contribution hereunder or thereunder may
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<PAGE> 15
be limited by federal or state securities laws or the public policy
underlying such laws.
(l) The execution and delivery of, and the performance by the
Company and the Roll-Up Entities of their respective obligations under,
each Transaction Document will be duly and validly authorized by the
Company and the Roll-Up Entities, and each Transaction Document will be
duly executed and delivered by the Company and, as applicable, the
Roll-Up Entities on or prior to the Closing Date and each Transaction
Document will constitute the legally valid and binding agreement of the
Company and the Roll-Up Entities enforceable against the Company and the
Roll-Up Entities in accordance with its terms, except (i) the
enforceability hereof or thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) the
remedy of specific performance and other forms of equitable relief may
be subject to certain equitable defenses and to the discretion of the
court before which the proceedings may be brought.
(m) Except as disclosed in the Registration Statement and the
Prospectuses (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the
Registration Statement and the Prospectuses (or any amendment or
supplement thereto), neither the Company nor any of its Subsidiaries has
incurred any liability or obligation, direct or contingent, or entered
into any transaction, not in the ordinary course of business, that is
material to the Company and its subsidiaries, taken as a whole, and
there has not been any change in the capital stock, or material increase
in the short-term debt or long-term debt, of the Company or any of its
Subsidiaries, or any material adverse change or any development
involving a prospective material adverse change, in the condition
(financial or other), business, properties, net worth or results of
operations of the Company and its subsidiaries, taken as a whole.
(n) Each of the Company and its Subsidiaries has (i) good and
marketable title in fee simple to all real property described in either
Prospectus as owned by it and (ii) good and marketable title to all
personal property described in either Prospectus as owned by it, which
personal property is material to the business of the Company and its
subsidiaries, taken as a whole, free and clear of all liens, claims,
security interests or other encumbrances, except such as are described
in
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<PAGE> 16
the Registration Statement and the Prospectuses or in a document filed
as an exhibit to the Registration Statement. All the property described
in either Prospectus as being held under lease by each of the Company
and its Subsidiaries is held by it under valid, subsisting and
enforceable leases (although no representation is made as to the
lessors' title to such property). Each agreement to which the Company
(or any subsidiary of the Company) is a party that provides for the
management or operation of a hotel property described in either
Prospectus as managed or operated by the Company is in full force and
effect and constitutes the valid and legally binding agreement of the
parties thereto, enforceable in accordance with its terms, except (i)
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, (ii) the remedy of
specific performance and other forms of equitable relief may be subject
to certain equitable defenses and to the discretion of the court before
which the proceedings may be brought and (iii) rights to indemnity and
contribution thereunder may be limited by applicable law.
(o) The Company has not distributed and, prior to the later to
occur of (i) the Closing Date or the Option Closing Date, if any, and
(ii) completion of the distribution of the Underwritten Shares, will not
distribute any offering material in connection with the offering and
sale of the Underwritten Shares other than the Registration Statement,
the Prepricing Prospectuses, the Prospectuses or other materials, if
any, permitted by the Act.
(p) The Company and each of its Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("Permits") as are necessary to own its respective
properties and to conduct its business in the manner described in the
Prospectuses, subject to such qualifications as may be set forth in the
Prospectuses and except where the failure to have any Permit would not
have a Material Adverse Effect; the Company and each of its Subsidiaries
has fulfilled and performed all its obligations with respect to such
Permits and no event has occurred that allows, or after notice or lapse
of time would allow, revocation or termination thereof or results in any
other impairment of the rights of the holder of any such Permit, subject
in each case to such qualification as may be set forth in the
Prospectuses, and except where the failure to so fulfill or perform its
obligation or such revocation or termination would
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<PAGE> 17
not have a Material Adverse Effect; and, except as described in the
Prospectuses, none of such Permits contains any restriction that is
materially burdensome to the Company or any of its Subsidiaries.
(q) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(r) To the Company's knowledge, neither the Company nor any of
its Subsidiaries nor any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any
Subsidiary or received or retained any funds in violation of any law,
rule or regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectuses.
(s) With respect to any Existing Entity (as defined in the
Formation Agreement) that is a partnership, for the period of its
existence, such entity has been properly classified as a partnership for
federal income tax purposes. With respect to any such Existing Entity
that has elected to be treated as a S corporation for federal income tax
purposes, such corporation has made a valid S corporation election under
Section 1362 of the Code and has at all times during the period of its
existence (through the Effective Time) satisfied the eligibility
criteria under the Code for such treatment. Each of the Existing
Entities has paid all income taxes to which it is subject, except where
the failure to so pay would not, singly or in the aggregate, have a
Material Adverse Effect.
(t) The representations and warranties of the Company in the
Transaction Documents are, and on the Closing Date and any Option
Closing Date will be, true and correct.
(u) Except as described in the Prospectuses, no holder of any
security of the Company has any right to
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<PAGE> 18
require registration of shares of Common Stock or any other security of
the Company because of the filing of the registration statement or
consummation of the transactions contemplated by this Agreement, the
International Underwriting Agreement or the Transaction Documents, or
otherwise. Except as described in or contemplated by the Prospectuses,
there are no outstanding options, warrants or other rights calling for
the issuance of, and there are no commitments, plans or arrangements to
issue, any shares of Common Stock of the Company or any security
convertible into or exchangeable or exercisable for Common Stock of the
Company.
(v) The Company has not taken, directly or indirectly, any action
designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares, except for the lock-up
arrangements referred to in the Prospectuses.
(w) As of the Closing Date, the Company and its Subsidiaries
will own or possess all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade names, copyrights,
licenses, inventions, trade secrets and rights described in either
Prospectus as being owned by them or any of them or necessary for the
conduct of their respective businesses, except where the lack of such
ownership or possession would not have a Material Adverse Effect, and,
except as disclosed in the Prospectuses, the Company is not aware of any
claim to the contrary or any challenge by any other person to the rights
of the Company and its Subsidiaries with respect to the foregoing.
(x) The Company is not now and, after sale of the Underwritten
Shares and application of the net proceeds from such sale as described
in the Prospectuses under the caption "Use of Proceeds", will not be an
"investment company" required to be registered under Section 8 of the
Investment Company Act of 1940, as amended (the "Investment Company
Act"), or an entity "controlled by an investment company" required to be
registered under Section 8 of the Investment Company Act.
(y) The Company has complied with all provisions of Florida
Statutes, Section 517.075, relating to issuers doing business with Cuba.
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(z) Except as disclosed in the Prospectuses, the Company and its
Subsidiaries (i) are in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection
of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"),
(ii) have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of
any such permit, license or approval, except where such noncompliance
with Environmental Laws, failure to receive required permits, licenses
or other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, singly or in the
aggregate, have a Material Adverse Effect.
(aa) The Company has reasonably concluded that costs and
liabilities associated with the effect of Environmental Laws on the
business, operations and properties of the Company and its subsidiaries
would not, singly or in the aggregate, have a Material Adverse Effect.
(bb) The management and operation of the hotel properties owned,
leased or managed by the Company are not in violation of any applicable
building code, zoning ordinance or other law or regulation, except where
such violation of any applicable building code, zoning ordinance or
other law or regulation would not, singly or in the aggregate, have a
Material Adverse Effect.
(cc) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
customary in the businesses in which the Company is engaged and proposes
to engage and the Company has no reason to believe that it will not be
able to renew such insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material
Adverse Effect.
(dd) As of the Closing Date, the Formation shall have been
consummated as set forth in the Prospectuses.
7. REPRESENTATIONS AND WARRANTIES OF CF SECURITIES. CF Securities,
L.P., a Texas limited partnership ("CF Securities"), represents and warrants to
each U.S. Underwriter that:
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(a) Each of this Agreement, the International Underwriting
Agreement and the Transaction Documents has been duly authorized,
executed and delivered by or on behalf of CF Securities and each Founder
that is a party thereto and is the valid and binding agreement of CF
Securities and each such Founder enforceable against CF Securities and
each such Founder in accordance with its terms, except that (i) the
enforceability hereof or thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, (ii) the
remedy of specific performance and other forms of equitable relief may
be subject to certain equitable defenses and to the discretion of the
court before which the proceedings may be brought and (iii) rights to
indemnity and contribution hereunder or thereunder may be limited by
federal or state securities laws or the public policy underlying such
laws.
(b) None of the execution, delivery or performance of this
Agreement, the International Underwriting Agreement or any Transaction
Document by or on behalf of CF Securities or any Founder that is a party
thereto nor the consummation by or on behalf of CF Securities or any
such Founder of the transactions contemplated hereby and thereby (i)
requires any consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (except such as
may be required for the registration of the Underwritten Shares under
the Act and the Exchange Act and compliance with the securities or Blue
Sky laws or real estate syndication laws of various jurisdictions, all
of which have been or will be effected in accordance with this
Agreement, or as may be required subsequent to the date hereof to give
effect to the transactions comprising the Formation, all of which will
be effected in a timely manner in connection with the Formation), or
conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, the certificate or articles of
incorporation or by-laws or other organizational documents of CF
Securities or any such Founder or (ii) conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, any
agreement, indenture, lease or other instrument to which CF Securities
or any such Founder is a party or by which CF Securities or any such
Founder is or may be bound, or violates or will violate any statute,
law, regulation or filing or judgment, injunction, order or decree
applicable to CF Securities or any such Founder, or will result in the
creation or
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<PAGE> 21
imposition of any lien, charge or encumbrance upon any property or
assets of CF Securities or any such Founder pursuant to the terms of any
agreement or instrument to which CF Securities or any such Founder is a
party or by which CF Securities or any such Founder may be bound or to
which any of the property or assets of CF Securities or any such Founder
is subject, in each case except for such conflicts, breaches, defaults,
violations, or encumbrances that would not singly or in the aggregate
have a Material Adverse Effect or materially adversely affect the
ability CF Securities or any of such Founder to fulfill its obligations
hereunder or thereunder.
(c) None of CF Securities or any Founder has taken, directly or
indirectly, any action designed to or that might reasonably be expected
to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares, except for
the lock-up arrangements referred to in the Prospectuses.
(d) The representations and warranties of CF Securities and each
Founder in the Transaction Documents are, and on the Closing Date and
any Option Closing Date will be, true and correct.
(e) None of Harlan R. Crow, Susan T. Groenteman or Kathy Smalley
has any knowledge that the Registration Statement or the Prospectuses
(or any amendment or supplement thereto) contains any untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein (with respect
to either Prospectus, in light of the circumstances under which they
were made) not misleading, except that this representation and warranty
does not apply to statements in or omissions from the registration
statement or the Prospectuses made in reliance upon and in conformity
with information relating to any U.S. Underwriter or Manager furnished
to CF Securities in writing by a U.S. Underwriter through the
Representatives or by a Manager through the Lead Managers expressly for
use therein.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each of you and each other U.S. Underwriter and
each person, if any, who controls any U.S. Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act from and against any
and all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation) arising out of or based upon any untrue statement or
alleged untrue
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statement of a material fact contained in any U.S. Prepricing Prospectus or in
the Registration Statement or the U.S. Prospectus or in any amendment or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of or are based upon
any untrue statement or omission or alleged untrue statement or omission that
has been made therein or omitted therefrom in reliance upon and in conformity
with the information relating to such U.S. Underwriter or Manager furnished in
writing to the Company by or on behalf of any U.S. Underwriter through you or
by or on behalf of any Manager through a Lead Manager expressly for use in
connection therewith; provided, however, that the indemnification contained in
this paragraph (a) with respect to any U.S. Prepricing Prospectus shall not
inure to the benefit of any U.S. Underwriter (or to the benefit of any person
controlling such U.S. Underwriter) on account of any such loss, claim, damage,
liability or expense arising from the sale of the Shares by such U.S.
Underwriter to any person if a copy of the U.S. Prospectus shall not have been
delivered or sent to such person within the time required by the Act, and the
untrue statement or alleged untrue statement or omission or alleged omission of
a material fact contained in such U.S. Prepricing Prospectus was corrected in
the U.S. Prospectus, provided that the Company has delivered the U.S.
Prospectus to the several U.S. Underwriters, no later than 2:00 P.M., New York
City time, on the business day following the date hereof, in such quantity as
the U.S. Underwriters shall have reasonably requested.
(b) CF Securities agrees that, in the event any U.S. Underwriter or
any person controlling any U.S. Underwriter shall obtain a judicial judgment,
order or decree against the Company for amounts payable by the Company to such
U.S. Underwriter or controlling person pursuant to this Section 8 (whether for
indemnification or contribution), which judgment has been and remains unstayed,
unsatisfied and undischarged for a period of 60 days or more, then CF
Securities shall promptly, upon the request of such U.S. Underwriter or
controlling person, pay to such U.S. Underwriter or controlling person an
amount equal to the amount payable by the Company to such U.S. Underwriter or
controlling person pursuant to such judgment. Notwithstanding the foregoing,
the aggregate liability of CF Securities pursuant to this Agreement and the
International Underwriting Agreement shall be limited to an amount equal to the
aggregate amount of cash received by the Founders pursuant to the Transaction
Documents.
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(c) If any action, suit or proceeding shall be brought against any
U.S. Underwriter or any person controlling any U.S. Underwriter in respect of
which indemnity may be sought against the Company, such U.S. Underwriter or
such controlling person shall promptly notify the Company and CF Securities,
and the Company shall assume the defense thereof, including the employment of
counsel and payment of all fees and expenses, provided that in the event the
Company fails to so assume such defense, CF Securities may so assume such
defense. Such U.S. Underwriter or any such controlling person shall have the
right to employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such U.S. Underwriter or such controlling person
unless (i) the Company or CF Securities, as the case may be, has agreed in
writing to pay such fees and expenses, (ii) the Company and CF Securities
failed to assume the defense and employ counsel, or (iii) the named parties to
any such action, suit or proceeding (including any impleaded parties) include
both such U.S. Underwriter or such controlling person and the Company and such
U.S. Underwriter or such controlling person shall have been advised by its
counsel that representation of such indemnified party and the Company by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case neither the Company nor CF Securities shall have the right to assume the
defense of such action, suit or proceeding on behalf of such U.S. Underwriter
or such controlling person). It is understood, however, that the Company or CF
Securities, as the case may be, shall, in connection with any one such action,
suit or proceeding or separate but substantially similar or related actions,
suits or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
only one separate firm of attorneys (in addition to any local counsel) at any
time for all such U.S. Underwriters and controlling persons and the Managers
and controlling persons referred to in Section 8(c) of the International
Underwriting Agreement not having actual or potential differing interests with
you or among themselves, which firm shall be designated in writing by Smith
Barney Inc., and that all such fees and expenses shall be reimbursed as they
are incurred. Neither the Company nor CF Securities shall be liable for any
settlement of any such action, suit or proceeding effected without their
written consent, but if settled with such written consent, or if there be a
final judgment for the plaintiff in any such action, suit or proceeding, the
Company agrees to indemnify and hold harmless any U.S. Underwriter, to the
extent provided in paragraph (a) above, and any such controlling
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<PAGE> 24
person from and against any loss, claim, damage, liability or expense by reason
of such settlement or judgment.
(d) Each U.S. Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to each U.S. Underwriter,
but only with respect to information relating to such U.S. Underwriter
furnished in writing by or on behalf of such U.S. Underwriter through you
expressly for use in the Registration Statement, the U.S. Prospectus or any
U.S. Prepricing Prospectus, or any amendment or supplement thereto. If any
action, suit or proceeding shall be brought against the Company, any of its
directors, any such officer any such controlling person based on the
Registration Statement, the U.S. Prospectus or any U.S. Prepricing Prospectus,
or any amendment or supplement thereto, and in respect of which indemnity may
be sought against any U.S. Underwriter pursuant to this paragraph (d), such
U.S. Underwriter shall have the rights and duties given to the Company by
paragraph (c) above (except that if the Company shall have assumed the defense
thereof such U.S. Underwriter shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof, but the fees
and expenses of such counsel shall be at such U.S. Underwriter's expense), and
the Company, its directors, any such officer, any such controlling person shall
have the rights and duties given to the U.S. Underwriters by paragraph (c)
above.
(e) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under paragraphs (a) or (d) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party (which for purposes of this paragraph (e)
shall not include CF Securities, the obligations of which with respect to
contribution are set forth in paragraph (b) hereof), in lieu of indemnifying or
paying such indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the U.S.
Underwriters on the other hand from the offering of the Shares (including the
application of the proceeds therefrom as described in the Prospectuses), or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company on the one hand and the U.S. Underwriters on the other hand in
connection
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with the statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the U.S. Underwriters on the other hand shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the U.S. Underwriters, each as set forth in the table
on the cover page of the U.S. Prospectus. The relative fault of the Company on
the one hand and the U.S. Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
by the U.S. Underwriters on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(f) The Company, CF Securities and the U.S. Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 8 were
determined by a pro rata allocation (even if the U.S. Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (e)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (e)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, no U.S.
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price of the Shares underwritten by it and distributed to
the public exceeds the amount of any damages that such U.S. Underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The U.S. Underwriters' obligations to contribute pursuant
to this Section 8 are several in proportion to the respective numbers of Firm
Shares set forth opposite their names in Schedule I hereto (or such numbers of
Firm Shares increased as set forth in Section 11 hereof) and not joint.
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(g) No indemnifying party shall, without the prior written consent of
each indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(h) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company and CF Securities set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any U.S. Underwriter or any
person controlling any U.S. Underwriter, the Company, its directors or officers
or any person controlling the Company, CF Securities or any Founder, (ii)
acceptance of any Shares and payment therefor hereunder, and (iii) any
termination of this Agreement, provided that the representations and warranties
of CF Securities set forth in this Agreement shall terminate on the date one
year following the Closing Date. A successor to any U.S. Underwriter or any
person controlling any U.S. Underwriter, or to the Company, its directors or
officers, or any person controlling the Company shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained
in this Section 8.
9. CONDITIONS OF U.S. UNDERWRITERS' OBLIGATIONS. The several
obligations of the U.S. Underwriters to purchase the Firm Shares hereunder are
subject to the following conditions:
(a) If, at the time this Agreement is executed and delivered, it
is necessary for the registration statement or a post-effective
amendment thereto to be declared effective before the offering of the
Shares may commence, the registration statement or such post-effective
amendment shall have become effective not later than 10:00 P.M., New
York City time, on the date hereof, or at such later date and time as
shall be consented to in writing by you, and all filings, if any,
required by Rules 424 and 430A under the Act shall have been timely
made; no stop order suspending the effectiveness of the registration
statement shall have been issued and no proceeding for that purpose
shall have been instituted or, to the knowledge of the
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<PAGE> 27
Company or any U.S. Underwriter, threatened by the Commission, and any
request of the Commission for additional information (to be included in
the Registration Statement or either Prospectus or otherwise) shall have
been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development that is
reasonably likely to result in a prospective change, in or affecting the
condition (financial or other), business, properties, net worth or
results of operations of the Company and its subsidiaries, taken as a
whole, not contemplated by the Prospectuses that, in your opinion, as
Representatives of the several U.S. Underwriters, would materially
adversely affect the market for the Shares, or (ii) any event or
development relating to or involving the Company or any officer or
director of the Company that makes any statement made in either
Prospectus untrue in any material respect or that, in the opinion of the
Company and its counsel or the U.S. Underwriters and their counsel,
requires the making of any addition to or change in either Prospectus in
order to state a material fact required by the Act or any other law to
be stated therein or necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, if amending or supplementing such Prospectus to reflect such
event or development would, in your opinion, as Representatives of the
several U.S. Underwriters, materially adversely affect the market for
the Shares.
(c) You shall have received on the Closing Date an opinion of
Locke Purnell Rain Harrell, counsel for the Company, dated the Closing
Date and addressed to you, as Representatives of the several U.S.
Underwriters, to the effect that:
(i) The Company is a corporation duly incorporated and
validly existing in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease
and operate its properties and to conduct its business as
described in the Registration Statement and the Prospectuses and
is duly qualified and in good standing in all other jurisdictions
in which the nature of the business transacted or property owned
or leased by it makes such qualification necessary, except where
the failure so to qualify or be in good standing would not have a
Material Adverse Effect;
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(ii) The authorized capital stock of the Company is as
set forth under the caption "Capitalization" in the Prospectuses
and the authorized capital stock of the Company conforms in all
material respects as to legal matters to the description thereof
contained in the Prospectuses under the caption "Description of
Capital Stock";
(iii) All the shares of capital stock of the Company
outstanding prior to the issuance of the Underwritten Shares have
been duly authorized and validly issued and are fully paid and
nonassessable;
(iv) The Underwritten Shares (A) have been duly
authorized and, (B) when issued and delivered to the U.S.
Underwriters and the Managers against payment therefor in
accordance with the terms of this Agreement and the International
Underwriting Agreement, (1) will be validly issued, fully paid
and nonassessable and (2) will be free of any preemptive rights
or, to the best knowledge of such counsel, similar rights that
entitle or will entitle any person to acquire any Shares upon the
issuance thereof by the Company;
(v) The form of certificates for the Shares conforms to
the requirements of the Delaware General Corporation Law;
(vi) The Registration Statement and all post-effective
amendments, if any, have become effective under the Act and, to
the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and
no proceedings therefor are pending before or contemplated by the
Commission; and any required filing of either Prospectus pursuant
to Rule 424(b) or Rule 434 has been made in accordance with Rule
424(b) and Rule 430A under the Act;
(vii) The Company has the corporate power and authority
to enter into each of this Agreement and the International
Underwriting Agreement and to issue, sell and deliver the
Underwritten Shares to the U.S. Underwriters and the Managers as
provided herein and therein, and each of this Agreement and the
International Underwriting Agreement has been duly authorized,
executed and delivered by the Company and is a legal, valid and
binding agreement of the Company, enforceable
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against the Company in accordance with its terms (provided that,
for purposes of such opinion, such counsel may assume that the
applicable law governing this Agreement and the International
Underwriting Agreement is the same as applicable Texas law),
except that (A) enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally,
(B) the remedy of specific performance and other forms of
equitable relief may be subject to certain equitable defenses and
to the discretion of the court before which the proceedings may
be brought and (C) rights to indemnity and contribution
thereunder may be limited by federal or state securities laws or
the public policy underlying such laws;
(viii) The Company and each of the Roll-Up Entities has
the necessary power and authority to enter into each of the
Transaction Documents, and each of the Transaction Documents have
been duly authorized, executed and delivered by the Company and,
as applicable, the Roll-Up Entities, and each of the Transaction
Documents is a legally valid and binding agreement of the Company
and, as applicable, the Roll-Up Entities, enforceable against the
Company and, as applicable, the Roll-Up Entities, in accordance
with its terms (provided that, for purposes of such opinion, such
counsel may assume that the applicable law governing each of the
several Transaction Documents is the same as applicable Texas
law), except that (A) enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally and (B) the remedy of specific performance and
other forms of equitable relief may be subject to certain
equitable defenses and to the discretion of the court before
which the proceedings may be brought;
(ix) To the best knowledge of such counsel, neither the
issuance, sale or delivery of the Underwritten Shares, nor the
execution, delivery or performance of this Agreement, the
International Underwriting Agreement or the Transaction
Documents, or compliance by the Company or any of the Roll-Up
Entities with all provisions of this Agreement, the International
Underwriting Agreement or the Transaction Documents, nor
consummation by the Company or any of the Roll-Up Entities of the
transactions
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contemplated hereby or thereby conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under,
the certificate of incorporation or by-laws or other
organizational documents of the Company or any of the Roll-Up
Entities or any agreement, indenture, lease or other instrument
identified on a certificate, substantially in the form of Annex A
hereto, executed by an executive officer of the Company, or will
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of
its Subsidiaries under any such agreement, indenture, lease or
other instrument, nor will any such action result in any
violation of any existing law, regulation, ruling (assuming
compliance with all applicable state securities and Blue Sky
laws), judgment, injunction, order or decree known to such
counsel, and applicable to the Company, any of its Subsidiaries
or any of the Roll-Up Entities or any of their respective
properties, in each case except for such conflicts, breaches,
defaults, violation, or encumbrances that would not singly or in
the aggregate have a Material Adverse Effect or materially
adversely affect the ability of the Company or any of the Roll-Up
Entities to fulfill its obligations hereunder or thereunder;
(x) No consent, approval, authorization or order of, or
registration or filing with, any court, regulatory body,
administrative agency or other governmental agency, body or
official is required to be obtained or made by the Company or the
Roll-Up Entities for the valid issuance and sale of the Shares
pursuant to this Agreement or, except where the failure to obtain
any such consent, approval, authorization, order or registration
or to make such filing would not, singly or in the aggregate,
have a Material Adverse Effect, the consummation of the
Formation, except in any case such as have been obtained under
the Act and the Exchange Act or such as may be required under
state securities or Blue Sky laws or real estate syndication laws
governing the purchase and distribution of the Shares;
(xi) The Registration Statement and the U.S. Prospectus
(except for the financial statements, schedules and notes thereto
and other financial and statistical data included therein, as to
which such counsel need not express an opinion) comply
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as to form in all material respects with the requirements of the
Act;
(xii) To the best knowledge of such counsel (A) other
than as described or contemplated in either Prospectus, there are
no legal or governmental proceedings pending or threatened
against the Company that are material to the Company and its
subsidiaries, taken as a whole, or to which the Company, or any
of its properties, is subject that are material to the Company
and its subsidiaries, taken as a whole, that are required to be
described in the Registration Statement or either Prospectus and
(B) there are no agreements, contracts, indentures, leases or
other instruments relating to the Company, of a character that
are required to be described in the Registration Statement or the
Prospectuses or to be filed as an exhibit to the Registration
Statement that are not described or filed as required, as the
case may be;
(xiii) The statements under the headings "The Formation
and the Financing Plan", "Description of Indebtedness",
"Description of Capital Stock", "Shares Eligible for Future Sale"
and "Certain U.S. Tax Consequences to Non-U.S. Stockholders" in
the Prospectuses and in the Registration Statement in Items 14
and 15, insofar as such statements constitute a summary of legal
matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal
matters, documents and proceedings and fairly summarize the
matters referred to therein;
(xiv) The Company is not now and, after sale of the
Underwritten Shares and application of the net proceeds from such
sale as described in the Prospectuses under the caption "Use of
Proceeds", will not be an "investment company" required to be
registered under Section 8 of the Investment Company Act of 1940,
as amended (the "Investment Company Act");
(xv) Each of the Subsidiaries of the Company (other than
Wyndham Hotels & Resorts (Aruba) N.V., an Aruban company, with
respect to which such counsel need not express an opinion) has
been duly incorporated and is validly existing in good standing
in the jurisdiction of its incorporation, with full corporate
power and authority to own, lease, and operate its properties and
to conduct
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its business as described in the Registration Statement and the
Prospectuses (and any amendment or supplement thereto); and all
the outstanding shares of capital stock of each of the
Subsidiaries of the Company (other than Wyndham Hotels & Resorts
(Aruba) N.V., an Aruban company, with respect to which such
counsel need not express an opinion) have been duly authorized
and validly issued, are fully paid and nonassessable, and, except
as otherwise disclosed in the Prospectuses, all of the
outstanding shares of capital stock of each of the Subsidiaries
of the Company are owned by the Company directly, or indirectly
through one of the other Subsidiaries, free and clear of any
lien, adverse claim, security interest, equity or other
encumbrance;
(xvi) To the best knowledge of such counsel, neither the
Company nor any of its Subsidiaries (other than Wyndham Hotels &
Resorts (Aruba) N.V., an Aruban company, with respect to which
such counsel need not express an opinion) is (A) in violation of
its certificate of incorporation or by-laws, or other
organizational documents or (B) in default in the performance of
any material obligation, agreement or condition contained in any
bond, debenture, note or other evidence of indebtedness
identified on a certificate, substantially in the form of Annex A
hereto, executed by an executive officer of the Company, except
as may be disclosed in the Prospectuses or where any such default
or defaults in the aggregate would not have a Material Adverse
Effect;
(xvii) To the best knowledge of such counsel, (A) neither
the Company nor any of its Subsidiaries is in material violation
of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of its Subsidiaries
or of any decree of any court or governmental agency or body
having jurisdiction over the Company or any of its Subsidiaries,
except for such violation or violations which in the aggregate
would not have a Material Adverse Effect, and (B) the Company and
each of its Subsidiaries has such Permits as are necessary to own
its respective properties and to conduct its business in the
manner described in the Prospectuses, except where the failure to
have any such Permit would not have a Material Adverse Effect;
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(xviii) To the best knowledge of such counsel, there is
no current, pending or threatened action, suit or proceeding
before any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its respective
properties of a character required to be described in the
Registration Statement or either Prospectus (or any amendment or
supplement thereto) that is not adequately so described;
(xix) To the best knowledge of such counsel, except as
described in the Registration Statement and the Prospectuses,
there are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or
liens related to or entitling any person to purchase or otherwise
to acquire any shares of capital stock of the Company or any
security convertible into or exchangeable or exercisable for
capital stock of the Company; to the best knowledge of such
counsel, the Shares, when issued pursuant to the terms of this
Agreement, will not be subject to any contractual preemptive
right; and
(xx) To the best knowledge of such counsel, except as
described in the Registration Statement and the Prospectuses,
there is no holder of any security of the Company or any other
person who has the right, contractual or otherwise, to cause the
Company to sell or otherwise issue to them, or to permit them to
underwrite the sale of, the Shares or the right to have any
Common Stock or other securities of the Company included in the
registration statement or the right, as a result of the filing of
the registration statement, to require registration under the Act
of any shares of Common Stock or other securities of the Company.
In addition, such counsel shall state that although such counsel
has not undertaken, except as otherwise indicated in their opinion, to
determine independently, and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements in the Registration
Statement and the Prospectuses, such counsel has participated in the
preparation of the Registration Statement and Prospectuses including
general review and discussion of the contents thereof but has made no
independent check or verification thereof (relying as to materiality to
a large extent upon the statements of officers and other representatives
of the Company), and such counsel has
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no reason to believe that the Registration Statement and the prospectus
included therein, at the time such Registration Statement or any
post-effective amendment became effective, 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
therein not misleading, or that the Prospectuses as of their respective
dates or as of the Closing Date or the Option Closing Date, as the case
may be, contained or contain any untrue statement of a material fact or
omitted or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; it being
understood that such counsel need express no statement with respect to
the financial statements, schedules and other financial and statistical
data included in the Registration Statement or the Prospectuses.
In rendering its opinion as aforesaid, such counsel may, as to
factual matters, rely upon written certificates or statements of
officers of the Company and its subsidiaries, each dated the Closing
Date, and may state that such counsel expresses no opinion as to the law
of any jurisdiction other than the United States, the State of Texas or
the corporation law of the State of Delaware. Notwithstanding the
foregoing, with respect to matters of Jamaican law, the Company shall
deliver to you, as Representatives of the several U.S. Underwriters, an
opinion of Jamaican counsel retained by the Company, provided that (1)
such local counsel is acceptable to the Representatives, (2) such
opinion is in form and substance satisfactory to them and their counsel
and (3) Locke Purnell Rain Harrell shall state in their opinion that
they believe that the U.S. Underwriters are justified in relying on such
opinion of Jamaican counsel.
(d) You shall have received on the Closing Date an opinion of
Davis Polk & Wardwell, counsel for the U.S. Underwriters, dated the
Closing Date, with respect to the matters referred to in clauses
(iv)(A), (iv)(B)(1), (vi), (xii), (xiii) (but only with respect to the
statements in the Prospectuses under the headings "Description of
Indebtedness -- Notes", "Description of Capital Stock" and
"Underwriting") and the paragraph immediately following clause (xvi) of
subsection (c) above and such other related matters as you may request.
(e) You shall have received letters addressed to you, as
Representatives of the several U.S.
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Underwriters, and dated the date hereof and the Closing Date from
Coopers & Lybrand, independent certified public accountants,
substantially in the forms heretofore approved by you.
(f)(i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been taken or, to the knowledge of the Company,
shall be contemplated by the Commission at or prior to the Closing Date;
(ii) there shall not have been any material change in the capital stock
of the Company nor any material increase in the short-term or long-term
debt of the Company (other than in the ordinary course of business) from
that set forth or contemplated in the Registration Statement or the
Prospectuses; (iii) there shall not have been, since the respective
dates as of which information is given in the Registration Statement and
the Prospectuses, except as may otherwise be stated in the Registration
Statement and Prospectuses (or any amendment or supplement thereto), any
material adverse change, or any development reasonably likely to result
in a prospective material adverse change, in the condition (financial or
other), business, properties, net worth or results of operations of the
Company and its subsidiaries, taken as a whole; and (iv) all the
representations and warranties of the Company contained in this
Agreement and the International Underwriting Agreement shall be true and
correct on and as of the date hereof and on and as of the Closing Date
as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive
officer and the chief financial officer of the Company (or such other
officers as are acceptable to you), to the effect set forth in this
Section 9(f) and in Sections 9(g) and 9(i) hereof.
(g) The Company shall not have failed at or prior to the Closing
Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder
at or prior to the Closing Date.
(h) The Common Stock shall have been listed or approved for
listing, subject to notice of issuance, on the New York Stock Exchange.
(i) The consummation of the Formation and receipt by the Company
of the proceeds of the Financing Plan (including, without limitation,
the Concurrent Debt Offering) shall have occurred prior to or shall
occur simultaneously with the closing hereunder.
35
<PAGE> 36
(j) The closing under the International Underwriting Agreement
shall have occurred concurrently with the closing hereunder.
(k) The Company shall have furnished or caused to be furnished
to you such further certificates and documents as you shall have
requested.
All such opinions, certificates, letters and other documents will
be in compliance with the provisions hereof only if they are satisfactory in
form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company
and delivered to you, as Representatives of the U.S. Underwriters, or to
counsel for the U.S. Underwriters, shall be deemed a representation and
warranty by the Company to each U.S. Underwriter as to the statements made
therein.
The several obligations of the U.S. Underwriters to purchase
Additional Shares hereunder are subject to the satisfaction on and as of the
Option Closing Date of the conditions set forth in this Section 9, except that,
if the Option Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (f) of this Section
9 shall be dated the Option Closing Date in question and the opinions called
for by paragraphs (c) and (d) shall be revised to reflect the sale of
Additional Shares.
10. EXPENSES. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction, and
filing with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectuses,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectuses, and all amendments or supplements to
any of them as may be reasonably requested for use in connection with the
offering and sale of the Shares; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Shares, including
any stamp taxes in connection with the original issuance and sale of the
Shares; (iv) the reproduction and delivery of this Agreement, the preliminary
and supplemental Blue Sky Memoranda and all other agreements or documents
reproduced and delivered in connection with the offering of the Shares; (v) the
registration of the Common Stock under
36
<PAGE> 37
the Exchange Act and the listing of the Common Stock on the New York Stock
Exchange; (vi) the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky laws or real estate syndication laws of
the several states as provided in Section 5(g) hereof (including the reasonable
fees, expenses and disbursements of counsel for the U.S. Underwriters relating
to the preparation, reproduction and delivery of the preliminary and
supplemental Blue Sky Memoranda and such registration and qualification); (vii)
the filing fees and the fees and expenses of counsel for the U.S. Underwriters
in connection with any filings required to be made with the National
Association of Securities Dealers, Inc.; (viii) the transportation and other
expenses incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Shares; and (ix) the fees and
expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company.
11. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the registration statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such
post-effective amendment has been released by the Commission. Until such time
as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several U.S.
Underwriters, by notifying the Company.
If any one or more of the U.S. Underwriters shall fail or refuse
to purchase Shares that it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares that such defaulting U.S.
Underwriter or U.S. Underwriters are obligated but fail or refuse to purchase
is not more than one-tenth of the aggregate number of Shares that the U.S.
Underwriters are obligated to purchase on the Closing Date, each non-defaulting
U.S. Underwriter shall be obligated, severally, in the proportion that the
number of Firm Shares set forth opposite its name in Schedule I hereto bears to
the aggregate number of Firm Shares set forth opposite the names of all
non-defaulting U.S. Underwriters or in such other proportion as you may specify
in accordance with Section 20 of the Master Agreement Among Underwriters of
Smith Barney Inc., to purchase the Shares that such defaulting U.S. Underwriter
or U.S. Underwriters are obligated, but fail or refuse, to purchase. If any
one or more of the U.S. Underwriters shall fail or refuse to
37
<PAGE> 38
purchase Shares that it or they are obligated to purchase on the Closing Date
and the aggregate number of Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Shares that the U.S.
Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such Shares by one or
more non-defaulting U.S. Underwriters or other party or parties approved by you
and the Company are not made within 36 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting U.S.
Underwriter or the Company. In any such case that does not result in
termination of this Agreement, either you or the Company shall have the right
to postpone the Closing Date, but in no event for longer than seven days, in
order that the required changes, if any, in the Registration Statement and the
Prospectuses or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting U.S.
Underwriter from liability in respect of any such default of any such U.S.
Underwriter under this Agreement. The term "U.S. Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule I hereto who, with your approval and the approval of the Company,
purchases Shares that a defaulting U.S. Underwriter is obligated, but fails or
refuses, to purchase.
Any notice under this Section 11 may be given by telegram,
telecopy or telephone but shall be subsequently confirmed by letter.
12. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
U.S. Underwriter to the Company, by notice to the Company if, prior to the
Closing Date or any Option Closing Date (if different from the Closing Date and
then only as to the Additional Shares), as the case may be, (i) trading in
securities generally on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market shall have been suspended or materially
limited, (ii) a general moratorium on commercial banking activities in the
State of New York or the State of Texas shall have been declared by either
federal or state authorities, or (iii) there shall have occurred any outbreak
or escalation of hostilities or other international or domestic calamity,
crisis or change in political, financial or economic conditions, the effect of
which is such as to make it, in your judgment, impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectuses or to
enforce contracts for the resale of the shares by the U.S. Underwriters.
Notice of such termination may be given to the Company by telegram, telecopy or
telephone and shall be subsequently confirmed by letter.
38
<PAGE> 39
13. INFORMATION FURNISHED BY THE U.S. UNDERWRITERS. The statements
set forth in the last paragraph on the cover page, the stabilization legend on
the inside front cover page, and the statements in the fourth, eighth, ninth,
tenth and fourteenth paragraphs under the caption "Underwriting" in any U.S.
Prepricing Prospectus and in the U.S. Prospectus constitute the only
information furnished by or on behalf of the U.S. Underwriters through you as
such information is referred to in Sections 6(b) and 8 hereof.
14. MISCELLANEOUS. Except as otherwise provided in Sections 5, 11
and 12 hereof, notice given pursuant to any provision of this Agreement shall
be in writing and shall be delivered (i) if to the Company, at the office of
the Company at 2001 Bryan Street, Suite 2300, Dallas, Texas 75201, Attention:
James D. Carreker, Chief Executive Officer; (ii) if to CF Securities, at the
office of CF Securities at 2001 Ross Avenue, Suite 3200, Dallas, Texas 75201,
Attention: Susan T. Groenteman or (iii) if to you, as Representatives of the
several U.S. Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
several U.S. Underwriters, the Company, its directors and officers, and the
other controlling persons referred to in Section 8 hereof and their respective
successors and assigns, to the extent provided herein, and no other person
shall acquire or have any right under or by virtue of this Agreement. Neither
the term "successor" nor the term "successors and assigns" as used in this
Agreement shall include a purchaser from any U.S. Underwriter of any of the
Shares in his status as such purchaser.
15. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed solely within the State of New
York.
This Agreement may be signed in various counterparts that
together constitute one and the same instrument. If signed in counterparts,
this Agreement shall not become effective unless at least one counterpart
hereof shall have been executed and delivered on behalf of each party hereto.
16. AGREEMENT OF WYNDHAM HOTEL COMPANY LTD. If this Agreement shall
terminate or shall be terminated after execution pursuant to any provisions
hereof (otherwise than pursuant to the second paragraph of Section 11 hereof or
by notice given by you terminating this Agreement pursuant to Section 11 or
Section 12 hereof) or if this Agreement shall be terminated by the U.S.
Underwriters because of any
39
<PAGE> 40
failure or refusal on the part of the Company to comply with the terms or
fulfill any of the conditions of this Agreement, Wyndham Hotel Company Ltd.
agrees to reimburse the Representatives for all reasonable out-of-pocket
expenses (including reasonable fees and expenses of counsel for the U.S.
Underwriters) incurred by you in connection with effecting the transactions
contemplated in this Agreement.
40
<PAGE> 41
Please confirm that the foregoing correctly sets forth the
agreement among the Company, CF Securities, Wyndham Hotel Company Ltd. and the
several U.S. Underwriters.
Very truly yours,
WYNDHAM HOTEL CORPORATION
By _____________________
Chief Executive
Officer
CF SECURITIES, L.P.
By: [ ],
its general partner
By ______________________
Name:
Title:
WYNDHAM HOTEL COMPANY LTD.
By: [ ],
its general partner
By ______________________
Name:
Title:
<PAGE> 42
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several U.S.
Underwriters named in Schedule I
hereto.
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MONTGOMERY SECURITIES
BT SECURITIES CORPORATION
As Representatives of the Several U.S. Underwriters
By SMITH BARNEY INC.
By ______________________
Managing Director
<PAGE> 43
SCHEDULE I
WYNDHAM HOTEL CORPORATION
<TABLE>
<CAPTION>
Number of
U.S. Underwriter Firm Shares
---------------- -----------
<S> <C>
Smith Barney Inc. . . . . . . . . . . . . . . . . . . . .
Donaldson, Lufkin & Jenrette
Securities Corporation . . . . . . . . . . . . . . . .
Montgomery Securities . . . . . . . . . . . . . . . . .
BT Securities Corporation . . . . . . . . . . . . . . . .
-----------
Total 2,680,000
===========
</TABLE>
<PAGE> 44
SCHEDULE II
Roll-Up Entities
Brookfield Lakes Partners Ltd., a Texas limited partnership
Commerce Hotel Partners Ltd., a Texas limited partnership
Garden Hotel Associates LP, a Texas limited partnership
Garden Hotel Associates Two L.P., a Texas limited partnership
Garden Hotel Partners LP, a Texas limited partnership
Garden Hotel Partners Two L.P., a Texas limited partnership
Garden Hotel Corporation No. 1, a Texas corporation
Garden Hotel Corporation No. 2, a Texas corporation
Garden Hotel Corporation No. 3, Inc., a Texas corporation
Indianapolis Partners Ltd, a Texas limited partnership
Rose Hall Associates Limited Partnership, a Texas limited
partnership
Schaumburg Hotel Associates, Ltd, a Texas limited partnership
Schaumburg Hotel Partners Limited Partnership, a Texas limited
partnership
WH Interest, Inc., a Texas corporation
WHI Limited Partnership, a Texas limited partnership
Wyndham Charlotte Garden Hotel Limited Partnership,
a Texas limited partnership
Wyndham Hotel Company Ltd., a Texas limited partnership
WHC Caribbean Limited, a Jamaican company
Wyndham Hotel Management Corporation, a Texas corporation
<PAGE> 45
Annex A
CERTIFICATE AS TO THE MATERIAL CONTRACTS
I, [name], [title] of Wyndham Hotel Corporation (the "Company")
hereby certify on behalf of the Company to Locke Purnell Rain Harrell (A
Professional Corporation), each of the U.S. Underwriters named in the U.S.
Underwriting Agreement dated as of __________, 1996 among the Company, CF
Securities L.P., Wyndham Hotel Company Ltd. and such U.S. Underwriters (the
"U.S. Underwriting Agreement"), each of the Managers named in the International
Underwriting Agreement dated as of _____________, 1996 among the Company, CF
Securities L.P., Wyndham Hotel Company Ltd. and such Managers (the
"International Underwriting Agreement"), and each of the Underwriters named in
the Debt Underwriting Agreement dated as of ___________, 1996 among the
Company, CF Securities L.P., Wyndham Hotel Company Ltd. and such Underwriters
(the "Debt Underwriting Agreement"), that the following constitute the
agreements, indentures, leases or other instruments to which the Company, any
of its Subsidiaries (as defined in the U.S. Underwriting Agreement, the
International Underwriting Agreement or the Debt Underwriting Agreement) or any
of the Roll-Up Entities (as defined in the U.S. Underwriting Agreement, the
International Underwriting Agreement, or the Debt Underwriting Agreement) is a
party or by which the Company, any of its Subsidiaries or any of the Roll-Up
Entities or any of their respective properties is bound that are material to
the business or operations of the Company and its subsidiaries, taken as a
whole:
[material contracts]
<PAGE> 1
EXHIBIT 1.1(b)
670,000 Shares
WYNDHAM HOTEL CORPORATION
Common Stock
INTERNATIONAL UNDERWRITING AGREEMENT
__________, 1996
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MONTGOMERY SECURITIES
BANKERS TRUST INTERNATIONAL PLC
As Lead Managers for the Several Managers
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Wyndham Hotel Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell an aggregate of 670,000 shares (the
"Shares") of its common stock, $.01 par value per share (the "Common Stock") to
the several Managers named in Schedule I hereto (the "Managers") for whom Smith
Barney Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Montgomery
Securities and Bankers Trust International PLC are acting as lead Managers (the
"Lead Managers").
It is understood that the Company is concurrently entering into a
U.S. Underwriting Agreement, dated the date hereof (the "U.S. Underwriting
Agreement"), providing for the sale of 2,680,000 shares of Common Stock (the
"Firm U.S. Shares"), plus an option granted by the Company to purchase up to an
additional 502,500 shares of Common Stock (the "Additional U.S. Shares") solely
for the purpose of covering over-allotments, through arrangements with certain
underwriters in the United States and Canada (the "U.S. Underwriters"), for
whom Smith Barney Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Montgomery Securities and BT Securities Corporation are acting as
representatives (the "Representatives"). All shares of Common Stock proposed
to be offered to the U.S. Underwriters pursuant to the U.S. Underwriting
Agreement, including the
<PAGE> 2
Firm U.S. Shares and the Additional U.S. Shares, are herein called the "U.S.
Shares"; the U.S. Shares and the Shares, collectively, are herein called the
"Underwritten Shares".
It is further understood that, prior to the Closing Date (as
defined below), the Company and certain other parties will enter into a
transaction referred to in the Prospectuses (as defined below) as the
"Formation" and that, simultaneously with the closing hereunder, the Company
and certain other parties will enter into a series of transactions referred to
in the Prospectuses as the "Financing Plan". The Formation Agreement, the
Hampstead Exchange Agreement and the Rose Hall Transfer Agreement to be entered
into among the Company and certain partnerships, corporations and other parties
referred to therein are hereinafter collectively referred to as the
"Transaction Documents" and each singly as a "Transaction Document". Under the
terms of the Transaction Documents, the Company will succeed to the hotel
ownership, hotel management and other business operations of the entities
identified on Schedule II hereto (the "Roll-Up Entities"). TCF Hotels LP,
Caribbean Hotel Management Company and Wyndham Finance Limited Partnership
(collectively, the "Founders") and certain other parties will each receive cash
from the proceeds of the Financing Plan.
It is further understood that as described in the International
Prospectus (as defined below) under the caption "The Formation and the
Financing Plan", the Company intends to publicly offer in a concurrent public
offering (the "Concurrent Debt Offering") ___% Senior Subordinated Notes due
2006.
The Company also understands that the Lead Managers and the
Representatives have entered into an agreement (the "Agreement Between U.S.
Underwriters and Managers") contemplating the coordination of certain
transactions between the Managers and the U.S. Underwriters and that, pursuant
thereto and subject to the conditions set forth therein, the Managers may
purchase from the U.S. Underwriters a portion of the U.S. Shares or sell to the
U.S. Underwriters a portion of the Shares. The Company understands that any
such purchases and sales between the Managers and the U.S. Underwriters shall
be governed by the Agreement Between U.S. Underwriters and Managers and shall
not be governed by the terms of this Agreement or the U.S. Underwriting
Agreement.
The Company wishes to confirm as follows its agreements with you
and the other several Managers on whose behalf you are acting, in connection
with the several purchases of the Shares by the Managers.
2
<PAGE> 3
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 under the Act (the "registration
statement"), including prospectuses subject to completion relating to the
Underwritten Shares. The term "Registration Statement" as used in this
Agreement means the registration statement, as amended at the time it becomes
effective or, if the registration statement became effective prior to the
execution of this Agreement, as supplemented or amended prior to the execution
of this Agreement. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the registration statement will be
filed and must be declared effective before the offering of the Underwritten
Shares may commence, the term "Registration Statement" as used in this
Agreement means the registration statement as amended by said post-effective
amendment. The term "Registration Statement" shall also include any
registration statement relating to the Shares that is filed and declared
effective pursuant to Rule 462(b) under the Act.
The term "Prospectuses" as used in this Agreement means the
prospectuses relating to the Underwritten Shares in the forms included in the
Registration Statement or, if the prospectuses included in the Registration
Statement omit information in reliance on Rule 430A under the Act and such
information is included in prospectuses filed with the Commission pursuant to
Rule 424(b) under the Act, the term "Prospectuses" as used in this Agreement
means the prospectuses relating to the Underwritten Shares in the forms
included in the Registration Statement as supplemented by the addition of the
Rule 430A information contained in the prospectuses relating to the
Underwritten Shares filed with the Commission pursuant to Rule 424(b), provided
that if prospectuses that meet the requirements of Section 10(a) of the Act are
delivered pursuant to Rule 434(b) under the Act, then (i) the term
"Prospectuses" as used in this Agreement means the prospectuses subject to
completion (as defined in Rule 434(g) under the Act) relating to the
Underwritten Shares as supplemented by the information contained in the term
sheets described in Rule 434(b)(3) under the Act, and (ii) the date of such
Prospectuses shall be deemed to be the date of such term sheets. The term
"Prepricing Prospectuses" as used in this Agreement means the prospectuses
subject to completion relating to the Underwritten Shares in the forms included
in the registration statement at the time of the initial filing of the
registration statement with the Commission, and as such
3
<PAGE> 4
prospectuses shall have been amended from time to time prior to the date of the
Prospectuses.
It is understood that two forms of Prepricing Prospectus and two
forms of Prospectus are to be used in connection with the offering and sale of
the Underwritten Shares: a Prepricing Prospectus and a Prospectus relating to
the U.S. Shares that are to be offered and sold in the United States (as
defined herein) or Canada (as defined herein) to U.S. or Canadian Persons (the
"U.S. Prepricing Prospectus" and the "U.S. Prospectus", respectively), and a
Prepricing Prospectus and a Prospectus relating to the Shares that are to be
offered and sold outside the United States or Canada to persons other than U.S.
or Canadian Persons (the "International Prepricing Prospectus" and the
"International Prospectus", respectively). The U.S. Prospectus and the
International Prospectus are herein collectively called the "Prospectuses", and
the U.S. Prepricing Prospectus and the International Prepricing Prospectus are
herein called the "Prepricing Prospectuses". For purposes of this Agreement:
"U.S. or Canadian Person" means any resident or national of the United States
or Canada, any corporation, partnership or other entity created or organized in
or under the laws of the United States or Canada or any estate or trust the
income of which is subject to United States or Canadian income taxation
regardless of the source of its income (other than the foreign branch of any
U.S. or Canadian Person), and includes any United States or Canadian branch of
a person other than a U.S. or Canadian Person; "United States" means the United
States of America (including the states thereof and the District of Columbia)
and its territories, its possessions and other areas subject to its
jurisdiction; and "Canada" means Canada and its territories, its possessions
and other areas subject to its jurisdiction.
2. AGREEMENTS TO SELL AND PURCHASE. Upon the basis of the
representations, warranties and agreements contained herein and subject to all
the terms and conditions set forth herein and to such other adjustments as you
may determine to avoid fractional shares, the Company hereby agrees to issue
and sell to each Manager, and each Manager agrees, severally and not jointly,
to purchase from the Company, at a purchase price of $______ per share (the
"purchase price per share"), the number of Shares set forth opposite the name
of such Manager in Schedule I hereto (or such number of Shares increased as set
forth in Section 11 hereof).
3. TERMS OF PUBLIC OFFERING. The Company has been advised by you
that the Managers propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable and
4
<PAGE> 5
initially to offer the Shares upon the terms set forth in the International
Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Managers of and payment for the Shares shall be made at the office of Locke
Purnell Rain Harrell (A Professional Corporation), 2200 Ross Avenue, Suite
2200, Dallas, Texas 75201 at 9:00 A.M., Dallas time, on _______, 1996 (the
"Closing Date"). The place of closing for the Shares and the Closing Date may
be varied by agreement between you and the Company.
Certificates for the Shares to be purchased hereunder shall be
registered in such names and in such denominations as you shall request prior
to 9:30 A.M., New York City time, on the second business day preceding the
Closing Date. Such certificates shall be made available to you in New York
City for inspection and packaging not later than 9:30 A.M., New York City time,
on the business day next preceding the Closing Date. The certificates
evidencing the Shares to be purchased hereunder shall be delivered to you on
the Closing Date, against payment of the purchase price therefor by wire
transfer to the Company of immediately-available funds.
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Managers as follows:
(a) If, at the time this Agreement is executed and delivered, it
is necessary for the Registration Statement or a post-effective
amendment thereto to be declared effective before the offering of the
Shares may commence, the Company will endeavor to cause the Registration
Statement or such post-effective amendment to become effective as soon
as possible and will advise you promptly and, if requested by you, will
confirm such advice in writing, when the Registration Statement or such
post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by
you, will confirm such advice in writing: (i) of any request by the
Commission for amendment of or a supplement to the Registration
Statement, any Prepricing Prospectuses or Prospectuses, or for
additional information; (ii) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or
of the suspension of qualification of the Shares for offering or sale in
any jurisdiction or the initiation of any proceeding for such purpose;
and (iii) within the period of time referred to in paragraph (f) below,
of any change in the condition (financial or other), business,
prospects, properties, net worth or results
5
<PAGE> 6
of operations of the Company and its subsidiaries, taken as a whole, or
of the happening of any event, including the filing of any information,
documents, or reports pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), that in each case makes any statement
of a material fact made in the Registration Statement or either
Prospectus (as then amended or supplemented) untrue or that requires the
making of any additions to or changes in the Registration Statement or
either Prospectus (as then amended or supplemented) in order to state a
material fact required by the Act to be stated therein or necessary in
order to make the statements therein (with respect to either Prospectus,
in the light of the circumstances under which they were made) not
misleading, or of the necessity to amend or supplement either Prospectus
(as then amended or supplemented) to comply with the Act or any other
law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company
will make every reasonable effort to obtain the withdrawal of such order
at the earliest possible time.
(c) The Company will furnish to you, without charge, five signed
copies of the registration statement as originally filed with the
Commission and of each amendment thereto, including financial statements
and all exhibits thereto, and will also furnish to you, without charge,
such number of conformed copies of the registration statement as
originally filed and of each amendment thereto, but without exhibits, as
you may reasonably request.
(d) The Company will not (i) file any amendment to the
Registration Statement or make any amendment or supplement to either
Prospectus of which you shall not previously have been advised or to
which you shall reasonably object after being so advised or (ii) so long
as, in the opinion of counsel for the Managers, a prospectus is required
to be delivered in connection with sales by any Manager or dealer, file
any information, documents or reports pursuant to the Exchange Act,
without delivering a copy of such information, documents or reports to
you, as Lead Managers for the Managers, prior to or concurrently with
such filing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you
have reasonably requested, copies of each form of the International
Prepricing Prospectus. The Company consents to the use, in accordance
with the provisions of the Act,
6
<PAGE> 7
prior to the date of the International Prospectus, of each International
Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement
as possible and thereafter from time to time for such period as in the
opinion of counsel for the Managers a prospectus is required by the Act
to be delivered in connection with sales by any Manager or dealer, the
Company will expeditiously deliver to each Manager and each dealer,
without charge, as many copies of the International Prospectus (and of
any amendment or supplement thereto) as you may request. The Company
consents to the use of the International Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of
the Act, both in connection with the offering and sale of the Shares and
for such period of time thereafter as a prospectus is required by the
Act to be delivered in connection with sales by any Manager or dealer.
If during such period of time any event shall occur that in the judgment
of the Company or in the opinion of counsel for the Managers is required
to be set forth in the International Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, or if it is necessary to supplement or amend
the International Prospectus to comply with the Act or any other law,
the Company will forthwith prepare and, subject to the provisions of
paragraph (d) above, file with the Commission an appropriate supplement
or amendment thereto, and will expeditiously furnish to the Managers and
dealers a reasonable number of copies thereof.
(g) The Company will cooperate with you and with counsel for the
Managers in connection with the registration or qualification of the
Shares for offering and sale by the several Managers and by dealers
under the securities or Blue Sky laws or real estate syndication laws of
such jurisdictions as you may designate and will file such consents to
service of process or other documents necessary or appropriate in order
to effect such registration or qualification; provided that in no event
shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action that
would subject it to service of process in suits, other than those
arising out of the offering or sale of the Shares, in any jurisdiction
where it is not now so subject.
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<PAGE> 8
(h) The Company will make generally available to its security
holders a consolidated earnings statement, which need not be audited,
covering a twelve-month period commencing after the effective date of
the Registration Statement and ending not later than 15 months
thereafter, as soon as practicable after the end of such period, which
consolidated earnings statement shall satisfy the provisions of Section
11(a) of the Act.
(i) During the period of three years hereafter, the Company will
furnish to you (i) as soon as available, a copy of each report of the
Company mailed to stockholders or filed with the Commission or the New
York Stock Exchange, and (ii) from time to time such other information
concerning the Company as you may request.
(j) The Company will apply the net proceeds from the sale of the
Underwritten Shares substantially in accordance with the description set
forth in the Prospectuses.
(k) If Rule 430A of the Act is employed, the Company will timely
file the Prospectuses pursuant to Rule 424(b) under the Act and will
advise you of the time and manner of such filing.
(l) For a period of 180 days after the date hereof (the "Lock-up
Period"), the Company will not, without the prior written consent of
Smith Barney Inc., (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common
Stock or (ii) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the
Common Stock, whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, except for (w) sales to the Managers
pursuant to this Agreement and the U.S. Underwriters pursuant to the
U.S. Underwriting Agreement, (x) the issuance of shares of Common Stock
in connection with the Formation, (y) the grant of options or other
rights under the Company's 1996 Long Term Incentive Plan or Non-Employee
Directors' Retainer Stock Plan or (z) the issuance of shares of Common
Stock upon exercise of the GE Option (as defined in the Prospectuses).
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<PAGE> 9
(m) The Company has furnished or will furnish to you "lock-up"
letters, in form and substance satisfactory to you, signed by each of
its current officers, directors, stockholders and General Electric
Pension Trust.
(n) Except as stated in this Agreement and in the U.S.
Underwriting Agreement and in the Prepricing Prospectuses and
Prospectuses, the Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected
to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Underwritten
Shares.
(o) The Company will use its best efforts to have the Common
Stock listed, subject to notice of issuance, on the New York Stock
Exchange concurrently with the effectiveness of the registration
statement.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Manager that (in each of paragraphs (a) through
(cc), after giving effect to Formation):
(a) Each International Prepricing Prospectus included as part of
the registration statement as originally filed or as part of any
amendment or supplement thereto, or filed pursuant to Rule 424 under the
Act, complied when so filed in all material respects with the provisions
of the Act. The Commission has not issued any order preventing or
suspending the use of any Prepricing Prospectus.
(b) The registration statement in the form in which it became or
becomes effective and also in such form as it may be when any
post-effective amendment thereto shall become effective and the
Prospectuses and any supplement or amendment thereto when filed with the
Commission under Rule 424(b) or Rule 462 under the Act, complied or will
comply in all material respects with the provisions of the Act and did
not or will not at any such times contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein (with respect to
either Prospectus, in the light of the circumstances under which they
were made) not misleading, except that this representation and warranty
does not apply to statements in or omissions from the registration
statement or the Prospectuses made in reliance upon and in conformity
with information relating to any Manager or U.S. Underwriter furnished
to the Company in writing by a
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<PAGE> 10
Manager through the Lead Managers or by a U.S. Underwriter through the
Representatives expressly for use therein.
(c) All the outstanding shares of Common Stock have been duly
authorized and validly issued, are fully paid and nonassessable and are
free of any preemptive or similar rights; the Shares have been duly
authorized and, when issued and delivered to the Managers against
payment therefor in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable and free of any preemptive or
similar rights, and as of the Closing Date, the capital stock of the
Company will conform to the description thereof in the Registration
Statement and the Prospectuses.
(d) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware with
full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectuses, and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction where
the nature of its properties or the conduct of its business requires
such registration or qualification, except where the failure so to
register or qualify or be in good standing does not have a material
adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect").
(e) All the Company's subsidiaries that are required to be
listed in an exhibit to the Registration Statement (the "Subsidiaries")
are so listed. Each Subsidiary is a corporation duly organized and
validly existing in good standing in the jurisdiction of its
incorporation, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectuses (and any amendment or
supplement thereto), and is duly registered and qualified to conduct its
business and is in good standing in each jurisdiction where the nature
of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register
or qualify does not have a Material Adverse Effect. All the outstanding
shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable, and, as
of the Closing Date, will be owned by the Company directly or indirectly
through one of the other Subsidiaries,
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<PAGE> 11
free and clear of any lien, adverse claim, security interest, equity or
other encumbrance (other than encumbrances imposed pursuant to the
Credit Agreement and the GHALP Lease, each as defined in the
Prospectuses).
(f) There are no legal or governmental proceedings pending or,
to the knowledge of the Company, threatened, against the Company or any
of its Subsidiaries or to which any of their respective properties is
subject that are material to the Company and its subsidiaries, taken as
a whole, that are required to be described in the Registration Statement
or either Prospectus but are not described as required, and there are no
agreements, contracts, indentures, leases or other instruments that are
required to be described in the Registration Statement or either
Prospectus or to be filed as an exhibit to the Registration Statement
that are not described or filed as required by the Act or the Exchange
Act. The descriptions of the terms of any such contracts or documents
contained in the Registration Statement or either Prospectus are correct
in all material respects.
(g) Neither the Company nor any of its Subsidiaries is in (i)
violation of its certificate or articles of incorporation or by-laws, or
other organizational documents, (ii) in violation of any law, ordinance,
administrative or governmental rule or regulation applicable to the
Company or any of its Subsidiaries or of any decree of any court or
governmental agency or body having jurisdiction over the Company or any
of its Subsidiaries (except where any such violation or violations in
the aggregate would not have a Material Adverse Effect), or (iii) in
default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of
indebtedness or in any material agreement, indenture, lease or other
instrument to which the Company or any of its Subsidiaries is a party or
by which any of them or any of their respective properties may be bound,
and no condition or state of facts exists that, with the passage of time
or the giving of notice or both, would constitute such a default (except
where any such default or defaults, singly or in the aggregate, in the
aggregate would not have a Material Adverse Effect).
(h) None of the issuance or sale of the Underwritten Shares, the
execution, delivery, or performance of this Agreement or the U.S.
Underwriting Agreement by the Company or the execution or delivery of,
or the performance by the Company or the Roll-Up
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<PAGE> 12
Entities of their respective obligations under, the Transaction
Documents or the consummation by the Company or the Roll-Up Entities of
the transactions contemplated hereby and thereby (i) requires any
consent, approval, authorization or order of or registration or filing
with any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be required
for the registration of the Underwritten Shares under the Act and the
Exchange Act and compliance with the securities or Blue Sky laws or real
estate syndication laws of various jurisdictions, all of which have been
or will be effected in accordance with this Agreement, or as may be
required subsequent to the date hereof to give effect to the
transactions comprising the Formation, all of which will be effected in
a timely manner in connection with the Formation), or conflicts or will
conflict with or constitutes or will constitute a breach of, or a
default under, the certificate or articles of incorporation or by-laws
or other organizational documents of the Company, any of its
Subsidiaries or any of the Roll-Up Entities (ii) conflicts or will
conflict with or constitutes or will constitute a breach of or a default
under any agreement, indenture, lease or other instrument to which the
Company, any of its Subsidiaries or any of the Roll-Up Entities is a
party or by which any of them or any of their respective properties may
be bound (except for such conflicts, breaches or defaults for which
waivers or consents have been obtained), or violates or will violate any
statute, law, regulation or filing or judgment, injunction, order or
decree applicable to the Company, any of its Subsidiaries, any of their
respective properties or any of the Roll-Up Entities, or will result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its Subsidiaries pursuant to
the terms of any agreement or instrument to which any of them or any of
the Roll-Up Entities is a party or by which any of them or any of the
Roll-Up Entities may be bound or to which any of the property or assets
of any of them is subject, in each case except for such conflicts,
breaches, defaults, violations, or encumbrances that would not singly or
in the aggregate have a Material Adverse Effect or materially adversely
affect the ability of the Company or any of the Roll-Up Entities to
fulfill its obligations hereunder or thereunder.
(i) The accountants, Coopers & Lybrand L.L.P., who have
certified or shall certify the financial statements included in the
Registration Statement or either Prospectus (or any amendment or
supplement
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<PAGE> 13
thereto) are independent public accountants as required by the Act.
(j) The historical and pro forma financial statements, together
with related schedules and notes, included in the Registration Statement
and the Prospectuses (and any amendment or supplement thereto) comply as
to form in all material respects with the requirements of the Act; such
historical financial statements, together with related schedules and
notes, present fairly the consolidated financial position, results of
operations, cash flows and changes in stockholders' equity or partners'
equity, as the case may be, of the entities to which they relate on the
basis stated in the Registration Statement at the respective dates or
for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout
the periods involved, except as disclosed therein; such pro forma
financial statements, together with related notes, have been prepared on
a basis consistent with such historical statements, except for pro forma
adjustments specified therein, and give effect to assumptions made on a
reasonable basis and present fairly the historical and proposed
transactions contemplated by the Prospectuses; and the other financial
and statistical information and data included in the Registration
Statement and the Prospectuses (and any amendment or supplement
thereto), historical and pro forma, are accurately presented and
prepared on a basis consistent with such financial statements and the
books and records of the entity to which they relate.
(k) The execution and delivery of, and the performance by the
Company of its obligations under, each of this Agreement and the U.S.
Underwriting Agreement have been duly and validly authorized by the
Company, and each of this Agreement and the U.S. Underwriting Agreement
has been duly executed and delivered by the Company and constitutes the
valid and legally binding agreement of the Company, enforceable against
the Company in accordance with its terms, except (i) the enforceability
hereof or thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, (ii) the remedy of
specific performance and other forms of equitable relief may be subject
to certain equitable defenses and to the discretion of the court before
which the proceedings may be brought and (iii) rights to indemnity and
contribution hereunder or thereunder
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<PAGE> 14
may be limited by federal or state securities laws or the public policy
underlying such laws.
(l) The execution and delivery of, and the performance by the
Company and the Roll-Up Entities of their respective obligations under,
each Transaction Document will be duly and validly authorized by the
Company and the Roll-Up Entities, and each Transaction Document will be
duly executed and delivered by the Company and, as applicable, the
Roll-Up Entities on or prior to the Closing Date and each Transaction
Document will constitute the legally valid and binding agreement of the
Company and the Roll-Up Entities enforceable against the Company and the
Roll-Up Entities in accordance with its terms, except (i) the
enforceability hereof or thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) the
remedy of specific performance and other forms of equitable relief may
be subject to certain equitable defenses and to the discretion of the
court before which the proceedings may be brought.
(m) Except as disclosed in the Registration Statement and the
Prospectuses (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the
Registration Statement and the Prospectuses (or any amendment or
supplement thereto), neither the Company nor any of its Subsidiaries has
incurred any liability or obligation, direct or contingent, or entered
into any transaction, not in the ordinary course of business, that is
material to the Company and its subsidiaries, taken as a whole, and
there has not been any change in the capital stock, or material increase
in the short-term debt or long-term debt, of the Company or any of its
Subsidiaries, or any material adverse change or any development
involving a prospective material adverse change, in the condition
(financial or other), business, properties, net worth or results of
operations of the Company and its subsidiaries, taken as a whole.
(n) Each of the Company and its Subsidiaries has (i) good and
marketable title in fee simple to all real property described in either
Prospectus as owned by it and (ii) good and marketable title to all
personal property described in either Prospectus as owned by it, which
personal property is material to the business of the Company and its
subsidiaries, taken as a whole, free and clear of all liens, claims,
security interests or other encumbrances, except such as are described
in
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<PAGE> 15
the Registration Statement and the Prospectuses or in a document filed
as an exhibit to the Registration Statement. All the property described
in either Prospectus as being held under lease by each of the Company
and its Subsidiaries is held by it under valid, subsisting and
enforceable leases (although no representation is made as to the
lessors' title to such property). Each agreement to which the Company
(or any subsidiary of the Company) is a party that provides for the
management or operation of a hotel property described in either
Prospectus as managed or operated by the Company is in full force and
effect and constitutes the valid and legally binding agreement of the
parties thereto, enforceable in accordance with its terms, except (i)
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, (ii) the remedy of
specific performance and other forms of equitable relief may be subject
to certain equitable defenses and to the discretion of the court before
which the proceedings may be brought and (iii) rights to indemnity and
contribution thereunder may be limited by applicable law.
(o) The Company has not distributed and, prior to the later to
occur of (i) the Closing Date and (ii) completion of the distribution of
the Underwritten Shares, will not distribute any offering material in
connection with the offering and sale of the Underwritten Shares other
than the Registration Statement, the Prepricing Prospectuses, the
Prospectuses or other materials, if any, permitted by the Act.
(p) The Company and each of its Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("Permits") as are necessary to own its respective
properties and to conduct its business in the manner described in the
Prospectuses, subject to such qualifications as may be set forth in the
Prospectuses and except where the failure to have any Permit would not
have a Material Adverse Effect; the Company and each of its Subsidiaries
has fulfilled and performed all its obligations with respect to such
Permits and no event has occurred that allows, or after notice or lapse
of time would allow, revocation or termination thereof or results in any
other impairment of the rights of the holder of any such Permit, subject
in each case to such qualification as may be set forth in the
Prospectuses, and except where the failure to so fulfill or perform its
obligation or such revocation or termination would
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<PAGE> 16
not have a Material Adverse Effect; and, except as described in the
Prospectuses, none of such Permits contains any restriction that is
materially burdensome to the Company or any of its Subsidiaries.
(q) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(r) To the Company's knowledge, neither the Company nor any of
its Subsidiaries nor any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any
Subsidiary or received or retained any funds in violation of any law,
rule or regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectuses.
(s) With respect to any Existing Entity (as defined in the
Formation Agreement) that is a partnership, for the period of its
existence, such entity has been properly classified as a partnership for
federal income tax purposes. With respect to any such Existing Entity
that has elected to be treated as a S corporation for federal income tax
purposes, such corporation has made a valid S corporation election under
Section 1362 of the Code and has at all times during the period of its
existence (through the Effective Time) satisfied the eligibility
criteria under the Code for such treatment. Each of the Existing
Entities has paid all income taxes to which it is subject, except where
the failure to so pay would not, singly or in the aggregate, have a
Material Adverse Effect.
(t) The representations and warranties of the Company in the
Transaction Documents are, and on the Closing Date will be, true and
correct.
(u) Except as described in the Prospectuses, no holder of any
security of the Company has any right to require registration of shares
of Common Stock or any
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<PAGE> 17
other security of the Company because of the filing of the registration
statement or consummation of the transactions contemplated by this
Agreement, the U.S. Underwriting Agreement or the Transaction Documents,
or otherwise. Except as described in or contemplated by the
Prospectuses, there are no outstanding options, warrants or other rights
calling for the issuance of, and there are no commitments, plans or
arrangements to issue, any shares of Common Stock of the Company or any
security convertible into or exchangeable or exercisable for Common
Stock of the Company.
(v) The Company has not taken, directly or indirectly, any action
designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares, except for the lock-up
arrangements referred to in the Prospectuses.
(w) As of the Closing Date, the Company and its Subsidiaries
will own or possess all patents, trademarks, trademark registrations,
service marks, service mark registrations, trade names, copyrights,
licenses, inventions, trade secrets and rights described in either
Prospectus as being owned by them or any of them or necessary for the
conduct of their respective businesses, except where the lack of such
ownership or possession would not have a Material Adverse Effect, and,
except as disclosed in the Prospectuses, the Company is not aware of any
claim to the contrary or any challenge by any other person to the rights
of the Company and its Subsidiaries with respect to the foregoing.
(x) The Company is not now and, after sale of the Underwritten
Shares and application of the net proceeds from such sale as described
in the Prospectuses under the caption "Use of Proceeds", will not be an
"investment company" required to be registered under Section 8 of the
Investment Company Act of 1940, as amended (the "Investment Company
Act"), or an entity "controlled by an investment company" required to be
registered under Section 8 of the Investment Company Act.
(y) The Company has complied with all provisions of Florida
Statutes, Section 517.075, relating to issuers doing business with Cuba.
(z) Except as disclosed in the Prospectuses, the Company and its
Subsidiaries (i) are in compliance with any and all applicable foreign,
federal, state and
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<PAGE> 18
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have received
all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, singly or in the
aggregate, have a Material Adverse Effect.
(aa) The Company has reasonably concluded that costs and
liabilities associated with the effect of Environmental Laws on the
business, operations and properties of the Company and its subsidiaries
would not, singly or in the aggregate, have a Material Adverse Effect.
(bb) The management and operation of the hotel properties owned,
leased or managed by the Company are not in violation of any applicable
building code, zoning ordinance or other law or regulation, except where
such violation of any applicable building code, zoning ordinance or
other law or regulation would not, singly or in the aggregate, have a
Material Adverse Effect.
(cc) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
customary in the businesses in which the Company is engaged and proposes
to engage and the Company has no reason to believe that it will not be
able to renew such insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material
Adverse Effect.
(dd) As of the Closing Date, the Formation shall have been
consummated as set forth in the Prospectuses.
7. REPRESENTATIONS AND WARRANTIES OF CF SECURITIES. CF Securities,
L.P., a Texas limited partnership ("CF Securities"), represents and warrants to
each Manager that:
(a) Each of this Agreement, the U.S. Underwriting Agreement and
the Transaction Documents has been duly authorized, executed and
delivered by or on behalf of CF Securities and each Founder that is a
party thereto
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<PAGE> 19
and is the valid and binding agreement of CF Securities and each such
Founder enforceable against CF Securities and each such Founder in
accordance with its terms, except that (i) the enforceability hereof or
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, (ii) the remedy of specific performance and
other forms of equitable relief may be subject to certain equitable
defenses and to the discretion of the court before which the proceedings
may be brought and (iii) rights to indemnity and contribution hereunder
or thereunder may be limited by federal or state securities laws or the
public policy underlying such laws.
(b) None of the execution, delivery or performance of this
Agreement, the U.S. Underwriting Agreement or any Transaction Document
by or on behalf of CF Securities or any Founder that is a party thereto
nor the consummation by or on behalf of CF Securities or any such
Founder of the transactions contemplated hereby and thereby (i) requires
any consent, approval, authorization or other order of, or registration
or filing with, any court, regulatory body, administrative agency or
other governmental body, agency or official (except such as may be
required for the registration of the Underwritten Shares under the Act
and the Exchange Act and compliance with the securities or Blue Sky laws
or real estate syndication laws of various jurisdictions, all of which
have been or will be effected in accordance with this Agreement, or as
may be required subsequent to the date hereof to give effect to the
transactions comprising the Formation, all of which will be effected in
a timely manner in connection with the Formation), or conflicts or will
conflict with or constitutes or will constitute a breach of, or a
default under, the certificate or articles of incorporation or by-laws
or other organizational documents of CF Securities or any such Founder
or (ii) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, any agreement, indenture,
lease or other instrument to which CF Securities or any such Founder is
a party or by which CF Securities or any such Founder is or may be
bound, or violates or will violate any statute, law, regulation or
filing or judgment, injunction, order or decree applicable to CF
Securities or any such Founder, or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of CF Securities or any such Founder pursuant to the terms of any
agreement or instrument to which CF Securities or any such Founder is a
party or
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<PAGE> 20
by which CF Securities or any such Founder may be bound or to which any
of the property or assets of CF Securities or any such Founder is
subject, in each case except for such conflicts, breaches, defaults,
violations, or encumbrances that would not singly or in the aggregate
have a Material Adverse Effect or materially adversely affect the
ability CF Securities or any of such Founder to fulfill its obligations
hereunder or thereunder.
(c) None of CF Securities or any Founder has taken, directly or
indirectly, any action designed to or that might reasonably be expected
to cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares, except for
the lock-up arrangements referred to in the Prospectuses.
(d) The representations and warranties of CF Securities and each
Founder in the Transaction Documents are, and on the Closing Date will
be, true and correct.
(e) None of Harlan R. Crow, Susan T. Groenteman or Kathy Smalley
has any knowledge that the Registration Statement or the Prospectuses
(or any amendment or supplement thereto) contains any untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein (with respect
to either Prospectus, in light of the circumstances under which they
were made) not misleading, except that this representation and warranty
does not apply to statements in or omissions from the registration
statement or the Prospectuses made in reliance upon and in conformity
with information relating to any Manager or U.S. Underwriter furnished
to CF Securities in writing by a Manager through the Lead Managers or by
a U.S. Underwriter through the Representatives expressly for use
therein.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each of you and each other Manager and each person,
if any, who controls any Manager within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation)
arising out of or based upon any untrue statement or alleged untrue statement
of a material fact contained in any International Prepricing Prospectus or in
the Registration Statement or the International Prospectus or in any amendment
or supplement thereto, or arising out of or based upon any omission or
20
<PAGE> 21
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or expenses arise out of or are based
upon any untrue statement or omission or alleged untrue statement or omission
that has been made therein or omitted therefrom in reliance upon and in
conformity with the information relating to such Manager or U.S. Underwriter
furnished in writing to the Company by or on behalf of any Manager through you
or by or on behalf of any U.S. Underwriter through a Representative expressly
for use in connection therewith; provided, however, that the indemnification
contained in this paragraph (a) with respect to any International Prepricing
Prospectus shall not inure to the benefit of any Manager (or to the benefit of
any person controlling such Manager) on account of any such loss, claim,
damage, liability or expense arising from the sale of the Shares by such
Manager to any person if a copy of the International Prospectus shall not have
been delivered or sent to such person within the time required by the Act, and
the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in such International Prepricing
Prospectus was corrected in the International Prospectus, provided that the
Company has delivered the International Prospectus to the several Managers, no
later than 2:00 P.M., New York City time, on the business day following the
date hereof, in such quantity as the Managers shall have reasonably requested.
(b) CF Securities agrees that, in the event any Manager or any person
controlling any Manager shall obtain a judicial judgment, order or decree
against the Company for amounts payable by the Company to such Manager or
controlling person pursuant to this Section 8 (whether for indemnification or
contribution), which judgment has been and remains unstayed, unsatisfied and
undischarged for a period of 60 days or more, then CF Securities shall
promptly, upon the request of such Manager or controlling person, pay to such
Manager or controlling person an amount equal to the amount payable by the
Company to such Manager or controlling person pursuant to such judgment.
Notwithstanding the foregoing, the aggregate liability of CF Securities
pursuant to this Agreement and the U.S. Underwriting Agreement shall be limited
to an amount equal to the aggregate amount of cash received by the Founders
pursuant to the Transaction Documents.
(c) If any action, suit or proceeding shall be brought against any
Manager or any person controlling any Manager in respect of which indemnity may
be sought against the Company, such Manager or such controlling person shall
promptly notify the Company and CF Securities, and the Company shall assume the
defense thereof, including the
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employment of counsel and payment of all fees and expenses, provided that in
the event the Company fails to so assume such defense, CF Securities may so
assume such defense. Such Manager or any such controlling person shall have
the right to employ separate counsel in any such action, suit or proceeding and
to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Manager or such controlling person
unless (i) the Company or CF Securities, as the case may be, has agreed in
writing to pay such fees and expenses, (ii) the Company and CF Securities
failed to assume the defense and employ counsel, or (iii) the named parties to
any such action, suit or proceeding (including any impleaded parties) include
both such Manager or such controlling person and the Company and such Manager
or such controlling person shall have been advised by its counsel that
representation of such indemnified party and the Company by the same counsel
would be inappropriate under applicable standards of professional conduct
(whether or not such representation by the same counsel has been proposed) due
to actual or potential differing interests between them (in which case neither
the Company nor CF Securities shall have the right to assume the defense of
such action, suit or proceeding on behalf of such Manager or such controlling
person). It is understood, however, that the Company or CF Securities, as the
case may be, shall, in connection with any one such action, suit or proceeding
or separate but substantially similar or related actions, suits or proceedings
in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Managers and controlling persons and the U.S. Underwriters and
controlling persons referred to in Section 8(c) of the U.S. Underwriting
Agreement not having actual or potential differing interests with you or among
themselves, which firm shall be designated in writing by Smith Barney Inc., and
that all such fees and expenses shall be reimbursed as they are incurred.
Neither the Company nor CF Securities shall be liable for any settlement of any
such action, suit or proceeding effected without their written consent, but if
settled with such written consent, or if there be a final judgment for the
plaintiff in any such action, suit or proceeding, the Company agrees to
indemnify and hold harmless any Manager, to the extent provided in paragraph
(a) above, and any such controlling person from and against any loss, claim,
damage, liability or expense by reason of such settlement or judgment.
(d) Each Manager agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the
Registration Statement, and any person who controls the Company within the
meaning of Section 15 of
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the Act or Section 20 of the Exchange Act, to the same extent as the foregoing
indemnity from the Company to each Manager, but only with respect to
information relating to such Manager furnished in writing by or on behalf of
such Manager through you expressly for use in the Registration Statement, the
International Prospectus or any International Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors, any such officer any such
controlling person based on the Registration Statement, the International
Prospectus or any International Prepricing Prospectus, or any amendment or
supplement thereto, and in respect of which indemnity may be sought against any
Manager pursuant to this paragraph (d), such Manager shall have the rights and
duties given to the Company by paragraph (c) above (except that if the Company
shall have assumed the defense thereof such Manager shall not be required to do
so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at such Manager's
expense), and the Company, its directors, any such officer, any such
controlling person shall have the rights and duties given to the Managers by
paragraph (c) above.
(e) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under paragraphs (a) or (d) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party (which for purposes of this paragraph (e)
shall not include CF Securities, the obligations of which with respect to
contribution are set forth in paragraph (b) hereof), in lieu of indemnifying or
paying such indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Managers on
the other hand from the offering of the Shares (including the application of
the proceeds therefrom as described in the Prospectuses), or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Managers on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Managers on the other hand shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by
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the Managers, each as set forth in the table on the cover page of the
International Prospectus. The relative fault of the Company on the one hand
and the Managers on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or by the Managers on the
other hand and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(f) The Company, CF Securities and the Managers agree that it would not
be just and equitable if contribution pursuant to this Section 8 were
determined by a pro rata allocation (even if the Managers were treated as one
entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in paragraph (e)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (e)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, no Manager shall
be required to contribute any amount in excess of the amount by which the total
price of the Shares underwritten by it and distributed to the public exceeds
the amount of any damages that such Manager has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Managers'
obligations to contribute pursuant to this Section 8 are several in proportion
to the respective numbers of Shares set forth opposite their names in Schedule
I hereto (or such numbers of Shares increased as set forth in Section 11
hereof) and not joint.
(g) No indemnifying party shall, without the prior written consent of
each indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
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(h) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company and CF Securities set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Manager or any person
controlling any Manager, the Company, its directors or officers or any person
controlling the Company, CF Securities or any Founder, (ii) acceptance of any
Shares and payment therefor hereunder, and (iii) any termination of this
Agreement, provided that the representations and warranties of CF Securities
set forth in this Agreement shall terminate on the date one year following the
Closing Date. A successor to any Manager or any person controlling any
Manager, or to the Company, its directors or officers, or any person
controlling the Company shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 8.
9. CONDITIONS OF MANAGERS' OBLIGATIONS. The several obligations of
the Managers to purchase the Shares hereunder are subject to the following
conditions:
(a) If, at the time this Agreement is executed and delivered, it
is necessary for the registration statement or a post-effective
amendment thereto to be declared effective before the offering of the
Shares may commence, the registration statement or such post-effective
amendment shall have become effective not later than 10:00 P.M., New
York City time, on the date hereof, or at such later date and time as
shall be consented to in writing by you, and all filings, if any,
required by Rules 424 and 430A under the Act shall have been timely
made; no stop order suspending the effectiveness of the registration
statement shall have been issued and no proceeding for that purpose
shall have been instituted or, to the knowledge of the Company or any
Manager, threatened by the Commission, and any request of the Commission
for additional information (to be included in the Registration Statement
or either Prospectus or otherwise) shall have been complied with to your
satisfaction.
(b) Subsequent to the effective date of this Agreement, there
shall not have occurred (i) any change, or any development that is
reasonably likely to result in a prospective change, in or affecting the
condition (financial or other), business, properties,
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<PAGE> 26
net worth or results of operations of the Company and its subsidiaries,
taken as a whole, not contemplated by the Prospectuses that, in your
opinion, as Lead Managers for the several Managers, would materially
adversely affect the market for the Shares, or (ii) any event or
development relating to or involving the Company or any officer or
director of the Company that makes any statement made in either
Prospectus untrue in any material respect or that, in the opinion of the
Company and its counsel or the Managers and their counsel, requires the
making of any addition to or change in either Prospectus in order to
state a material fact required by the Act or any other law to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
if amending or supplementing such Prospectus to reflect such event or
development would, in your opinion, as Lead Managers for the several
Managers, materially adversely affect the market for the Shares.
(c) You shall have received on the Closing Date an opinion of
Locke Purnell Rain Harrell, counsel for the Company, dated the Closing
Date and addressed to you, as Lead Managers for the several Managers, to
the effect that:
(i) The Company is a corporation duly incorporated and
validly existing in good standing under the laws of the State of
Delaware, with full corporate power and authority to own, lease
and operate its properties and to conduct its business as
described in the Registration Statement and the Prospectuses and
is duly qualified and in good standing in all other jurisdictions
in which the nature of the business transacted or property owned
or leased by it makes such qualification necessary, except where
the failure so to qualify or be in good standing would not have a
Material Adverse Effect;
(ii) The authorized capital stock of the Company is as
set forth under the caption "Capitalization" in the Prospectuses
and the authorized capital stock of the Company conforms in all
material respects as to legal matters to the description thereof
contained in the Prospectuses under the caption "Description of
Capital Stock";
(iii) All the shares of capital stock of the Company
outstanding prior to the issuance of the Underwritten Shares have
been duly authorized and
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validly issued and are fully paid and nonassessable;
(iv) The Underwritten Shares (A) have been duly
authorized and, (B) when issued and delivered to the Managers and
the U.S. Underwriters against payment therefor in accordance with
the terms of this Agreement and the U.S. Underwriting Agreement,
(1) will be validly issued, fully paid and nonassessable and (2)
will be free of any preemptive rights or, to the best knowledge
of such counsel, similar rights that entitle or will entitle any
person to acquire any Shares upon the issuance thereof by the
Company;
(v) The form of certificates for the Shares conforms to
the requirements of the Delaware General Corporation Law;
(vi) The Registration Statement and all post-effective
amendments, if any, have become effective under the Act and, to
the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and
no proceedings therefor are pending before or contemplated by the
Commission; and any required filing of either Prospectus pursuant
to Rule 424(b) or Rule 434 has been made in accordance with Rule
424(b) and Rule 430A under the Act;
(vii) The Company has the corporate power and authority
to enter into each of this Agreement and the U.S. Underwriting
Agreement and to issue, sell and deliver the Underwritten Shares
to the Managers and the Managers as provided herein and therein,
and each of this Agreement and the U.S. Underwriting Agreement
has been duly authorized, executed and delivered by the Company
and is a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms
(provided that, for purposes of such opinion, such counsel may
assume that the applicable law governing this Agreement and the
U.S. Underwriting Agreement is the same as applicable Texas law),
except that (A) enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally,
(B) the remedy of specific performance and other forms of
equitable relief may be subject to certain equitable defenses and
to the discretion of the court before
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which the proceedings may be brought and (C) rights to indemnity
and contribution thereunder may be limited by federal or state
securities laws or the public policy underlying such laws;
(viii) The Company and each of the Roll-Up Entities has
the necessary power and authority to enter into each of the
Transaction Documents, and each of the Transaction Documents have
been duly authorized, executed and delivered by the Company and,
as applicable, the Roll-Up Entities, and each of the Transaction
Documents is a legally valid and binding agreement of the Company
and, as applicable, the Roll-Up Entities, enforceable against the
Company and, as applicable, the Roll-Up Entities, in accordance
with its terms (provided that, for purposes of such opinion, such
counsel may assume that the applicable law governing each of the
several Transaction Documents is the same as applicable Texas
law), except that (A) enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally and (B) the remedy of specific performance and
other forms of equitable relief may be subject to certain
equitable defenses and to the discretion of the court before
which the proceedings may be brought;
(ix) To the best knowledge of such counsel, neither the
issuance, sale or delivery of the Underwritten Shares, nor the
execution, delivery or performance of this Agreement, the U.S.
Underwriting Agreement or the Transaction Documents, or
compliance by the Company or any of the Roll-Up Entities with all
provisions of this Agreement, the U.S. Underwriting Agreement or
the Transaction Documents, nor consummation by the Company or any
of the Roll-Up Entities of the transactions contemplated hereby
or thereby conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the certificate of
incorporation or by-laws or other organizational documents of the
Company or any of the Roll-Up Entities or any agreement,
indenture, lease or other instrument identified on a certificate,
substantially in the form of Annex A hereto, executed by an
executive officer of the Company, or will result in the creation
or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its Subsidiaries
under any such agreement, indenture, lease or other instrument,
nor will any
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such action result in any violation of any existing law,
regulation, ruling (assuming compliance with all applicable state
securities and Blue Sky laws), judgment, injunction, order or
decree known to such counsel, and applicable to the Company, any
of its Subsidiaries or any of the Roll-Up Entities or any of
their respective properties, in each case except for such
conflicts, breaches, defaults, violation, or encumbrances that
would not singly or in the aggregate have a Material Adverse
Effect or materially adversely affect the ability of the Company
or any of the Roll-Up Entities to fulfill its obligations
hereunder or thereunder;
(x) No consent, approval, authorization or order of, or
registration or filing with, any court, regulatory body,
administrative agency or other governmental agency, body or
official is required to be obtained or made by the Company or the
Roll-Up Entities for the valid issuance and sale of the Shares
pursuant to this Agreement or, except where the failure to obtain
any such consent, approval, authorization, order or registration
or to make such filing would not, singly or in the aggregate,
have a Material Adverse Effect, the consummation of the
Formation, except in any case such as have been obtained under
the Act and the Exchange Act or such as may be required under
state securities or Blue Sky laws or real estate syndication laws
governing the purchase and distribution of the Shares;
(xi) The Registration Statement and the International
Prospectus (except for the financial statements, schedules and
notes thereto and other financial and statistical data included
therein, as to which such counsel need not express an opinion)
comply as to form in all material respects with the requirements
of the Act;
(xii) To the best knowledge of such counsel (A) other
than as described or contemplated in either Prospectus, there are
no legal or governmental proceedings pending or threatened
against the Company that are material to the Company and its
subsidiaries, taken as a whole, or to which the Company, or any
of its properties, is subject that are material to the Company
and its subsidiaries, taken as a whole, that are required to be
described in the Registration Statement or either Prospectus and
(B) there are no agreements, contracts, indentures, leases or
other instruments
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relating to the Company, of a character that are required to be
described in the Registration Statement or the Prospectuses or to
be filed as an exhibit to the Registration Statement that are not
described or filed as required, as the case may be;
(xiii) The statements under the headings "The Formation
and the Financing Plan", "Description of Indebtedness",
"Description of Capital Stock", "Shares Eligible for Future Sale"
and "Certain U.S. Tax Consequences to Non-U.S. Stockholders" in
the Prospectuses and in the Registration Statement in Items 14
and 15, insofar as such statements constitute a summary of legal
matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal
matters, documents and proceedings and fairly summarize the
matters referred to therein;
(xiv) The Company is not now and, after sale of the
Underwritten Shares and application of the net proceeds from such
sale as described in the Prospectuses under the caption "Use of
Proceeds", will not be an "investment company" required to be
registered under Section 8 of the Investment Company Act of 1940,
as amended (the "Investment Company Act");
(xv) Each of the Subsidiaries of the Company (other than
Wyndham Hotels & Resorts (Aruba) N.V., an Aruban company, with
respect to which such counsel need not express an opinion) has
been duly incorporated and is validly existing in good standing
in the jurisdiction of its incorporation, with full corporate
power and authority to own, lease, and operate its properties and
to conduct its business as described in the Registration
Statement and the Prospectuses (and any amendment or supplement
thereto); and all the outstanding shares of capital stock of each
of the Subsidiaries of the Company (other than Wyndham Hotels &
Resorts (Aruba) N.V., an Aruban company, with respect to which
such counsel need not express an opinion) have been duly
authorized and validly issued, are fully paid and nonassessable,
and, except as otherwise disclosed in the Prospectuses, all of
the outstanding shares of capital stock of each of the
Subsidiaries of the Company are owned by the Company directly, or
indirectly through one of the other Subsidiaries,
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<PAGE> 31
free and clear of any lien, adverse claim, security interest,
equity or other encumbrance;
(xvi) To the best knowledge of such counsel, neither the
Company nor any of its Subsidiaries (other than Wyndham Hotels &
Resorts (Aruba) N.V., an Aruban company, with respect to which
such counsel need not express an opinion) is (A) in violation of
its certificate of incorporation or by-laws, or other
organizational documents or (B) in default in the performance of
any material obligation, agreement or condition contained in any
bond, debenture, note or other evidence of indebtedness
identified on a certificate, substantially in the form of Annex A
hereto, executed by an executive officer of the Company, except
as may be disclosed in the Prospectuses or where any such default
or defaults in the aggregate would not have a Material Adverse
Effect;
(xvii) To the best knowledge of such counsel, (A) neither
the Company nor any of its Subsidiaries is in material violation
of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of its Subsidiaries
or of any decree of any court or governmental agency or body
having jurisdiction over the Company or any of its Subsidiaries,
except for such violation or violations which in the aggregate
would not have a Material Adverse Effect, and (B) the Company and
each of its Subsidiaries has such Permits as are necessary to own
its respective properties and to conduct its business in the
manner described in the Prospectuses, except where the failure to
have any such Permit would not have a Material Adverse Effect;
(xviii) To the best knowledge of such counsel, there is
no current, pending or threatened action, suit or proceeding
before any court or governmental agency, authority or body or any
arbitrator involving the Company or any of its respective
properties of a character required to be described in the
Registration Statement or either Prospectus (or any amendment or
supplement thereto) that is not adequately so described;
(xix) To the best knowledge of such counsel, except as
described in the Registration Statement and the Prospectuses,
there are no outstanding subscriptions, rights, warrants,
options, calls,
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convertible securities, commitments of sale or liens related to
or entitling any person to purchase or otherwise to acquire any
shares of capital stock of the Company or any security
convertible into or exchangeable or exercisable for capital stock
of the Company; to the best knowledge of such counsel, the
Shares, when issued pursuant to the terms of this Agreement, will
not be subject to any contractual preemptive right; and
(xx) To the best knowledge of such counsel, except as
described in the Registration Statement and the Prospectuses,
there is no holder of any security of the Company or any other
person who has the right, contractual or otherwise, to cause the
Company to sell or otherwise issue to them, or to permit them to
underwrite the sale of, the Shares or the right to have any
Common Stock or other securities of the Company included in the
registration statement or the right, as a result of the filing of
the registration statement, to require registration under the Act
of any shares of Common Stock or other securities of the Company.
In addition, such counsel shall state that although such counsel
has not undertaken, except as otherwise indicated in their opinion, to
determine independently, and does not assume any responsibility for, the
accuracy, completeness or fairness of the statements in the Registration
Statement and the Prospectuses, such counsel has participated in the
preparation of the Registration Statement and Prospectuses including
general review and discussion of the contents thereof but has made no
independent check or verification thereof (relying as to materiality to
a large extent upon the statements of officers and other representatives
of the Company), and such counsel has no reason to believe that the
Registration Statement and the prospectus included therein, at the time
such Registration Statement or any post-effective amendment became
effective, 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 therein not misleading, or that the Prospectuses as
of their respective dates or as of the Closing Date, contained or
contain any untrue statement of a material fact or omitted or omit to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; it being understood that
such
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counsel need express no statement with respect to the financial
statements, schedules and other financial and statistical data included
in the Registration Statement or the Prospectuses.
In rendering its opinion as aforesaid, such counsel may, as to
factual matters, rely upon written certificates or statements of
officers of the Company and its subsidiaries, each dated the Closing
Date, and may state that such counsel expresses no opinion as to the law
of any jurisdiction other than the United States, the State of Texas, or
the corporation law of the State of Delaware. Notwithstanding the
foregoing, with respect to matters of Jamaican law, the Company shall
deliver to you, as Lead Managers for the several Managers, an opinion of
Jamaican counsel retained by the Company, provided that (1) such local
counsel is acceptable to the Lead Managers, (2) such opinion is in form
and substance satisfactory to them and their counsel and (3) Locke
Purnell Rain Harrell shall state in their opinion that they believe that
the Managers are justified in relying on such opinion of Jamaican
counsel.
(d) You shall have received on the Closing Date an opinion of
Davis Polk & Wardwell, counsel for the Managers, dated the Closing Date,
with respect to the matters referred to in clauses (iv)(A), (iv)(B)(1),
(vi), (xii), (xiii) (but only with respect to the statements in the
Prospectuses under the headings "Description of Indebtedness - Notes",
"Description of Capital Stock" and "Underwriting") and the paragraph
immediately following clause (xvi) of subsection (c) above and such
other related matters as you may request.
(e) You shall have received letters addressed to you, as Lead
Managers for the several Managers, and dated the date hereof and the
Closing Date from Coopers & Lybrand, independent certified public
accountants, substantially in the forms heretofore approved by you.
(f)(i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for
that purpose shall have been taken or, to the knowledge of the Company,
shall be contemplated by the Commission at or prior to the Closing Date;
(ii) there shall not have been any material change in the capital stock
of the Company nor any material increase in the short-term or long-term
debt of the Company (other than in the ordinary course of business) from
that set forth or contemplated in the Registration Statement or the
Prospectuses; (iii) there
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shall not have been, since the respective dates as of which information
is given in the Registration Statement and the Prospectuses, except as
may otherwise be stated in the Registration Statement and Prospectuses
(or any amendment or supplement thereto), any material adverse change,
or any development reasonably likely to result in a prospective material
adverse change, in the condition (financial or other), business,
properties, net worth or results of operations of the Company and its
subsidiaries, taken as a whole; and (iv) all the representations and
warranties of the Company contained in this Agreement and the U.S.
Underwriting Agreement shall be true and correct on and as of the date
hereof and on and as of the Closing Date as if made on and as of the
Closing Date, and you shall have received a certificate, dated the
Closing Date and signed by the chief executive officer and the chief
financial officer of the Company (or such other officers as are
acceptable to you), to the effect set forth in this Section 9(f) and in
Sections 9(g) and 9(i) hereof.
(g) The Company shall not have failed at or prior to the Closing
Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder
at or prior to the Closing Date.
(h) The Common Stock shall have been listed or approved for
listing, subject to notice of issuance, on the New York Stock Exchange.
(i) The consummation of the Formation and receipt by the Company
of the proceeds of the Financing Plan (including, without limitation,
the Concurrent Debt Offering) shall have occurred prior to or shall
occur simultaneously with the closing hereunder.
(j) The closing under the U.S. Underwriting Agreement shall have
occurred concurrently with the closing hereunder.
(k) The Company shall have furnished or caused to be furnished
to you such further certificates and documents as you shall have
requested.
All such opinions, certificates, letters and other documents will
be in compliance with the provisions hereof only if they are satisfactory in
form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company
and delivered to you, as Lead Managers for
34
<PAGE> 35
the Managers, or to counsel for the Managers, shall be deemed a representation
and warranty by the Company to each Manager as to the statements made therein.
10. EXPENSES. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction, and
filing with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectuses,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectuses, and all amendments or supplements to
any of them as may be reasonably requested for use in connection with the
offering and sale of the Shares; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Shares, including
any stamp taxes in connection with the original issuance and sale of the
Shares; (iv) the reproduction and delivery of this Agreement, the preliminary
and supplemental Blue Sky Memoranda and all other agreements or documents
reproduced and delivered in connection with the offering of the Shares; (v) the
registration of the Common Stock under the Exchange Act and the listing of the
Common Stock on the New York Stock Exchange; (vi) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws or real estate syndication laws of the several states as provided in
Section 5(g) hereof (including the reasonable fees, expenses and disbursements
of counsel for the Managers relating to the preparation, reproduction and
delivery of the preliminary and supplemental Blue Sky Memoranda and such
registration and qualification); (vii) the filing fees and the fees and
expenses of counsel for the Managers in connection with any filings required to
be made with the National Association of Securities Dealers, Inc.; (viii) the
transportation and other expenses incurred by or on behalf of Company
representatives in connection with presentations to prospective purchasers of
the Shares; and (ix) the fees and expenses of the Company's accountants and the
fees and expenses of counsel (including local and special counsel) for the
Company.
11. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the registration statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the
35
<PAGE> 36
registration statement or such post-effective amendment has been released by
the Commission. Until such time as this Agreement shall have become effective,
it may be terminated by the Company, by notifying you, or by you, as Lead
Managers for the several Managers, by notifying the Company.
If any one or more of the Managers shall fail or refuse to
purchase Shares that it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares that such defaulting Manager
or Managers are obligated but fail or refuse to purchase is not more than
one-tenth of the aggregate number of Shares that the Managers are obligated to
purchase on the Closing Date, each non-defaulting Manager shall be obligated,
severally, in the proportion that the number of Shares set forth opposite its
name in Schedule I hereto bears to the aggregate number of Shares set forth
opposite the names of all non-defaulting Managers or in such other proportion
as you may specify in accordance with Section 20 of the Master Agreement Among
Underwriters of Smith Barney Inc., to purchase the Shares that such defaulting
Manager or Managers are obligated, but fail or refuse, to purchase. If any one
or more of the Managers shall fail or refuse to purchase Shares that it or they
are obligated to purchase on the Closing Date and the aggregate number of
Shares with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares that the Managers are obligated to purchase on the
Closing Date and arrangements satisfactory to you and the Company for the
purchase of such Shares by one or more non-defaulting Managers or other party
or parties approved by you and the Company are not made within 36 hours after
such default, this Agreement will terminate without liability on the part of
any non-defaulting Manager or the Company. In any such case that does not
result in termination of this Agreement, either you or the Company shall have
the right to postpone the Closing Date, but in no event for longer than seven
days, in order that the required changes, if any, in the Registration Statement
and the Prospectuses or any other documents or arrangements may be effected.
Any action taken under this paragraph shall not relieve any defaulting Manager
from liability in respect of any such default of any such Manager under this
Agreement. The term "Manager" as used in this Agreement includes, for all
purposes of this Agreement, any party not listed in Schedule I hereto who, with
your approval and the approval of the Company, purchases Shares that a
defaulting Manager is obligated, but fails or refuses, to purchase.
Any notice under this Section 11 may be given by telegram,
telecopy or telephone but shall be subsequently confirmed by letter.
36
<PAGE> 37
12. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Manager to the Company, by notice to the Company if, prior to the Closing Date,
(i) trading in securities generally on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market shall have been suspended
or materially limited, (ii) a general moratorium on commercial banking
activities in the State of New York or the State of Texas shall have been
declared by either federal or state authorities, or (iii) there shall have
occurred any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which is such as to make it, in your judgment,
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectuses or to enforce contracts for the resale of the shares by the
U.S. Underwriters. Notice of such termination may be given to the Company by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.
13. INFORMATION FURNISHED BY THE MANAGERS. The statements set forth
in the last paragraph on the cover page, the stabilization legend on the inside
front cover page, and the statements in the fourth, eighth, ninth, tenth,
eleventh, twelfth (insofar as such statements relate to the Managers) and
fourteenth paragraphs under the caption "Underwriting" in any International
Prepricing Prospectus and in the International Prospectus constitute the only
information furnished by or on behalf of the Managers through you as such
information is referred to in Sections 6(b) and 8 hereof.
14. MISCELLANEOUS. Except as otherwise provided in Sections 5, 11
and 12 hereof, notice given pursuant to any provision of this Agreement shall
be in writing and shall be delivered (i) if to the Company, at the office of
the Company at 2001 Bryan Street, Suite 2300, Dallas, Texas 75201, Attention:
James D. Carreker, Chief Executive Officer; (ii) if to CF Securities at the
office of CF Securities at 2001 Ross Avenue, Suite 3200, Dallas, Texas 75201,
Attention: Susan T. Groenteman or (iii) if to you, as Lead Managers for the
several Managers, care of Smith Barney Inc., 388 Greenwich Street, New York,
New York 10013, Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
several Managers, the Company, its directors and officers, and the other
controlling persons referred to in Section 8 hereof and their respective
successors and assigns, to the extent provided herein, and no other person
shall acquire or have any right under or by virtue of this Agreement. Neither
the term "successor" nor the term
37
<PAGE> 38
"successors and assigns" as used in this Agreement shall include a purchaser
from any Manager of any of the Shares in his status as such purchaser.
15. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed solely within the State of New
York.
This Agreement may be signed in various counterparts that
together constitute one and the same instrument. If signed in counterparts,
this Agreement shall not become effective unless at least one counterpart
hereof shall have been executed and delivered on behalf of each party hereto.
16. AGREEMENT OF WYNDHAM HOTEL COMPANY LTD. If this Agreement shall
terminate or shall be terminated after execution pursuant to any provisions
hereof (otherwise than pursuant to the second paragraph of Section 11 hereof or
by notice given by you terminating this Agreement pursuant to Section 11 or
Section 12 hereof) or if this Agreement shall be terminated by the Managers
because of any failure or refusal on the part of the Company to comply with the
terms or fulfill any of the conditions of this Agreement, Wyndham Hotel Company
Ltd. agrees to reimburse the Lead Managers for all reasonable out-of-pocket
expenses (including reasonable fees and expenses of counsel for the Managers)
incurred by you in connection with effecting the transactions contemplated in
this Agreement.
38
<PAGE> 39
Please confirm that the foregoing correctly sets forth the
agreement among the Company, CF Securities, Wyndham Hotel Company Ltd. and the
several Managers.
Very truly yours,
WYNDHAM HOTEL CORPORATION
By _____________________
Chief Executive
Officer
CF SECURITIES, L.P.
By: [ ],
its general partner
By ______________________
Name:
Title:
WYNDHAM HOTEL COMPANY LTD.
By: [ ],
its general partner
By ______________________
Name:
Title:
<PAGE> 40
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Managers named in Schedule I
hereto.
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MONTGOMERY SECURITIES
BANKERS TRUST INTERNATIONAL PLC
As Lead Managers for the Several Managers
By SMITH BARNEY INC.
By ______________________
Managing Director
<PAGE> 41
SCHEDULE I
WYNDHAM HOTEL CORPORATION
<TABLE>
<CAPTION>
Number of
Manager Shares
------- ------
<S> <C>
Smith Barney Inc. . . . . .
Donaldson, Lufkin & Jenrette
Securities Corporation . .
Montgomery Securities . . . . . . . . . . . . . . . . . . . . .
Bankers Trust International PLC . . . . . . . . . . . . . . . . .
-------
Total 670,000
=======
</TABLE>
<PAGE> 42
SCHEDULE II
Roll-Up Entities
Brookfield Lakes Partners Ltd., a Texas limited partnership
Commerce Hotel Partners Ltd., a Texas limited partnership
Garden Hotel Associates LP, a Texas limited partnership
Garden Hotel Associates Two L.P., a Texas limited partnership
Garden Hotel Partners LP, a Texas limited partnership
Garden Hotel Partners Two L.P., a Texas limited partnership
Garden Hotel Corporation No. 1, a Texas corporation
Garden Hotel Corporation No. 2, a Texas corporation
Garden Hotel Corporation No. 3, Inc., a Texas corporation
Indianapolis Partners Ltd, a Texas limited partnership
Rose Hall Associates Limited Partnership, a Texas limited
partnership
Schaumburg Hotel Associates, Ltd, a Texas limited partnership
Schaumburg Hotel Partners Limited Partnership, a Texas limited
partnership
WH Interest, Inc., a Texas corporation
WHI Limited Partnership, a Texas limited partnership
Wyndham Charlotte Garden Hotel Limited Partnership,
a Texas limited partnership
Wyndham Hotel Company Ltd., a Texas limited partnership
WHC Caribbean Limited, a Jamaican company
Wyndham Hotel Management Corporation, a Texas corporation
<PAGE> 43
Annex A
CERTIFICATE AS TO THE MATERIAL CONTRACTS
I, [name], [title] of Wyndham Hotel Corporation (the "Company")
hereby certify on behalf of the Company to Locke Purnell Rain Harrell (A
Professional Corporation), each of the U.S. Underwriters named in the U.S.
Underwriting Agreement dated as of __________, 1996 among the Company, CF
Securities L.P., Wyndham Hotel Company Ltd. and such U.S. Underwriters (the
"U.S. Underwriting Agreement"), each of the Managers named in the International
Underwriting Agreement dated as of _____________, 1996 among the Company, CF
Securities L.P., Wyndham Hotel Company Ltd. and such Managers (the
"International Underwriting Agreement"), and each of the Underwriters named in
the Debt Underwriting Agreement dated as of ___________, 1996 among the
Company, CF Securities L.P., Wyndham Hotel Company Ltd. and such Underwriters
(the "Debt Underwriting Agreement"), that the following constitute the
agreements, indentures, leases or other instruments to which the Company, any
of its Subsidiaries (as defined in the U.S. Underwriting Agreement, the
International Underwriting Agreement or the Debt Underwriting Agreement) or any
of the Roll-Up Entities (as defined in the U.S. Underwriting Agreement, the
International Underwriting Agreement, or the Debt Underwriting Agreement) is a
party or by which the Company, any of its Subsidiaries or any of the Roll-Up
Entities or any of their respective properties is bound that are material to
the business or operations of the Company and its subsidiaries, taken as a
whole:
[material contracts]
<PAGE> 1
EXHIBIT 4.1
<TABLE>
<S> <C>
COMMON COMMON
PAR VALUE $.01 PAR VALUE $.01
NUMBER THIS CERTIFICATE IS TRANSFERABLE IN CUSIP 983100 10 8 SHARES
W DALLAS, TX AND NEW YORK, NY SEE REVERSE FOR CERTAIN DEFINITIONS
WYNDHAM HOTEL CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS
CERTIFIES
THAT
IS THE
OWNER OF
[LOGO] FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK OF [SEAL]
Wyndham Hotel Corporation transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney
upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued under and shall
be subject to all of the provisions of the Certificate of Incorporation and Bylaws of the Corporation and any amendments thereto,
copies of which are on file with the Corporation and the Transfer Agent, to all of which the holder, by acceptance hereof, assents.
This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated:
/s/ JAMES D. CARREKER COUNTERSIGNED AND REGISTERED:
PRESIDENT CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT
AND REGISTRAR
/s/ CARLA S. MORELAND BY
SECRETARY AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 2
[LOGO]
WYNDHAM HOTEL CORPORATION
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF OF
THE CORPORATION, AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH
PREFERENCES AND/OR RIGHTS. SUCH REQUEST SHOULD BE MADE TO THE CORPORATION OR TO
THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ________ Custodian _________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act _______________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ____________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
| |
|_____________________________________|_________________________________________
________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated, ______________________
NOTICE:
THE SIGNATURE(S) TO THIS X_______________________________________
ASSIGNMENT MUST CORRE- (SIGNATURE)
SPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF - -)
THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTER-
ATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER. X_______________________________________
(SIGNATURE)
---------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKHOLDERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
---------------------------------------
SIGNATURE(S) GUARANTEED BY:
---------------------------------------
<PAGE> 1
EXHIBIT 5.1
[LOCKE PURNELL RAIN HARRELL LETTERHEAD]
(214) 740-8675
May 14, 1996
Wyndham Hotel Corporation
2001 Bryan Street, Suite 2300
Dallas, Texas 75201
Re: Registration Statement on Form S-1
(No. 333-2214)
Ladies and Gentlemen:
We have acted as counsel for Wyndham Hotel Corporation, a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of an aggregate of 3,852,500
shares of the Company's Common Stock, $.01 par value per share (the
"Securities"). We have examined such documents and questions of law as we have
deemed necessary or advisable for purposes of this opinion.
Based upon the foregoing, we are of the opinion that the Securities,
when issued and delivered against payment of the purchase price therefor as
described in the above referenced Registration Statement (as amended, the
"Registration Statement"), will be legally issued, fully paid and
nonassessable.
The opinion expressed above is limited in all respects to the laws of
the State of Texas, the General Corporation Law of the State of Delaware and
the federal laws of the United States of America, each as presently in effect.
This letter is furnished by us as counsel to you in connection with the
above referenced public offering and is solely for your benefit and not for the
benefit of any other person. This letter may not be relied upon by you for any
other purpose or relied upon or furnished to any other person without our prior
written consent.
<PAGE> 2
Wyndham Hotel Corporation
May 14, 1996
Page 2
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the prospectus
contained therein under the caption "Legal Matters." In giving this consent, we
do not thereby admit that we come within the category of persons whose consent
is required under Section 7 of the Act or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Respectfully submitted,
LOCKE PURNELL RAIN HARRELL
(A Professional Corporation)
By: /s/ JOHN B. MCKNIGHT
-----------------------------------
John B. Mcknight
<PAGE> 1
EXHIBIT 10.5(a)
Wyndham Form
ASSET MANAGEMENT AGREEMENT
, 19
between
WYNDHAM HOTEL CORPORATION
and
______________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE 1
ENGAGEMENT OF ASSET MANAGER
Section 1.1 General Engagement . . . . . . . . . . . . . . 1
ARTICLE 2
ASSET MANAGER DUTIES
Section 2.1 Business Plans . . . . . . . . . . . . . . . . 1
Section 2.2 Asset and Entity Services . . . . . . . . . . 2
Section 2.3 Disposition Services . . . . . . . . . . . . . 4
Section 2.4 Legal Services . . . . . . . . . . . . . . . . 4
Section 2.5 Retention of Third Parties . . . . . . . . . . 4
Section 2.6 Books, Records and Reports . . . . . . . . . . 5
Section 2.7 Payment of Costs and Expenses . . . . . . . . 5
Section 2.8 Insufficiency of Asset Revenues . . . . . . . 6
ARTICLE 3
OWNER'S DUTIES
Section 3.1 Information and Cooperation . . . . . . . . . 6
Section 3.2 Approval Policy . . . . . . . . . . . . . . . 6
Section 3.3 Funding . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4
COMPENSATION
Section 4.1 Asset Management Fee . . . . . . . . . . . . . 6
Section 4.2 Reimbursable Expenses . . . . . . . . . . . . 7
Section 4.3 Additional Services . . . . . . . . . . . . . 7
Section 4.4 Emergency Expenditures . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
ARTICLE 5
LIABILITY INSURANCE AND RISK ALLOCATION
Section 5.1 Fidelity Bond . . . . . . . . . . . . . . . . 7
Section 5.2 Liability Insurance . . . . . . . . . . . . . 7
Section 5.3 Evidence of Insurance . . . . . . . . . . . . 8
Section 5.4 Mutual Waiver of Subrogation . . . . . . . . . 8
Section 5.5 Indemnification . . . . . . . . . . . . . . . 8
ARTICLE 6
TERM
Section 6.1 Term . . . . . . . . . . . . . . . . . . . . . 9
Section 6.2 Duties on Termination or Expiration . . . . . 9
ARTICLE 7
MISCELLANEOUS
Section 7.1 Assignment; Change of Ownership Interest . . . 10
Section 7.2 Notices . . . . . . . . . . . . . . . . . . . 10
Section 7.3 Number: Gender; Captions; and References . . . 11
Section 7.4 Severability . . . . . . . . . . . . . . . . . 11
Section 7.5 No Waiver of Default . . . . . . . . . . . . . 11
Section 7.6 Entire Agreement . . . . . . . . . . . . . . . 11
Section 7.7 Competition . . . . . . . . . . . . . . . . . 12
Section 7.8 Governing Law . . . . . . . . . . . . . . . . 12
Section 7.9 Attorneys' Fees . . . . . . . . . . . . . . . 12
Section 7.10 Relationship of the Parties . . . . . . . . . 12
Section 7.11 Representations and Warranties . . . . . . . . 12
Section 7.12 Confidentiality . . . . . . . . . . . . . . . 13
Section 7.13 Liability of Owner . . . . . . . . . . . . . . 13
Section 7.14 Liability of Asset Manager . . . . . . . . . . 13
Section 7.15 Counterparts . . . . . . . . . . . . . . . . . 13
</TABLE>
ii
<PAGE> 4
LIST OF DEFINED TERMS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Asset Management Fee . . . . . . . . . . . . . . . . . . . . . 6
Asset Manager . . . . . . . . . . . . . . . . . . . . . . . . . 1
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . 2
Disposition Fee . . . . . . . . . . . . . . . . . . . . . . . . 8
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 1
Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Hotel Management Agreement . . . . . . . . . . . . . . . . . . 2
Hotel Manager . . . . . . . . . . . . . . . . . . . . . . . . . 2
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . 10
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . 10
Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Property Managers . . . . . . . . . . . . . . . . . . . . . . . 2
Refinancing Fee . . . . . . . . . . . . . . . . . . . . . . . . 8
Tenn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
iii
<PAGE> 5
ASSET MANAGEMENT AGREEMENT
THIS ASSET MANAGEMENT AGREEMENT ("the Agreement"), is entered into by,
a______________________ (the "Owner"), and WYNDHAM HOTEL CORPORATION, a
Delaware corporation (the "Asset Manager"), effective as of _________________,
19_ (the "Effective Date").
RECITAL
Wyndham Hotel Company LTD, a Texas limited partnership, has been providing
certain asset and entity management services for Owner. Pursuant to that
certain Formation Agreement dated as of March 10, 1996, the assets and
operations of Wyndham Hotel Company LTD will be "rolled-up", together with
other assets, into Asset Manager or its subsidiaries. Owner and Asset Manager
desire to evidence and formalize their agreements with respect to entity and
asset management services.
ARTICLE 1
ENGAGEMENT OF ASSET MANAGER
Section 1.1 GENERAL ENGAGEMENT. Owner engages Asset Manager as an
independent contractor to provide certain services described in this Agreement
relating to (i) the administration of certain aspects of Owner's legal entity
and the legal entities (whether partnerships, corporations or other business
associations) that comprise Owner (the "ENTITIES" and each an "ENTITY"); and
(ii) the acquisition, financing, administration, supervision and disposition of
the assets described in Schedule I (the "ASSETS" and each an "ASSET").
Additional Assets may be brought within the scope of this Agreement by a
supplement to Schedule I signed by the parties. Owner and Asset Manager may
from time to time agree to expand or reduce the scope of services to be
provided hereunder and either party, upon request of the other shall execute a
schedule that properly evidences the scope of services then being provided
hereunder. The Asset Manager shall in good faith provide the services set forth
in this Agreement in accordance with normal and prudent practices in the hotel
real estate industry and shall have the authority to take all actions necessary
or appropriate to fulfill its obligations.
ARTICLE 2
ASSET MANAGER DUTIES
Section 2.1 BUSINESS PLANS.
(1) Initial Business Plan. Pursuant to the terms of a separate
agreement (the "HOTEL MANAGEMENT AGREEMENT"), Owner has engaged Wyndham
Management Corporation, a wholly owned subsidiary of Asset Manager (the "HOTEL
MANAGER") to operate and manage the Assets. The Hotel Management Agreement
provides for Owner and Hotel Manger to agree on an annual
1
<PAGE> 6
business and capital plan for the operation, management and maintenance of the
Assets. In the event that the initial business plans have not yet been agreed
upon by Owner and Hotel Manager, Asset Manager shall cooperate with Hotel
Manager to provide all services ordinarily and customarily provided by asset
managers to administer, preserve, protect and maintain the Assets and Entities
until the initial business plan is prepared and approved.
(2) REVISIONS TO BUSINESS Plans. Asset Manager shall cooperate
with Hotel Manager and submit proposed revisions to the Business Plan from time
to time when necessary because of changes in circumstances relating to the
ownership, administration, financing, supervision and disposition of the Assets
or Entities. Additionally, Asset Manager shall cooperate with Owner and Hotel
Manger in the preparation a revised business plan for the following year, and
Owner and Asset Manager shall cooperate so as to approve the revised business
plan by April 30 of the operating year to which it relates. If owner does not
object to the business plan by April 30, the Business Plan is deemed to be
approved, and after approval the revised plan shall be a "Business Plan"
hereunder.
(3) IMPLEMENTATION. Following Owner's approval of any Business
Plan (or revision thereto), Asset Manager shall be authorized and empowered to
(a) implement it in accordance with its terms, (b) incur the obligations
therein contemplated, and (c) enter into and execute as Owner's agent such
agreements and documents as Asset Manager deems necessary or advisable in
connection therewith.
Section 2.2 ASSET AND ENTITY SERVICES. The Asset Manager will
provide the following services with regard to the Assets and Entities:
(1) ACCOUNTING Services. Coordinate with Hotel Manager to (i) perform
all normal and customary accounting functions for Owner's legal
entity and for all entities that comprise Owner's legal entity and
maintain all necessary books and records in connection therewith;
and (ii) monitor the actual monthly income and expenses of the
Assets and Entities, collect revenues and pay operating expenses,
compare actual results to the relevant operating budgets, and
report to Owner.
(2) RISK MANAGEMENT SERVICES. Assist Owner in review of the insurable
risks of each Asset and the determination of levels of insurance
coverage; develop, administer and implement a risk management
program for the Assets; procure insurance coverage in accordance
with Owner's instructions; and subject to Owner's guidelines and
approval, oversee the investigation and resolution of all casualty
and liability claims brought by or against the Assets or Entities.
(3) TAX SERVICES. Prepare all state and federal income tax returns for
Owner and,, to the extent requested by Owner, for those
constituent ownership entities that comprise Owner; review
existing assessed valuations of Assets for ad valorem tax purposes
and implement appropriate plans to reduce assessed valuations,
where appropriate, coordinate with Hotel Manger all sales tax
filings and state unemployment tax filings; and coordinate with
Owner and Hotel Manger and oversee any challenges, disputes and
audits of any income, sales or unemployment taxes.
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(4) CONSTRUCTION MANAGEMENT SERVICES. Asset Manager shall supervise
the performance of all renovation, improvement, repair, and other
construction work with regard to the Assets and shall as Owner's
agent, engage such architects, engineers, contractors, managers,
and other parties as may be necessary to accomplish the same.
(5) REPAIR, MAINTENANCE, AND ALTERATION REVIEW. Inspection of the
Assets and, in accordance with the Business Plan, implementation
of any alterations, construction, redemption, renovation, or
repairs that are necessary or desirable to preserve, maintain, or
enhance the value of the Assets.
(6) REGULATORY COMPLIANCE Review. Assist Owner (if requested) in (a)
reviewing Assets to assure compliance with applicable governmental
regulations (including environmental regulations and the Americans
WITH Disabilities Act); (b) subject to Owner's budgetary
constraints, implementing a program to bring any non- complying
Assets into compliance with applicable regulations; and (c)
implementing a program to monitor continuing compliance with
governmental regulations.
(7) FINANCING SERVICES. From time to time, in accordance with the
Business Plan, Asset Manager shall act as Owner's agent in
financing or refinancing indebtedness with respect to the Assets.
Asset Manager shall:
(a) monitor existing financing;
(b) negotiate and finalize existing financing renewals as
required;
(c) monitor and negotiate any equity partner requirements on
behalf of Owner;
(d) negotiate any required refinancing of Assets; and
(e) negotiate any required restructuring/workout of existing
financing (debt or equity).
Although Asset Manager shall make recommendations to Owner concerning
terms and conditions of any financing or refinancing and the lender(s)
to provide the same and shall negotiate the terms thereof and shall
assist in consummating the transactions, Owner shall have the sole
authority to execute the requisite agreements therefor.
Section 2.3 DISPOSITION SERVICES. Upon Owner's request and in
accordance upon Owner's direction and guidelines, Asset Manager shall act as
Owner's agent in the disposition of any Assets in accordance with the terms and
provisions contemplated by the Business Plan. Asset Manager shall be primarily
responsible for negotiating disposition agreements and for consummating
approved dispositions within Owner's guidelines, but Owner shall have the sole
authority to approve the final terms of such dispositions and to execute
agreements therefor.
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Section 2.4 LEGAL SERVICES. Asset Manager is authorized to engage
attorneys and other advisors (including, without limitation, Asset Manager's
in-house legal staff) as necessary to provide legal services in connection with
the day-to-day operation of the Assets and Entities, including enforcement of
contracts; review of contracts, leases, and other documents; maintenance of the
Entities; and implementing and defending legal actions.
Section 2.5 RETENTION OF THIRD PARTIES. Asset Manager is authorized
and empowered, as Owner's agent, to engage and enter into contracts with third
parties to provide the services referred to in this Article 2, and may delegate
performance of its duties to third parties, including the Hotel Manager. Such
contracts shall be on such terms as Asset Manager approves, provided the same
are in compliance with the Business Plan. Without limiting the generality of
the foregoing, the services of third parties which may be engaged include
property management services, ad valorem tax services, brokerage services,
surveyors, title services, data processing services, construction management
services, marketing and market study services, engineering services,
environmental consulting services, legal services and architectural services.
Asset Manager shall not engage or enter into a contract with an Affiliate
(defined below) unless the compensation payable to the Affiliate for such
services does not exceed that which would be payable to a comparably qualified
third party service provider that is not affiliated with Asset Manager. For the
purposes of this Agreement, an "Affiliate" of any person shall mean any other
person that is directly or indirectly controlling, controlled by, or under
common control with that person, where the term "control" means the possession,
directly or indirectly, of the actual power to direct the affairs of the
controlled person.
Section 2.6 BOOKS, RECORDS AND REPORTS.
(1) BOOKS AND RECORDS. Asset Manager shall maintain at its
principal place of business, or at such other location as it may reasonably
designate, a complete and accurate set of files, books and records of all
business activities and operations conducted by Asset Manager with respect to
the Assets. All financial records shall be kept in accordance with sound
accounting principles and practices, with such modifications as Owner may
request or approve. During the Term (defined below) and during the one (1)
year period following the expiration or termination of this Agreement, Owner
and its duly authorized agents may, at reasonable times, examine, inspect,
audit, and copy Asset Manager's books, records, files, and reports pertaining
to the Assets.
(2) MONTHLY REPORTS. Asset Manager shall make available to Owner,
within 20 days after the end of each calendar month, reports detailing the
operations of the Assets which shall be in the format specified in Schedule
2.6(b).
(3) QUARTERLY REPORTS. Asset Manager shall make available to
Owner, within 45 days after the end of each calendar quarter, reports detailing
the operations of the Assets which shall be in the format specified in Schedule
2.6(c).
(4) ANNUAL REPORTS. Asset Manager shall, within ninety (90) days
after the end of each calendar year, make available to Owner the following
reports and statements, having been
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prepared in accordance with sound accounting principles (as modified at Owner's
request and with Owner's approval):
(a) a balance sheet and statements of income and expenses
as of the end of such year; and
(b) a cash flow statement for such year.
(5) OTHER REPORTS. Asset Manager shall make available to Owner
reports listed on Schedule 2.
(6) SPECIAL REPORTS. Asset Manager shall also, at Owner's expense,
provide any other reports, summaries, statements or schedules reasonably
requested by Owner.
Section 2.7 PAYMENT OF COSTS AND EXPENSES. Asset Manager is
authorized to pay out of Asset revenues all of the costs and expenses incurred
by Asset Manager in performing its duties hereunder. Asset Manager shall
maintain detailed records of all such payments with appropriate cash and
disbursement controls in compliance with Owner's requirements.
Section 2.8 INSUFFICIENCY OF ASSET REVENUES. If the Asset revenues
are insufficient to enable Asset Manager to perform its duties, Asset Manager
shall notify Owner, specifying the amounts necessary to enable Asset Manager to
perform its duties. Owner shall fund such amounts within ten (10) days of the
receipt of Asset Manager's notice, failing which, Asset Manager shall be
released from all responsibilities for which it has not been provided
sufficient funds. Asset Manager shall not be obligated to pay any expense of
Owner with Asset Manager's funds to discharge its duties and responsibilities
hereunder.
ARTICLE 3
OWNER'S DUTIES
Section 3.1 INFORMATION AND COOPERATION. Owner shall (1) provide
Asset Manager one copy of all files in its possession pertaining to the Assets,
(2) furnish Asset Manager with all information in Owners possession reasonably
necessary to enable Asset Manager to perform its duties, and (3) otherwise
cooperate with, and assist Asset Manager in, performance of Asset Manager's
duties.
Section 3.2 APPROVAL POLICY. Owner has delivered to Asset Manager a
list of those parties empowered to approve matters requiring Owner's approval
under this Agreement. Owner may revise such fist from time to time by
delivering written notice to Asset Manager. Owner shall cooperate with Asset
Manager in granting or withholding approvals required under this Agreement in a
timely manner. If Asset Manager seeks approval of any matter of Owner hereunder
and Owner does not respond to such request for approval within five (5)
business days following such request, then Owner shall be deemed to have
approved the matter in question. When seeking Owner's approval of matters
hereunder, Asset Manager shall endeavor to provide
5
<PAGE> 10
such supporting information as may be reasonably necessary to enable Owner to
evaluate the matter in question.
Section 3.3 FUNDING. Owner shall provide all funds required to enable
Asset Manager to perform its duties hereunder and for Asset Manager's
compensation.
ARTICLE 4
COMPENSATION
Section 4.1 ASSET MANAGEMENT FEE. For performing its Asset review and
management duties, Owner shall pay to Asset Manager a fee equal to a reasonable
cost allocation of all salaries, cost and overhead of Asset Manager for the
time devoted to performing the duties and services herein described (the "ASSET
MANAGEMENT FEE"). The Asset Management Fee shall be payable in arrears on or
before the twentieth (20TH) day of each calendar quarter in respect of the
services provided during the preceding quarter.
Section 4.2 REIMBURSABLE EXPENSES. Without duplication of the items
included in the cost allocation determination for the Asset Management Fee,
Owner shall reimburse Asset Manager for all expenses incurred by Asset Manager
in performing its duties hereunder, including, without limitation, expenses of
third parties engaged pursuant to this Agreement; travel and other
out-of-pocket expenses; and filing or other fees paid to third parties. Asset
Manager shall not be reimbursed for legal fees and expenses relating to the
negotiation and preparation of this Agreement.
Section 4.3 ADDITIONAL SERVICES. If Owner requests Asset Manager to
perform services other than those required hereunder, such additional services,
if performed, shall be compensated separately on terms agreed upon by Asset
Manager and Owner prior to the performance of such services, which terms shall
not be (1) less favorable to Asset Manager than the terms under which qualified
unaffiliated persons are then performing such services for comparable
organizations, or (2) less favorable to Owner than the terms under which Owner
could obtain such services from qualified unaffiliated third persons.
Section 4.4 EMERGENCY EXPENDITURES. In case of an emergency, Asset
Manager may make expenditures for the preservation of the Assets, repairs to
the Assets and other items without Owner's prior written approval if, in the
reasonable judgment of Asset Manager, such expenditures are necessary to
prevent damage to the Assets or to preserve the health or safety of any person.
Asset Manager shall inform Owner of any such expenditures as soon as reasonably
practicable but in no event later than the end of the next business day
succeeding the date upon which such expenditures are made.
ARTICLE 5
LIABILITY INSURANCE AND RISK ALLOCATION
Section 5.1 FIDELITY BOND. Asset Manager shall, at Owner's expense,
maintain a blanket fidelity bond with responsible companies with broad coverage
of all officers, employees or other persons acting in any capacity with respect
to the Assets or handling funds, money,
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documents and papers relating to the Assets, insuring Owner against losses
including those arising from theft, embezzlement, fraud, or misplacement of
funds, money, or documents. The minimum coverage under any such bond shall be
at least equal to the amount specified in Schedule 5.
Section 5.2 LIABILITY INSURANCE. Asset Manager shall, at Owner's
expense, maintain comprehensive general liability, automobile liability,
workers' compensation and other insurance to protect the interests of Asset
Manager and Owner as their interests may appear in connection with the
performance of this Agreement in accordance with the coverage, amounts, and
deductibles set forth in Schedule 5.
Section 5.3 EVIDENCE OF INSURANCE. Upon request, Asset Manager shall
provide to Owner certificates of insurance or other proof evidencing the
insurance coverage required under this Article 5.
Section 5.4 MUTUAL WAIVER OF SUBROGATION. Each party waives on behalf
of the insurers of such party's property any and all claims or rights of
subrogation of any such insurer against the other party hereto for loss or
damage to any property so insured.
Section 5.5 INDEMNIFICATION.
(1) PARTIES' INDEMNITIES. Subject to Section 5.4, Asset Manager
shall indemnify and defend Owner, and Owner's directors, officers and employees
from and against any and all loss, cost, damage, liability and expense,
including reasonable counsel fees, incurred by Owner, resulting from Asset
Manager's gross negligence, willful misconduct, fraud, or breach of this
Agreement. Except for the matters against which Asset Manager has afforded
Owner indemnity in accordance with the preceding sentence and subject to
Section 5.4, Owner shall indemnify and defend Asset Manager, and Asset
Manager's directors, officers and employees from and against any and all loss,
cost, damage, liability and expense, including reasonable counsel fees,
incurred by Asset Manager and resulting from Asset Manager's performance of its
duties and obligations in accordance with this Agreement, including those which
arise from Asset Manager's negligence. The provisions of this Section 5.5(l)
are not in lieu of, but are in addition to, any other rights and obligations of
an indemnified party.
(2) NOTICE. Upon receipt by any party entitled to indemnification
under Section 5.5(l) (an "INDEMNIFIED PARTY") of a complaint, claim or other
notice of any loss, damage or liability giving rise to a claim for
indemnification under Section 5.5(l), such Indemnified Party shall promptly
notify the party from whom indemnification is sought (the "INDEMNIFYING
PARTY"), but failure to provide such Notice shall not relieve the Indemnifying
Party from its duty to indemnify unless the Indemnifying Party is materially
prejudiced by such failure and had no actual knowledge of such complaint, claim
or other notice.
(3) INDEMNIFICATION RIGHTS. With respect to any claim made or
threatened against any party for which such party is or may be entitled to
indemnification hereunder, the Indemnifying Party shall have the right, upon
reasonable prior notice, in its sole discretion and at its sole expense, but
subject to the right of any insurance company having an interest in the outcome
of such claim to exercise any rights it may have under any applicable insurance
coverage,
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to (a) participate in the investigation, defense and settlement of such claims
and (b) control the defense of such claim, including the right to designate
counsel and to control all negotiations, litigation, arbitration, settlements,
compromises and appeals of any such claim provided that the Indemnifying Party
shall have advised the Indemnified Party that such party is entitled to be
fully indemnified with respect to such claim. The Indemnified Party and the
Indemnifying Party shall cooperate and act in good faith in the conduct of the
defense of any claims to be indemnified hereunder.
(4) SURVIVAL. The terms and provisions of this Section 5.5 shall
survive the expiration or termination of this Agreement.
ARTICLE 6
TERM
Section 6.1 TERM. This Agreement shall commence on the Effective Date
and continue unless terminated by either party giving written notice of
termination to the other at least 30 days prior to the effective termination
date (the "TERM"). The Term is subject to earlier termination as provided below
and shall also end as to any particular Asset upon the disposition thereof by
Owner to a third party that is not an Affiliate.
Section 6.2 DUTIES ON TERMINATION OR EXPIRATION.
(1) ASSET MANAGER'S DUTIES. Upon termination or expiration of this
Agreement, as to any Asset or Assets, Asset Manager shall within fifteen (15)
days thereafter deliver to Owner complete copies of all books and records of
the Assets in question and all funds in possession of Asset Manager belonging
to Owner or received by Asset Manager with regard to such Assets. Asset Manager
shall also be available for a period of not less than thirty (30) days
following termination or expiration to consult with Owner concerning operation
of the Assets in question; Asset Manager shall not receive a fee for such
consultation, but shall be reimbursed for all costs incurred in connection
therewith.
(2) OWNER'S DUTIES. Owner shall, within five (5) days following
the end of the Term compensate Asset Manager for all fees and reimbursements
due hereunder through the date of termination or expiration.
ARTICLE 7
MISCELLANEOUS
Section 7.1 ASSIGNMENT; CHANGE OF OWNERSHIP INTEREST. Asset Manager
may not, without the prior written consent of Owner, assign this Agreement, and
any transfer, assignment, or other conveyance or exchange of any ownership
interest in Asset Manager, other than to an Affiliate (which is hereby
permitted), shall be considered an assignment hereunder. Asset Manager may,
however, from time to time delegate its duties to Affiliates. Subject to the
foregoing, this Agreement shall be binding upon, and inure to the benefit of,
Asset Manager and Owner and their respective successors and assigns, and all
references in this Agreement to "Asset
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Manager" and "Owner" shall include the respective successors and assigns of
such parties permitted under this Agreement.
NOTICES. Any notice provided or permitted to be given hereunder shall
be in writing and may be given by (1) depositing in the U.S. Mail, postage
prepaid and certified with return receipt requested; (2) delivery service; or
(3) facsimile transmission. Notice shall be effective upon the earlier of
refusal of receipt by addressee or actual receipt at the address of the
intended addressee. The addresses of the parties, until changed by notice given
as provided herein, shall be as follows:
Owner: c/o: Susan T. Groenteman
Crow Family Holdings
2001 Ross Avenue, Suite 3200
Dallas, Texas 75201
Telephone No. (214) 979-6265
Fax No. (214) 979-6249
Asset Manager: 2001 Bryan Street, Suite 2300
Dallas, Texas 75201
Attention: Anne Raymond
Telephone No. (214) _________________________
Fax No. (214) _____________________________
with copy to:
Legal Department
2001 Bryan Street, Suite 2300
Dallas, Texas 75201
Telephone No. (214) ___________________________
Fax No. (214) _______________________________
Section 7.3 NUMBER: GENDER; CAPTIONS; AND REFERENCES. Pronouns,
wherever used, and whatever gender, shall include natural persons,
corporations, and associates of every kind and character and the singular shall
include the plural wherever and as often as may be appropriate. Section
headings are for convenience of reference and shall not affect the construction
or interpretation of this Agreement. Whenever the terms "hereof", "hereby",
"herein", or words of similar import are used in this Agreement, they shall be
construed as referring to this Agreement in its entirety rather than to a
particular section or provision. Any reference to a particular "section" shall
be construed as referring to the indicated section of this Agreement. The term
"including" shall mean "including, without limitation", except where the
context otherwise specifically requires.
Section 7.4 SEVERABILITY. If any term or provision of this Agreement
or the application thereof to any person or circumstance shall, to any extent,
be invalid or unenforceable, the remainder of this Agreement, or the
application of that term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
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thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
Section 7.5 NO WAIVER OF DEFAULT. The failure by Owner or Asset
Manager to insist upon the strict performance of any one of the terms or
conditions of this Agreement or to exercise any right, remedy or election
herein contained or permitted by law shall not constitute or be construed as
waiver or relinquishment for the future of that term, condition, right, remedy
or election, which shall continue and remain in full force and effect. AU
rights and remedies that Owner or Asset Manager may have at law, in equity or
otherwise for any breach of any term or condition of this Agreement shall be
distinct, separate and cumulative rights and remedies and no one of them shall
be deemed to be in exclusion of any other right or remedy of Owner or Asset
Manager.
Section 7.6 ENTIRE AGREEMENT AND MODIFICATION. This Agreement
constitutes the entire agreement between the parties with respect to the
matters herein contained and any agreement hereafter made shall be ineffective
unless made in writing and signed by the parties hereto. No provision of this
Agreement shall be modified, waived or terminated except by an instrument in
writing signed by the party against whom such modification, waiver or
termination is to be enforced.
Section 7.7 COMPETITION. Nothing in this Agreement will prevent the
Asset Manager or Owner from, directly or indirectly, engaging in the ownership,
financing, leasing, operation, management, brokerage, development, or sale of
real property, including projects similar to the Assets and whether or not
competitive with the Assets.
Section 7.8 GOVERNING LAW. This Agreement shall be governed by and
constructed in accordance with the laws of the State of Texas.
Section 7.9 ATTORNEYS' FEES. Should either party employ attorneys to
enforce the provisions hereof or to recover damages for the breach of this
Agreement, the non-prevailing party in any such action agrees to pay the
prevailing party all reasonable costs, damages and expenses, including
reasonable attorneys' fees, expended or incurred by the prevailing party in
connection therewith.
Section 7.10 RELATIONSHIP OF THE PARTIES. The relationship of Owner
and Asset Manager shall be that of principal and agent, and nothing contained
in this Agreement, nor any acts of the parties shall create the relationship of
a partnership or a joint venture, or cause the Asset Manager to be responsible
in any way for the debts or obligations of Owner or any other party-
Section 7.11 REPRESENTATIONS AND WARRANTIES.
(1) ASSET MANAGER. Asset Manager represents and warrants to Owner that
(a) Asset Manager is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite power
and authority to carry on its business as now conducted and to execute, deliver
and perform this Agreement; (b) the execution, delivery
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and performance by Asset Manager of this Agreement is within its power, has
been authorized by all necessary corporate action and does not contravene any
provision of its organizational documents; (c) this Agreement has been duly
executed and delivered by a person authorized to do so on Asset Manager's
behalf, and (d) this Agreement constitutes the valid and binding obligation of
Asset Manager.
(2) OWNER. Owner represents and warrants to Asset Manager that (a)
Owner is a ___________________________, duly organized and validly existing
under the laws of the State of _____________________, and has all requisite
power and authority to carry on its business as now conducted and to execute,
deliver and perform this Agreement; (b) the execution, delivery and performance
by Owner of this Agreement is within its power, has been authorized by all
necessary partnership action and does not contravene any provision of its
organizational documents; (c) this Agreement has been duly executed and
delivered by a person authorized to do so on Owner's behalf, and (d) this
Agreement constitutes the valid and binding obligations of Owner.
Section 7.12 CONFIDENTIALITY. Owner and Asset Manager shall keep
confidential all information obtained by one from the other in connection with
this Agreement. The parties shall not disclose such information to any person
(other than their respective agents, representatives and legal counsel), unless
specifically authorized in writing by the other party or if disclosure is
required by subpoena, court order, judicial decree, or law, or is otherwise
required to enable Asset Manager to perform its duties. This confidentiality
obligation shall not be binding on any party with respect to information in the
public domain or information that enters the public domain through no fault of
that party. The provisions of this Section 7.12 shall survive the expiration or
termination of this Agreement.
Section 7.13 LIABILITY OF OWNER. Asset Manager shall look solely to
Owner's interest in the Assets and Entities subject to this Agreement at the
time any such claim accrued for recovery of any judgment or claim against Owner
relating or arising out of this Agreement, and Owner, its partners, officers,
directors, shareholders, agents and representatives shall not be liable
otherwise for any claim of Asset Manager arising out of or relating to this
Agreement.
Section 7.14 LIABILITY OF ASSET MANAGER. Owner shall look solely to
Asset Manager's corpor`ate assets for recovery of any judgment or claim against
Asset Manager relating or arising out of this Agreement, and Asset Manager's
officers, employees, directors, shareholders, agents and representatives shall
not be liable for any claim of Owner arising out of or relating to this
Agreement.
Section 7.15 COUNTERPARTS. This Agreement may be executed in a number
of counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same Agreement.
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Executed as of the day and year first above written.
OWNER:
-----------------------------------------
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
ASSET MANAGER: WYNDHAM HOTEL CORPORATION
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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SCHEDULE 2
OWNERSHIP ACCOUNTING AND REPORTING REQUIREMENTS
* Monthly and Quarterly Tax and Legal Processing
* Quarterly Capital Transaction Report
* Annual Accrual Financial Statements
* ASSET Reserve Estimation AS needed
* Quarterly Pool Cash Forecast for Real Estate Operations
* Annual Database Update
* Annual Budgetary Process
* Annual Tax Return Preparation
* Quarterly Estimate of Crow Equity and Liability
* Monthly EAB cash report and, where applicable, mortgage
payment cash flow reporting
* Annual valuation of each Crow Asset on the Estimated Value
Balance Sheet (EVBS) Basis
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LIST OF SCHEDULES
Schedule 1 Assets List
Schedule 2.2 Form of Business Plan
Schedule 2.11(b) Form of Monthly Report
Schedule 2.11(c) Form of Quarterly Report
Schedule 5 List of Insurance Coverage
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SCHEDULE 2.11(b)
FORM OF MONTHLY REPORT
BALANCE SHEET See Schedule 2.11(c)
INCOME STATEMENT See Schedule 2.11(c)
CASHFLOW STATEMENT See Schedule 2.11(c)
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SCHEDULE 2.11(c)
FORM OF QUARTERLY REPORT
BALANCE SHEET ATTACHED
INCOME STATEMENT ATTACHED
CASHFLOW STATEMENT ATTACHED
16
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SCHEDULE 5
LIST OF INSURANCE COVERAGE
FIDELITY BOND $
LIABILITY INSURANCE $
17
<PAGE> 1
EXHIBIT 10.6(a)
Wyndham Form
SERVICE AGREEMENT
, 19
between
WYNDHAM HOTEL CORPORATION
and
______________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE 1
ENGAGEMENT OF SERVICE MANAGER
Section 1.1 General Engagement . . . . . . . . . . . . . . 1
ARTICLE 2
SERVICE MANAGER DUTIES
Section 2.1 Business Plans . . . . . . . . . . . . . . . . 1
Section 2.2 Entity Services. . . . . . . . . . . . . . . . 2
Section 2.3 Disposition Services. . . . . . . . . . . . . 4
Section 2.4 Legal Services. . . . . . . . . . . . . . . . 4
Section 2.5 Retention of Third Parties. . . . . . . . . . 4
Section 2.6 Books, Records and Reports. . . . . . . . . . 5
Section 2.7 Payment of Costs and Expenses . . . . . . . . 5
Section 2.8 Insufficiency of Revenues . . . . . . . . . . 6
ARTICLE 3
OWNER'S DUTIES
Section 3.1 Information and Cooperation . . . . . . . . . 6
Section 3.2 Approval Policy. . . . . . . . . . . . . . . . 6
Section 3.3 Funding . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4
COMPENSATION
Section 4.1 Service Fee . . . . . . . . . . . . . . . . . 6
Section 4.2 Reimbursable Expenses . . . . . . . . . . . . 7
Section 4.3 Additional Services . . . . . . . . . . . . . 7
Section 4.4 Emergency Expenditures. . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE 5
LIABILITY INSURANCE AND RISK ALLOCATION
<S> <C> <C>
Section 5.1 Fidelity Bond . . . . . . . . . . . . . . . . 7
Section 5.2 Liability Insurance . . . . . . . . . . . . . 7
Section 5.3 Evidence of Insurance . . . . . . . . . . . . 8
Section 5.4 Mutual Waiver of Subrogation. . . . . . . . . 8
Section 5.5 Indemnification . . . . . . . . . . . . . . . 8
ARTICLE 6
TERM
Section 6.1 Term. . . . . . . . . . . . . . . . . . . . . 9
Section 6.2 Duties on Termination or Expiration . . . . . 9
ARTICLE 7
MISCELLANEOUS
Section 7.1 Assignment Change of Ownership Interest . . . 10
Section 7.2 Notices . . . . . . . . . . . . . . . . . . . 10
Section 7.3 Number: Gender; Captions; and References. . . 11
Section 7.4 Severability. . . . . . . . . . . . . . . . . 11
Section 7.5 No Waiver of Default. . . . . . . . . . . . . 11
Section 7.6 Entire Agreement. . . . . . . . . . . . . . . 11
Section 7.7 Competition . . . . . . . . . . . . . . . . . 12
Section 7.8 Governing Law. . . . . . . . . . . . . . . . . 12
Section 7.9 Attorneys' Fees. . . . . . . . . . . . . . . . 12
Section 7.10 Relationship of the Parties . . . . . . . . . 12
Section 7.11 Representations and Warranties. . . . . . . . 12
Section 7.12 Confidentiality . . . . . . . . . . . . . . . 13
Section 7.13 Liability of Owner. . . . . . . . . . . . . . 13
Section 7.14 Liability of Service Manager. . . . . . . . . 13
Section 7.15 Counterparts. . . . . . . . . . . . . . . . . 13
</TABLE>
ii
<PAGE> 4
LIST OF DEFINED TERMS
<TABLE>
<CAPTION>
PageNo.
------
<S> <C>
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Disposition Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Hotel Management Agreement. . . . . . . . . . . . . . . . . . . . . 2
Hotel Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . 10
Indemnifying Party. . . . . . . . . . . . . . . . . . . . . . . . . 10
Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Property Managers . . . . . . . . . . . . . . . . . . . . . . . . . 2
Refinancing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Service Management Fee . . . . . . . . . . . . . . . . . . . . . .
Service Manager . . . . . . . . . . . . . . . . . . . . . . . . . .
Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
iii
<PAGE> 5
SERVICE AGREEMENT
THIS SERVICE AGREEMENT (the Agreement"), is entered into by
________________________________a (the "Owner"), and WYNDHAM HOTEL CORPORATION,
a Delaware corporation (the "Service Manager"), effective as of
____________________, 19__ (the "Effective Date").
RECITAL
Wyndham Hotel Company LTD, a Texas limited partnership, has been providing
certain services for Owner. Pursuant to that certain Formation Agreement dated
as of March 10, 1996, the Entities and operations of Wyndham Hotel Company LTD
will be ".,rolled-up", together with other Entities, into Service Manager or
its subsidiaries. Owner and Service Manager desire to evidence and formalize
their agreements with respect to these services.
ARTICLE 1
ENGAGEMENT OF SERVICE MANAGER
Section 1.1 General Engagement Owner engages Service Manager as an
independent contractor to provide certain services described in this Agreement
relating to the administration and servicing of certain aspects of Owner's
legal entity and the legal entities (whether partnerships, corporations or
other business associations) that comprise Owner (the 'Entities" and each an
"Entity"). Owner and Service Manager may from time to time agree to expand or
reduce the scope of services to be provided hereunder and either party, upon
request of the other shall execute a schedule that properly evidences the scope
of services then being provided hereunder. The Service Manager shall in good
faith provide the services set forth in this Agreement in accordance with
normal and prudent practices and shall have the authority to take all actions
necessary or appropriate to fulfill its obligations.
ARTICLE 2
SERVICE MANAGER DUTIES
Section 2.1 Entity Services. The Service Manager will provide the
following services with regard to the Entities:
(1) ACCOUNTING SERVICES. (i) Perform all normal and customary
accounting functions for Owner's legal entity and for all entities
that comprise Owner's
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<PAGE> 6
legal entity and maintain all necessary books and records in
connection therewith, and (ii) monitor the actual monthly income
and expenses of the Entities, collect revenues and pay operating
expenses, compare actual results to the relevant operating
budgets, and report to Owner.
(2) RISK MANAGEMENT SERVICES. Assist Owner in review of the insurable
risks of each Entity and the determination of levels of insurance
coverage; develop, administer and implement a risk management
program for the Entities; procure insurance coverage in accordance
with Owner's instructions; and subject to Owner's guidelines and
approval, oversee the investigation and resolution of all casualty
and liability claims brought by or against the Entities.
(3) TAX SERVICES. Prepare all state and federal income tax returns for
Owner and, to the extent requested by Owner, for those constituent
ownership entities that comprise Owner; prepare all sales tax
filings and state unemployment tax filings; and coordinate with
Owner and oversee any challenges, disputes and audits of any
income, sales or unemployment taxes.
(4) HUMAN RESOURCES. Upon Owner's request, provide Service Manager's
standard human resource services including implementation and
oversight of interview and hiring guidelines and services;
implementation and oversight of employment policies and
procedures; conduct periodic employee reviews; and to the extent
permitted by applicable law and governmental regulations,
employee benefits in accordance with Service Manager's standard
benefits.
(5) REGULATORY COMPLIANCE REVIEW. Assist Owner (if requested) in (a)
reviewing Entities to assure compliance with applicable
governmental regulations (including environmental regulations and
the Americans With Disabilities Act); (b) subject to Owner's
budgetary constraints, implementing a program to bring any non-
complying Entities into compliance with applicable regulations;
and (c) implementing a program to monitor continuing compliance
with governmental regulations.
(6) FINANCING SERVICES. From time to time, upon Owner's request and in
accordance with Owner's business plan, Service Manager shall act
as Owner's agent in financing or refinancing indebtedness with
respect to the Entities. Service Manager shall:
(a) monitor existing financing;
(b) negotiate and finalize existing financing renewals as
required;
2
<PAGE> 7
(c) monitor and negotiate any equity partner requirements on
behalf of Owner;
(d) negotiate any required refinancing; and
(e) negotiate any required restructuring/workout of existing
financing (debt or equity).
Although Service Manager shall make recommendations to Owner
concerning terms and conditions of any financing or refinancing and
the lender(s) to provide the same and shall negotiate the terms
thereof and shall assist in consummating the transactions, Owner shall
have the sole authority to execute the requisite agreements therefor.
Section 2.4 LEGAL SERVICES. Service Manager is authorized to engage
attorneys and other advisors (including, without limitation, Service Manager's
in-house legal staff) as necessary to provide legal services in connection with
the day-to-day operation of the Entities, including enforcement of contracts;
review of contracts, leases, and other documents; maintenance of the Entities;
and implementing and defending legal actions.
Section 2.5 RETENTION OF THIRD PARTIES. Service Manager is authorized
and empowered, as Owner's agent, to engage and enter into contracts with third
parties to provide the services referred to in this Article 2, and may delegate
performance of its duties to third parties, including Service Manager's
subsidiaries and affiliates. Such contracts shall be on such terms as Service
Manager approves, provided the same are in compliance with Owner's budget and
guidelines. Without limiting the generality of the foregoing, the services of
third parties which may be engaged include tax services, brokerage services,
data processing services, consulting services, and legal services. Service
Manager shall not engage or enter into a contract with an Affiliate (defined
below) unless the compensation payable to the Affiliate for such services does
not exceed that which would be payable to a comparably qualified third party
service provider that is not affiliated with Service Manager. For the purposes
of this Agreement, an "Affiliate" of any person shall mean any other person
that is directly or indirectly controlling, controlled by, or under common
control with that person, where the term "control" means the possession,
directly or indirectly, of the actual power to direct the affairs of the
controlled person.
Section 2.6 BOOKS, RECORDS AND REPORTS.
(1) BOOKS AND RECORDS. Service Manager shall maintain at its
principal place of business, or at such other location as it may reasonably
designate, a complete and accurate set of files, books and records of all
business activities and operations
3
<PAGE> 8
conducted by Service Manager with respect to the Entities. All financial
records shall be kept in accordance with sound accounting principles and
practices, with such modifications as Owner may request or approve. During the
Term (defined below) and during the one (1) year period following the
expiration or termination of this Agreement, Owner and its duly authorized
agents may, at reasonable times, examine, inspect, audit, and copy Service
Manager's books, records, files, and reports pertaining to the Entities.
(2) MONTHLY REPORTS. Service Manager shall make available to
Owner, within 20 days after the end of each calendar month, reports detailing
the operations of the Entities which shall be in the format specified in
Schedule 2.6(b).
(3) QUARTERLY REPORTS. Service Manager shall make available to
Owner, within 45 days after the end of each calendar quarter, reports detailing
the operations of the Entities which shall be in the format specified in
Schedule 2.6(c).
(4) ANNUAL REPORTS. Service Manager shall, within ninety (90) days
after the end of each calendar year, make available to Owner the following
reports and statements, having been prepared in accordance with sound
accounting principles (as modified at Owner's request and with Owner's
approval):
(a) a balance sheet and statements of income and
expenses as of the end of such year; and
(b) a cash flow statement for such year.
(5) OTHER REPORTS. Service Manager shall make available to Owner
reports listed on Schedule 2.
(6) SPECIAL REPORTS. Service Manager shall also, at Owner's
expense, provide any other reports, summaries, statements or schedules
reasonably requested by Owner.
Section 2.7 PAYMENT OF COSTS AND EXPENSES. Service Manager is
authorized to pay out of Entity revenues all of the costs and expenses incurred
by Service Manager in performing its duties hereunder. Service Manager shall
maintain detailed records of all such payments with appropriate cash and
disbursement controls in compliance with Owner's requirements.
Section 2.8 INSUFFICIENCY OF REVENUES. If the Entity revenues are
insufficient to enable Service Manager to perform its duties, Service Manager
shall notify Owner, specifying the amounts necessary to enable Service Manager
to perform its duties. Owner shall fund such amounts within ten (10) days of
the receipt of Service Manager's
4
<PAGE> 9
notice, failing which, Service Manager shall be released from all
responsibilities for which it has not been provided sufficient funds. Service
Manager shall not be obligated to pay any expense of Owner with Service
Manager's funds to discharge its duties and responsibilities hereunder.
ARTICLE 3
OWNER'S DUTIES
Section 3.1 INFORMATION AND COOPERATION. Owner shall (1) provide
Service Manager one copy of all files in its possession pertaining to the
Entities and their respective operations, (2) furnish Service Manager with all
information in Owner's possession reasonably necessary to enable Service
Manager to perform its duties, and (3) otherwise cooperate with, and assist
Service Manager in, performance of Service Manager's duties.
Section 3.2 APPROVAL POLICY. Owner has delivered to Service Manager a
list of those parties empowered to approve matters requiring Owner's approval
under this Agreement Owner may revise such list from time to time by delivering
written notice to Service Manager. Owner shall cooperate with Service Manager
in granting or withholding approvals required under this Agreement in a timely
manner. If Service Manager seeks approval of any matter of Owner hereunder and
Owner does not respond to such request for approval within five (5) business
days following such request, then Owner shall be deemed to have approved the
matter in question. When seeking Owner's approval of matters hereunder, Service
Manager shall endeavor to provide such supporting information as may be
reasonably necessary to enable Owner to evaluate the matter in question.
Section 3.3 FUNDING. Owner shall provide all funds required to enable
Service Manager to perform its duties hereunder and for Service Manager's
compensation.
ARTICLE 4
COMPENSATION
Section 4.1 SERVICE FEE. For performing its servicing and
administration duties, Owner shall pay to Service Manager a fee equal to a
reasonable cost allocation of all salaries, cost and overhead of Service
Manager for the time devoted to performing the duties and services herein
described (the "SERVICE FEE"). The Service Fee shall be payable in arrears on
or before the twentieth (20th) day of each calendar quarter in respect of the
services provided during the preceding quarter.
Section 4.2 REIMBURSABLE EXPENSES. Without duplication of the items
included in the cost allocation determination for the Service Fee, Owner shall
reimburse Service Manager for all expenses incurred by Service Manager in
performing its duties hereunder, including, without limitation, expenses of
third parties engaged pursuant to
5
<PAGE> 10
this Agreement; travel and other out-of-pocket expenses; and filing or other
fees paid to third parties. Service Manager shall not be reimbursed for legal
fees and expenses relating to the negotiation and preparation of this Agreement
Section 4.3 ADDITIONAL SERVICES. If Owner requests Service Manager to
perform services other than those required hereunder, such additional services,
if performed, shall be compensated separately on terms agreed upon by Service
Manager and Owner prior to the performance of such services, which terms shall
not be (1) less favorable to Service Manager than the terms under which
qualified unaffiliated persons are then performing such services for comparable
organizations, or (2) less favorable to Owner than the terms under which Owner
could obtain such services from qualified unaffiliated third persons.
Section 4.4 Emergency Expenditures. In case of an emergency Service
Manager may make expenditures for the protection and preservation of the
Entities, without Owner's prior written approval if, in the reasonable judgment
of Service Manager, such expenditures are necessary to prevent damage or
material diminution in value to the Entities or to preserve the health or
safety of any person. Service Manager shall inform Owner of any such
expenditures as soon as reasonably practicable but in no event later than the
end of the next business day succeeding the date upon which such expenditures
are made.
ARTICLE 5
LIABILITY INSURANCE AND RISK ALLOCATION
Section 5.1 FIDELITY BOND. Service Manager shall, at Owner's expense,
maintain a blanket fidelity bond with responsible companies with broad coverage
of all officers, employees or other persons acting in any capacity with respect
to the Entities or handling funds, money, documents and papers relating to the
Entities, insuring Owner against losses including those arising from theft,
embezzlement, fraud, or misplacement of funds, money, or documents. The minimum
coverage under any such bond shall be at least equal to the amount specified in
Schedule 5.
Section 5.2 LIABILITY INSURANCE. Service Manager shall, at Owner's
expense, maintain comprehensive general liability, automobile liability,
workers' compensation and other insurance to protect the interests of Service
Manager and Owner as their interests may appear in connection with the
performance of this Agreement in accordance with the coverage, amounts, and
deductibles set forth in Schedule 5.
Section 5.3 EVIDENCE OF INSURANCE. Upon request, Service Manager
shall provide to Owner certificates of insurance or other proof evidencing the
insurance coverage required under this Article 5.
6
<PAGE> 11
Section 5.4 MUTUAL WAIVER OF SUBROGATION. Each party waives on behalf
of the insurers of such party's property any and all claims or rights of
subrogation of any such insurer against the other party hereto for loss or
damage to any property so insured.
Section 5.5 INDEMNIFICATION.
(1) PARTIES' INDEMNITIES. Subject to Section 5.4, Service Manager
shall indemnify and defend Owner, and Owner's directors, officers and employees
from and against any and all loss, cost, damage, liability and expense,
including reasonable counsel fees, incurred by Owner, resulting from Service
Manager's gross negligence, willful misconduct, fraud, or breach of this
Agreement Except for the matters against which Service Manager has afforded
Owner indemnity in accordance with the preceding sentence and subject to
Section 5.4, Owner shall indemnify and defend Service Manager, and Service
Manager's directors, officers and employees from and against any and all loss,
cost, damage, liability and expense, including reasonable counsel fees,
incurred by Service Manager and resulting from Service Manager's performance of
its duties and obligations in accordance with this Agreement, including those
which arise from Service Manager's negligence. The provisions of this Section
5.5(l) are not in lieu of, but are in addition to, any other rights and
obligations of an indemnified party.
(2) NOTICE. Upon receipt by any party entitled to indemnification
under Section 5.5(l) (an "INDEMNIFIED PARTY") of a complaint, claim or other
notice of any loss, damage or liability giving rise to a claim for
indemnification under Section 5.5(l), such Indemnified Party shall promptly
notify the party from whom indemnification is sought (the "INDEMNIFYING
PARTY"), but failure to provide such Notice shall not relieve the Indemnifying
Party from its duty to indemnify unless the Indemnifying Party is materially
prejudiced by such failure and had no actual knowledge of such complaint, claim
or other notice.
(3) INDEMNIFICATION RIGHTS. With respect to any claim made or
threatened against any party for which such party is or may be entitled to
indemnification hereunder, the Indemnifying Party shall have the right, upon
reasonable prior notice, in its sole discretion and at its sole expense, but
subject to the right of any insurance company having an interest in the outcome
of such claim to exercise any rights it may have under any applicable insurance
coverage, to (a) participate in the investigation, defense and settlement of
such claims and (b) control the defense of such claim, including the right to
designate counsel and to control all negotiations, litigation, arbitration,
settlements, compromises and appeals of any such claim, provided that the
Indemnifying Party shall have advised the Indemnified Party that such party is
entitled to be fully indemnified with respect to such claim. The Indemnified
Party and the Indemnifying Party shall cooperate and act in good faith in the
conduct of the defense of any claims to be indemnified hereunder.
7
<PAGE> 12
(4) SURVIVAL. The terms and provisions of this Section 5.5 shall
survive the expiration or termination of this Agreement
ARTICLE 6
TERM
Section 6. TERM. This Agreement shall commence on the Effective
Date and continue unless terminated by either party giving written notice of
termination to the other at least 30 days prior to the effective termination
date (the "Term"). The Term is subject to earlier termination as provided below
and shall also end as to any particular Entity upon the transfer of majority
ownership therein by Owner to a third party that is not an Affiliate.
Section 6.2 DUTIES ON TERMINATION OR EXPIRATION.
(1) SERVICE MANAGER'S DUTIES. Upon termination or expiration of
this Agreement, as to any Entities, Service Manager shall within fifteen (15)
days thereafter deliver to Owner complete copies of all books and records of
the Entities in question and all funds in possession of Service Manager
belonging to Owner or received by Service Manager with regard to such Entities.
Service Manager shall also be available for a period of not less than thirty
(30) days following termination or expiration to consult with Owner concerning
operation of the Entities in question; Service Manager shall not receive a fee
for such consultation, but shall be reimbursed for an costs incurred in
connection therewith.
(2) OWNER'S DUTIES. Owner shall, within five (5) days following
the end of the Term compensate Service Manager for all fees and reimbursements
due hereunder through the date of termination or expiration.
ARTICLE 7
MISCELLANEOUS
Section 7.1 ASSIGNMENT; CHANGE OF OWNERSHIP INTEREST. Service Manager
may not, without the prior written consent of Owner, assign this Agreement, and
any transfer, assignment, or other conveyance or exchange of any ownership
interest in Service Manager, other than to an Affiliate (which is hereby
permitted), shall be considered an assignment hereunder. Service Manager may,
however, from time to time delegate its duties to Affiliates. Subject to the
foregoing, this Agreement shall be binding upon, and inure to the benefit of,
Service Manager and Owner and their respective successors and assigns, and all
references in this Agreement to "Service Manager" and "Owner" shall include the
respective successors and assigns of such parties permitted under this
Agreement
8
<PAGE> 13
NOTICES. Any notice provided or permitted to be given hereunder
shall be in writing and may be given by (1) depositing in the U.S. Mail,
postage prepaid and certified with return receipt requested; (2) delivery
service; or (3) facsimile transmission. Notice shall be effective upon the
earlier of refusal of receipt by addressee or actual receipt at the address of
the intended addressee. The addresses Of the parties, until changed by notice
given as provided herein, shall be as follows:
Owner: c/o: Susan T. Groenteman
Crow Family Holdings
2001 Ross Avenue, Suite 3200
Dallas, Texas 75201
Telephone No. (214) 863-4265
Fax No. (214) 863-4249
Service Manager: 2001 Bryan Street, Suite 2300
Dallas, Texas 75201
Attention: Anne Raymond
Telephone No. (214) 863-1266
Fax No. (214) 863-1262
with copy to:
Legal Department
2001 Bryan Street, Suite 2300
Dallas, Texas 75201
Telephone No. (214) 863-1000
Fax No. (214) 863-1262
Section 7.3 NUMBER. GENDER; CAPTIONS; AND REFERENCES. Pronouns,
wherever used, and whatever gender, shall include natural persons,
corporations, and associates of every kind and character and the singular shall
include the plural wherever and as often as may be appropriate. Section
headings are for convenience of reference and shall not affect the construction
or interpretation of this Agreement Whenever the terms "hereof", "hereby",
"herein", or words of similar import are used in this Agreement, they shall be
construed as referring to this Agreement in its entirety rather than to a
particular section or provision. Any reference to a particular "section" shall
be construed as referring to the indicated section of this Agreement The term
"including" shall mean "including, without limitation", except where the
context otherwise specifically requires.
Section 7.4 SEVERABILITY If any term or provision of this Agreement
or the application thereof to any person or circumstance shall, to any extent,
be invalid or unenforceable, the remainder of this Agreement, or the
application of that term or provision to persons or circumstances other than
those as to which it is held invalid or
9
<PAGE> 14
Section 7.5 NO WAIVER OF DEFAULT. The failure by Owner or Service
Manager to insist upon the strict performance of any one of the terms or
conditions of this Agreement or to exercise any right, remedy or election
herein contained or permitted by law shall not constitute or be construed as
waiver or relinquishment for the future of that term, condition, right, remedy
or election, which shall continue and remain in full force and effect AR rights
and remedies that Owner or Service Manager may have at law, in equity or
otherwise for any breach of any term or condition of this Agreement shall be
distinct, separate and cumulative rights and remedies and no one of them shall
be deemed to be in exclusion of any other right or remedy of Owner or Service
Manager.
Section 7.6 ENTIRE AGREEMENT AND MODIFICATION. This Agreement
constitutes the entire agreement between the parties with respect to the
matters herein contained and any agreement hereafter made shall be ineffective
unless made in writing and signed by the parties hereto. No provision of this
Agreement shall be modified, waived or terminated except by an instrument in
writing signed by the party against whom such modification, waiver or
termination is to be enforced.
Section 7.7 COMPETITION. Nothing in this Agreement will prevent the
Service Manager or Owner from, directly or indirectly, engaging in the
ownership, financing, leasing, operation, management, brokerage, development,
or sale of real property, including projects similar to the Entities and
whether or not competitive with the Entities.
Section 7.8 GOVERNING LAW. This Agreement shall be governed by and
constructed in accordance with the laws of the State of Texas.
Section 7.9 ATTORNEYS' FEES. Should either party employ attorneys to
enforce the provisions hereof or to recover damages for the breach of this
Agreement, the non-prevailing party in any such action agrees to pay the
prevailing party all reasonable costs, damages and expenses, including
reasonable attorneys' fees, expended or incurred by the prevailing party in
connection therewith.
Section 7.10 RELATIONSHIP OF THE PARTIES.' The relationship of Owner
and Service Manager shall be that of principal and agent, and nothing contained
in this Agreement, nor any acts of the parties shall create the relationship of
a partnership or a joint venture, or cause the Service Manager to be
responsible in any way for the debts or obligations of Owner or any other
party.
Section 7.11 REPRESENTATIONS AND WARRANTIES.
(1) SERVICE MANAGER. Service Manager represents and warrants to
Owner that (a) Service Manager is a corporation duly organized, validly
existing and in good
10
<PAGE> 15
standing under the laws of the State of Delaware, and has an requisite power
and authority to carry on its business as now conducted and to execute, deliver
and perform this Agreement, (b) the execution, delivery and performance by
Service Manager of this Agreement is within its power, has been authorized by
all necessary corporate action and does not contravene any provision of its
organizational documents; (c) this Agreement has been duly executed and
delivered by a person authorized to do so on Service Manager's behalf; and (d)
this Agreement constitutes the valid and binding obligation of Service Manager.
(2) OWNER. Owner represents and warrants to Service Manager that (a)
Owner is a, duly organized and validly existing under the laws of the State of
and has all requisite power and authority to carry on its business as now
conducted and to execute, deliver and perform this Agreement, (b) the
execution, delivery and performance by Owner of this Agreement is within its
power, has been authorized by all necessary partnership action and does not
contravene any provision of its organizational documents; (c) this Agreement
has been duly executed and delivered by a person authorized to do so on Owner's
behalf; and (d) this Agreement constitutes the valid and binding obligations of
Owner.
Section 7.12 CONFIDENTIALITY. Owner and Service Manager shall keep
confidential all information obtained by one from the other in connection with
this Agreement The parties shall not disclose such information to any person
(other than their respective agents, representatives and legal counsel), unless
specifically authorized in writing by the other party or if disclosure is
required by subpoena, court order, judicial decree, or law, or is otherwise
required to enable Service Manager to perform its duties. This confidentiality
obligation shall not be binding on any party with respect to information in the
public domain or information that enters the public domain through no fault of
that party. The provisions of this Section 7.12 shall survive the expiration or
termination of this Agreement
Section 7.13 LIABILITY OF OWNER. Service Manager shall look solely to
Owner's interest in the Entities subject to this Agreement at the time any such
claim accrued for recovery of any judgment or claim against Owner relating or
arising out of this Agreement, and Owner, its partners, officers, directors,
shareholders, agents and representatives shall not be liable otherwise for any
claim of Service Manager arising out of or relating to this Agreement
Section 7.14 LIABILITY OF SERVICE MANAGER. Owner shall look solely to
Service Manager's corporate Entities for recovery of any judgment or claim
against Service Manager relating or arising out of this Agreement, and Service
Manager's officers, employees, directors, shareholders, agents and
representatives shall not be liable for any claim of Owner arising out of or
relating to this Agreement
11
<PAGE> 16
Section 7.15 COUNTERPARTS. This Agreement may be executed in a number
of counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same Agreement
12
<PAGE> 17
Executed as of the day and year first above written.
OWNER:
-----------------------------------------------
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
ASSET MANAGER: WYNDHAM HOTEL CORPORATION
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
13
<PAGE> 18
SCHEDULE 2
OWNERSHIP ACCOUNTING AND REPORTING REQUIREMENTS
* Monthly and Quarterly Tax and Legal Processing
* Quarterly Capital Transaction Report
* Annual Accrual Financial Statements
* Reserve Estimation as needed
* Quarterly Pool Cash Forecast for Operations
* Annual Database Update
* Annual Budgetary Process
* Annual Tax Return Preparation
* Quarterly Estimate of Crow Equity and Liability
* Monthly EAB cash report and, where applicable,
mortgage payment cash flow reporting
* Annual valuation of each Crow Entity on the
Estimated Value Balance Sheet (EVBS) Basis
14
<PAGE> 19
LIST OF SCHEDULES
Schedule 1 Entities List
Schedule 2.2 Form of Business Plan
Schedule 2.11(b) Form of Monthly Report
Schedule 2.11(c) Form of Quarterly Report
Schedule 5 List of Insurance Coverage
15
<PAGE> 20
SCHEDULE 2.11(b)
FORM OF MONTHLY REPORT
BALANCE SHEET See Schedule 2.11(c)
INCOME STATEMENT See Schedule 2.11(c)
CASHFLOW STATEMENT See Schedule 2.11(c)
16
<PAGE> 21
SCHEDULE 2.11(c)
FORM OF QUARTERLY REPORT
BALANCE SHEET ATTACHED
INCOME STATEMENT ATTACHED
CASHFLOW STATEMENT ATTACHED
17
<PAGE> 1
EXHIBIT 4.1
DRAFT
================================================================================
WYNDHAM HOTEL CORPORATION
AS THE COMPANY
THE SUBSIDIARIES LISTED ON THE
SIGNATURE PAGES HERETO,
AS GUARANTORS
AND
BANK ONE, COLUMBUS, N.A.
AS TRUSTEE
___________________________________
INDENTURE
DATED AS OF MAY , 1996
___________________________________
__% SENIOR SUBORDINATED NOTES DUE 2006
================================================================================
<PAGE> 2
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.3 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . 25
SECTION 1.4 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE TWO
THE NOTES
SECTION 2.1 Form, Dating and Denomination . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.2 Additional Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.3 Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.4 Registrar and Paying Agent; Agents Generally . . . . . . . . . . . . . . . . . 28
SECTION 2.5 Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.6 Holders Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.7 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.8 Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.9 Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.10 Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.12 CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.13 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE THREE
REDEMPTION
SECTION 3.1 Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.2 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.3 Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.4 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
__________________________________
*Note: The Table of Contents shall not for any purposes be deemed to be a
part of the Indenture.
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SECTION 3.5 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.6 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.7 Payment of Notes Called for Redemption . . . . . . . . . . . . . . . . . . . . 36
SECTION 3.8 Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE FOUR
COVENANTS
SECTION 4.1 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.3 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.4 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.5 Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.6 Limitation on the Issuance of Capital Stock of Restricted Subsidiaries . . . . 46
SECTION 4.7 Limitation on Issuances of Guarantees by Restricted Subsidiaries . . . . . . . 46
SECTION 4.8 Limitation on Transactions with Stockholders and Affiliates . . . . . . . . . 47
SECTION 4.9 Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.10 Limitation on Other Subordinated Indebtedness . . . . . . . . . . . . . . . . 52
SECTION 4.11 Limitation on Line of Business . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.12 Repurchase of Notes upon a Change of Control . . . . . . . . . . . . . . . . . 53
SECTION 4.13 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.14 Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 4.15 Maintenance of Properties and Insurance . . . . . . . . . . . . . . . . . . . 56
SECTION 4.16 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.17 Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 4.18 Commission Reports and Reports to Holders . . . . . . . . . . . . . . . . . . 57
SECTION 4.19 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . 58
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.1 When Company May Merge, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 5.2 Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
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ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.2 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 6.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.4 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 6.5 Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.6 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.7 Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.8 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.9 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.12 Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 6.13 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 6.14 Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE SEVEN
TRUSTEE
SECTION 7.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.2 Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 7.3 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 7.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 7.6 Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.7 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.8 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 7.9 Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.10 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.11 Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 7.12 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.1 Termination of Company's Obligations . . . . . . . . . . . . . . . . . . . . . 73
SECTION 8.2 Defeasance and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . 74
SECTION 8.3 Defeasance of Certain Obligations . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 8.4 Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 8.5 Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 8.6 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 9.2 With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 9.3 Revocation and Effect of Consent . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 9.4 Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 9.5 Trustee to Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 9.6 Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE TEN
SUBORDINATION
SECTION 10.1 Notes Subordinated to Senior Indebtedness . . . . . . . . . . . . . . . . . . 84
SECTION 10.2 No Payment on Notes in Certain Circumstances . . . . . . . . . . . . . . . . . 84
SECTION 10.3 Notes Subordinated to Prior Payment of All Senior Indebtedness on
Dissolution, Liquidation or Reorganization of Company . . . . . . . . . . . . 86
SECTION 10.4 Securityholders to be Subrogated to Rights of Holders of Senior
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 10.5 Obligations of the Company Unconditional . . . . . . . . . . . . . . . . . . . 88
SECTION 10.6 Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice . . . 89
SECTION 10.7 Application by Trustee of Assets Deposited with It . . . . . . . . . . . . . . 89
SECTION 10.8 Subordination Rights Not Impaired by Acts or Omissions of the Company or
Holders of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 10.9 Securityholders Authorize Trustee to Effectuate Subordination of Notes . . . . 90
SECTION 10.10 Right of Trustee to Hold Senior Indebtedness . . . . . . . . . . . . . . . . . 91
SECTION 10.11 Article Ten Not to Prevent Events of Default . . . . . . . . . . . . . . . . . 91
SECTION 10.12 No Fiduciary Duty of Trustee to Holders of Senior Indebtedness . . . . . . . . 91
</TABLE>
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ARTICLE ELEVEN
SUBSIDIARY GUARANTEES
SECTION 11.1 Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 11.2 Subordination of Subsidiary Guarantee . . . . . . . . . . . . . . . . . . . . 93
SECTION 11.3 Limits of Subsidiary Guarantees. . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 11.4 Release of a Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.1 Trust Indenture Act of 1939 . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 12.3 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . 96
SECTION 12.4 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . 96
SECTION 12.5 Rules by Trustee, Paying Agent or Registrar . . . . . . . . . . . . . . . . . 96
SECTION 12.6 Payment Date Other Than a Business Day . . . . . . . . . . . . . . . . . . . . 97
SECTION 12.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 12.8 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . 97
SECTION 12.9 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 12.10 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 12.11 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 12.12 Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
SECTION 12.13 Table of Contents and Headings. . . . . . . . . . . . . . . . . . . . . . . . 98
SIGNATURES
EXHIBIT A Form of Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
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<PAGE> 7
INDENTURE, dated as of May , 1996, among Wyndham Hotel
Corporation, a Delaware corporation, as the Company, the Subsidiaries listed on
the signature pages hereto, as Guarantors (each, a "Guarantor") and Bank One,
Columbus, N.A., an Ohio state banking corporation, as Trustee (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the execution and delivery
of this Indenture to provide for the issuance of up to $100,000,000 aggregate
principal amount of the Company's __% Senior Notes Due 2006 (the "Notes")
issuable as provided in this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid
indenture and agreement according to its terms have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the Notes by
the holders thereof, the Company, the Guarantors and the Trustee mutually
covenant and agree for the equal and proportionate benefit of the respective
holders from time to time of the Notes as follows:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (i)
existing at the time such Person merged with or into the Company or a
Restricted Subsidiary or became a Restricted Subsidiary or (ii) assumed in
connection with the acquisition by the Company or a Restricted Subsidiary of
assets from such Person.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined in conformity with GAAP; provided that the following
items shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income (or loss) of any Person that is not a
Restricted Subsidiary, except to the extent of the amount of dividends or other
distributions that both (x) are actually paid in cash to the Company or any of
its Restricted Subsidiaries by such Person during such period
<PAGE> 8
and (y) when taken together with all other dividends and distributions paid
during such period in cash to the Company or any of its Restricted Subsidiaries
by such Person, are not in excess of the Company's or any of its Restricted
Subsidiaries' pro rata share of such other Person's aggregate net income earned
during such period; (ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of Section 4.4 (and in such case, except to the extent includable
pursuant to clause (i) above), the net income of any Person accrued prior to
the date it becomes a Restricted Subsidiary or is merged into or consolidated
with the Company or any of its Restricted Subsidiaries or all or substantially
all of the property and assets of such Person are acquired by the Company or
any of its Restricted Subsidiaries; (iii) the net income (or loss) of any
Restricted Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of such net
income is not permitted by its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
Restricted Subsidiary; (iv) any net gains or losses (on an after-tax basis)
attributable to Asset Sales; and (v) all net after-tax extraordinary gains and
extraordinary losses.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent, transfer agent or
Authenticating Agent or co-Registrar.
"Asset Acquisition" means (i) an investment by the Company or any
of its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary or shall be merged into or
consolidated with the Company or any of its Restricted Subsidiaries; (ii) an
acquisition by the Company or any of its Restricted Subsidiaries of property or
assets of any Person other than the Company or any of its Restricted
Subsidiaries that constitute substantially all of a division or line of
business, or one or more hotel properties or other material properties to be
used in a Hospitality-Related Business, of
2
<PAGE> 9
such Person or (iii) the entering into by the Company or any of its Restricted
Subsidiaries of a contract to manage, lease, operate or franchise one or more
hotel properties or other material properties to be used in a Hospitality-
Related Business, but only in a transaction or series of related transactions
involving three or more of such contracts.
"Asset Disposition" means (i) the sale of other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary) of (A) all or substantially all of the Capital
Stock of any Restricted Subsidiary or (B) all or substantially all of the
assets that constitute a division or line of business, or one or more hotel
properties or other material properties used in a Hospitality-Related Business,
of the Company or any of its Restricted Subsidiaries or (ii) the termination of
a contract to manage, lease, operate or franchise one or more hotel properties
or other material properties used in a Hospitality-Related Business to which
the Company or any of its Restricted Subsidiaries was a party, but only in a
transaction or series of related transactions involving three or more of such
contracts.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transactions) in
one transaction or a series of related transactions by the Company or any of
its Restricted Subsidiaries of all or any of its property, business or assets
(including, with limitation, the Capital Stock of any Restricted Subsidiary);
provided that the following shall not be included within the meaning of "Asset
Sale": (i) any conveyance, sale, lease, transfer or other disposition by a
Restricted Subsidiary of the Company of any or all of its assets (upon
voluntary liquidation or otherwise) to the Company or a Restricted Subsidiary
of the Company that is a Guarantor; (ii) any conveyance, sale, lease, transfer
or other disposition by the Company or any Restricted Subsidiary of the Company
in the ordinary course of business of assets acquired and held for resale in
the ordinary course of business; (iii) any conveyance, sale, lease, transfer or
other disposition by the Company and its Restricted Subsidiaries of assets
pursuant to and in accordance with the provisions described under Section 5.1;
(iv) any sale, lease, transfer or other disposition by the Company or any
Restricted Subsidiary of the Company of damaged, worn out or other obsolete
property in the ordinary course of business; (v) any abandonment by the Company
or any Restricted Subsidiary of the Company of assets and properties that are
no longer useful in its business and cannot be sold; or (vi) any transfer by
the Company or any Restricted Subsidiary of the Company of any Capital Stock of
3
<PAGE> 10
any Restricted Subsidiary of the Company to the Company or any Restricted
Subsidiary of the Company that is a Guarantor.
"Average Life" means, at any date of determination with respect to
any debt security, the quotient obtained by dividing (i) the sum of the
products of (A) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security and
(B) the amount of such principal payment by (ii) the sum of all such principal
payments.
"Board of Directors" means the Board of Directors of the Company or
any committee of such Board of Directors duly authorized to act under this
Indenture.
"Board Resolution" means a resolution, certified by the Secretary
of the Company to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day, other than a Saturday or Sunday, that
is neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close in The City of New York or
in the city in which the Corporate Trust Office of the Trustee is located.
"Capital Contribution Notes" means those three certain promissory
notes, each payable to Wyndham Management Corporation, a Subsidiary of the
Company, one executed as of December 22, 1995 by WHC-LG Hotel Partners L.P., a
Texas limited partnership, in the original principal amount of $4,115,263,
another executed as of October 2, 1995 by Pleasanton Hotel Partners, L.P., a
Texas limited partnership, in the original principal amount of $1,350,000, and
another executed as of May 26, 1995 by New Orleans Hotel I, L.P., a Texas
limited partnership, in the original principal amount of $966,000.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's capital stock or other ownership
interests, whether now outstanding or issued after the date of this Indenture,
including, without limitation, all common stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such Person; and
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<PAGE> 11
"Capitalized Lease Obligation" means the rental obligations, as aforesaid,
under such lease.
"Change of Control" means (i) any sale, transfer or other
conveyance, whether direct or indirect, of a majority of the fair market value
of the assets of the Company, on a consolidated basis, in one transaction or
series of related transactions, to any Person or Persons other than the Company
or one or more of its Restricted Subsidiaries; (ii) any "person" or "group" (as
such terms are used for the purposes of Section 13(d) and 14(d) of the Exchange
Act, whether or not applicable), other than an Excluded Person or Excluded
Group, is or becomes the "beneficial owner" (as such term is used in Rule 13d-3
promulgated pursuant to the Exchange Act), directly or indirectly, of more than
45% of the total voting power in the aggregate of all classes of Capital Stock
of the Company then outstanding normally entitled to vote in elections of
directors; or (iii) during any period of two consecutive years after the
Closing Date, individuals who at the beginning of any such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board or whose nomination for election by the stockholders of
the Company was approved by a majority of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
"Closing Date" means the date and time at which the Notes are
originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's common stock, whether now
outstanding or issued after the date of this Indenture, including, without
limitation, all series and classes of such common stock.
"Company" means the party named as such in the first paragraph of
this Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means the successor.
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<PAGE> 12
"Company Order" means a written request or order signed in the name
of the Company (i) by its Chairman, its President, an Executive Vice President
or a Vice President and (ii) by its Chief Financial Officer, Treasurer, an
Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to
the Trustee; provided, however, that such written request or order may be
signed by any two of the officers or directors listed in clause (i) above in
lieu of being signed by one of such officers or directors listed in such clause
(i) and one of the officers listed in clause (ii) above.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) income taxes, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income (other than income taxes (either
positive or negative) attributable to extraordinary and non-recurring gains or
losses or sales of assets), (iv) depreciation expense, to the extent such
amount was deducted in calculating Adjusted Consolidated Net Income, (v)
amortization expense, to the extent such amount was deducted in calculating
Adjusted Consolidated Net Income, (vi) all other non-cash items reducing
Adjusted Consolidated Net Income, less all non-cash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in conformity with GAAP and (vii) all
but the principal components of rentals in respect of Capitalized Lease
Obligations paid, accrued or scheduled to be paid or to be accrued by the
Company and its Restricted Subsidiaries during such period; provided, that, if
any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the Adjusted
Consolidated Net Income attributable to such Subsidiary multiplied by (B) the
quotient of (1) the number of shares of outstanding common stock of such
Subsidiary not owned on the last day of such period by the Company or any of
its Restricted Subsidiaries divided by (2) the total number of shares of
outstanding common stock of such Subsidiary on the last day of such period.
"Consolidated Fixed Charge Coverage Ratio" means, on any
Transaction Date, the ratio of (i) the sum of (x) the aggregate amount of
Consolidated EBITDA for the four fiscal quarters for which financial
information in respect thereof is available immediately prior to such
Transaction Date (the "Reference Period") and (y) one-third of the rental
expense of the Company and its Restricted Subsidiaries during such period
attributable to operating leases with an initial term, including any renewals
at the option of either party, in
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excess of one year to (ii) the aggregate Consolidated Fixed Charges during such
Reference Period. In making the foregoing calculation, (A) pro forma effect
shall be given to (1) any Indebtedness Incurred subsequent to the end of the
Reference Period and prior to the Transaction Date, (2) any Indebtedness
Incurred during such Reference Period to the extent such Indebtedness is
outstanding at the Transaction Date and (3) any Indebtedness to be Incurred on
the Transaction Date, in each case as if such Indebtedness had been Incurred on
the first day of such Reference Period and after giving pro forma effect to the
application of the proceeds thereof as if such application had occurred on such
first day; (B) Consolidated Interest Expense attributable to interest on any
Indebtedness (whether existing or being Incurred) computed on a pro forma basis
and bearing a floating interest rate shall be computed as if the rate in effect
on the Transaction Date (taking into account any Interest Rate Protection
Agreement applicable to such Indebtedness if such Interest Rate Protection
Agreement has a remaining term in excess of 12 months) had been the applicable
rate for the entire period; (C) there shall be excluded from Consolidated Fixed
Charges any Consolidated Fixed Charges related to any amount of Indebtedness,
Redeemable Stock or obligations under leases that was outstanding during such
Reference Period or thereafter but that is not outstanding or is to be repaid
on the Transaction Date, except for Consolidated Interest Expense accrued (as
adjusted pursuant to clause (B) above) during such Reference Period under a
revolving credit or similar arrangement to the extent of the commitment
thereunder (or under any successor revolving credit or similar arrangement) in
effect on the Transaction Date; (D) pro forma effect shall be given to Asset
Dispositions and Asset Acquisitions (including those in connection with the
Formation) (including giving pro forma effect to the application of proceeds of
any Asset Disposition) that occur during such Reference Period or thereafter
and on or prior to the Transaction Date as if they had occurred and such
proceeds had been applied on the first day of such Reference Period; (E) with
respect to any such Reference Period commencing prior to the Closing Date, the
issuance of the Notes and the consummation of the other transactions
constituting the Formation and the Financing Plan shall be deemed to have taken
place on the first day of such Reference Period; and (F) pro forma effect shall
be given to asset dispositions and asset acquisitions (including giving pro
forma effect to the application of proceeds of any asset disposition) that have
been made by any Person that has become a Restricted Subsidiary or has been
merged with or into the Company or any Restricted Subsidiary during such
Reference Period or subsequent to such period and prior to the Transaction Date
and that would have constituted Asset Dispositions or Asset Acquisitions had
such transactions
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<PAGE> 14
occurred when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions, respectively, that occurred on the first day of such Reference
Period; provided that to the extent that clause (D) or (F) of this sentence
requires that pro forma effect be given to an asset acquisition or asset
disposition, such pro forma calculation shall be based upon the four full
fiscal quarters immediately preceding the Transaction Date of the Person, or
property or assets of the Person (if such property or assets consist of a
division or line of business of such Person), that is acquired or disposed for
which financial information is available.
"Consolidated Fixed Charges" means, for any period, the sum
(without duplication) of (i) Consolidated Interest Expense for such period,
(ii) the interest component of rentals in respect of Capitalized Lease
Obligations paid, accrued or scheduled to be paid or to be accrued by the
Company and its Restricted Subsidiaries during such period, (iii) one-third of
the rental expense of the Company and its Restricted Subsidiaries during such
period attributable to operating leases with an initial term, including any
renewals at the option of either party, in excess of one year, (iv) any amount
paid as dividends on Preferred Stock of the Company during such period and (v)
the product of (x) cash and non-cash dividends (except dividends payable solely
in shares of Capital Stock that are not Redeemable Stock) paid, declared,
accrued or accumulated on any Redeemable Stock of the Company or a Restricted
Subsidiary that is held by a Person other than the Company or a Restricted
Subsidiary and (y) a fraction, the numerator of which is one and the
denominator of which is one minus the sum of the currently effective combined
Federal, state, local and foreign tax rate of the Company and its Restricted
Securities.
"Consolidated Interest Expense" means, for any period, without
duplication, the aggregate amount of interest in respect of Indebtedness of the
Company and its Restricted Subsidiaries (including amortization of original
issue discount on any Indebtedness and the interest portion of any deferred
payment obligation, calculated in accordance with the effective interest method
of accounting; all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing; the net costs
associated with Interest Rate Protection Agreements; and interest on
Indebtedness that is Guaranteed by the Company or any of its Restricted
Subsidiaries); excluding, however, any amount of such interest of any
Restricted Subsidiary if the net income of such Restricted Subsidiary is
excluded in the calculation of Adjusted Consolidated Net Income pursuant to
clause (iii) of the definition thereof (but only in the same
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<PAGE> 15
proportion as the net income of such Restricted Subsidiary is excluded from the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof).
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity of the Company and its Restricted Subsidiaries, less, if
included in such stockholders' equity, any amounts attributable to Redeemable
Stock or any equity security convertible into or exchangeable for Indebtedness
prior to the Stated Maturity of the Notes.
"Corporate Trust Office" means the office of the Trustee at which
the corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at _________________________________________________. Attention:
Corporate Trust Administration.
"Credit Agreement" means the Revolving Credit Facility (or, if the
Revolving Credit Facility is not entered into as described in the Prospectus, a
similar senior credit or loan facility entered into by the Company and one or
more lenders), as such may be amended, supplemented, extended, renewed,
replaced or modified from time to time, including, without limitation, by
adding parties thereto or increasing the commitment thereunder. Without
limiting the foregoing, any replacement of the Revolving Credit Facility (or a
replacement facility) need not consist solely of a revolving credit facility,
need not be entered into (or effective) contemporaneously with the termination
of the Revolving Credit Facility (or such replacement) and need not involve the
same lenders as the Revolving Credit Facility (or such replacement). There can
only be one such credit agreement designated to be the "Credit Agreement" at
any one time, although there may be more than one facility thereunder.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
the Company or any of its Restricted Subsidiaries against fluctuations in
currency values to or under which the Company or any of its Restricted
Subsidiaries is a party or a beneficiary on the date of this Indenture or
becomes a party or a beneficiary thereafter.
"DAB Note" means [to come from LPRH]
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default as defined in Section 6.1.
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"Depositary" means The Depositary Trust Company until a successor
Depositary shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Depositary" shall mean or include each Person who is
then a Depositary hereunder.
"Designated Senior Indebtedness" means Senior Indebtedness of the
Company in respect of the Revolving Credit Facility or, after all Senior
Indebtedness of the Company in respect of the Revolving Credit Facility has
been paid in full and the Revolving Credit Facility shall have been terminated,
Indebtedness that otherwise would constitute Senior Indebtedness in respect of
any refinancing or replacement thereof or, if there is no such refinancing or
replacement thereof, or after all Indebtedness of the Company in respect of any
such refinancing or replacement has been paid in full, "Designated Senior
Indebtedness" shall mean any class of Senior Indebtedness the aggregate
principal amount outstanding of which exceeds $10 million and which is
specifically designated in the instrument evidencing such Senior Indebtedness
or the agreement under which such Senior Indebtedness arises as "Designated
Senior Indebtedness."
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Group" means a "group" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) that includes one or more Excluded
Persons; provided that the voting power of the Capital Stock of the Company
"beneficially owned" (as such term is used in Rule 13d-3 promulgated under the
Exchange Act) by such Excluded Persons (without attribution to such Excluded
Persons of the ownership by other members of the "group") represents not less
than 75% of the voting power of the Capital Stock "beneficially owned" (as such
term is used in Rule 13d-3 promulgated under the Exchange Act) by such group.
"Excluded Person" means each of (i) Mr. or Mrs. Trammell Crow, any
lineal descendant of Mr. or Mrs. Trammell Crow, any trust of which not less
than 75% of the beneficial interests are held by Mr. or Mrs. Trammell Crow or
such lineal descendants or any partnership, corporation or other entity of
which not less than 75% of the outstanding equity interests are owned directly
or indirectly by Mr. or Mrs. Trammell Crow or such lineal descendants, (ii)
Wynopt Investment Partnership Level II, a Delaware limited partnership ("Wynopt
II"), Wynopt Investment Partnership, a Delaware limited partnership ("Wynopt"),
or an Affiliate of Wynopt II or Wynopt (x) of which not less than 75% of the
outstanding equity interests are owned directly or indirectly by the direct or
indirect
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owners of the outstanding equity interests of Wynopt II and Wynopt as of the
Closing Date and (y) the business and affairs of which are controlled by Donald
J. McNamara, Robert A. Whitman and Daniel A. Decker or any one or more of them
and (iii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company.
"Existing Real Estate" means any real estate owned, leased or
optioned by the Company or any of its Subsidiaries on the Closing Date, or any
real estate on which the Company or any of its Subsidiaries holds a mortgage on
the Closing Date.
"Financing Plan" means the transactions referred to as the
"Financing Plan" in the Prospectus.
"Formation" means the transactions contemplated by the Formation
Agreement dated as of March 10, 1996, among the Company and the parties
identified on the signature pages thereof, the Transfer Agreement dated as of
_____, 1996, among the Company, Bank of Nova Scotia, Bank of Nova Scotia
(Jamaica) and Caribbean Hotel Management Company, and the Exchange Agreement
dated as of March 10, 1996, among the Company, Wyndham Hotel Company Ltd.,
Wynopt Investment Partnership Level II, L.P., Wynopt Investment Partnership,
L.P., and The Hampstead Group L.L.C. and joined in by Bedrock Hotel Partners,
L.L.C.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date of this Indenture, including,
without limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession.
"GHALP Lease" means (to come from LPRH)
"Global Note" means a Note in global registered form evidencing all
or a part of the Notes and issued to the Depositary in accordance with Section
2.1.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other
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<PAGE> 18
obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning. Notwithstanding
the foregoing, the term "Guarantee" shall not include any customary contractual
indemnity obligation entered into by a Person in the ordinary course of
business consistent with past practice, which obligation (i) is in the nature
of a "completion guarantee", "shortfall guarantee", "performance guarantee" or
similar obligation entered into in connection with the acquisition, amendment
or other modification of a contract to manage, lease, operate or franchise a
hotel property (or other property or asset used or to be used in a
Hospitality-Related Business) not owned by the Company or the extension of such
a contract beyond its stated terms (provided that, if such hotel property (or
other property or asset used or to be used in a Hospitality-Related Business)
is owned by a Related Party, such Investment must satisfy the requirements of
the provisions described under Section 4.8) or (ii) relates to fraud, willful
misconduct, misrepresentation, misapplication of funds, reckless damage to
assets or matters of similar import or customary undertakings with respect to
environmental matters or construction defects.
"Guarantor" means (i) each party named as such in the first
paragraph of this Indenture until a successor replaces it pursuant to Article
Five of this Indenture and thereafter means the successor and (ii) each Person
that becomes obligated with respect to a Subsidiary Guarantee subsequent to the
date hereof by means of an indenture supplemental hereto.
"Guarantor Designated Senior Indebtedness" means Guarantor Senior
Indebtedness (including any Guarantee) of any Guarantor in respect of the
Revolving Credit Facility or, after all Guarantor Senior Indebtedness of the
Guarantor in respect of the Revolving Credit Facility has been paid in full and
the Revolving Credit Facility shall have been terminated, Indebtedness of such
Guarantor that otherwise would constitute Guarantor Senior Indebtedness in
respect of any refinancing or replacement thereof or, if there is no such
refinancing or replacement thereof, or after all Indebtedness of the Guarantor
in respect of any such refinancing or replacement
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has been paid in full, "Guarantor Designated Senior Indebtedness" shall mean
any class of Guarantor Senior Indebtedness the aggregate principal amount
outstanding of which exceeds $10 million and which is specifically designated
in the instrument evidencing such Guarantor Senior Indebtedness or the
agreement under which such Guarantor Senior Indebtedness arises as "Designated
Guarantor Senior Indebtedness".
"Guarantor Senior Indebtedness" means (i) Indebtedness of any
Guarantor (other than, as to each Subsidiary Guarantee, the other Subsidiary
Guarantees), except (A) Redeemable Stock of such Guarantor, (B) any obligation
of such Guarantor to the Company or any Subsidiary of the Company, (C) any
Indebtedness of such Guarantor that, by its terms or the terms of the
instrument creating or evidencing such Indebtedness, is pari passu with or
expressly subordinate in right of payment to the Subsidiary Guarantee of such
Guarantor and (D) any Indebtedness of such Guarantor incurred in violation of
the covenant described under Section 4.10 and (ii) obligations of GHALP
Corporation under the GHALP Lease.
"Holder" means the holder of a Note.
"Hospitality-Related Business" means the hotel, resort, extended
stay lodging, senior living, travel, travel agency, other hospitality, vacation
or travel-related business or any casino, recreational or athletic-related
business and other businesses necessary for, incident to, in support of, in
connection with or arising out of such business, including, without limitation,
(i) developing , managing, operating, improving or acquiring lodging
facilities, restaurants and other food-service facilities, sports or other
entertainment facilities or club, convention or meeting facilities, and
marketing services related thereto, (ii) acquiring, developing, managing or
improving the Existing Real Estate, any real estate taken in foreclosure (or
similar settlement) by the Company or any of its Subsidiaries, or any real
estate ancillary or connected to any hotel, resort, extended stay lodging,
senior living, travel, travel agency, other hospitality, vacation or
travel-related business or any casino, recreational or athletic-related
business constructed, leased, owned, managed or operated (or proposed to be
constructed, leased, owned, managed or operated) by the Company or any of its
Restricted Subsidiaries at any time and (iii) other activities related thereto.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness;
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provided that (i) the Indebtedness of a Person existing at the time such Person
became a Subsidiary or a Restricted Subsidiary, as the case may be, shall be
deemed to have been Incurred by such Subsidiary or Restricted Subsidiary, as
the case may be, and (ii) that neither the accrual of interest nor the
accretion of original issue discount shall be considered an Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), whether or not Incurred at the date of
this Indenture (i) all indebtedness of such Person for borrowed money
(including all Obligations in respect thereof, but excluding indebtedness
resulting from the inadvertent honoring by a financial institution, against
insufficient funds, of a check, draft or similar instrument (provided that such
indebtedness is extinguished within four business days)), (ii) all Obligations
of such Person evidenced by or in respect of bonds, debentures, notes or other
similar instruments, (iii) all Obligations of such Person in respect of
bankers' acceptance, letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business), (v) all obligations of such Person as lessee
under Capitalized Leases, (vi) all Indebtedness of other Persons secured by a
Lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person; (provided that the amount of such Indebtedness shall be the
lesser of (A) the fair market value of such asset at such date of determination
and (B) the amount of such Indebtedness), (vii) all Indebtedness of other
Persons Guaranteed by such Person to the extent such Indebtedness is Guaranteed
by such Person, (viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Protection Agreements,
(ix) the liquidation preference and any mandatory redemption payment
obligations (without duplication) of any Restricted Subsidiary of such Person
in respect of Preferred Stock issued by such Restricted Subsidiary and (x) the
maximum fixed redemption or repurchase price of any Redeemable Stock issued by
such Person. In addition, "Indebtedness" of any Person shall include
Indebtedness described in the foregoing clauses (i), (ii) or (iv) that would
not appear as a liability on the balance sheet of such Person if (1) such
Indebtedness is the obligation of a partnership or joint venture that is not a
Restricted Subsidiary of such Person (a "Joint Venture"), (2) such Person or a
Restricted Subsidiary is a general partner of the Joint Venture (a "General
Partner") and (3) there is recourse, by contract or operation of law, with
respect to the
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<PAGE> 21
payment of such Indebtedness to property or assets of such Person or a
Restricted Subsidiary; and such Indebtedness shall be included in an amount not
to exceed (x) the greater of (A) the net assets of the General Partner and (B)
the amount of such obligations to the extent that there is recourse, by
contract or operation of law, to the property or assets of such Person or a
Restricted Subsidiary of such Person (other than the General Partner) or (y) if
less than the amount determined pursuant to clause (x) immediately above, the
actual amount of such Indebtedness that is recourse to such Person, if the
Indebtedness is evidenced by a writing and is for a determinable amount.
Without limiting the foregoing, there shall not be considered to be recourse,
by contract or operation of law, with respect to the payment of any
Indebtedness to property or assets of such Person or a Restricted Subsidiary
solely by reason of the existence of any customary contractual indemnity
obligation entered into by such Person or a Restricted Subsidiary in the
ordinary course of business consistent with past practice and in connection
with the Incurrence of such Indebtedness, which obligation (i) is in the nature
of a "completion guarantee," "shortfall guarantee," "performance guarantee" or
similar obligation entered into in connection with the acquisition, amendment
or other modification of a contract to manage, lease, operate or franchise a
hotel property (or other property or asset used or to be used in a
Hospitality-Related Business) not owned by the Company or the extension of such
a contract beyond its stated term (provided that, if such hotel property (or
other property or asset used or to be used in a Hospitality-Related Business)
is owned by a Related Party, such Investment must satisfy the requirements of
the provisions described under Section 4.8) or (ii) relates to fraud, willful
misconduct, misrepresentation, misapplication of funds, reckless damage to
assets or matters of similar import or customary undertakings with respect to
environmental matters or construction defects. The amount outstanding at any
time of any Indebtedness issued with original issue discount is the face amount
of such Indebtedness less the remaining unamortized portion of the original
issue discount of such Indebtedness at such time as determined in conformity
with GAAP.
"Independent Directors" means any director of the Company who is
not employed by the Company or employed by, a director of or otherwise
affiliated with any Related Party.
"Indenture" means this Indenture as originally executed or as it
may be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
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<PAGE> 22
"Interest Payment Date" has the meaning set forth in Exhibit A.
"Interest Rate Protection Agreement" means any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement designed to protect the Company or any of its Restricted
Subsidiaries against fluctuations in interest rates to or under which the
Company or any of its Restricted Subsidiaries is a party or a beneficiary on
the date of this Indenture or becomes a party or a beneficiary hereafter.
"Investment" means any direct or indirect advance, loan or other
extension of credit (other than advances to customers in the ordinary course of
business that are, in conformity with GAAP, recorded as accounts receivable on
the balance sheet of the Company or its Restricted Subsidiaries) or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the account or use of others), or
any purchase or acquisition of Capital Stock, bonds, notes, debentures or other
similar instruments issued by any other Person. For purposes of the definition
of "Unrestricted Subsidiary" and Section 4.4, (i) "Investment" shall include
the fair market value of the assets (net of liabilities) of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the fair market value of the assets
(net of liabilities) of any Unrestricted Subsidiary at the time that such
Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) any
property transferred to or from any Person shall be valued at its fair market
value at the time of such transfer, in each case as determined by the Board of
Directors in good faith.
"Investment Company Act of 1940" means the Investment Company Act
of 1940, as amended.
"Junior Indebtedness" means Indebtedness of any Person that (i)
requires no payment of Principal prior to or on the date on which all Principal
of, premium, if any, and interest on the Notes is paid in full and (ii) is
subordinate and junior in right of payment to the Notes in all respects.
"Junior Securities" of any Person means securities (including
shares of Capital Stock that is not Redeemable Junior Stock) issued by such
Person to a Holder on account of the Notes pursuant to an order or decree of a
court of competent jurisdiction in a Reorganization, which securities
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<PAGE> 23
(i) have a maturity, mandatory redemption obligation or put right, if any,
longer than, or occurring after the scheduled maturity date of, all Senior
Indebtedness outstanding on the date of issuance of such Junior Securities (and
to any securities issued in exchange for any Senior Indebtedness), (ii) are
unsecured and (iii) by their terms or by law are subordinated to the Senior
Indebtedness of such Person outstanding on the date of issuance of such Junior
Securities (and to any securities in exchange of any such Senior Indebtedness)
at least to the same extent as the Notes are subordinated to the payment of the
Senior Indebtedness pursuant to this Indenture.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof, any option
or other agreement to sell, or any filing of or any agreement to give any
security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of counsel, Qualified
Appraisers, accountants and investment bankers) related to such Asset Sale,
(ii) provisions for all taxes (whether or not such taxes will actually be paid
or are payable, and specifically including, without limitation, taxes
attributable to required prepayments or repayments of Indebtedness with the
proceeds of such Asset Sale) as a result of such Asset Sale without regard to
the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to prepay or repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale, (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary as a reserve against any
liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP and
(v) amounts
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required to be paid to any Person (other than the Company or a Restricted
Subsidiary) in respect of such Person's ownership interest in the property or
assets that are the subject of such Asset Sale.
"Non-Recourse Indebtedness" means Indebtedness (i) as to which
neither the Company nor any of its Significant Subsidiaries (A) provides credit
support (other than in the form of a Lien on an asset serving as security for
Non-Recourse Indebtedness) pursuant to any undertaking, agreement or instrument
that would constitute Indebtedness, (B) is directly or indirectly liable (other
than in the form of a Lien on an asset serving as security for Non-Recourse
Indebtedness) or (C) is the lender and (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against a Subsidiary of the Company that is not a Significant
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness (other than Indebtedness arising under the Credit Agreement)
of the Company or any of its Significant Subsidiaries to declare a default on
such Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity. Without limiting the foregoing, no Indebtedness
shall be considered Recourse Indebtedness solely by reason of the existence of
any customary contractual indemnity obligation entered into by the Company or a
Restricted Subsidiary in the ordinary course of business consistent with past
practice and in connection with the Incurrence of such Indebtedness, which
obligation (i) is in the nature of a "completion guarantee," "shortfall
guarantee," "performance guarantee" or similar obligation entered into in
connection with the acquisition, amendment or other modification of a contract
to manage, lease, operate or franchise a hotel property (or other property or
asset used or to be used in a Hospitality-Related Business) not owned by the
Company or the extension of such a contract beyond its stated term (provided
that, if such hotel property (or other property or asset used or to be used in
a Hospitality-Related Business) is owned by a Related Party, such Investment
must satisfy the requirements of the provisions described under Section 4.8) or
(ii) relates to fraud, willful misconduct, misrepresentations, misapplication
of funds, reckless damage to assets or matters of similar import or customary
undertakings with respect to environmental matters or construction defects.
"Notes" means any of the securities, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered under
this Indenture.
"Obligations" means all obligations (whether in existence on the
date of this Indenture or arising thereafter)
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<PAGE> 25
for, or guaranteeing the payment of, Principal, premium, interest (including,
without limitation, all interest accrued or accruing after the commencement of
any Reorganization of any Person obligated with respect thereto in accordance
with and at the contract rate (including, without limitation, any rate
applicable upon default) specified in the agreement or instrument creating,
evidencing or governing any Indebtedness, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such case or proceeding), penalties, fees, indemnifications, reimbursements
and other amounts in respect of any Indebtedness, and any amendment, extension
or refunding of any of the foregoing, without duplication.
"Officer" means, with respect to the Company, the Chairman of the
Board, the President, the Chief Executive Officer, any Executive Vice
President, any Vice President, the Chief Financial Officer, the Treasurer or
any Assistant Treasurer, or the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed in the name of
the Company (i) by the Chairman of the Board, the President or the Chief
Executive Officer, or an Executive Vice President or a Vice President and (ii)
by the Chief Financial Officer, the Treasurer or any Assistant Treasurer, or
the Secretary or any Assistant Secretary, complying with Sections 12.3 (as
applicable) and 12.4 and delivered to the Trustee. Each such Certificate
shall comply with Section 314 of the Trust Indenture Act.
"Opinion of Counsel" means a written opinion signed by legal
counsel, who may be an employee of or counsel to the Company satisfactory to
the Trustee and complying with Sections 12.3 (as applicable) and 12.4. Each
such Opinion of Counsel shall comply with Section 314 of the Trust Indenture
Act and include the statements provided in Sections 12.3 (as applicable) and
12.4, if and to the extent required thereby.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's preferred or preference stock,
whether now outstanding or issued after the date of this Indenture, including,
without limitation, all series and classes of such preferred or preference
stock.
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"Principal" of a debt security, including the Notes, means the
principal amount due on the Stated Maturity as shown on such debt security.
"Prospectus" means the Company's Prospectus, dated May __, 1996,
relating to the Notes, which Prospectus forms a part of the Company's
registration statement on Form S-1, File No. 333-2214.
"Qualified Appraiser" means an appraiser that is a member of the
American Institute of Real Estate Appraisers (or any successor organization)
and is not an Affiliate of the Company or a holder of 5% or more of any class
of Capital Stock of the Company.
"Recourse Indebtedness" means Indebtedness that is not Non-Recourse
Indebtedness.
"Redeemable Junior Stock" of any Person means any class or series
of Capital Stock of any Person issued to a Holder on account of the Notes
pursuant to an order or decree of a court of competent jurisdiction in a
Reorganization, which securities are (i) required to be redeemed prior to the
scheduled final maturity date of all Senior Indebtedness outstanding on the
date of issuance of such Redeemable Junior Stock (and of any securities issued
in exchange for any Senior Indebtedness), (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to such
scheduled final maturity date or (iii) convertible into or exchangeable for
Capital Stock referred to in clause (i) or (ii) above or Indebtedness having a
scheduled maturity as to any principal amount prior to such scheduled final
maturity date; provided that Capital Stock shall not be deemed to be Redeemable
Junior Stock if it may only be so redeemed solely in consideration of Capital
Stock that is not Redeemable Junior Stock.
"Redeemable Stock" means any class or series of Capital Stock of
any Person that by its terms or otherwise is (i) required to be redeemed prior
to the Stated Maturity of the Notes, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Notes or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a
scheduled maturity prior to the Stated Maturity of the Notes; provided that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such Person to repurchase
or redeem such Capital Stock upon the occurrence of an "asset sale" or "change
of control" occurring prior to the Stated Maturity of the Notes shall not
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constitute Redeemable Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are no more favorable to the
holders of such Capital Stock than the provisions contained in Section 4.9 and
Section 4.12 and such Capital Stock specifically provides that such Person will
not repurchase or redeem any such stock pursuant to such provision prior to the
Company's repurchase of such Notes as are required to be repurchased pursuant
to the provisions of Section 4.9 and Section 4.12. Notwithstanding the
foregoing, Capital Stock shall not be deemed to be Redeemable Stock if it may
only be so redeemed solely in consideration of Capital Stock that is not
Redeemable Stock.
"Redemption Date", when used with respect to any Notes to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which such Note is to be redeemed pursuant to this
Indenture.
"Regular Record Date" has the meaning set forth in Exhibit A.
"Related Party" means any Affiliate of the Company or any holder
(or any Affiliate of such a holder) of 5% or more of any class of Capital Stock
of the Company.
"Reorganization" means, with respect to any Person, any
reorganization, bankruptcy, insolvency, receivership or other similar statutory
or common law proceedings or arrangements, including without limitation any
proceeding under Title 11, United States Code or any similar federal, state or
foreign law for the relief of debtors, involving such Person or the
readjustment of such Person's liabilities or any assignment for the benefit of
creditors or any marshaling of the assets or liabilities of such Person.
"Responsible Officer" means, when used with respect to the Trustee,
any senior trust officer, any vice president, any trust officer, any assistant
trust officer, or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively, or to whom any corporate
trust matter is referred because of his or her knowledge of and familiarity
with the particular subject.
"Restricted Investment" means any Investment in any Person other
than (i) an Investment in a Restricted Subsidiary that is a Guarantor or in any
Person that, as a result of such Investment, becomes a Restricted Subsidiary
that is a
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Guarantor, (ii) cash, (iii) U.S. Government Obligations, (iv) time deposits and
certificates of deposit or Eurodollar deposits due within one year of any
commercial bank whose outstanding senior long-term debt securities are rated
either A- or higher by Standard & Poor's Incorporated or A3 or higher by
Moody's Investors Service, Inc., (v) repurchase obligations with a term of not
more than 7 days for underlying securities of the types described in clause
(iii) of this paragraph with any bank meeting the qualifications specified in
clause (iv) of this paragraph, (vi) commercial paper rated at least A-1 or the
equivalent thereof by Standard & Poor's Incorporated or at least P-1 or the
equivalent thereof by Moody's Investor Service, Inc., maturing within one year
after the date of acquisition, (vii) an Investment in a money market mutual
fund substantially all of the assets of which are comprised of securities of
the types described in clauses (iii) through (vi) of this paragraph, (viii)
loans or advances made to employees in the ordinary course of business that do
not in the aggregate exceed $3 million at any time outstanding, (ix) other
Investments that do not in the aggregate exceed $10 million at any time
outstanding or (x) an Investment made in connection with the Formation.
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"Revolving Credit Facility" means [to come from LPRH], as such may
be amended, supplemented, extended, renewed or modified from time to time
including, without limitation, by adding parties thereto or increasing the
commitment thereunder.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means (i) Indebtedness of the Company and all
Obligations in respect thereof (other than, as to each Note, the other Notes),
whether or not Incurred in violation of this Indenture (except as provided in
clause (E) below), except (A) Redeemable Stock of the Company, (B) any
obligation of the Company to any Subsidiary of the Company, (C) any
Indebtedness of the Company that, by its terms or the terms of the instrument
creating or evidencing such Indebtedness, is pari passu with or expressly
subordinate in right of payment to the Notes and (D) any Indebtedness of the
Company Incurred in violation of the provisions of Section 4.10 and (ii)
Indebtedness evidenced by or in respect of debt securities issued by any person
to a holder of any Indebtedness referred to in clause (i) on account of such
Indebtedness pursuant to an order or decree of a court of competent
jurisdiction.
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"Significant Subsidiary" means any Restricted Subsidiary that would
be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X promulgated under the Securities Act, as such Regulation is in effect on
the date hereof.
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of Principal of such debt security is due and payable and (ii) with
respect to any scheduled installment of Principal of or interest on any debt
security, the date specified in such debt security as the fixed date on which
such installment is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the outstanding
Voting Stock is owned, directly or indirectly, by such Person and one or more
other Subsidiaries of such Person.
"Subsidiary Guarantee" means the Obligations of a Guarantor
pursuant to Article Eleven hereof.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted
Payment, the date such Restricted Payment is to be made.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended (15 U.S. Code Sections 77aaa-77bbb), as it may be amended from time
to time.
"Trustee" means the party named as such in the first paragraph of
this Indenture until a successor replaces it in accordance with the provisions
of Article Seven of this Indenture and thereafter means such successor.
"United States Bankruptcy Code" means the Bankruptcy Reform Act of
1978, as amended and as codified in Title 11 of the United States Code, as
amended from time to time hereafter, or any successor federal bankruptcy law.
"U.S. Government Obligations" means securities issued or directly
and fully guaranteed or insured by the United States of America or any agent or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof).
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"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary; provided that (i) such
designation would be permitted under Section 4.4, (ii) no portion of the
Indebtedness or any other obligation (contingent or otherwise) of such
Subsidiary (A) is Guaranteed by the Company or any Restricted Subsidiary, (B)
is Recourse Indebtedness or (C) subjects any property or asset of the Company
or any Restricted Subsidiary, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, and (iii) no default or event of
default with respect to any Indebtedness of such Subsidiary would permit any
holder of any Indebtedness of the Company or any Restricted Subsidiary to
declare such Indebtedness of the Company or any Restricted Subsidiary due and
payable prior to its maturity. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided
that immediately after giving effect to such designation (x) the Company could
Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) and
(y) no Default or Event of Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing provisions.
"Vinings Indebtedness" means the industrial revenue bond
Indebtedness, not to exceed $9.8 million in principal amount, to be assumed by
a Subsidiary of the Company in connection with the acquisition of the Vinings
Wyndham Garden Hotel, as defined in the Prospectus.
"Voting Stock" means with respect to any Person, Capital Stock of
any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
such Subsidiary if all of the outstanding
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Common Stock or other similar equity ownership interests (but not including
Preferred Stock) in such Subsidiary (other than any director's qualifying
shares or Investments by foreign nationals mandated by applicable law) is owned
directly or indirectly by such Person.
SECTION 1.2 Other Definitions. Each of the following terms is
defined in the section set forth opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acceleration Notice 6.2
Appraisable Assets 4.8
Additional Notes 2.2
Authenticating Agent 2.3
Change of Control Offer 4.12
Change of Control Payment 4.12
Change of Control Payment Date 4.12(ii)
CUSIP 2.12
Event of Default 6.1
Excess Proceeds 4.9
Excess Proceeds Offer 4.9
Excess Proceeds Payment 4.9
Excess Proceeds Payment Date 4.9(ii)
Guaranteed Indebtedness 4.7
Payment Blockage Period 10.2(b)
Permitted Indebtedness 4.3
Permitted Refinancing Indebtedness 4.3(iii)
Related Party Transaction 4.8
Restricted Payments 4.4
Security Register 2.4
Vinings Bond Documents 6.1(iv)
</TABLE>
SECTION 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the Trust Indenture Act, the
provision is incorporated by reference in and made a part of this Indenture.
The following terms used in this Indenture that are defined by the Trust
Indenture Act have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
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"obligor" on the indenture securities means the Company, the
Guarantor, or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the
Trust Indenture Act, defined by reference in the Trust Indenture Act to another
statute or defined by a rule of the Commission and not otherwise defined herein
have the meanings assigned to them therein.
SECTION 1.4 Rules of Construction. Unless the context
otherwise requires:
(i) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(ii) words in the singular include the plural, and words in the
plural include the singular;
(iii) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or
other subdivision;
(iv) all references to Sections or Articles refer to Sections
or Articles of this Indenture unless otherwise indicated; and
(v) use of masculine, feminine or neuter pronouns should not
be deemed a limitation, and the use of any such pronouns should be
construed to include, where appropriate, the other pronouns.
ARTICLE TWO
THE NOTES
SECTION 2.1 Form, Dating and Denomination. The Notes (except
as otherwise provided in this paragraph) and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A, which is part
of this Indenture. Subject to Sections 2.2 and 2.8 hereof, the Notes shall be
in an aggregate principal amount of $100,000,000. The Notes may have imprinted
or otherwise reproduced thereon such notations, legends or endorsements, not
inconsistent with the provisions of this Indenture, as may be required to
comply with any law, or with any rules of any securities exchange or usage, all
as may be determined by the officers executing such Notes as evidenced by their
execution of the Notes. Each Note shall be dated the date of its
authentication. The Notes shall be
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<PAGE> 33
issued initially in denominations of $1,000 of principal amount and integral
multiples thereof.
The Notes are to be issued in the form of one or more Global Notes.
The Company shall execute and the Trustee shall authenticate and deliver one or
more Global Notes that (i) shall represent and shall be denominated in an
amount equal to the aggregate principal amount of all of the Notes, (ii) shall
be registered in the name of the Depositary or the nominee of such Depositary,
(iii) shall be delivered by the Trustee to the Depositary or its custodian or
pursuant to the Depositary's instructions and (iv) shall bear a legend
substantially to the following effect: "Unless and until it is exchanged in
whole or in part for Notes in definitive registered form, this Note may not be
transferred except as a whole by the Depositary to the nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary."
SECTION 2.2 Additional Notes. The Company may issue
additional Notes under this Indenture in an aggregate principal amount not to
exceed $50,000,000 (the "Additional Notes"); provided that after giving effect
to any issuance of the Additional Notes and the application of the proceeds
therefrom, the Company could incur at least $1.00 of Indebtedness (other than
Permitted Indebtedness). If issued, the Holders of any Additional Notes will
be entitled to all the benefits of this Indenture granted to the Holders of
Notes and to the benefit of any Subsidiary Guarantees. Additional Notes, if
any, will be treated for all purposes as Notes under this Indenture.
SECTION 2.3 Execution and Authentication. Two Officers shall
execute the Notes for the Company by facsimile or manual signature in the name
and on behalf of the Company. The seal of the Company, if any, shall be
reproduced on the Notes. If an Officer whose signature is on a Note no longer
holds that office at the time the Note is authenticated, the Note shall
nevertheless be valid.
The Trustee, at the expense of the Company, may appoint an
authenticating agent (the "Authenticating Agent") to authenticate Notes. The
Authenticating Agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such Authenticating Agent.
A Note shall not be valid until the Trustee or Authenticating Agent
manually signs the certificate of
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<PAGE> 34
authentication on the Note. The signature shall be conclusive evidence that
the Note has been authenticated under this Indenture.
The Trustee shall, upon a Company Order, authenticate Notes for
original issue up to an aggregate principal amount stated in Section 2.1
hereof. The aggregate principal amount of Notes outstanding at any time may
not exceed the amount set forth herein, except as provided in Sections 2.2 and
2.8.
SECTION 2.4 Registrar and Paying Agent; Agents Generally. The
Company shall maintain an office or agency where Notes may be presented for
registration, registration of transfer or for exchange (the "Registrar") and an
office or agency where Notes may be presented for payment (the "Paying Agent"),
which shall be in the Borough of Manhattan, The City of New York. The Company
may appoint one or more co-registrars and one or more additional paying agents.
The term "Paying Agent" includes any additional paying agent. The Company
shall cause the Registrar to keep a register of the Registered Notes and of
their registration, transfer and exchange (the "Security Register"). At the
option of the Company, payment of interest may be made by check mailed to the
address of the Holders at such address as appears in the Security Register.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture and the Trust Indenture Act that relate to such
Agent. The Company shall give prompt written notice to the Trustee of the name
and address of any Agent and any change in the name or address of an Agent. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall
act as such. The Company may remove any Agent upon written notice to such
Agent and the Trustee; provided that no such removal shall become effective
until (i) the acceptance of an appointment by a successor Agent to such Agent
as evidenced by an appropriate agency agreement entered into by the Company and
such successor Agent and delivered to the Trustee or (ii) notification to the
Trustee that the Trustee shall serve as such Agent until the appointment of a
successor Agent in accordance with clause (i) of this proviso. The Company or
any Affiliate of the Company may act as Paying Agent or Registrar; provided
that neither the Company nor an Affiliate of the Company shall act as Paying
Agent in connection with the defeasance of the Notes or the discharge of this
Indenture under Article Eight.
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<PAGE> 35
The Company initially appoints the Trustee as Registrar, Paying
Agent and Authenticating Agent. If, at any time, the Trustee is not the
Registrar, the Registrar shall make available to the Trustee ten (10) days
prior to each interest payment date and at such other time as the Trustee may
reasonably request the names and addresses of the Holders as they appear in the
Security Register.
SECTION 2.5 Paying Agent to Hold Money in Trust. Not later
than 10:00 a.m. New York City time on each due date of any Principal or
interest on any Notes, the Company shall deposit with the Paying Agent money in
immediately available funds sufficient to pay such Principal or interest. The
Company shall require each Paying Agent other than the Trustee to agree in
writing that such Paying Agent shall hold in trust for the benefit of the
Holders of such Notes or the Trustee all money held by the Paying Agent for the
payment of Principal of, premium, if any, or interest on such Notes and shall
promptly notify the Trustee of any default by the Company or Guarantor, if any,
in making any such payment. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee and account for any funds disbursed,
and the Trustee may at any time during the continuance of any payment default,
upon written request to a Paying Agent, require such Paying Agent to pay all
money held by it to the Trustee and to account for any funds disbursed. Upon
doing so, the Paying Agent (if other than the Company) shall have no further
liability for the money so paid over to the Trustee. If the Company or any
affiliate of the Company acts as Paying Agent, it will, on or before each due
date of any Principal of or interest on any Notes, segregate and hold in a
separate trust fund for the benefit of the Holders thereof a sum of money
sufficient to pay such Principal or interest so becoming due until such sum of
money shall be paid to such Holders or otherwise disposed of as provided in
this Indenture, and will promptly notify the Trustee in writing of its action
or failure to act as required by this Section 2.5.
SECTION 2.6 Holders Lists. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Holders and shall otherwise comply with the
Trust Indenture Act Section 312(a). If the Trustee is not the Registrar, the
Company shall furnish to the Trustee at lease seven (7) Business Days before
each interest payment date and at such other times as the Trustee may require
in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Holders, including the
aggregate principal amount thereof, and the Company shall otherwise comply with
the Trust Indenture Act Section 312(a).
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<PAGE> 36
SECTION 2.7 Transfer and Exchange. When Notes are presented
to the Registrar with a request to register, transfer or exchange such Notes
for an equal principal amount of Notes of other authorized denominations, the
Register shall register the transfer or make the exchange as requested if its
reasonable requirements for such transactions are met; provided, however, that
any Note presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Registrar and the Trustee duly executed by the Holder
or his or her attorney duly authorized in writing. To permit registrations of
transfer and exchanges, the Company shall issue and the Trustee shall
authenticate Notes at the Registrar's request, subject to such rules as the
Trustee may reasonably require.
Neither the Registrar nor the Company shall be required (i) to
issue, authenticate, register the transfer of or exchange Notes for a period of
15 days before a selection of such Notes to be redeemed pursuant to Article
Three, or the mailing of a notice of a Change of Control Offer or (ii) to
register the transfer of or exchange any Note selected for redemption in whole
or in part pursuant to Article Three, except the unredeemed portion of any Note
being redeemed in part.
Notwithstanding any other provision of this Section 2.7, unless and
until it is exchanged in whole or in part for Notes in definitive registered
form, a Global Note representing all or a portion of the Notes may not be
transferred except as a whole by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or if at any time the Depositary
shall no longer be eligible under applicable law, the Company shall appoint a
successor Depositary eligible under applicable law. If a successor Depositary
eligible under applicable law is not appointed by the Company within 90 days
after the Company receives such notice or becomes aware of such ineligibility,
the Company will execute, and the Trustee, upon receipt of the Company's order
for the authentication and delivery of definitive Notes, will authenticate and
deliver certified Notes, in any authorized denominations, in an aggregate
principal amount equal to the principal amount of such Global Notes, in
exchange for such Global Notes.
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<PAGE> 37
Any time the Notes are not in the form of Global Notes pursuant to
the preceding paragraph, the Company agrees to supply the Trustee with a
reasonable supply of certificated Notes without the legend required by Section
2.1 and the Trustee agrees to hold such Notes in safekeeping until
authenticated and delivered pursuant to the terms of this Indenture.
The Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
exchange or registration of transfer of Notes. No service charge shall be made
for any such transaction.
All Notes issued upon any transfer or exchange of Notes shall be
valid obligations of the Company, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Notes surrendered upon such transfer
or exchange.
SECTION 2.8 Replacement Notes. If a defaced or mutilated Note
is surrendered to the Trustee or if a Holder claims that its Note has been
lost, destroyed or wrongfully taken, the Company shall, subject to the further
provisions of this Section 2.8, issue and the Trustee shall authenticate a
replacement Note of such tenor and principal amount bearing a number not
contemporaneously outstanding. The Company may charge such Holder for any tax
or other governmental charge that may be imposed as a result of or in
connection with replacing a Note and for its expenses and the expenses of the
Trustee (including without limitation attorneys' fees and expenses) in
replacing a Note. In case any such mutilated, defaced, lost, destroyed or
wrongfully taken Note has become or is about to become due and payable, the
Company in its discretion may pay such Note instead of issuing a new Note in
replacement thereof. If required by the Trustee or the Company, (i) an
indemnity bond must be furnished that is sufficient in the judgment of both the
Trustee and the Company to protect the Company, the Trustee and any Agent from
any loss that any of them may suffer if a Note is replaced or paid as provided
in this Section 2.8 and (ii) in the case of a lost, destroyed or wrongfully
taken Note, evidence must be furnished to the satisfaction of both the Trustee
and the Company of the loss, destruction or wrongful taking of such Note.
Notwithstanding the foregoing, the Company and the Trustee shall have no
obligation to replace or pay a Note pursuant to this Section 2.8 if either the
Company or the Trustee has notice that such Note has been acquired by a bona
fide purchaser.
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Every replacement Note is an additional obligation of the Company
and shall be entitled to the benefits of this Indenture.
To the extent permitted by law, the foregoing provisions of this
Section 2.8 are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or wrongfully taken Notes.
SECTION 2.9 Outstanding Notes. Notes outstanding at any time
are all Notes that have been authenticated and delivered by the Trustee except
for those canceled by it, those delivered to it for cancellation and those
described in this Section 2.9 as not outstanding.
If a Note is replaced pursuant to Section 2.8, it ceases to be
outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Note is held by a holder in due course.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on the maturity date or any redemption date or date for
repurchase of the Notes money sufficient to pay Notes payable or to be redeemed
or repurchased on that date, then on and after that date such Notes cease to be
outstanding and interest on them shall cease to accrue.
A Note does not cease to be outstanding because the Company or one
of its Affiliates holds such Note, provided, however, that, in determining
whether the Holders of the requisite principal amount of the outstanding Notes
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, Notes owned by the Company or any Affiliate of the Company
shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only
Notes as to which a Responsible Officer of the Trustee has received written
notice to be so owned shall be so disregarded. Any Notes so owned which are
pledged by the Company, or by any Affiliate of the Company, as security for
loans or other obligations, otherwise than to another such Affiliate of the
Company, shall be deemed to be outstanding, if the pledgee is entitled pursuant
to the terms of its pledge agreement and is free to exercise in its, his or her
discretion the right to vote such securities, uncontrolled by the Company or by
any such Affiliate.
SECTION 2.10 Temporary Notes. Until definitive Notes are ready
for delivery, the Company may prepare and the
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Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have insertions,
substitutions, omissions and other variations determined to be appropriate by
the Officers executing the temporary Notes, as evidenced by their execution of
such temporary Notes. If temporary Notes are issued, the Company will cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes upon surrender of such temporary Notes at the office or agency
of the Company designated for such purpose pursuant to Section 4.2, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes the Company shall execute and the Trustee shall authenticate
and deliver in exchange therefor a like principal amount of definitive Notes
and authorized denominations. Until so exchanged, the temporary Notes shall be
entitled to the same benefits under this Indenture as definitive Notes.
SECTION 2.11 Cancellation. The Company at any time may deliver
to the Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee for cancellation any Notes
previously authenticated hereunder which the Company has not issued and sold.
The Registrar, any transfer agent and the Paying Agent shall forward to the
Trustee any Notes surrendered to them for transfer, exchange or payment. The
Trustee shall cancel and destroy all Notes surrendered for transfer, exchange,
payment or cancellation and shall deliver a certificate of destruction to the
Company. The Company may not issue new Notes to replace Notes it has paid in
full or delivered to the Trustee for cancellation.
SECTION 2.12 CUSIP Number. The Company in issuing the Notes
may use a "CUSIP" number, and, if it does so, the Trustee shall use the CUSIP
number in notices of redemption or exchange as a convenience to Holders and no
representation shall be made as to the correctness of such number either as
printed on the Notes or as contained in any notice of redemption or exchange.
SECTION 2.13 Defaulted Interest. If the Company defaults in a
payment of interest on the Notes, it shall pay, or shall deposit with the
Paying Agent money in immediately available funds sufficient to pay the
defaulted interest plus (to the extent lawful) any interest payable on the
defaulted interest to the Persons who are Holders on a subsequent special
record date, which shall mean the 15th day next preceding the date fixed by the
Company for the payment of defaulted interest, whether or not such day is a
Business Day.
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At least 15 days before such special record date, the Company shall mail to
each Holder and to the Trustee a notice that states the special record date,
the payment date and the amount of defaulted interest to be paid.
ARTICLE THREE
REDEMPTION
SECTION 3.1 Right of Redemption. (a) The Notes may be
redeemed, at the Company's option, in whole or in part, at any time on or
after ___________, 2001 and prior to maturity, upon not less than 30 nor more
than 60 days' prior notice mailed by first class mail to each Holders' last
address as it appears in the Security Register, at the following Redemption
Prices (expressed in percentages of principal amount), plus accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date), if redeemed
during the 12-month period commencing ___________, of the years set forth
below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2001 10 . %
2002 10 . %
2003 10 . %
2004 and thereafter 100.000%
</TABLE>
SECTION 3.2 Notices to Trustee. If the Company elects to
redeem Notes pursuant to Section 3.1, it shall notify the Trustee in writing of
the Redemption Date and the principal amount of Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.2
in an Officers' Certificate at least 45 days before the Redemption Date (unless
a shorter period shall be satisfactory to the Trustee).
SECTION 3.3 Selection of Notes to Be Redeemed. If less than
all of the Notes are to be redeemed at any time, the Trustee shall select the
Notes to be redeemed in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not listed on a national securities exchange, on a pro rata basis, by
lot or by such other method as the Trustee in its sole discretion shall deem to
be fair and appropriate; provided that no Note of $1,000 in principal amount or
less shall be redeemed in part.
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The Trustee shall make the selection from the Notes outstanding and
not previously called for redemption. Notes in denominations of $1,000 in
principal amount may only be redeemed in whole. The Trustee may select for
redemption portions (equal to $1,000 in principal amount or any integral
multiple thereof) of Notes that have denominations larger than $1,000 in
principal amount. Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption. The Trustee
shall notify the Company and the Registrar promptly in writing of the Notes to
be redeemed and, if any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note.
SECTION 3.4 Notice of Redemption. At least 30 days but not
more than 60 days before a Redemption Date, the Company shall mail a notice of
redemption by first class mail to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price and the amount of accrued and
unpaid interest to be paid upon such redemption;
(iii) the name, address and telephone number of the Paying
Agent;
(iv) that Notes called for redemption must be surrendered to
the Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders is to
receive payment of the Redemption Price plus accrued interest to the
Redemption Date upon surrender of the Notes to the Paying Agent;
(vi) if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 in principal amount or any integral
multiple thereof) of such Note to be redeemed and that, on and after the
Redemption Date, upon surrender of such Note, a new Note
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or Notes in principal amount equal to the unredeemed portion thereof will
be reissued;
(v) if less than all the Notes are to be redeemed, the
identification of the particular Notes (or portions thereof) to be
redeemed, as well as the aggregate principal amount of such Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption;
(vi) that, if any Note contains a CUSIP number as provided in
Section 2.12, no representation is being made as to the correctness of the
CUSIP number either as printed on the Notes or as contained in the notice
of redemption and that reliance may be placed only on the other
identification numbers printed on the Notes; and
(vii) that the notice is being sent pursuant to this Section
3.4.
At the Company's request (which request may be revoked by the
Company at any time prior to the time at which the Trustee shall have given
such notice to the Holders), made in writing to the Trustee at least 60 days
(or such shorter period as shall be satisfactory to the Trustee) before a
Redemption Date, the Trustee shall give the notice of redemption in the name
and at the expense of the Company. If, however, the Company gives such notice
to the Holders, the Company shall concurrently deliver to the Trustee an
Officers' Certificate stating that such notice has been given.
SECTION 3.5 Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender of any Notes to
the Paying Agent, such Notes shall be paid at the Redemption Price, plus
accrued interest to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed,
whether or not the Holder receives the notice. In any event, failure to give
such notice, or any defect therein, shall not affect the validity of the
proceedings for the redemption of Notes held by Holders to whom such notice was
properly given.
SECTION 3.6 Deposit of Redemption Price. On or prior to any
Redemption Date, the Company shall deposit with the Paying Agent (or, if the
Company is acting as its own Paying Agent, shall segregate and hold in trust as
provided in Section 2.5) money sufficient to pay the Redemption Price of and
accrued interest on all Notes to be redeemed on the date
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<PAGE> 43
other than Notes or portions thereof called for redemption on that date that
have been delivered by the Company to the Trustee for cancellation.
SECTION 3.7 Payment of Notes Called for Redemption. If notice
of redemption has been given in the manner provided above, the Notes or portion
of securities specified in such notice to be redeemed shall become due and
payable on the Redemption Date at the Redemption Price stated therein, together
with accrued interest to such Redemption Date, and on and after such date
(unless the Company shall default in the payment of such Notes at the
Redemption Price and accrued interest to the Redemption Date, in which case the
Principal, until paid shall bear interest from the Redemption Date at the rate
prescribed in the Notes), such Notes shall cease to accrue interest. Upon
surrender of any Note for redemption in accordance with a notice of redemption,
such Note shall be paid and redeemed by the Company at the Redemption Price,
together with accrued interest to the Redemption Date; provided that
installments of interest whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders registered as such at the close of
business on the relevant Regular Record Date.
SECTION 3.8 Notes Redeemed in Part. Upon surrender of any
Note that is redeemed in part, the Company shall execute and the Trustee shall
authenticate and deliver to the Holder a new Note equal in principal amount to
the unredeemed portion of such surrendered Note.
ARTICLE FOUR
COVENANTS
SECTION 4.1 Payment of Notes. The Company shall pay the
Principal of, premium, if any, and interest on the Notes on the dates and in
the manner provided in the Notes and this Indenture. An installment of
Principal, premium, if any, or interest shall be considered paid on the date
due if the Trustee or Paying Agent (other than the Company, a Subsidiary of the
company, or any Affiliate of any of them) holds on that date money designated
for and sufficient to pay the installment. If the Company or any Subsidiary of
the Company or any Affiliate of any of them, acts as Paying Agent, an
installment of Principal, premium, if any, or interest shall be considered paid
on the due date if the entity acting as Paying Agent complies with the last
sentence of Section 2.5. As provided in Section 6.9, upon any bankruptcy or
reorganization procedure relative to the Company, the Trustee
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shall serve as the Paying Agent and conversion agent, if any, for the Notes.
The Company shall pay interest on overdue Principal, premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
the rate per annum specified in the Notes.
SECTION 4.2 Maintenance of Office or Agency. The Company will
maintain in the Borough of Manhattan, the City of New York an office or agency
where Notes may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Company
in respect of the Notes and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in
the location, of such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in
Section 12.2.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change
in the location of any such other office or agency.
The Company hereby initially designates the Corporate Trust Office
of the Trustee, located in the Borough of Manhattan, the City of New York, as
such office of the Company in accordance with Section 2.4.
SECTION 4.3 Limitation on Indebtedness. (a) The Company will
not, and will not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness (other than Permitted Indebtedness, Indebtedness evidenced by the
Notes and the Subsidiary Guarantees and Indebtedness existing on the Closing
Date) unless, after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, the Consolidated Fixed
Charge Coverage Ratio would be greater than 1.75:1 with respect to any
Incurrence prior to _________, 1997, or 2.00:1 with respect to any Incurrence
on or after _______, 1997.
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Notwithstanding the foregoing, the Company and any Restricted
Subsidiary (except as specified below) may Incur each and all of the following
(each, "Permitted Indebtedness"):
(i) Indebtedness of the Company or any of its Restricted
Subsidiaries outstanding at any time in an aggregate principal amount not
to exceed an amount equal to $150 million under the Credit Agreement, less
any amount by which Senior Indebtedness created under the Credit Agreement
is permanently reduced and, in the event the Credit Agreement is a
revolving credit facility, but without duplication, the commitments and
availability under the Credit Facility are permanently reduced as provided
under Section 4.9 and Guarantees of such Indebtedness by any of the
Company's Subsidiaries;
(ii) Indebtedness to the Company or any of its Restricted
Subsidiaries as long as such Indebtedness continues to be owed to the
Company or any of its Restricted Subsidiaries;
(iii) Indebtedness ("Permitted Refinancing Indebtedness") issued
in exchange for, or the net proceeds of which are used to refinance
(whether by amendment, renewal, extension or otherwise) or refund, then
outstanding Indebtedness, other than Indebtedness Incurred under clause
(i), (v), (vii) or (x) of this paragraph, and any successive refinancings
thereof in an amount not to exceed the amount so refinanced or refunded
(plus premiums, accrued interest, fees and expenses); provided that
Indebtedness the proceeds of which are used to refinance or refund the
Notes or Indebtedness that is pari passu with, or subordinated in right of
payment to, the Notes shall only be permitted under this clause (iii) if
(A) in case the Notes are refinanced in part or the Indebtedness to be
refinanced is pari passu with the Notes, such new Indebtedness, by its
terms or by the terms of any agreement or instrument pursuant to which such
new Indebtedness is outstanding, is expressly made pari passu with, or
subordinate in right of payment to, the remaining Notes, (B) in case the
Indebtedness to be refinanced is subordinated in right of payment to the
Notes, such new Indebtedness, by its terms or by the terms of any agreement
or instrument pursuant to which such new Indebtedness is outstanding, is
expressly made subordinate in right of payment to the Notes at least to the
extent that the Indebtedness to be refinanced is subordinated to the Notes
and (C) such new Indebtedness, determined as of the date of Incurrence of
such new Indebtedness, does not mature prior to the Stated
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Maturity of the Indebtedness to be refinanced or refunded, and the Average
Life of such new Indebtedness is at least equal to the remaining Average
Life of the Indebtedness to be refinanced or refunded; and provided further
that in no event may Indebtedness of the Company be refinanced pursuant to
this clause (iii) by means of any Indebtedness of any Restricted
Subsidiary;
(iv) Indebtedness (A) in respect of performance, surety or
appeal bonds provided in the ordinary course of business consistent with
past practice, (B) under Currency Agreements and Interest Rate Protection
Agreements (provided that, in the case of Currency Agreements that relate
to other Indebtedness, such Currency Agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a result
of fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder) and (C) arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit, surety bonds
or performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred
in connection with the disposition of any business, assets or Restricted
Subsidiary (other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition), in a principal
amount not to exceed the gross proceeds actually received by the Company or
any Restricted Subsidiary in connection with such disposition;
(v) Indebtedness under letters of credit and bankers'
acceptances issued in the ordinary course of business;
(vi) Acquired Indebtedness; provided that, with respect to this
clause (vi), after giving effect to the Incurrence thereof, the Company
could Incur at least $1.00 of Indebtedness (other than Permitted
Indebtedness);
(vii) Indebtedness, in an amount not to exceed $3 million at any
one time outstanding, Incurred by the Company in connection with the
purchase, redemption, acquisition, cancellation or other retirement for
value of shares of Capital Stock of the Company, options on any such shares
or related stock appreciation rights or similar securities held by officers
or employees or
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former officers or employees of the Company or any of its Subsidiaries (or
their estates or beneficiaries under their estates), upon death,
disability, retirement, severance or termination of employment or pursuant
to any agreement under which such shares of stock or related rights were
issued;
(viii) Indebtedness consisting of a Guarantee permitted by the
provisions described under Section 4.7 by a Restricted Subsidiary of
Indebtedness of the Company or another Restricted Subsidiary or a Guarantee
by the Company of Indebtedness of a Restricted Subsidiary;
(ix) the Vinings Indebtedness; and
(x) Indebtedness of the Company or any of its Restricted
Subsidiaries in an aggregate principal amount at any time outstanding not
to exceed $25 million.
(b) For purposes of determining compliance with Section 4.3(a),
(A) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described in the above clauses, the Company, in
its sole discretion, shall classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of such
clauses and (B) the amount of Indebtedness issued at a price that is less than
the principal amount thereof shall be equal to the amount of the liability in
respect thereof determined in conformity with GAAP.
SECTION 4.4 Limitation on Restricted Payments. So long as any
of the Notes are outstanding, the Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, after the Closing Date:
(i) declare or pay any dividend or make any distribution on its
Capital Stock (other than dividends or distributions payable solely in
shares of its Capital Stock (other than Redeemable Stock) of the same class
or in options, warrants, or other rights to acquire such shares of Capital
Stock) held by Persons other than the Company or any of its Wholly Owned
Restricted Subsidiaries that are Guarantors;
(ii) purchase, redeem, retire or otherwise acquire for value any
shares of Capital Stock of the Company or any Restricted Subsidiary
(including options, warrants or other rights to acquire such shares of
Capital Stock) held by Persons other than the Company or any of its Wholly
Owned Restricted Subsidiaries that are Guarantors;
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(iii) make any voluntary or optional Principal payment, or
voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value (other than for value payable solely in
Junior Indebtedness or in shares of Capital Stock that is not Redeemable
Stock), of Indebtedness of the Company that is pari passu with or
subordinated in right of payment to the Notes; or
(iv) make any Investment that is a Restricted Investment
(such payments or any other actions described in clauses (i) through (iv) being
collectively "Restricted Payments") if, at the time of, and after giving effect
to, the proposed Restricted Payment: (A) a Default or Event of Default shall
have occurred and be continuing, (B) the Company could not Incur at least $1.00
of Indebtedness (other than Permitted Indebtedness) or (C) the aggregate amount
expended for all Restricted Payments (the amount so expended, if other than in
cash, to be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) after
the Closing Date shall exceed the sum of (1) 50% of the aggregate amount of the
Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income
is a loss, minus 100% of such amount) (determined by excluding income created
by transfers of assets received by the Company or a Restricted Subsidiary from
an Unrestricted Subsidiary) accrued on a cumulative basis during the period
(taken as one accounting period) beginning on April 1, 1996 and ending on the
last day of the Company's last fiscal quarter ended before the Transaction Date
plus (2) the aggregate net proceeds (including the fair market value of
non-cash proceeds as determined in good faith by the Board of Directors)
received by the Company from the issuance and sale permitted by this Indenture
of its Capital Stock (other than Redeemable Stock) to a Person who is not a
Subsidiary of the Company, including an issuance or sale permitted by this
Indenture for cash or other property upon the conversion of any Indebtedness of
the Company subsequent to the Closing Date, or from the issuance of any
options, warrants or other rights to acquire Capital Stock of the Company (in
each case, exclusive of any Redeemable Stock or any options, warrants or other
rights that are redeemable at the option of the holder, or are required to be
redeemed, prior to the Stated Maturity of the Notes) plus (3) an amount equal
to the net reduction in Investments in Persons that are not Restricted
Subsidiaries resulting from payments of interest on Indebtedness, dividends,
repayments of loans or advances, or other transfers of assets, in each case to
the Company or any Restricted Subsidiary from Persons that are not Restricted
Subsidiaries,
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or from redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries
(valued in each case as provided in the definition of "Investments"), not to
exceed, in the case of any Person that is not a Restricted Subsidiary, the
amount of Investments previously made by the Company and any Restricted
Subsidiary in such Person, plus (4) $15 million.
The foregoing provision shall not take into account, and shall not
be violated by reason of:
(i) the payment of any dividend within 60 days after the date
of declaration thereof if, at said date of declaration, such payment would
comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Junior Indebtedness including
premium, if any, and accrued and unpaid interest, with the proceeds of, or
in exchange for, Permitted Refinancing Indebtedness;
(iii) the repurchase, redemption or other acquisition of Capital
Stock of the Company in exchange for, or out of the proceeds of a
substantially concurrent offering of, shares of Capital Stock (other than
Redeemable Stock) of the Company;
(iv) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Junior Indebtedness of the Company
in exchange for, or out of the proceeds of, a substantially concurrent
offering of, shares of the Capital Stock of the Company (other than
Redeemable Stock);
(v) the purchase, redemption, acquisition, cancellation or
other retirement for value of shares of Capital Stock of the Company,
options on any such shares or related stock appreciation rights or similar
securities held by officers or employees or former officers or employees of
the Company or any of its Subsidiaries (or their estates or beneficiaries
under their estates), upon death, disability, retirement, severance or
termination of employment or pursuant to any agreement or plan under which
such shares of stock or related options or other rights were issued;
provided that the aggregate consideration paid for such purchase,
redemption, acquisition, cancellation or other retirement of such shares of
Capital Stock or related rights after the Closing Date does not exceed an
aggregate amount of $1 million in any one fiscal year, with amounts unused
in
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a given fiscal year being available for use in subsequent fiscal years;
(vi) payments or distributions pursuant to or in connection
with a consolidation, merger or transfer of property or assets that
complies with the provisions of this Indenture applicable to mergers,
consolidations and transfers of all or substantially all of the property
and assets of the Company;
(vii) Investments made in connection with (and, in the case of
any Investment in excess of $5 million, determined in good faith by the
Board of Directors to be reasonably necessary to consummate) the
acquisition, amendment or other modification of a contract to manage,
lease, operate or franchise a hotel property (or other property or asset
used or to be used in a Hospitality-Related Business) not owned by the
Company or the extension of such a contract beyond its stated term
(provided that, if such hotel property (or other property or asset used or
to be used in a Hospitality-Related Business) is owned by a Related Party,
such Investment must satisfy the requirements of the provisions described
under Section 4.8); and
(viii) the transactions constituting the Formation and the
Financing Plan; provided that, except in the case of clauses (i) and (iii),
no Default or Event of Default shall have occurred and be continuing or
occur as a consequence of the actions or payments set forth therein.
Notwithstanding the foregoing, in the event of an issuance of
Capital Stock of the Company and (l) the repurchase, redemption or other
acquisition of Capital Stock out of the proceeds of such issuance or (2) the
acquisition of Notes or Indebtedness that is subordinated in right of payment
to the Notes out of the proceeds of such issuance, then, in calculating whether
the conditions of clause (C) of the first paragraph of this Section 4.4 have
been met with respect to any subsequent Restricted Payments, the proceeds of
any such issuance shall be included under such clause (C) only to the extent
such proceeds are not applied as described in clause (1) or (2) of this
paragraph.
SECTION 4.5 Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. So long as any of the Notes
are outstanding, the Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (i) pay dividends or
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make any other distributions permitted by applicable law on any Capital Stock
of such Restricted Subsidiary owned by the Company or any other Restricted
Subsidiary, (ii) pay any Indebtedness or other obligations owed to the Company
or any other Restricted Subsidiary, (iii) make loans or advances to the Company
or any other Restricted Subsidiary or (iv) transfer any of its property or
assets to the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions:
(i) existing on the Closing Date in the Credit Agreement, this
Indenture or any other agreements in effect on the Closing Date, and any
extensions, refinancings, renewals or replacements of any of the foregoing;
provided that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced, renewed or
replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property or
assets of such Person acquired by the Company or any Restricted Subsidiary
and existing at the time of such acquisition, which encumbrances or
restrictions (A) are not applicable to any Person or the property or assets
of any Person other than such Person or the property or assets of such
Person so acquired and (B) were not put in place in anticipation of such
acquisition, and any extensions, refinancings, renewals or replacements of
any of the foregoing; provided that the encumbrances and restrictions in
any such extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders than those encumbrances or
restrictions that are then in effect and that are being extended,
refinanced, renewed or replaced;
(iv) in the case of clause (iv) of the first paragraph of this
Section 4.5, arising or agreed to in the ordinary course of business (A)
that restrict in a customary manner the subletting, assignment or transfer
of any property or asset that is a lease, license, conveyance or contract
or similar property or asset, (B) existing by virtue of any transfer of,
agreement to transfer or option or right with respect to any property or
assets of the Company or any Restricted Subsidiary not
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otherwise prohibited by this Indenture or (C) not relating to any
Indebtedness and, in each of cases (A), (B) or (C), that do not,
individually or in the aggregate, detract from the value of property or
assets of the Company or any Restricted Subsidiary in any manner material
to the Company or any Restricted Subsidiary;
(v) with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Subsidiary; or
(vi) in the nature of customary capital expenditure, furniture,
fixture and equipment or similar reserves contained in contracts of
Restricted Subsidiaries for the management, lease, operation or franchise
of hotel properties.
Nothing contained in this Section 4.5 shall prevent the Company or any
Restricted Subsidiary from restricting the sale or other disposition of
property or assets of the Company or any of its Restricted Subsidiaries that
secure Indebtedness of the Company of any of its Restricted Subsidiaries.
SECTION 4.6 Limitation on the Issuance of Capital Stock of
Restricted Subsidiaries. The Company will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell any shares of its Capital
Stock (including options, warrants or other rights to purchase shares of such
Capital Stock) except (i) to the Company or a Wholly Owned Restricted
Subsidiary of the Company that is a Guarantor or (ii) if, immediately after
giving effect to such issuance or sale, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary.
SECTION 4.7 Limitation on Issuances of Guarantees by
Restricted Subsidiaries. The Company will not permit any Restricted
Subsidiary, directly or indirectly, to Guarantee any Indebtedness of the
Company ("Guaranteed Indebtedness"), unless (i) such Guarantee is not otherwise
in violation of the terms of this Indenture, (ii) except in the event such
Guarantee relates to Indebtedness under the Credit Agreement, such Restricted
Subsidiary is a Guarantor, (iii) except in the event such Guarantee relates to
Indebtedness under the Credit Agreement, such Restricted Subsidiary waives and
will not in any manner whatsoever claim or take the benefit or advantage of,
any rights of reimbursement, indemnity or subrogation or any other rights
against the Company or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under such Guarantee; and (iv) (A) if the
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Guaranteed Indebtedness is pari passu with the Notes, then the Guarantee of
such Guaranteed Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guarantee of such Restricted Subsidiary, or (B) if the Guaranteed
Indebtedness is subordinated to the Notes, then the Guarantee of such
Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee of
such Restricted Subsidiary at least to the extent that the Guaranteed
Indebtedness is subordinated to the Notes; provided that this Section 4.7 shall
not be applicable to any Guarantee of any Restricted Subsidiary that (x)
existed at the time such Person became a Restricted Subsidiary and (y) was not
Incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary.
SECTION 4.8 Limitation on Transactions with Stockholders and
Affiliates. The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service, or the making
of any Investment) with any Related Party (each a "Related Party Transaction"),
except upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than could be obtained, at the time of such transaction
or at the time of the execution of the agreement providing therefor, in a
comparable arm's-length transaction with a Person that is not such a holder or
an Affiliate.
Without limiting the foregoing, (a) any Related Party Transaction
or series of related Related Party Transactions with an aggregate value in
excess of $1 million (or, in the case of a Related Party Transaction or series
of related Related Party Transactions that relate predominantly to the
provision of services, which relate to services with an aggregate value in
excess of $1 million in any fiscal year) must first be approved by a majority
of the directors of the Company who are disinterested in the subject matter of
the transaction, if any, pursuant to a Board Resolution, (b) with respect to
any Related Party Transaction or series of related Related Party Transactions
(other than a Related Party Transaction or series of related Related Party
Transactions that relate predominantly to the provision of services) with an
aggregate value in excess of $10 million but not more than $25 million, the
Company must first obtain either (i) a favorable written opinion from an
independent financial advisor of national reputation as to the fairness from a
financial point of view of such transaction to the Company or such Restricted
Subsidiary, as the case may be or (ii) in the event such Related Party
Transaction relates solely to real
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estate or other property or assets to be used in a Hospitality-Related Business
(other than stock or other securities) ("Appraisable Assets") or an entity that
holds no material assets other than Appraisable Assets and engages in no
material business other than the holding of Appraisable Assets, a certificate
of a Qualified Appraiser as to the fair value of such Appraisable Assets and
(c) with respect to any Related Party Transaction or series of related Related
Party Transactions (other than a Related Party Transaction or series of related
Related Party Transactions that relate predominantly to the provision of
services) with an aggregate value in excess of $25 million, the Company must
first obtain a favorable written opinion of an independent financial advisor of
national reputation as to the fairness from a financial point of view of such
transaction to the Company or such Restricted Subsidiary, as the case may be.
In the case of any Related Party Transaction among the Company or any of its
Restricted Subsidiaries, a Related Party and one or more other Persons, only
the value of such Related Party Transaction attributable to the Company shall
be considered in calculating the aggregate value of such Related Party
Transaction pursuant to the immediately preceding sentence.
The foregoing limitation does not limit, and shall not apply to:
(i) the payment of reasonable and customary regular fees to directors
of the Company who are not employees of the Company;
(ii) any Restricted Payments not prohibited by Section 4.4;
(iii) any loans or advances by the Company to employees of the Company
or a Restricted Subsidiary in the ordinary course of business and in
furtherance of the Company's business, in an aggregate amount not to exceed
$2 million at any one time outstanding;
(iv) any extension of a DAB Note or a Capital Contribution Note on
terms substantially identical to its then existing terms or, with the
approval of a majority of the directors of the Company who are
disinterested in the subject matter of the transaction, if any, as
evidenced by a Board Resolution, any extension, renewal, amendment or
modification of a DAB Note or a Capital Contribution Note on terms not
substantially less favorable to the Company then its then existing terms;
(v) Related Party Transactions between or among the Company and/or
its Wholly Owned Restricted Subsidiaries;
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(vi) any grant of stock options or other rights to employees or
directors of the Company or any of its Subsidiaries pursuant to benefit
plans or agreements adopted or authorized by the Company's Independent
Directors;
(vii) payments by the Company or a Restricted Subsidiary to employees
of the Company or any of its Subsidiaries (A) of salary, bonus and other
ordinary compensation in the ordinary course of business and (B) pursuant
to employment agreements entered into in compliance with the foregoing two
paragraphs of this Section 4.8;
(viii) the transactions constituting the Formation and the Financing
Plan; and
(ix) any transaction or series of transactions pursuant to
agreements entered into on or before the date of this Indenture and
disclosed in the Prospectus.
SECTION 4.9 Limitation on Asset Sales. The Company shall not
effect or permit any Asset Sale unless (i) such Asset Sale is effected at fair
market value (as determined, either at the time of such Asset Sales or at the
time of execution of the agreement providing therefor, in good faith by the
Board of Directors), (ii) in the case of any Asset Sale or series of related
Asset Sales for a total consideration in excess of $5 million, at least 75% of
the consideration is received in cash (provided that the amount of any Senior
Indebtedness of the Company or any Guarantor Senior Indebtedness of any
Guarantor making such Asset Sale that is assumed by a transferee of the
property or assets that are the subject of such Asset Sale in connection with
such Asset Sale shall be deemed to be cash for purposes of this Section
4.9(ii)) and (iii) in the event and to the extent that the Net Cash Proceeds
received by the Company or any of its Restricted Subsidiaries from one or more
Asset Sales occurring on or after the Closing Date in any period of 12
consecutive months exceed $5 million, then the Company shall or shall cause the
relevant Restricted Subsidiary to (A) within 12 months after the date Net Cash
Proceeds so received exceed $5 million in any period of 12 consecutive months
(x) apply an amount equal to such excess Net Cash Proceeds to permanently repay
Senior Indebtedness of the Company or Indebtedness of any Restricted
Subsidiary, in each case owing to a Person other than the Company or any of its
Restricted Subsidiaries, and, in the case of repayment of Senior Indebtedness
arising under the Credit Agreement or other revolving credit facility, effect a
permanent reduction in the commitments or availability under
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the Credit Agreement or such other facility or (y) invest an equal amount, or
the amount not so applied pursuant to clause (x) (or enter into a definitive
agreement committing to so invest within 12 months after the date of such
agreement), in property or assets that are used in a Hospitality-Related
Business (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) and (B)
apply (no later than the end of the 12-month period referred to in clause (A)
above) such excess Net Cash Proceeds (to the extent not applied pursuant to
clause (A) above) as provided in the following paragraphs of this Section 4.9.
The amount of such excess Net Cash Proceeds required to be applied (or to be
committed to be applied) during such 12-month period as set forth in clause
(A) of the preceding sentence and not applied as so required by the end of such
period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount
of Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as
defined below) totals at least $5 million, the Company must, not later than the
fifteenth Business Day of such month, make an offer (an "Excess Proceeds
Offer") to purchase from the Holders on a pro rata basis an aggregate principal
amount of Notes equal to the Excess Proceeds on such date, at a purchase price
equal to 100% of the principal amount of the Notes, plus, in each case, accrued
interest (if any) to the date of purchase (the "Excess Proceeds Payment").
The Company shall commence an Excess Proceeds Offer by mailing a
notice to the Trustee and each Holder stating:
(i) that the Excess Proceeds Offer is being made pursuant to this
Section 4.9 and that all Notes validly tendered will be accepted for
payment on a pro rata basis;
(ii) the purchase price and the date of purchase (which shall be the
date 20 Business Days from the date such notice is mailed) (the "Excess
Proceeds Payment Date");
(iii) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the Excess
Proceeds Payment, any Note accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest on and after the Excess
Proceeds Payment Date;
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(v) that Holders electing to have a Note purchased pursuant to the
Excess Proceeds Offer will be required to surrender the Note, together with
the form entitled "Option of the Holder to Elect Purchase" on the reverse
side of the Note completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day immediately
preceding the Excess Proceeds Payment Date;
(vi) that such Holder will be entitled to withdraw his or her election
if the Paying Agent receives, not later than the close of business on the
third Business Day immediately preceding the Excess Proceeds Payment Date,
a telegram, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Notes delivered for purchase and a
statement that such Holder is withdrawing his or her election to have such
Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples
thereof.
On the Excess Proceeds Payment Date, the Company shall (i) accept
for payment on a pro rata basis Notes or portions thereof tendered pursuant to
the Excess Proceeds Offer; (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Notes or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee all Notes or portions
thereof so accepted together with an Officers' Certificate specifying the Notes
or portions thereof accepted for payment by the Company. The Paying Agent
shall promptly mail to the Holders of Notes so accepted payment in an amount
equal to the purchase price, and the Trustee shall promptly authenticate and
mail to such Holders a new Note equal in principal amount to any unpurchased
portion of the Note surrendered; provided that each Note purchased and each new
Note issued shall be in a principal amount of $1,000 or integral multiples
thereof. The Company will publicly announce the results of the Excess Proceeds
Offer as soon as practicable after the Excess Proceeds Payment Date. For
purposes of this Section 4.9, the Trustee shall act as the Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable, in the event that such Excess Proceeds are
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received by the Company under this Section 4.9 and the Company is required to
repurchase Notes as described above.
Notwithstanding the provisions of the preceding paragraphs of this
Section 4.9, the Company and its Restricted Subsidiaries may, in the ordinary
course of business (or, if otherwise than in the ordinary course of business,
upon receipt of (i) a favorable written opinion from an independent financial
advisor of national reputation as to the fairness from a financial point of
view to the Company or such Restricted Subsidiary of the proposed transaction
or (ii) in the case of a transaction or series of related transactions with an
aggregate value of not more than $25 million that relates solely to Appraisable
Assets or an entity that holds no material assets other than Appraisable Assets
and engages in no material business other than the holding of Appraisable
Assets, a certificate of a Qualified Appraiser as to the fair value of such
Appraisable Assets), exchange all or a portion of its property, businesses or
assets for property, businesses or assets that, or Capital Stock of a Person
all or substantially all of whose assets, are of a type used in a
Hospitality-Related Business (provided that such Person shall initially be
designated a Restricted Subsidiary if such Person becomes a Subsidiary of the
Company by virtue of such Asset Sale), or a combination of any such property,
businesses or assets, or Capital Stock of such a Person and cash or cash
equivalents; provided that (i) there shall not exist immediately prior or
subsequent thereto a Default or an Event of Default, (ii) a majority of the
Independent Directors of the Company shall have approved a Board Resolution
that such exchange is fair to the Company or such Restricted Subsidiary, as the
case may be, and (iii) any cash or cash equivalents received pursuant to any
such exchange shall be applied in the manner applicable to Net Cash Proceeds
from an Asset Sale as set forth pursuant to the provisions of the preceding
paragraphs of this Section 4.9; and provided, further, that any Capital Stock
of a Person received in an Asset Sale pursuant to this paragraph shall be owned
directly by the Company or a Restricted Subsidiary and, when combined with the
Capital Stock of such Person already owned by the Company and its Restricted
Subsidiaries, shall constitute a majority of the voting power and Capital Stock
of such Person.
SECTION 4.10 Limitation on Other Subordinated Indebtedness.
The Company will not Incur any Indebtedness that is both subordinate in right
of payment to any Senior Indebtedness and senior in right of payment to the
Notes, and no Guarantor will Incur any Indebtedness that is both subordinate in
right of payment to any Guarantor Senior Indebtedness of such Guarantor and
senior in right of payment to such Guarantor's Guarantee of the Notes.
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SECTION 4.11 Limitation on Line of Business. For so long as
any of the Notes are outstanding, the Company will not, and will not permit any
of its Restricted Subsidiaries to, engage in any business or activity other
than a Hospitality-Related Business.
SECTION 4.12 Repurchase of Notes upon a Change of Control.
Upon the occurrence of a Change of Control, each Holder shall have the right to
require the repurchase of his or her Notes by the Company in cash pursuant to
the offer described below (the "Change of Control Offer") at a purchase price
equal to 101% of the principal amount thereof, plus accrued interest (if any)
to the date of purchase (the "Change of Control Payment"). Prior to the
mailing of the notice to Holders provided for in the succeeding paragraph of
this Section 4.12, but in any event within 30 days following any Change of
Control, the Company covenants to (i) repay in full all indebtedness of the
Company that would prohibit the repurchase of the Notes as provided for in the
succeeding paragraph of this Section 4.12 or (ii) obtain any requisite consents
under instruments governing any such indebtedness of the Company to permit the
repurchase of the Notes as provided for in the succeeding paragraph of this
Section 4.12. The Company shall first comply with the covenant in the
preceding sentence before it shall be required to repurchase Notes pursuant to
this Section 4.12. Notwithstanding the foregoing, a third party may make the
Change of Control Offer on behalf of the Company, provided such Change of
Control offer is made in the manner, at the times and otherwise in accordance
with the requirements applicable to a Change of Control made by the Company and
such third party purchases all Notes validly tendered and not withdrawn
pursuant to such Change of Control Offer.
Within 30 days of the Change of Control, the Company shall mail a
notice to the Trustee and each Holder stating:
(i) that a Change of Control has occurred (and a brief description of
the events resulting in such Change of Control), that the Change of Control
Offer is being made pursuant to this Section 4.12 and that all Notes
validly tendered will be accepted for payment;
(ii) the purchase price and the date of purchase (which shall be the
date 20 Business Days from the date such notice is mailed) (the "Change of
Control Payment Date");
(iii) that any Note not tendered will continue to accrue interest
pursuant to its terms;
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(iv) that, unless the Company defaults in the payment of the Change of
Control Payment, any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest on and after the Change of
Control of Payment Date;
(v) that Holders electing to have any Note or portion thereof
purchased pursuant to the Change of Control Offer will be required to
surrender such Note, together with the form entitled "Option of the Holder
to Elect Purchase" on the reverse side of such Note completed, to the
Paying Agent at the address specified in the notice prior to the close of
business on the Business Day immediately preceding the Change of Control
Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Notes delivered for purchase and a
statement that such Holder is withdrawing his or her election to have such
Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered; provided that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples
thereof.
On or before the Change of Control Payment Date, the Company shall:
(i) accept for payment Notes or portion thereof tendered pursuant to the Change
of Control Offer; (ii) deposit with the Paying Agent money sufficient to pay
the purchase price of all Notes or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee, all Notes or portions
thereof so accepted together with an Officers' Certificate specifying the Notes
or portions thereof accepted for payment by the Company. The Paying Agent
shall promptly mail, to the Holders of Notes so accepted, payment in an amount
equal to the purchase price, and the Trustee shall promptly authenticate and
mail to such Holders a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered; provided that each Note purchased and each
new Note issued shall be in a principal amount of $1,000 or integral multiples
thereof. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
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For purposes of this Section 4.12, the Trustee shall act as Paying Agent.
The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in the event that a Change of Control occurs and
the Company is required to repurchase the Notes under this Section 4.12.
If the Company is unable to repay all of its indebtedness that
would prohibit repurchase of the Notes or is unable to obtain the consents of
the holders of indebtedness, if any, of the Company outstanding at the time of
a Change of Control whose consent would be so required to permit the repurchase
of Notes, then the Company will have breached this Section 4.12. This breach
will constitute an Event of Default if it continues for a period of 30
consecutive days after written notice is given to the Company by the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes
outstanding. In addition, the failure by the Company to repurchase Notes at
the conclusion of the Change of Control Offer will constitute an Event of
Default without any waiting period or notice requirements.
SECTION 4.13 Existence. Subject to Articles Four and Five of
this Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and the existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each such Subsidiary and the rights
(whether pursuant to charter, partnership certificate, agreement, statute or
otherwise), material licenses and franchises of the Company and each such
Subsidiary; provided that the Company shall not be required to preserve any
such right, license or franchise, or the existence of any Restricted
Subsidiary, if the maintenance or preservation thereof is no longer desirable
in the conduct of the business of the Company and its Restricted Subsidiaries
taken as a whole.
SECTION 4.14 Payment of Taxes and Other Claims. The Company
will pay or discharge and shall cause each of its Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (i) all material taxes, assessments and governmental charges levied
or imposed upon (a) the Company or any such Subsidiary, (b) the income or
profits of any such Subsidiary which is a corporation or (c) the property of
the Company or any such Subsidiary and (ii) all material lawful claims for
labor, materials and supplies that, if unpaid, might by law become a
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Lien upon the property of the Company or any such Subsidiary; provided that the
Company shall not be required to pay or discharge, or cause to be paid or
discharged, any such tax, assessment, charge or claim the amount, applicability
or validity of which is being contested in good faith by appropriate
proceedings and for which adequate reserves have been established.
SECTION 4.15 Maintenance of Properties and Insurance. The
Company will cause all properties used or useful in the conduct of its business
or the business of any of its Restricted Subsidiaries, to be maintained and
kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided
that nothing in this Section 4.15 shall prevent the Company or any such
Subsidiary from discontinuing the use, operation or maintenance of any of such
properties or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Company, desirable in the conduct of the business of the
Company or such Subsidiary.
The Company will provide or cause to be provided, for itself and
its Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
products liability insurance and public liability insurance, with reputable
insurers or with the government of the United States of America, or an agency
or instrumentality thereof, in such amounts, with such deductibles and by such
methods as shall be customary for corporations similarly situated in the
industry in which the Company or such Restricted Subsidiary, as the case may
be, is then conducting business.
SECTION 4.16 Notice of Defaults. In the event that the Company
becomes aware of any Default or Event of Default the Company, promptly after it
becomes aware thereof, will give written notice thereof to the Trustee.
SECTION 4.17 Compliance Certificates. (a) The Company shall
deliver to the Trustee, within 45 days after the end of each fiscal quarter
(120 days after the end of the last fiscal quarter of each year), an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that occurred during such fiscal quarter. In the case of the Officers'
Certificate delivered on or before a date not
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more than 120 days of the end of each fiscal year, such certificate shall
contain a certification from the principal executive officer, principal
financial officer or principal accounting officer that they have conducted or
supervised a review of the activities of the Company and its Restricted
Subsidiaries and of the Company's and its Restricted Subsidiaries' performance
under this Indenture and that to the best of such officer's knowledge, based
upon such review, the Company has complied with all conditions and covenants
under this Indenture. For purposes of this Section 4.17, such compliance shall
be determined without regard to any period of grace or requirement of notice
provided under this Indenture. If they do know of such a Default or Event of
Default, the certificate shall describe any such Default or Event of Default
and its nature and status thereof. The first certificate to be delivered
pursuant to clause (a) of this Section 4.17 shall be for the first fiscal
quarter beginning after the execution of this Indenture.
(b) The Company shall deliver to the Trustee, within 90 days after
the end of the Company's fiscal year, a certificate signed by the Company's
independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the Notes
as they relate to accounting matters, (ii) that they have read the most recent
Officers' Certificate delivered to the Trustee pursuant to paragraph (a) of
this Section 4.17 and (iii) whether, in connection with their audit
examination, anything came to their attention that caused them to believe that
the Company was not in compliance with any of the terms, covenants, provisions
or conditions of Article Four and Section 5.1 of this Indenture as they pertain
to accounting matters and, if any Default or Event of Default has come to their
attention, specifying the nature and period of existence thereof; provided that
such independent certified public accountants shall not be liable in respect of
such statement 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 an audit
examination conducted in accordance with generally accepted auditing standards
in effect at the date of such examination.
(c) Within 90 days of the end of each of the Company's fiscal
years, the Company shall deliver to the Trustee a list of all Significant
Subsidiaries. The Trustee shall have no duty with respect to any such list
except to keep it on file and available for inspection by the Holders.
SECTION 4.18 Commission Reports and Reports to Holders.
Whether or not required by the rules and regulations of the Commission, so long
as any Notes are outstanding, the
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Company will furnish to the Holders all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants. In
addition, whether or not required by the rules and regulations of the
Commission, the Company will submit a copy of all such information with the
Commission for public availability (unless the Commission will not accept such
a submission) and file such information with the Trustee and make such
information available to investors and securities analysts who request it in
writing.
SECTION 4.19 Waiver of Stay, Extension or Usury Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not
at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the Principal of, premium, if any, or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or that may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.1 When Company May Merge, Etc. Neither the Company
nor any Guarantor shall consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person (other than a
consolidation with or merger with or into a Wholly Owned Restricted Subsidiary
that is a Guarantor and has a positive net worth; provided that, in connection
with any such merger of the Company or any Guarantor with such a Wholly Owned
Restricted Subsidiary, no consideration (other than Common stock in the
surviving Person or the Company) shall be issued or distributed to the
stockholders of the Company or such Guarantor, as the case may be) nor permit
any
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Person to merge with or into the Company or such Guarantor, as the case may be
unless:
(i) the Company or such Guarantor, as the case may be, shall be the
continuing Person, or the Person (if other than the Company or such
Guarantor) formed by such consolidation or into which the Company or such
Guarantor is merged or that acquired or leased such property and assets of
the Company or such Guarantor shall be a corporation organized and validly
existing under the laws of the United States of America or any jurisdiction
thereof and shall expressly assume, by a supplemental indenture, executed
and delivered to the Trustee, all of the obligations of the Company on all
of the Notes and under this Indenture or all of the obligations of such
Guarantor under its Subsidiary Guarantee, as the case may be;
(ii) immediately prior to and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such transaction on a pro
forma basis, the Company or such Guarantor, as the case may be, or any
Person becoming the successor obligor of the Notes or the Subsidiary
Guarantee of such Guarantor, as the case may be, shall have a Consolidated
Net Worth equal to or greater than the Consolidated Net Worth of the
Company or such Guarantor, as the case may be, immediately prior to such
transaction;
(iv) immediately after giving effect to such transaction on a pro
forma basis, the Company could Incur at least $1.00 of Indebtedness (other
than Permitted Indebtedness); and
(v) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (iii) and (iv) of this Section 5.1) and Opinion of Counsel, in each
case stating that such consolidation, merger or transfer and such
supplemental indenture complies with this Section 5.1 and that all
conditions precedent provided for herein relating to such transaction have
been complied with;
provided, however, that clauses (iii) and (iv) of this Section 5.1 do not apply
if, in the good faith determination of the Board of Directors of the Company,
whose determination shall be evidenced by a Board Resolution, the principal
purpose of
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such transaction is to change the state of incorporation of the Company or such
Guarantor; and provided further that any such transaction shall not have as one
of its purposes the evasion of the foregoing limitations.
SECTION 5.2 Successor Substituted. Upon any consolidation or
merger, or any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.1 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default. An "Event of Default" shall
occur with respect to the Notes if:
(i) the Company defaults in the payment of the Principal of or
premium, if any, on any Note when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise;
(ii) the Company defaults in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period
of 30 days;
(iii) the Company or any Guarantor defaults in the performance of or
breaches any other covenant or agreement of the Company in this Indenture
or under the Notes and such default or breach continues for a period of 45
consecutive days after written notice by the Trustee or the Holders of 25%
or more in aggregate principal amount of the Notes;
(iv) there occurs with respect to any issue or issues of (A) Recourse
Indebtedness of the Company or any of its Significant Subsidiaries having
an outstanding principal amount, in the aggregate for all such issues of
all such Persons, of $10 million or more, whether such Indebtedness now
exists or shall hereafter be created, or (B) Non-Recourse Indebtedness of
the Company or any of its Significant Subsidiaries having an outstanding
principal amount, in the aggregate for all such issues of
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all such Persons, in excess of the greater of (x) $15 million or (y) 10% of
the aggregate assets of the Company and its Restricted Subsidiaries,
measured as of the end of the Company's most recent fiscal quarter for
which internal financial statements are available immediately preceding the
date on which such default occurred, determined on a pro forma basis,
whether such Non-Recourse Indebtedness now exists or shall hereafter be
created, an event of default that has caused the holder thereof to declare
such Indebtedness to be due and payable prior to its Stated Maturity or a
failure to pay such Indebtedness at its Stated Maturity, provided that with
respect to both clause (A) and clause (B), such declaration and
acceleration or such failure to pay, as the case may be, is not rescinded
or cured within 10 days after the later of (I) the Closing Date and (II)
the date of such declaration and acceleration or such failure to pay, and
provided further that for purposes of calculating any amount pursuant to
this Section 6.1(iv), the principal amount of the Vinings Indebtedness
shall be zero if and so long as no Person shall have any right by law,
contract, ownership of securities or otherwise, to exercise any default
remedy under the Vinings Indebtedness or any related instrument, agreement
or other document (collectively, the "Vinings Bond Documents"), to take any
other action to enforce against any person the obligation to pay any
principal amount of, interest on, or other amount payable in respect of,
the Vinings Bond Documents or any Indebtedness or other Obligations created
or evidenced thereby or to exercise any right to foreclose, draw or
otherwise realize on any letter of credit, other credit enhancement,
mortgage, pledge or other security for the Vinings Bond Documents or any
such Indebtedness or other Obligations;
(v) any final judgment or order (other than that portion of a final
judgment or order as to which a reputable insurance company has accepted
full liability) for the payment of money in excess of $10 million (or, in
the case of such a judgment in respect of Non-Recourse Indebtedness, in
excess of the greater of (A) $15 million or (B) 10% of the aggregate assets
of the Company and its Restricted Subsidiaries, measured as of the end of
the Company's most recent fiscal quarter for which internal financial
statements are available immediately preceding the date on which such
default occurred, determined on a pro forma basis) in the aggregate for all
such final judgments or orders shall be rendered against the Company or any
of its Significant Subsidiaries and shall not be paid or discharged, and
there shall be any period of 30 consecutive days following entry of the
final judgment or
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order that causes the aggregate amount for all such final judgments or
orders outstanding and not paid or discharged against all such Persons to
exceed $10 million (or, in the case all such judgments are in respect of
Non-Recourse Indebtedness, in excess of the greater of (A) $15 million or
(B) 10% of the aggregate assets of the Company and its Restricted
Subsidiaries, measured as of the end of the Company's most recent fiscal
quarter for which internal financial statements are available immediately
preceding the date on which such default occurred, determined on a pro
forma basis) during which a stay of enforcement of such final judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
(vi) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any of its Significant Subsidiaries or
for all or substantially all of the property and assets of the Company or
any of its Significant Subsidiaries or (C) the winding up or liquidation of
the affairs of the Company or any of its Significant Subsidiaries and, in
each case, such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; or
(vii) the Company or any of its Significant Subsidiaries (A) commences
a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B) consents to
the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Company or any of its Significant Subsidiaries or for all or substantially
all of the property and assets of the Company or any of its Significant
Subsidiaries or (C) effects any general assignment for the benefit of
creditors.
SECTION 6.2 Acceleration. If an Event of Default (other than
an Event of Default specified in clause (vi) or (vii) of Section 6.1 that
occurs with respect to the Company) occurs and is continuing under this
Indenture, the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding, by written notice to the Company
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(and to the Trustee if such notice is given by the Holders) (the "Acceleration
Notice"), may, and the Trustee at the request of such Holders shall, declare
the Principal of, premium, if any, and accrued interest on the Notes to be
immediately due and payable. Upon a declaration of acceleration, such
Principal of, premium, if any, and accrued interest shall be immediately due
and payable. In the event of a declaration of acceleration because an Event of
Default set forth in clause (iv) of Section 6.1 has occurred and is continuing,
such declaration of acceleration shall be automatically rescinded and annulled
if the event of default or payment default triggering such Event of Default
pursuant to clause (iv) of Section 6.1 shall be remedied or cured by the
Company and/or the relevant Significant Subsidiaries or waived by the holders
of the relevant Indebtedness within 60 days after the declaration of
acceleration with respect thereto. If an Event of Default specified in clause
(vi) or (vii) of Section 6.1 occurs with respect to the Company, the Principal
of, premium, if any, and accrued interest on the Notes then outstanding shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
The Holders of at least a majority in principal amount of the
outstanding Notes, by written notice to the Company and to the Trustee, may
waive all past Defaults and rescind and annul a declaration of acceleration and
its consequences if (i) all existing Events of Default, other than the
nonpayment of the Principal of, premium, if any, and interest on the Notes that
have become due solely by such declaration of acceleration, have been cured or
waived and (ii) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction.
SECTION 6.3 Other Remedies. If an Event of Default occurs and
is continuing, the Trustee may pursue, in its own name or as trustee of an
express trust, any available remedy by proceeding at law or in equity to
collect the payment of Principal of, premium, if any, or interest on the Notes
or to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding.
SECTION 6.4 Waiver of Past Defaults. Subject to Sections 6.2,
6.7 and 9.2, the Holders of at least a majority in principal amount of the
outstanding Notes, by notice to the Trustee, may waive an existing Default or
Event of Default and its consequences, except a Default in the payment of
Principal
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of, premium, if any, or interest on any Note as specified in clause (i) or (ii)
of Section 6.1 or in respect of a covenant or provision of this Indenture which
cannot be modified or amended without the consent of the holder of each
outstanding Note affected. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereto.
SECTION 6.5 Control by Majority. The Holders of at least a
majority in aggregate principal amount of the outstanding Notes may direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising any trust or power conferred on the Trustee.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture, that may involve the Trustee in personal liability, or that
the Trustee determines in good faith may be unduly prejudicial to the rights of
Holders of Notes not joining in the giving of such direction and may take any
other action it deems proper that is not inconsistent with any such direction
received from Holders of Notes pursuant to this Section 6.5.
SECTION 6.6 Limitation on Suits. A Holder may not institute
any proceeding, judicial or otherwise, with respect to this Indenture or the
Notes, or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(i) the Holder gives the Trustee written notice of a continuing Event
of Default;
(ii) the Holders of at least 25% in aggregate principal amount of
outstanding Notes makes a written request to the Trustee to pursue the
remedy;
(iii) such Holder or Holders offer the Trustee indemnity reasonably
satisfactory to the Trustee against any costs, liabilities or expenses to
be incurred in compliance with such request;
(iv) the Trustee within 60 days after its receipt of such notice,
request and offer of indemnity fails to institute any such proceeding; and
(v) during such 60-day period, the Holders of at least a majority in
aggregate principal amount of the outstanding Notes do not give the Trustee
a direction that is inconsistent with such written request.
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A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Note to receive payment of Principal of, premium, if any, or interest on,
such Note or to bring suit for the enforcement of any such payment, on or after
the respective due dates expressed on such Note, shall not be impaired or
affected without the consent of such Holder.
SECTION 6.8 Collection Suit by Trustee. If an Event of
Default in payment of Principal, premium or interest specified in clause (i),
(ii) or (iii) of Section 6.1 occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the
Company, any Guarantor, or any other obligor of the Notes for the whole amount
of Principal, premium, if any, and accrued interest remaining unpaid, together
with interest on overdue Principal, premium, if any, and, to the extent that
payment of such interest is lawful, interest on overdue installments of
interest, in each case at the rate specified in the Notes, and such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
SECTION 6.9 Trustee May File Proofs of Claim. The Trustee may
file such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel, and any other amounts due the Trustee under Section 7.7)
and the Holders allowed in any judicial proceedings relative to the Company (or
any other obligor of the Notes), its creditors or its property and shall be
entitled and empowered to collect and receive any monies, securities or other
property payable or deliverable upon conversion or exchange of the Notes or
upon any such claims and to distribute the same, and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel, and any other amounts due the
Trustee under Section 7.7. Nothing herein contained shall be deemed to empower
the Trustee to authorize or consent to, or accept or adopt on
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behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10 Priorities. If the Trustee collects any money
pursuant to this Article Six, it shall pay out the money in the following
order:
First: to the Trustee for all amounts due under Section 7.7;
Second: to Holders for amounts then due and unpaid for Principal
of, premium, if any, and interest on the Notes in respect of which or for
the benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Notes for Principal, premium, if any, and interest,
respectively; and
Third: to the Company or any other obligors of the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this
Section 6.10.
SECTION 6.11 Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court may
require any party litigant in such suit (other than the Trustee) to file an
undertaking to pay the costs of the suit, and the court may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant (other
than the Trustee) in the suit having due regard to the merits and good faith of
the claims or defenses made by the party litigant. This Section 6.11 does not
apply to a suit by a Holder pursuant to Section 6.7, or a suit by Holders of
more than 10% in principal amount of the outstanding Notes.
SECTION 6.12 Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then, and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and
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remedies of the Company, Trustee and the Holders shall continue as though no
such proceeding had been instituted.
SECTION 6.13 Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Notes in Section 2.8, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.14 Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Six or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.1 General. The duties and responsibilities of the
Trustee shall be as provided by the Trust Indenture Act and as set forth
herein. Notwithstanding the foregoing, no provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers, unless it receives indemnity
satisfactory to it against any loss, liability or expense. Whether or not
therein expressly so provided, every provision of this Indenture relating to
the conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Article Seven.
SECTION 7.2 Certain Rights of Trustee. Subject to Trust
Indenture Act Sections 315(a) through (d):
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution,
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certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document, but the Trustee, in
its discretion, may make such further inquiry or investigation into such
facts or matters as it may see fit;
(ii) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, which shall
conform to Section 12.4. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or
opinion;
(iii) the Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care;
(iv) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses
and liabilities that might be incurred by it in compliance with such
request or direction;
(v) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers or for any action it takes or omits to take in accordance
with the direction of the Holders of a majority in principal amount of the
outstanding Notes relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee, under this Indenture; provided that
the Trustee's conduct does not constitute negligence or bad faith; and
(vi) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
SECTION 7.3 Individual Rights of Trustee. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company or its Affiliates with the same rights it
would have
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if it were not the Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Trust Indenture Act Sections 310(b) and 311.
For purposes of Trust Indenture Act Section 311(b)(4) and (6), the following
terms shall mean:
(a) "cash transaction" means any transaction in which full payment
for goods or securities sold is made within seven days after delivery of the
goods or securities in currency or in checks or other orders drawn upon banks
or bankers and payable upon demand; and
(b) "self-liquidating paper" means any draft, bill of exchange,
acceptance or obligation which is made, drawn, negotiated or incurred by the
Company for the purpose of financing the purchase, processing, manufacturing,
shipment, storage or sale of goods, wares or merchandise and which is secured
by documents evidencing title to, possession of, or a lien upon, the goods,
wares or merchandise or the receivables or proceeds arising from the sale of
the goods, wares or merchandise previously constituting the security, provided
the security is received by the Trustee simultaneously with the creation of the
creditor relationship with the Company arising from the making, drawing,
negotiating or incurring of the draft, bill of exchange, acceptance or
obligation.
SECTION 7.4 Trustee's Disclaimer. Neither the Trustee nor any
of its agents (i) makes any representation as to the validity or adequacy of
this Indenture or the Notes, (ii) shall be accountable for the Company's use or
application of the proceeds from the Notes and (iii) shall be responsible for
any statement in the Notes other than its certificate of authentication.
SECTION 7.5 Notice of Default. If any Default or any Event of
Default occurs and is continuing and if such Default or Event of Default is
known to the Trustee, the Trustee shall mail to each Holder in the manner and
to the extent provided in Trust Indenture Act Section 313(c) notice of Default
or Event of Default within 45 days after it occurs, unless such Default or
Event of Default has been cured; provided, however, that, except in the case of
a default in the payment of the Principal of, premium, if any, or interest on
any Note, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determine
that the withholding of such notice is in the interest of the Holders.
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SECTION 7.6 Reports by Trustee to Holders. Within 60 days
after each May 15, beginning with May 15, 1996, the Trustee shall mail to each
Holder as provided in Trust Indenture Act Section 313(c) a brief report dated
as of such May 15, if required by Trust Indenture Act Section 313(a).
SECTION 7.7 Compensation and Indemnity. The Company shall pay
to the Trustee such compensation as shall be agreed upon in writing for its
services. The compensation of the Trustee shall not be limited by any law on
compensation of a Trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses, disbursements
and advances incurred or made by the Trustee. Such expenses shall include the
reasonable compensation and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any loss or liability or expense incurred by it without negligence or
bad faith on its part arising out of or in connection with the acceptance or
administration of this Indenture and its duties under this Indenture and the
Notes, including the costs and expenses of defending itself against any claim
or liability and of complying with any process served upon it or any of its
officers in connection with the exercise or performance of any of its powers or
duties under this Indenture and the Notes.
To secure the Company's payment obligations in this Section 7.7,
the Trustee shall have a lien prior to the Notes on all money or property held
or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay Principal of, premium, if any, and interest on
particular Notes.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (vi) or (vii) of Section
6.1, the expenses and the compensation for the services will be intended to
constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
SECTION 7.8 Replacement of Trustee. A resignation or removal
of the Trustee and appointment of a successor Trustee shall become effective
only upon the successor Trustee's acceptance of appointment as provided in this
Section 7.8.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Notes may remove the
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Trustee by so notifying the Trustee in writing and may appoint a successor
Trustee with the consent of the Company. The Company may remove the Trustee
if: (i) the Trustee is no longer eligible under Section 7.10 of this Indenture;
(ii) the Trustee is adjudged a bankrupt or an insolvent; (iii) a receiver or
other public officer takes charge of the Trustee or its property; or (iv) the
Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company. If the successor Trustee does not deliver its written acceptance
required by the next succeeding paragraph of this Section 7.8 within 30 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of a majority in principal amount of the outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.7, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder.
Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts
referred to in the preceding paragraph.
If the Trustee is no longer eligible under Section 7.10, any Holder
who satisfies the requirements of Trust Indenture Act Section 310(b) may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
The Company shall give notice of any resignation and any removal of
the Trustee and each appointment of a successor Trustee to all Holders. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
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Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligation under Section 7.7 shall continue for the benefit
of the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
SECTION 7.10 Eligibility. This Indenture shall always have a
Trustee who satisfies the requirements of Trust Indenture Act Section
310(a)(1). The Trustee shall have a combined capital and surplus of at least
$25,000,000 as set forth in its most recent published annual report of
condition.
SECTION 7.11 Money Held in Trust. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may agree
with the Company. Money held in trust by the Trustee need to be segregated
from other funds except to the extent required by law and except for money held
in trust under Article Eight of this Indenture.
SECTION 7.12 Withholding Taxes. The Trustee, as agent for the
Company, shall exclude and withhold from each payment of Principal and interest
and other amounts due hereunder or under the Notes any and all withholding
taxes applicable thereto as required by law. The Trustee agrees to act as such
withholding agent and, in connection therewith, whenever any present or future
taxes or similar charges are required to be withheld with respect to any
amounts payable in respect of the Notes, to withhold such amounts and timely
pay the same to the appropriate authority in the name of and on behalf of the
holders of the Notes, that it will file any necessary withholding tax returns
or statements when due, and that, as promptly as possible after the payment
thereof, it will deliver to each holder of a Note appropriate documentation
showing the payment thereof, together with such additional documentary evidence
as such holders may reasonably request from time to time.
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ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.1 Termination of Company's Obligations. Except as
otherwise provided in this Section 8.1, the Company and each Guarantor may
terminate their respective obligations under the Notes, the Subsidiary
Guarantees and this Indenture if:
(i) all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes that have been replaced or Notes that
are paid pursuant to Section 4.1 or Notes for whose payment money or
securities have theretofore been held in trust and thereafter repaid to the
Company, as provided in Section 8.5) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it hereunder; or
(ii) (A) the Notes mature within one year or all of them are
to be called for redemption within one year under arrangements satisfactory
to the Trustee for giving the notice of redemption, (B) the Company
irrevocably deposits in trust with the Trustee during such one-year period,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds solely for the benefit of the
Holders for that purpose, money or U.S. Government Obligations sufficient
(in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee), without consideration of any reinvestment of any interest thereon,
to pay Principal, premium, if any, and interest on the Notes to maturity or
redemption, as the case may be, and to pay all other sums payable by it
hereunder, (C) no Default or Event of Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit, (D) such
deposit will not result in a breach or violation of, or constitute a default
under, this Indenture or any other agreement or instrument to which the
Company is a party or by which it is bound and (E) the Company has delivered
to the Trustee an Officers' Certificate and an Opinion of Counsel, in each
case stating that all conditions precedent provided for herein relating to
the satisfaction and discharge of this Indenture have been complied with.
With respect to the foregoing clause (i), the Company's obligations
under Section 7.7 shall survive. With
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respect to the foregoing clause (ii), the Company's obligations in Sections
2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.8, 2.13, 4.1, 4.2, 7.7, 7.8, 8.4, 8.5 and 8.6
and the Guarantors' obligations in Article Eleven shall survive until the Notes
are no longer outstanding. Thereafter, only the Company's obligations in
Sections 7.7, 8.5 and 8.6 shall survive. After any such irrevocable deposit,
the Trustee upon request shall acknowledge in writing the discharge of the
Company's and the Guarantors' obligations under the Notes, the Subsidiary
Guarantees and this Indenture except for those surviving obligations specified
above.
SECTION 8.2 Defeasance and Discharge of Indenture. Except as
otherwise provided in this Section 8.2, the Company will be deemed to have paid
and will be discharged from any and all obligations in respect of the Notes
(and each Guarantor will be discharged from any and all obligations in respect
of the Subsidiary Guarantees) on the 123rd day after the date of the deposit
referred to in clause (A) of this Section 8.2, and the provisions of this
Indenture will no longer be in effect with respect to the Notes and the
Subsidiary Guarantees, and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same, provided that the following
conditions shall have been satisfied:
(A) with reference to this Section 8.2, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section 7.10 of
this Indenture) and conveyed all right, title and interest for the benefit
of the Holders, under the terms of an irrevocable trust agreement in form
and substance satisfactory to the Trustee as trust funds in trust,
specifically pledged to the Trustee for the benefit of the Holders as
security for payment of the Principal of, premium, if any, and interest, if
any, on the Notes, and dedicated solely to, the benefit of the Holders, in
and to (1) money in an amount, (2) U.S. Government Obligations that,
through the payment of interest, premium, if any, and Principal in respect
thereof in accordance with their terms, will provide, not later than one
day before the due date of any payment referred to in this clause (A),
money in an amount or (3) a combination thereof in an amount sufficient, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge, without consideration of the reinvestment of
such interest and after payment of all federal, state and local taxes or
other charges and assessments in respect thereof payable by the Trustee,
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the Principal of, premium, if any, and accrued interest on the outstanding
Notes at the Stated Maturity of such Principal or interest; provided that
the Trustee shall have been irrevocably instructed to apply such money or
the proceeds of such U.S. Government Obligations to the payment of such
Principal, premium, if any, and interest with respect to the Notes;
(B) such deposit will not result in a breach or violation of,
or constitute a default under, this Indenture or any other agreement or
instrument to which the Company or any Guarantor is a party or by which it
is bound;
(C) immediately after giving effect to such deposit on a pro
forma basis, no Event of Default, or event that after the giving of notice
or lapse of time or both would become an Event of Default, shall have
occurred and be continuing on the date of such deposit or during the period
ending on the 123rd day after such date of deposit;
(D) the Company shall have delivered to the Trustee (i) either
(x) an Opinion of Counsel directed to the Trustee to the effect that the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of the Company's exercise of its option under this
Section 8.2 and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the case if
such option had not been exercised, which Opinion of Counsel must be based
up (and accompanied by a copy of) a ruling of the Internal Revenue Service
to the same effect unless there has been a change in the applicable federal
income tax law after the date of this Indenture such that a ruling from the
Internal Revenue Service is no longer required or (y) a ruling directed to
the Trustee received from the Internal Revenue Service to the same effect
as the Opinion of Counsel described in clause (x) above and (ii) an Opinion
of Counsel to the effect that (x) the creation of the defeasance trust does
not violate the Investment Company Act of 1940 and (y) after the passage of
123 days following the deposit (except, with respect to any trust funds for
the account of any Holder who may be deemed to be an "insider" for purposes
of the United States Bankruptcy Code, after one year following the
deposit), the trust funds will not be subject to the effect of Section 547
of the United States Bankruptcy Code or Section 15 of the New York Debtor
and Creditor Law in a case commenced by or against the Company under either
such statute, and either (I) the trust funds will no
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longer remain the property of the Company (and therefore will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally) or
(II) if a court were to rule under any such law in any case or proceeding
that the trust funds remained in the possession of the Trustee prior to
such court ruling to the extent not paid to the Holders, the Trustee will
hold, for the benefit of the Holders, a valid and perfected security
interest in such trust funds that is not avoidable in bankruptcy or
otherwise except for the effect of Section 552(b) of the United States
Bankruptcy Code on interest on the trust funds accruing after the
commencement of a case under such statute and (b) the Holders will be
entitled to receive adequate protection of their interests in such trust
funds if such trust funds are used in such case or proceeding;
(E) if the Notes are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit, defeasance and discharge will not
cause the Notes to be delisted; and
(F) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.2 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day (or
one year) period referred to in clause (D)(2)(y) of this Section 8.2, none of
the Company's or the Guarantors' obligations under this Indenture shall be
discharged. Subsequent to the end of such 123-day (or one year) period with
respect to this Section 8.2, the Company's obligations in Sections 2.2, 2.3,
2.4, 2.5, 2.6, 2.7, 2.8, 2.13, 4.1, 4.2, 7.7, 7.8, 8.5 and 8.6 and the
Guarantors' obligations in Article Eleven shall survive until the Notes are no
longer outstanding. Thereafter, only the Company's obligations in Sections
7.7, 8.5 and 8.6 shall survive. If and when a ruling from the Internal Revenue
Service or an Opinion of Counsel referred to in clause (D)(1) of this Section
8.2 is able to be provided specifically without regard to, and not in reliance
upon, the continuance of the Company's obligations under Section 4.1, then the
Company's obligations under such Section 4.1 shall cease upon delivery to the
Trustee of such ruling or Opinion of Counsel and compliance with the other
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.2.
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After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.3 Defeasance of Certain Obligations. The Company
may omit to comply with any term, provision or condition set forth in (x)
clauses (iii) and (iv) of Section 5.1 and all of the covenants described under
Sections 4.3 through 4.18, and (y) clause (iii) of Section 6.1 with respect to
such clauses and covenants and clauses (iv) and (v) of Section 6.1 shall be
deemed not to be Events of Default, in each case with respect to the
outstanding Notes if:
(i) with reference to this Section 8.3, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section 7.10)
and conveyed all right, title and interest to the Trustee for the benefit
of the Holders, under the terms of an irrevocable trust agreement in form
and substance satisfactory to the Trustee as trust funds in trust,
specifically pledged to the Trustee for the benefit of the Holders as
security for payment of the Principal of, premium, if any, and interest, if
any, on the Notes, and dedicated solely to, the benefit of the Holders, in
and to (A) money in an amount, (B) U.S. Government Obligations that,
through the payment of interest and Principal in respect thereof in
accordance with their terms, will provide, not later than one day before
the due date of any payment referred to in this clause (i), money in an
amount or (C) a combination thereof in an amount sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the Principal of,
premium, if any, and interest on the outstanding Notes on the Stated
Maturity of such Principal or interest; provided that the Trustee shall
have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of such Principal, premium,
if any, and interest with respect to the Notes;
(ii) such deposit will not result in a breach or violation
of, or constitute a default under, this Indenture or any other agreement or
instrument to which
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the Company or any Guarantor is a party or by which it is bound;
(iii) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit;
(iv) the Company has delivered to the Trustee an Opinion of
Counsel to the effect that (A) the creation of the defeasance trust does not
violate the Investment Company Act of 1940, (B) the Holders have a valid
first- priority security interest in the trust funds, (C) the Holders will
not recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance of certain obligations and Events of
Default and will be subject to federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred and (D) after the passage of 123
days following the deposit (except, with respect to any trust funds for the
account of any Holder who may be deemed to be an "insider" for purposes of
the United States Bankruptcy Code, after one year following the deposit),
the trust funds will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law in a case commenced by or against the Company under either such
statute, and either (1) the trust funds will no longer remain the property
of the Company (and therefore will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally) or (2) if a court were to rule under any such
law in any case or proceeding that the trust funds remained property of the
Company, (x) assuming such trust funds remained in the possession of the
Trustee prior to such court ruling to the extent not paid to the Holders,
the Trustee will hold, for the benefit of the Holders, a valid and perfected
security interest in such trust funds that is not avoidable in bankruptcy or
otherwise (except for the effect of Section 552(b) of the United States
Bankruptcy Code on interest on the trust funds accruing after the
commencement of a case under such statute), (y) the Holders will be entitled
to receive adequate protection of their interests in such trust funds if
such trust funds are used in such case or proceeding and (z) no property,
rights in property or other interests granted to the Trustee or the Holders
in exchange for, or with respect to, such trust funds will be subject to any
prior rights of holders of other Indebtedness of the Company or any of its
Subsidiaries;
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(v) if the Notes are then listed on a national securities
exchange, the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that such deposit defeasance and discharge will not
cause the Notes to be delisted; and
(vi) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.3 have been complied with.
SECTION 8.4 Application of Trust Money. Subject to Section
8.6, the Trustee or Paying Agent shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to Section 8.1, 8.2 or 8.3, as the case
may be, and shall apply the deposited money and the money from U.S. Government
Obligations in accordance with the Notes and this Indenture to the payment of
Principal of, premium, if any, and interest on the Notes; but such money need
not be segregated from other funds except to the extent required by law.
SECTION 8.5 Repayment to Company. Subject to Sections 7.7,
8.1, 8.2 and 8.3, the Trustee and the Paying Agent shall promptly pay to the
Company upon request set forth in an Officers' Certificate any excess money
held by them at any time and thereupon shall be relieved from all liability
with respect to such money. The Trustee and the Paying Agent shall pay to the
Company upon request any money held by them for the payment of Principal,
premium, if any, or interest that remains unclaimed for two years; provided
that the Trustee or such Paying Agent before being required to make any payment
may cause to be published at the expense of the Company once in a newspaper of
general circulation in the City of New York or mail to each Holder entitled to
such money at such Holder's address (as set forth in the Security Register)
notice that such money remains unclaimed and that after a date specified
therein (which shall be at least 30 days from the date of such publication or
mailing) any unclaimed balance of such money then remaining will be repaid to
the Company. After payment to the Company, Holders entitled to such money must
look to the Company for payment as general creditors unless an applicable law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
SECTION 8.6 Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
Section 8.1, 8.2 or 8.3, as the case may be, by reason of any legal proceeding
or by reason of any order or judgment of any court or governmental authority
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enjoining, restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to Section 8.1, 8.2 or 8.3, as the
case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
8.1, 8.2 or 8.3, as the case may be; provided that, if the Company has made any
payment of Principal of, premium, if any, or interest on any Notes because of
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders. The Company when
authorized by a resolution of its Board of Directors, the Guarantors and the
Trustee may amend or supplement this Indenture or the Notes without notice to
or the consent of any Holder to:
(i) cure any ambiguity, defect or inconsistency in this
Indenture; provided that such amendments or supplements shall not adversely
affect the interests of the Holders in any material respect;
(ii) comply with Article Five;
(iii) comply with any requirements of the Commission in
connection with the qualification of this Indenture under the Trust
Indenture Act;
(iv) evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(v) make any other change that does not materially and
adversely affect the rights of any Holder.
SECTION 9.2 With Consent of Holders. Subject to Sections 6.4
and 6.7 and without prior notice to the Holders, the Company when authorized by
its Board of Directors (as evidence by a Board Resolution), the Guarantors, and
the Trustee may amend this Indenture and the Notes with the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Notes then outstanding, and the Holders of not less than a majority in
aggregate principal amount of the Notes then outstanding by written notice to
the
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Trustee may waive future compliance by the Company with any provision of this
Indenture or the Notes.
Notwithstanding the provisions of this Section 9.2, without the
consent of each Holder affected, a modification, amendment or waiver, including
a waiver pursuant to Section 6.4, may not:
(i) change the Stated Maturity of the Principal of, or any
installment of interest on, any Note;
(ii) reduce the principal amount of, or premium, if any, or
interest on, any Note;
(iii) change the place or currency of payment of Principal
of, premium, if any, or interest on, any Note;
(iv) impair the right to institute suit for the enforcement
of any payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date) of any Note;
(v) reduce the percentage stated in this Section 9.2 in
principal amount of outstanding Notes the consent of whose Holders is
necessary to modify or amend this Indenture;
(vi) waive a default in the payment of Principal of,
premium, if any, or interest on the Notes;
(vii) reduce the percentage or aggregate principal amount of
outstanding Notes the consent of whose Holders is necessary for waiver of
compliance with certain provisions of this Indenture or for waiver of
certain defaults;
(viii) modify or change any provision of this Indenture
affecting the ranking of the Notes or the Subsidiary Guarantees in a manner
adverse to the holders of the Notes; or
(ix) release any Guarantor from any of its obligations under
its Subsidiary Guarantee or this Indenture other than in accordance with the
provisions of this Indenture, or amend or modify any provision relating to
such release.
Notwithstanding anything to the contrary elsewhere in this
Indenture, for so long as the Revolving Credit Facility is in effect, no
amendment under this Section 9.2 may (i) modify the subordination provision
under Article Ten in a
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manner adverse to the holders of Indebtedness under the Revolving Credit
Facility, (ii) change the definition of either Designated Senior Indebtedness
or Senior Indebtedness, (iii) increase the rate of interest on the Notes, (iv)
change the maturity date of the Notes to a date prior to _______, 2006, (v)
increase any Redemption Price or (vi) change the provisions of this Indenture
relating to the events constituting an Event of Default under Section 6.1, or
acceleration of the Notes under Section 6.2, may be effective unless the
holders of a majority of the Senior Indebtedness then outstanding under the
Revolving Credit Facility shall have previously consented thereto in writing.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company
will mail supplemental indentures to Holders upon request. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture or waiver.
Neither the Company nor any of its Subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all Holders of the Notes that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
SECTION 9.3 Revocation and Effect of Consent. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the Note of the consenting
Holder, even if notation of the consent is not made on any Note. However, any
such Holder or subsequent Holder may revoke the consent as to its Note or
portion of its Note. Such revocation shall be effective only if the Trustee
receives the notice of revocation before the date the amendment, supplement or
waiver becomes effective. An amendment, supplement or waiver shall become
effective on receipt by the Trustee of
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written consents from the Holders of the requisite percentage in principal
amount of the outstanding Notes.
The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies) and only those persons shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder unless it is of the type described in any of clauses
(i) through (ix) of Section 9.2. In case of an amendment or waiver of the type
described in clauses (i) through (ix) of Section 9.2, the amendment or waiver
shall bind each Holder who has consented to it and every subsequent Holder of a
Note that evidences the same indebtedness as the Note of the consenting Holder.
SECTION 9.4 Notation on or Exchange of Notes. If an
amendment, supplement or waiver changes the terms of a Note, the Trustee may
require the Holder to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Note about the changed terms and return it to the
Holder and the Trustee may place an appropriate notation on any Note thereafter
authenticated. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Note shall issue and the Trustee shall authenticate
a new Note that reflects the changed terms.
SECTION 9.5 Trustee to Sign Amendments, Etc. The Trustee shall
be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article Nine is authorized or permitted by
this Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver if the same does not adversely affect the
rights of the Trustee. The Trustee may, but shall not be obligated to, execute
any such amendment, supplement or waiver that affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
SECTION 9.6 Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article
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Nine shall conform to the requirements of the Trust Indenture Act as then in
effect.
ARTICLE TEN
SUBORDINATION
SECTION 10.1 Notes Subordinated to Senior Indebtedness. The
Company, for itself and its successors, and each Holder, by his or her
acceptance of Notes, agrees that the payment of the Principal of and interest
on the Notes is subordinated, to the extent and in the manner provided in this
Article Ten, to the right of payment in full to all present and future Senior
Indebtedness, and that these subordination provisions are for the benefit of
the holders of Senior Indebtedness.
This Article Ten shall constitute a continuing offer to all persons
who, in reliance upon such provisions, become holders of, or continue to hold,
Senior Indebtedness, and such provisions are made for the benefit of the
holders of Senior Indebtedness, and such holders are made obligees hereunder
and any one or more of them may enforce such provisions.
SECTION 10.2 No Payment on Notes in Certain Circumstances. (a)
No payment (by conversion, exchange, set-off or otherwise) shall be made by or
on behalf of the Company on account of any Obligation or, to the extent the
subordination thereof is permitted by applicable law, claim in respect of the
Notes, including the Principal of, premium, if any, or interest on the Notes,
or to redeem (or make a deposit in redemption of), defease (other than payments
made by the Trustee pursuant to Article Eight with respect to a defeasance
permitted by this Indenture, including the subordinated provisions herein) or
acquire any of the Notes for cash, property or securities (other than Junior
Securities of the Company), (i) upon the maturity of the Designated Senior
Indebtedness or any other Senior Indebtedness with an aggregate principal
amount in excess of $1 million by lapse of time, acceleration or otherwise,
unless and until all Principal of, premium, if any, and interest on such Senior
Indebtedness and all other obligations in respect thereof shall first be paid
in full in cash or cash equivalents or such payment is duly provided for, or
unless and until any such maturity by acceleration has been rescinded or waived
or (ii) in the event of default in payment of any Principal of, premium, if
any, or interest on or any other amount payable in respect of the Designated
Senior Indebtedness or any other Senior Indebtedness with an aggregate
principal amount in excess of $1 million when it becomes due and payable,
whether
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at maturity or at a date fixed for prepayment or by declaration or otherwise,
unless and until such payment default has been cured or waived or has otherwise
ceased to exist.
(b) Upon the happening of a default (any event that, after
notice or passage of time would be an event of default) or an event of default
(any event that permits the holders of Senior Indebtedness or their
representative or representatives immediately to accelerate its maturity) with
respect to any Designated Senior Indebtedness, other than a default in payment
of the Principal of, premium, if any, or interest on such Designated Senior
Indebtedness, upon written notice of such default or event of default given to
the Company and the Trustee by the holders of a majority of the principal
amount outstanding of such Designated Senior Indebtedness or their
representative or representatives or, if such default or event of default
results from the acceleration of the Notes, immediately upon such acceleration,
then, unless and until such default or event of default has been cured or
waived or otherwise has ceased to exist, no payment may be made by or on behalf
of the Company with respect to any Obligation or claim in respect of the Notes,
including the Principal of, premium, if any, or interest on the Notes or to
redeem (or make a deposit in redemption of), defease or acquire any of the
Notes for cash, property or securities (other than Junior Securities of the
Company). Notwithstanding the foregoing, unless the Designated Senior
Indebtedness in respect of which such default or event of default exists has
been declared due and payable in its entirety within 180 days after the date
written notice of such default or event of default is delivered as set forth
above or the date of such acceleration, as the case may be (the "Payment
Blockage Period"), and such declaration or acceleration has not been rescinded,
the Company shall be required then to pay all sums not paid to the Holders of
the Notes during the Payment Blockage Period due to the foregoing prohibitions
and to resume all other payments as and when due on the Notes. Any number of
such notices may be given; provided, however, that (i) during any 360
consecutive days, only one Payment Blockage Period shall commence and (ii) any
such default or event of default that existed upon the commencement of a
Payment Blockage Period may not be the basis for the commencement of any other
Payment Blockage Period, unless such default or event of default shall have
been cured or waived for a period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing
provisions of this Section 10.2, any payment or distribution of assets of the
Company from any source whether in cash, property or securities (other than
Junior Securities
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of the Company), shall be received by the Trustee or the Holders on account of
any Obligation or claim in respect of the Notes at a time when such payment or
distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of Senior
Indebtedness, and shall be paid or delivered by the Trustee or such Holders, as
the case may be, to the holders of the Senior Indebtedness remaining unpaid or
unprovided for or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
of such Senior Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Indebtedness held
or represented by each, for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay or to provide for
the payment in full in cash or cash equivalents of all such Senior
Indebtedness, after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness.
The Company shall give prompt written notice to the Trustee of any
default or event of default, and any cure or waiver thereof, or any
acceleration under any Senior Indebtedness or under any agreement pursuant to
which Senior Indebtedness may have been issued.
SECTION 10.3 Notes Subordinated to Prior Payment of All Senior
Indebtedness on Dissolution, Liquidation or Reorganization of Company. Upon
any distribution of assets of the Company upon any dissolution, winding up,
total or partial liquidation or reorganization or readjustment of the Company,
whether voluntary or involuntary, in bankruptcy, insolvency, receivership or
similar proceeding or upon assignment for the benefit of creditors, or any
other marshalling of the assets and liabilities of the Company or otherwise:
(a) the holders of all Senior Indebtedness would first be entitled
to receive payment in full in cash or cash equivalents (or have such payment
duly provided for) of the Principal, premium, if any, and interest payable in
respect thereof before the Holders would be entitled to receive any payment on
account of the Principal of, premium, if any, and interest on the Notes, in
respect of the Redemption Price or Change of Control Payment or otherwise in
respect of the Notes;
(b) any payment or distribution of assets of the Company of
any kind or character, from any source, whether in cash, property or securities
(other than Junior Securities of the Company) to which the Holders or the
Trustee on behalf of the Holders would be entitled, except for the
subordination
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provisions of this Article Ten, would be paid by the liquidating trustee or
agent or other person making such a payment or distribution directly to the
holders of Senior Indebtedness remaining unpaid or unprovided for or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or represented by
each, for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay or provide for the payment in full in
cash or cash equivalents of all such Senior Indebtedness, after giving effect
to any concurrent payment or distribution to the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company, whether in cash, property or
securities (other than Junior Securities of the Company), shall be received by
the Trustee or the Holders on account of Principal of or interest on the Notes
before all Senior Indebtedness is paid in full or such payment is duly provided
for, such payment or distribution (subject to the provision of Section 10.6 and
10.7) shall be held in trust by the Trustee or such Holders for the benefit of
the holders of the Senior Indebtedness, or their respective representative,
ratably according to the respective amounts of Senior Indebtedness held or
represented by each, to the extent necessary to make payment in full (except as
such payment otherwise shall have been provided for) of all Senior Indebtedness
remaining unpaid after giving effect to all concurrent payments and
distributions and all provisions therefor to the holders of such Senior
Indebtedness, but only to the extent that as to any holder of Senior
Indebtedness, as promptly as practicable following notice from the Trustee to
the holders of Senior Indebtedness that such prohibited payment has been
received by the Trustee or Holder(s), such holder (or a representative
therefor) notifies the Trustee of the amounts then due and owing on the Senior
Indebtedness, if any, held by such holder and only the amounts specified in
such notices to the Trustee shall be paid to the holders of Senior
Indebtedness.
The Company shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the Company or
assignment for the benefit of creditors by the Company.
SECTION 10.4 Securityholders to be Subrogated to Rights of
Holders of Senior Indebtedness. Subject to the payment in full of all Senior
Indebtedness (or provision made
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for its payment), the Holders of Notes shall be subrogated to the rights of the
holders of such Senior Indebtedness to receive payments or distributions of
assets of the Company applicable to the Senior Indebtedness until all amounts
owing on the Notes shall be paid in full, and for the purpose of such
subrogation no such payments or distributions to the holders of a Senior
Indebtedness by or on behalf of the Company, or by or on behalf of the Holders
by virtue of this Article Ten, which otherwise would have been made to the
Holders shall, as between the Company and the Holders, be deemed to be payment
by the Company to or on account of the Senior Indebtedness, it being understood
that the provisions of this Article Ten are and are intended solely for the
purpose of defining the relative rights of the Holders, on the one hand, and
the holders of Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article Ten shall have been
applied, pursuant to the provisions of this Article Ten, to the payment of
amounts payable under Senior Indebtedness, then the Holders shall be entitled
to receive from the holders of such Senior Indebtedness any payments or
distributions received by such holders of Senior Indebtedness in excess of the
amount sufficient to pay all amounts payable under or in respect of the Senior
Indebtedness in full.
SECTION 10.5 Obligations of the Company Unconditional. Nothing
contained in this Article Ten or elsewhere in this Indenture or in the Notes is
intended to or shall impair, as between the Company and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the Principal of, premium, if any, and interest on the Notes as and
when the same shall become due and payable in accordance with their terms, or
is intended to or shall affect the relative rights of the Holders and creditors
of the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or any Holder from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article Ten, of the
holders of Senior Indebtedness in respect of cash, property or securities of
the Company received upon the exercise of any such remedy. Notwithstanding
anything to the contrary in this Article Ten or elsewhere in this Indenture or
in the Notes, upon any distribution of assets of the Company referred to in
this Article Ten, the Trustee, subject to the provisions of Sections 8.1 and
8.2, and the Holders shall be entitled to rely upon any order or decree made by
any court of competent
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jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceeding are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the Holders for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article Ten. Nothing in this Section 10.5 shall apply to the claims
of, or payments to, the Trustee under or pursuant to Section 7.7.
SECTION 10.6 Trustee Entitled to Assume Payments Not Prohibited
in Absence of Notice. The Trustee shall not at any time be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment to or by the Trustee unless and until a Trust Officer of the Trustee
shall have received, no later than three Business Days prior to such payment,
written notice thereof from the Company or from one or more holders of Senior
Indebtedness or from any representative therefor and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Section 8.1
and 8.2, shall be entitled in all respects conclusively to assume that no such
fact exists.
SECTION 10.7 Application by Trustee of Assets Deposited with
It. U.S. Legal Tender or U.S. Government Obligations deposited in trust with
the Trustee pursuant to and in accordance with Section 9.1 shall be for the
sole benefit of Securityholders and, to the extent (i) the making of such
deposit by the Company shall not have been in contravention of any term or
provision of any agreement creating or evidencing Senior Indebtedness and (ii)
allocated for the payment of Notes, shall not be subject to the subordination
provisions of this Article Ten. Otherwise, any deposit of assets by the
Company with the Trustee or any Paying Agent (whether or not in trust) for the
payment of Principal of or interest on any Notes shall be subject to the
provisions of Sections 10.1, 10.2, 10.3 and 10.4; provided, that, if prior to
the second Business Day preceding the date on which by the terms of this
Indenture any such assets may become distributable for any purpose (including
without limitation, the payment of either Principal of or interest on any Note)
the Trustee or such Paying Agent shall not have received with respect to such
assets the written notice provided for in Section 10.6, then the Trustee or
such Paying Agent shall have full power and authority to receive such assets
and to apply the same to the purpose for which they were received, and shall
not be affected by any notice to the contrary which may be received by it on or
after such date.
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SECTION 10.8 Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior Indebtedness. No right of any
present or future holders of any Senior Indebtedness to enforce subordination
provisions contained in this Article Ten shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or be otherwise charged
with. The holders of Senior Indebtedness may extend, renew, restate,
supplement, modify or amend the terms of the Senior Indebtedness or any
security therefor and release, sell or exchange such security and otherwise
deal freely with the Company all without affecting the liabilities and
obligations of the parties to this Indenture or the Holders.
SECTION 10.9 Securityholders Authorize Trustee to Effectuate
Subordination of Notes. Each Holder of the Notes by his or her acceptance
thereof authorizes and expressly directs the Trustee on his or her behalf to
take such action in accordance with the terms of this Indenture as may be
necessary or appropriate to effectuate the subordination provisions contained
in this Article Ten and to protect the rights of the Holders pursuant to this
Indenture, and appoints the Trustee his or her attorney-in-fact for such
purpose, including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company) tending towards
liquidation of the business and assets of the Company, the immediate filing of
a claim for the unpaid balance of his or her Notes in the form required in said
proceedings and cause said claim to be approved. If the Trustee does not file
a proper claim or proof of debt in the form required in such proceeding prior
to 30 days before the expiration of the time to file such claim or claims, then
the holders of the Senior Indebtedness or their representatives are or is
hereby authorized to have the right to file and are or is hereby authorized to
file an appropriate claim for and on behalf of the Holders of said Notes.
Nothing herein contained shall be deemed to authorize the Trustee or the
holders of Senior Indebtedness or their representative to authorize or consent
to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee or the holders of
Senior Indebtedness or their representative to vote in respect of the claim of
any Securityholder in any such proceeding.
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SECTION 10.10 Right of Trustee to Hold Senior Indebtedness. The
Trustee shall be entitled to all of the rights set forth in this Article Ten in
respect of any Senior Indebtedness at any time held by it to the same extent as
any other holder of Senior Indebtedness, and nothing in this Indenture shall be
construed to deprive the Trustee of any of its rights as such holder.
SECTION 10.11 Article Ten Not to Prevent Events of Default. The
failure to make a payment on account of Principal of or interest on the Notes
by reason of any provision of this Article Ten shall not be construed as
preventing the occurrence of a Default or an Event of Default under Section 6.1
or in any way prevent the Holders from exercising any right hereunder other
than the right to receive payment on the Notes.
SECTION 10.12 No Fiduciary Duty of Trustee to Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness, and shall not be liable to any such holders
(other than for its willful misconduct or negligence) if it shall in good faith
mistakenly pay over or distribute to the Holders of Notes or the Company or any
other person, cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article Ten or otherwise.
Nothing in this Section 10.12 shall affect the obligation of any other such
person to hold such payment for the benefit of, and to pay such payment over
to, the holders of Senior Indebtedness or their representative.
ARTICLE ELEVEN
SUBSIDIARY GUARANTEES
SECTION 11.1 Subsidiary Guarantees. Subject to the provisions
of this Article Eleven, each Guarantor from time to time hereby jointly and
severally, fully and unconditionally Guarantees to each Holder of a Note
authenticated and delivered by the trustee, and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Notes or the Obligations of the Company under this Indenture or
the Notes, that: (i) the Principal of, premium, if any, and interest on the
Notes will be promptly paid in full when due, whether at the maturity, by
acceleration, redemption or otherwise, and interest on the overdue Principal of
and interest and premium, if any, on the Notes, if any, to the extent lawful,
and all other Obligations of the Company to the Holders or the Trustee under
this Indenture and the Notes will be promptly paid in
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full, all in accordance with the terms of this Indenture and the Notes; (ii) in
case of any extension of time of payment or renewal of any Notes or any of such
other Obligations, that the Notes will be promptly paid in full when due in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise; and (iii) any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder in enforcing any rights under any Subsidiary Guarantee will be paid.
Failing payment when due of any amount so guaranteed for whatever reason, each
Guarantor will be obligated to pay the same whether or not such failure to pay
has become an Event of Default which could cause acceleration pursuant to
Section 6.2 hereof. An Event of Default under this Indenture or the Notes
shall constitute an event of default under each Subsidiary Guarantee, and shall
entitle the Holders of Notes to accelerate the Obligations of each Guarantor
hereunder in the same manner and to the same extent as the Obligations of the
company. Each Guarantor hereby further agrees that its Obligations under this
Indenture and the Notes shall be unconditional, regardless of the validity,
legality or enforceability of this Indenture or the Notes, the absence of any
action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any provisions of this Indenture or the Notes, any modification
or amendment of, or supplement to, this Indenture or the Notes, the recovery of
any judgment against the Company or any action to enforce any such judgment or
any other circumstance that might otherwise constitute a legal or equitable
discharge or defense of each Guarantor. Each Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that the Subsidiary Guarantee will not be discharged
except by complete performance by the Company of such Obligations. If any
Holder or the trustee is required by any court or otherwise to return to the
Company, any Guarantor or any custodian, Trustee, liquidator or other similar
official acting in relation to either the Company or any Guarantor any amount
paid by any such entity to the Trustee or such Holder, each Subsidiary
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor hereby acknowledges and agrees that, as
between it, on the one hand, and the Holders of Notes and the Trustee, on the
other hand, (x) the maturity of the Obligations under this Indenture and the
Notes may be accelerated as provided in Article 6 hereof for purposes of the
Subsidiary Guarantee notwithstanding any stay, injunction or other prohibition
preventing such acceleration, and (y) in the event of any declaration of
acceleration of such Obligations under this Indenture and the
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Notes as provided in Article 6 hereof, such Obligations (whether or not due and
payable) shall forthwith become due and payable by such Guarantor for the
purpose of such Subsidiary Guarantee.
Each Guarantor hereby waives all rights of subrogation,
contribution, reimbursement and indemnity, and all other rights, that any
Guarantor would have against the Company at any time as a result of any payment
in respect of the Subsidiary Guarantee (whether contractual, under Section 509
of the Bankruptcy Code, or otherwise).
SECTION 11.2 Subordination of Subsidiary Guarantees. Each
Guarantor's Obligations under its Subsidiary Guarantee shall be junior and
subordinated in right of payment to any Guarantor Senior Indebtedness of such
Guarantor in the same manner and to the same extent as the Notes are
subordinated to Senior Indebtedness of the Company pursuant to Article Ten and
the provisions of Article Ten and any terms defined therein or incorporated by
reference into such defined terms will apply to the Subsidiary Guarantee as if
references in Article Ten to the "Note(s)", the "Company", "Senior
Indebtedness", "Designated Senior Indebtedness" and "this Article Ten" are
references to such "Subsidiary Guarantee", such "Guarantor", such Guarantor's
"Guarantor Senior Indebtedness", such Guarantor's "Guarantor Designated Senior
Indebtedness" and "Article Ten as read to apply to each Guarantor's Subsidiary
Guarantee pursuant to this Section 11.2", respectively, except that reference
in Section 10.5 to "the obligation of the Company, which is absolute and
unconditional, to pay to the Holders the Principal of, premium, if any, and
interest on the Notes as and when the same shall become due and payable in
accordance with their terms", or any words of similar meaning, are references
to "such Guarantor's Obligations under its Subsidiary Guarantee". Any notice of
a default or event of default given to the Trustee in respect of Designated
Senior Indebtedness pursuant to Section 10.2(b) shall be deemed to be a notice
a default or event of default given to the Trustee in respect of such
Guarantor's Guarantor Designated Senior Indebtedness and any notice of a
default or event of default given to the Trustee in respect of such Guarantor's
Guarantor Designated Senior Indebtedness pursuant to this Section 11.2 shall be
deemed to be a notice of a default or event of default given to the Trustee in
respect of Designated Senior Indebtedness.
In the event of a conflict between the provisions of Section
10.2(b) and the provisions of Section 10.2(b) as read to apply to the
Guarantor's Subsidiary Guarantee pursuant to this Section 11.2, the provisions
of Section 10.2(b) shall apply and govern this Indenture.
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SECTION 11.3 Limits of Subsidiary Guarantees.
Notwithstanding anything to the contrary in this Article Eleven, each
Guarantor's liability will be that amount from time to time equal to the
aggregate amount of the Obligations guaranteed under this Indenture, but shall
be limited to the lessor of (i) the maximum amount that would not render such
Guarantor's obligations subject to avoidance under applicable fraudulent
conveyance provisions of the United States Bankruptcy Code or any comparable
provision of any applicable state law; or (ii) the maximum amount that would
not render such Guarantor's Subsidiary Guarantee an improper corporate
distribution by such Guarantor under state law. In addition, such Guarantor's
Subsidiary Guarantee will cease to be effective if and to the extent that prior
to the date it is probable to be called upon, such Guarantor would be required
to reflect the amount of its Subsidiary Guarantee on the face of its balance
sheet under GAAP and to do so would prevent such Guarantor from distributing to
the Company amounts sufficient to pay Principal of, premium, if any, or
interest on the Notes when due.
SECTION 11.4 Release of a Guarantor. In the event of a sale,
exchange or transfer, to any Person not an Affiliate of the Company, of (i) all
of the Capital Stock owned by the Company or any Subsidiary of the Company of,
or (ii) all or substantially all the assets of, such Guarantor (which sale,
exchange or transfer is not prohibited by this Indenture or is effected
pursuant to the foreclosure or other enforcement (effected in accordance with
any applicable law) of any lien, pledge or other security interest securing the
payment of any Senior Indebtedness or Guarantor Senior Indebtedness), such
Guarantor will be automatically and unconditionally released and discharged of
any obligations as a Guarantor under this Article Eleven, and shall thereafter
not be a "Guarantor" under this Indenture. The Trustee shall deliver an
appropriate instrument evidencing any such release under this Section 11.4 upon
receipt of a request by the Company accompanied by an Officers' Certificate and
an Opinion of Counsel certifying as to the compliance with this Section 11.4.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.1 Trust Indenture Act of 1939. This Indenture shall
incorporate and be governed by the provisions of the Trust Indenture Act that
are required to be part of and to govern indentures qualified under the Trust
Indenture Act. If any provision of this Indenture limits, qualifies or
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conflicts with the duties imposed by operation of Section 318(c) of the Trust
Indenture Act, the imposed duties shall control.
SECTION 12.2 Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail addressed as follows:
if to the Company or any Guarantor:
Wyndham Hotel Corporation
2001 Bryan Street, Suite 2300
Dallas, Texas 75201
Attention: Chief Financial Officer
if to the Trustee:
Bank One, Columbus, N.A.
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attention: Corporate Trust Administration
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to
him or her at his or her address as it appears on the Security Register by
first class mail and shall be sufficiently given to him or her if so mailed
within the time prescribed. Copies of any such communication or notice to a
Holder shall also be mailed to the Trustee and each Agent at the same time.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. Except
for a notice to the Trustee, which is deemed given only when received, and
except as otherwise provided in this Indenture, if a notice or communication is
mailed in the manner provided in this Section 12.2, it is duly given, whether
or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but such
filing shall not be a condition precedent to the validity of any action taken
in reliance upon such waiver.
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In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 12.3 Certificate and Opinion as to Conditions
Precedent. Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
Counsel, all such conditions precedent have been complied with.
SECTION 12.4 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinion contained in such
certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he or she
has made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with; provided,
however, that, with respect to matters of fact, an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 12.5 Rules by Trustee, Paying Agent or Registrar. The
Trustee may make reasonable rules for action
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by or at a meeting of Holders. The Paying Agent or Registrar may make
reasonable rules for its functions.
SECTION 12.6 Payment Date Other Than a Business Day. If an
Interest Payment Date, Redemption Date, Change of Control Payment Date, Excess
Proceeds Payment Date, Stated Maturity or date of maturity of any Note shall
not be a Business Day at any place of payment, then payment of Principal of,
premium, if any, or interest on such Note, as the case may be, need not be made
on such date, but may be made on the next succeeding Business Day at any place
of payment with the same force and effect as if made on the Interest Payment
Date, Change of Control Payment Date, Excess Proceeds Payment Date, or
Redemption Date, or at the Stated Maturity or date of maturity of such Note;
provided that no interest shall accrue for the period from and after such
Interest Payment Date, Change of Control Payment Date, Excess Proceeds Payment
Date, Redemption Date, Stated Maturity or date of maturity, as the case may be.
SECTION 12.7 Governing Law. The laws of the State of New York
shall govern this Indenture and the Notes. The Trustee, the Company and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to this Indenture
or the Notes.
SECTION 12.8 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any Subsidiary of the Company. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 12.9 No Recourse Against Others. No recourse for the
payment of the Principal of, premium, if any, or interest on any of the Notes
or for any claim based thereon or otherwise in respect thereof, and no recourse
under or upon any obligation, covenant or agreement of the Company contained in
this Indenture, or in any of the Notes, or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator or
against any past, present or future stockholder, officer, director, employee or
controlling person, as such, of the Company, any of its Subsidiaries or of any
predecessor or successor Person, either directly or through the Company, any of
its Subsidiaries or any predecessor or successor Person, whether by virtue of
any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the Notes.
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SECTION 12.10 Successors. All agreements of the Company in this
Indenture and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 12.11 Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
SECTION 12.12 Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 12.13 Table of Contents and Headings. The Table of
Contents and headings of the Article and Sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms and provisions
hereof.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed, all as of the date first written above.
WYNDHAM HOTEL CORPORATION
as Issuer
By:
---------------------------
Name:
Title:
WYNDHAM MANAGEMENT CORPORATION
as Guarantor
By:
---------------------------
Name:
Title:
GHALP CORPORATION
as Guarantor
By:
---------------------------
Name:
Title:
WYNDHAM IP CORPORATION
as Guarantor
By:
---------------------------
Name:
Title:
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WH INTEREST, INC.
as Guarantor
By:
---------------------------
Name:
Title:
ROSE HALL ASSOCIATES LIMITED
PARTNERSHIP as Guarantor
By: WHC CARIBBEAN LIMITED
By:
---------------------------
Name:
Title:
WHC CARIBBEAN LIMITED
as Guarantor
By:
---------------------------
Name:
Title:
WHC ROSE HALL LIMITED
as Guarantor
By:
---------------------------
Name:
Title:
WHC VININGS CORPORATION LIMITED
as Guarantor
By:
---------------------------
Name:
Title:
<PAGE> 107
[S]
WATERFRONT MANAGEMENT CORPORATION
as Guarantor
By:
---------------------------
Name:
Title:
WHCMB, INC.
as Guarantor
By:
---------------------------
Name:
Title:
WYNDHAM HOTELS & RESORTS
(ARUBA) N.V. as Guarantor
By:
---------------------------
Name:
Title:
BANK ONE, COLUMBUS, N.A.
as Trustee
By:
---------------------------
Name:
Title:
101
<PAGE> 108
EXHIBIT A
[FACE OF NOTE]
CUSIP No. $
Unless and until it is exchanged in whole or in part for Notes in definitive
registered form, this Note may not be transferred except as a whole by the
Depositary to the nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary.
WYNDHAM HOTEL CORPORATION
___% Senior Subordinated Note due 2006
WYNDHAM HOTEL CORPORATION, a Delaware corporation (the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to _________________,
or registered assigns, at the office or agency of the Company in New York, New
York, the principal sum of __________________Dollars on ________, 2006, in the
coin or currency of the United States, and to pay interest, semi-annually on
________ and ________ of each year (each, an "Interest Payment Date")
commencing ________, 1996, on said principal sum at said office or agency, in
like coin or currency, at the rate per annum specified in the title of this
Note, from the Interest Payment Date, as the case may be, next preceding the
date of this Note to which interest has been paid or duly provided for, unless
the date hereof is a date to which interest has been paid or duly provided for,
in which case from the date of this Note, or unless no interest has been paid
or duly provided for on these Notes, in which case from ________, 1996, until
payment of said principal sum has been made or duly provided for; provided,
that payment of interest may be made at the option of the Company by check
mailed to the address of the person entitled thereto as such address shall
appear on the Security Register as provided in the Indenture. Notwithstanding
the foregoing, if the date hereof is after ________ or ________ (each, a
"Regular Record Date"), as the case may be, and before the following Interest
Payment Date, this Note shall bear interest from such Interest Payment Date;
provided, that if the Company shall default in the payment of
<PAGE> 109
interest due on such Interest Payment Date, then this Note shall bear interest
from the next preceding Interest Payment Date, to which interest has been paid
or duly provided for or, if no interest has been paid or duly provided for on
these Notes, from ________, 1996. The interest so payable on any Interest
Payment Date will, subject to certain exceptions provided in the Indenture
referred to on the reverse hereof, be paid to the person in whose name this
Note is registered at the close of business on the Regular Record Date, as the
case may be, next preceding such Interest Payment Date, whether or not such day
is a Business Day.
Reference is made to the further provisions of this Note set forth
on the reverse hereof. Such further provisions shall for all purposes have the
same effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee under the Indenture referred to on the reverse hereof.
A-2
<PAGE> 110
IN WITNESS WHEREOF, WYNDHAM HOTEL CORPORATION has caused this
instrument to be signed manually or by facsimile by its duly authorized
officers and has caused a facsimile of its corporate seal to be affixed
hereunto or imprinted hereon.
Dated:
(SEAL) WYNDHAM HOTEL CORPORATION
By________________________________
By________________________________
Attest:
________________________
A-3
<PAGE> 111
CERTIFICATE OF AUTHENTICATION
This is one of the ___% Senior Subordinated Notes due 2006 referred
to in the within-mentioned Indenture.
Dated: Bank One, Columbus, N.A.,
as Trustee
By _________________________
Authorized Signatory
<PAGE> 112
[REVERSE OF NOTE]
WYNDHAM HOTEL CORPORATION
___% Senior Subordinated Note due 2006
1. Indenture.
This Note is one of a duly authorized issue of ___% Senior
Subordinated Notes due 2006 of the Company (hereinafter called the "Notes"),
all issued or to be issued under and pursuant to an indenture dated as of May
__, 1996 (herein called the "Indenture"), duly executed and delivered by the
Company and certain Subsidiaries of the Company, as Guarantors, to Bank One,
Columbus, N.A., as Trustee (herein called the "Trustee"), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company, the Guarantors and the
Holders of the Notes. The Notes are limited in aggregate principal amount to
$100,000,000, except as provided in the Indenture.
2. Defined Terms.
Terms used herein which are defined in the Indenture shall have the
respective meanings assigned thereto in the Indenture.
3. Interest; Payment Dates.
Interest will be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal and, to the
extent lawful, on overdue installments of interest at the rate per annum borne
by this Note. If a payment date is not a Business Day as defined in the
Indenture at a place of payment, payment may be made at that place on the next
succeeding day that is a Business Day, and no interest shall accrue for the
intervening period.
4. Form and Denomination.
The Notes are issuable initially only in global registered form
without coupons in denominations of $1,000 and any multiple of $1,000 at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, and in the manner and subject to the limitations provided in the
Indenture, but, without the payment of any service charge, Notes may be
<PAGE> 113
exchanged for a like aggregate principal amount of Notes of other authorized
denominations.
5. Transfer and Exchange.
Upon due presentment for registration of transfer of this Note at
the office or agency of the Company in the Borough of Manhattan, The City of
New York, a new Note or Notes of authorized denominations for an equal
aggregate principal amount will be issued to the transferee in exchange
therefor, subject to the limitations provided in the Indenture, without charge
except for any tax or other governmental charge imposed in connection
therewith.
6. Optional Redemption.
The Notes may be redeemed, at the Company's option, in whole or in
part, at any time on or after __________, 2001 and prior to maturity, upon not
less than 30 nor more than 60 days' prior notice mailed by first class mail to
each Holder's last address as it appears in the Security Register, at the
following Redemption Prices (expressed in percentages of principal amount),
plus accrued and unpaid interest, if any, to the Redemption Date (subject to
the right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date), if redeemed during the 12-month period commencing ________, of the years
set forth below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2001 10 . %
2002 10 . %
2003 10 . %
2004 and thereafter 100.000%
</TABLE>
Any such redemption will comply with the Indenture.
Notice of redemption will be mailed at least 30 days but
not more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at such Holder's last address as it appears in the Security Register.
Notes in original denominations larger than $1,000 may be redeemed in part. On
and after the Redemption Date, interest ceases to accrue on Notes or portions
of Notes called or redemption, unless the Company defaults in the payment of
the Redemption Price.
A-2
<PAGE> 114
7. Restrictive Covenants.
The Indenture imposes certain limitations on the ability
of the Company, its Restricted Subsidiaries and the Guarantors, among other
things, to Incur additional Indebtedness, make Restricted Payments, make Asset
Sales, engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each fiscal
quarter (120 days after the end of the last fiscal quarter of each year), the
Company must report to the Trustee on compliance with such limitations.
8. Repurchase upon a Change of Control.
Upon the occurrence of a Change of Control, as defined in
the Indenture, each Holder shall have the right to require the repurchase of
its Notes by the Company in cash pursuant to the offer described in the
Indenture (the "Change of Control Offer") at a purchase price equal to 101% of
the principal amount thereof plus accrued and unpaid interest (if any) to the
date of purchase (the "Change of Control Payment").
A notice of such Change of Control will be mailed within
30 days after any Change of Control occurs to each Holder at his last address
as it appears in the Security Register. Notes in original denominations larger
than $1,000 may be sold to the Company in part. On and after the Change of
Control Payment Date, interest ceases to accrue on Notes or portions of Notes
surrendered for purchase by the Company, unless the Company defaults in the
payment of the Change of Control Payment.
9. Default and Remedies.
In case an Event of Default, as defined in the Indenture,
shall have occurred and be continuing, the principal hereof and the interest
accrued hereon, if any, may be declared, and upon such declaration shall
become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
10. Amendments, Supplements and Waivers.
Subject to certain exceptions, the Indenture or the Notes
may be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision of the Indenture or the Notes may be
waived with the consent of the Holders of a least a majority in principal
amount of the Notes then outstanding. Without notice to or the
A-3
<PAGE> 115
consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency and make any change that does not materially and adversely affect
the rights of any Holder.
11. Subordination.
The Company, for itself and its successors, and each
Holder, by accepting the Notes, agrees that the payment of the principal of and
interest on the Notes is subordinated, to the extent and in the manner provided
in the Indenture, to the right of payment in full of all present and future
Senior Indebtedness, and that the subordination provisions in the Indenture are
for the benefit of the holders of Senior Indebtedness.
12. Subsidiary Guarantees.
Each Guarantor from time to time jointly and severally,
fully and unconditionally Guarantees the prompt payment when due of the
Principal of, premium, if any, and interest on the Notes, whether at maturity,
by acceleration, redemption or otherwise, and the payment of any and all costs
and expense incurred by the Trustee or any Holder in enforcing any rights under
any Subsidiary Guarantee, to the extent and in the manner provided in the
Indenture. Each Guarantor's liability is limited to the lesser of (a) the
maximum amount that would not render such Guarantor's obligations subject to
avoidance under applicable fraudulent conveyance provisions of the United
States Bankruptcy Code or any comparable provision of any applicable state law
or (b) the maximum amount that would not render such Guarantor's Subsidiary
Guarantee an improper corporate distribution by such Guarantor under state law.
In addition, the Subsidiary Guarantee will cease to be effective if and to the
extent that prior to the date it is probable to be called upon, the Guarantor
would be required to reflect the amount of such Subsidiary Guarantee on the
face of its balance sheet under GAAP and to do so would prevent the Guarantor
from distributing to the Company amounts sufficient to pay Principal of,
premium, if any, or interest on the Notes when due.
To the extent and in the manner provided in the Indenture,
each Guarantor's Obligations under its Subsidiary Guarantee shall be junior and
subordinated in right of payment to any Guarantor Senior Indebtedness of such
Guarantor to the same extent as the Notes are subordinated to Senior
Indebtedness of the Company pursuant to the Indenture.
13. Holder Treated as Owner.
A-4
<PAGE> 116
The Company, the Guarantors, the Trustee and any agent of
the Company, the Guarantors or the Trustee may deem and treat the registered
Holder hereof as the absolute owner of this Note (whether or not this Note
shall be overdue and notwithstanding any notation of ownership or other writing
hereon), for the purpose of receiving payment of, or on account of, the
Principal hereof and, subject to the provisions hereof, interest hereon, and
for all other purposes, and none of the Company, the Guarantors, the Trustee
and any agent of the Company or the Trustee shall be affected by any notice to
the contrary.
14. No Recourse Against Others.
No recourse for the payment of the Principal of, premium,
if any, or interest on any of the Notes, or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company contained in the Indenture, or in any of
the Notes, or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator or against any past, present or future
stockholder, officer, director, employee or controlling person, as such, of the
Company or of any successor Person, either directly or through the Company or
any successor Person, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and
released as a condition of, and as a consideration for, the execution of the
Indenture and the issue of the Notes.
15. Obligations Absolute.
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the Principal of, premium,
if any, and interest on this Note in the manner, at the place, at the
respective times, at the rate and in the coin or currency herein prescribed.
A-5
<PAGE> 117
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
[PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE]
______________________________________
____________________________________________________________
____________________________________________________________
[PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]
____________________________________________________________
the within Note and all rights thereunder, hereby
____________________________________________________________
irrevocably constituting and appointing such person attorney
____________________________________________________________to transfer such
Note on the books of the Issuer, with full
____________________________________________________________
power of substitution in the premises.
Dated:______________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Note in every particular
without alteration or enlargement or any change whatsoever.
A-6
<PAGE> 1
EXHIBIT 10.15
Draft 4/23/96
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (this "Agreement") dated as of
________, 1996, is between Wyndham Hotel Corporation, a Delaware corporation
(the "Company"), and the undersigned [director and/or officer] of the Company
(the "Indemnitee"), with reference to the following facts:
The Indemnitee is currently serving as a [director and/or officer] of
the Company and the Company desires that the Indemnitee continue in such
capacity. The Indemnitee is willing, under certain circumstances, to continue
serving as a [director and/or officer] of the Company.
Section 145 of the General Corporation Law of the State of Delaware,
under which Law the Company is organized, empowers a corporation to indemnify a
person serving as a director, officer, employee or agent of the corporation and
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and such Section 145 and the bylaws of the Company specify
that the indemnification set forth in said Section 145 and in the bylaws,
respectively, shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
In order to induce the Indemnitee to continue to serve as a [director
and/or officer] of the Company and in consideration of his or her continued
service, the Company hereby agrees to indemnify the Indemnitee as follows:
<PAGE> 2
1. Indemnity. The Company shall indemnify the
Indemnitee and his or her executors, administrators or assigns, for
any Expenses (as defined below) that the Indemnitee is or becomes
legally obligated to pay in connection with any Proceeding. As used
in this Agreement the term "Proceeding" shall include any threatened,
pending or completed claim, action, suit, investigation or proceeding,
whether brought by or in the right of the Company or otherwise and
whether of a civil, criminal, administrative or investigative nature,
in which the Indemnitee may be or may have been involved as a party,
witness or otherwise, by reason of the fact that Indemnitee is or was
a director or officer of the Company, by reason of any actual or
alleged error or misstatement or misleading statement made or suffered
by the Indemnitee, by reason of any action taken by him or her or of
any inaction on his or her part while acting as such director or
officer, or by reason of the fact that he or she was serving at the
request of the Company as a director, trustee, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise; provided, however, that in each such case Indemnitee
acted in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Company,
and, in the case of a criminal proceeding, in addition had no
reasonable cause to believe that his or her conduct was unlawful. As
used in this Agreement, the term "other enterprise" shall include
(without limitation) employee
INDEMNIFICATION AGREEMENT - Page 2
<PAGE> 3
benefit plans and administrative committees thereof, and the term
"fines" shall include (without limitation) any excise tax assessed
with respect to any employee benefit plan. Any corporation,
partnership, limited liability company or other entity on behalf of
which Indemnitee may be deemed to be acting in connection with his or
her service to the Company shall be entitled to the benefits of the
indemnity provided for by this Agreement to the same extent and under
the same conditions upon which Indemnitee is entitled to such
indemnity.
2. Expenses. As used in this Agreement, the term
"Expenses" shall include, without limitation, damages, judgments,
fines, penalties, settlements and costs, attorneys' fees and
disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to
indemnification under this Agreement.
3. Enforcement. If a claim or request under this
Agreement is not paid by the Company, or on its behalf, within 30
calendar days after a written claim or request has been received by
the Company, then the Indemnitee may at any time thereafter bring suit
against the Company to recover the unpaid amount of the claim or
request and if successful in whole or in part, the Indemnitee shall be
entitled to be paid also the Expenses of prosecuting such suit. The
burden of proving that the Indemnitee is not entitled to
indemnification for any reason shall be upon the Company.
INDEMNIFICATION AGREEMENT - Page 3
<PAGE> 4
4. Subrogation. Upon any payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all
of the rights of recovery of the Indemnitee, who shall execute all
papers required and shall do everything that may be necessary to
secure such rights, including the execution of such documents
necessary to enable the Company effectively to bring suit to enforce
such rights.
5. Exclusions. The Company shall not be liable under
this Agreement to pay any Expenses in connection with any claim made
against the Indemnitee:
(a) to the extent that payment is actually made
to the Indemnitee under a valid, enforceable and collectible
insurance policy;
(b) to the extent that the Indemnitee is
indemnified and actually paid otherwise than pursuant to this
Agreement;
(c) in connection with a judicial action by or in
the right of the Company, in respect of any claim, issue or
matter as to which the Indemnitee shall have been adjudged to
be liable to the Company unless and only to the extent that
any court in which such action was brought shall determine
upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, the
Indemnitee is fairly and reasonably entitled to indemnity for
such expenses as such court shall deem proper;
INDEMNIFICATION AGREEMENT - Page 4
<PAGE> 5
(d) if it is proved by final judgment in a court
of law or other final adjudication to have been based upon or
attributable to the Indemnitee's in fact having gained any
personal profit or advantage to which he or she was not
legally entitled;
(e) for a disgorgement of profits made from the
purchase and sale by the Indemnitee of securities pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as
amended, and amendments thereto or similar provisions of any
state statutory law or common law; or
(f) for any judgment, fine or penalty which the
Company is prohibited by applicable law from paying.
6. Indemnification of Expenses of Successful Party.
Notwithstanding any other provision of this Agreement, to the extent
that the Indemnitee has been successful on the merits or otherwise in
defense of any Proceeding or in defense of any claim, issue or matter
therein, including dismissal without prejudice, Indemnitee shall be
indemnified against any and all Expenses incurred in connection
therewith.
7. Partial Indemnification. If the Indemnitee is
entitled under any provision of this Agreement to indemnification by
the Company for some or a portion of Expenses, but not, however, for
the total amount thereof, the Company shall nevertheless indemnify the
Indemnitee for the portion of such Expenses to which the Indemnitee is
entitled.
8. Advance of Expenses. Expenses incurred by the
Indemnitee in connection with any Proceeding, except the
INDEMNIFICATION AGREEMENT - Page 5
<PAGE> 6
amount of any settlement, shall be paid by the Company in advance upon
request of the Indemnitee that the Company pay such expenses. The
Indemnitee hereby undertakes to repay to the Company the amount of any
Expenses theretofore paid by the Company to the extent that it is
ultimately determined that such Expenses were not reasonable or that
the Indemnitee is not entitled to indemnification.
9. Notice of Claim. The Indemnitee, as a condition
precedent to his or her right to be indemnified under this Agreement,
shall give to the Company notice in writing as soon as practicable of
any claim made against him or her for which indemnity will or could be
sought under this Agreement, but a failure to give such notice will
affect the obligations of the Company hereunder only to the extent
that the Company is actually and materially prejudiced thereby.
Notice to the Company shall be given at its corporate headquarters and
shall be directed to the corporate secretary (or such other addressee
as the Company shall designate in writing to the Indemnitee); notice
shall be deemed received if sent by prepaid mail properly addressed,
the date of such notice being the date postmarked. In addition, the
Indemnitee shall give the Company such information and cooperation as
it may reasonably require in connection with such claim.
10. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute
one instrument.
INDEMNIFICATION AGREEMENT - Page 6
<PAGE> 7
11. Indemnification Hereunder Not Exclusive. Nothing
herein shall be deemed to diminish or otherwise restrict the
Indemnitee's right to indemnification under any provision of the
Certificate of Incorporation or bylaws of the Company and amendments
thereto or under law.
12. Governing Law. This Agreement shall be governed by
and construed in accordance with Delaware law, without giving effect
to the principles of conflict of laws thereof.
13. Saving Clause. Wherever there is conflict between
any provision of this Agreement and any applicable present or future
statute, law or regulation contrary to which the Company and the
Indemnitee have no legal right to contract, the latter shall prevail,
but in such event the affected provisions of this Agreement shall be
curtailed and restricted only to the extent necessary to bring them
within applicable legal requirements.
14. Coverage. The provisions of this Agreement shall
apply with respect to the Indemnitee's service as a [director and/or
officer] of the Company prior to the date of this Agreement and with
respect to all periods of such service after the date of this
Agreement, even though the Indemnitee may have ceased to be a
[director and/or officer] of the Company.
15. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, legatees, legal representatives, successors and
permitted assigns.
INDEMNIFICATION AGREEMENT - Page 7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and signed as of the day and year first above written.
"COMPANY" WYNDHAM HOTEL CORPORATION
By
-----------------------------
"INDEMNITEE"
--------------------------------
--------------------------------
INDEMNIFICATION AGREEMENT - Page 8
<PAGE> 1
EXHIBIT 10.19(a)
NON-STANDARDIZED PROFIT SHARING/THRIFT PLAN WITH 401(k) FEATURE
ADOPTION AGREEMENT NUMBER 004
This Adoption Agreement when executed by the Employer and accepted by the
Administrator, and the Trustee, if applicable, and accepted by Connecticut
General Life Insurance Company establishes the Employer's Plan and Trust, if
applicable, for the benefit of its eligible Employees and their Beneficiaries.
The terms of the Connecticut General Life Insurance Company Defined
Contribution Plan are expressly incorporated therein and shall form a part
hereof as fully as if set forth herein except that if more than one election is
provided, only that election made by the Employer shall be so incorporated. The
terms of the Plan so incorporated together with the terms of this Adoption
Agreement shall constitute the sole terms of the Employer's Plan and Trust, if
applicable, and no further trust instrument or other instrument of any nature
whatsoever shall be required. The Employer's participation under the Plan shall
be subject to all the terms set forth therein and in this Adoption Agreement.
Name of Employer (Legal Name):
Wyndham Hotel Company LTD. a Texas Limited Partnership
------------------------------------------------------
Address:
Street 2001 Bryan Street
-----------------------------------------------
City Dallas State Texas Zip 75201
--------------------------------------------------
Type of Business:
Hotel Management
------------------------------------------------------
Classification of Business: Employer Tax Status:
Corporation Tax Year Ends 12 31
----- ----- ---
X Partnership Month Day
-----
S Corporation
-----
Sole Proprietorship Tax Basis: Cash
----- -------
Other Accrual
----- -------
----------------
----------------
----------------
-1-
<PAGE> 2
Name of Sponsoring Organization:
Connecticut General Life Insurance Company
P.O. Box 2975
Hartford, CT 06104
Authorized Representative:
Director of Underwriting
(203) 725-2004
Plan Name: Wyndham Employee Savings & Retirement Plan
--------------------------------------------
I. COMPENSATION, Section 1.13
A. Compensation means:
---(1) 415 safe harbor compensation. (See Section 5.8(b)(4) of
Basic Plan Document 02 for the complete definition of this
term.)
---(2) Wages, Tips, and Other Compensation Box on Form W-2. (See
Section 5.8(b)(1) of Basic Plan Document 02 for the
complete definition of this term.)
X (3) Modified Wages, Tips, and Other Compensation Box on Form
--- W-2. (See Section 5.8(b)(2) of Basic Plan Document 02 for
the complete definition of this term.)
---(4) Section 3401(a) wages. (W-2 wages for purposes of income
tax withholding at the source. See Section 5.8(b)(3) of
Basic Plan Document 02 for the complete definition of this
term.)
---(5) Regular or base salary or wages. (See Section 1.13(a) of
Basic Plan Document 02 for the complete definition of this
term.)
---(6) Regular or base salary or wages plus (x) overtime and/or
(x) bonuses. (See Section 1.13(b) of Basic Plan Document 02
for the complete definition of this term.)
Notes: (i) If option (1), (2), (3) or (4) is
elected, you must elect the same
definition of Compensation in Section XX.
C. of this Adoption Agreement.
(ii) Option (5) or (6) may not be elected
by an integrated plan.
(iii) Use of option (5) or (6) requires that
the employer satisfy a compensation
nondiscrimination test.
-2-
<PAGE> 3
I. COMPENSATION (CONT'D)
B. Compensation shall be determined over the following applicable period:
X (1) The Plan Year.
---
(2) A 12 consecutive month period beginning on ________ and ending
--- with or within the Plan Year.
(3) The Plan Year. However, for the Plan Year in which an Employee's
--- participation begins, the applicable period is the portion of the
Plan Year during which the Employee is eligible to participate
in the Plan.
C. Compensation SHALL NOT SHALL X include Employer contributions, made
--- ---
pursuant to a salary deferral agreement, which are not includable in the
gross income of the Employee under section 125, 402(a)(8), 402(h) or
403(b) of the Code.
D. The highest annual Compensation to be used in determining allocations to
a Participant's Account shall be $__________. (Enter dollar amount if
less than the $200,000 indexed amount.)
E. The following shall be selected, and shall be effective in lieu of all
other selections in Section I, in the event an integrated contribution
formula is selected, or if the Plan is top-heavy.
(1) Compensation shall be determined over the following applicable period:
(a) The Plan Year.
---
(b) A 12 consecutive month period beginning on ___________ and
--- ending with or within the Plan Year.
X (c) The Plan Year. However, for the Plan Year in which an
--- Employee's participation begins, the applicable period is the
portion of the Plan Year during which the Employee is
eligible to participate in the Plan.
(2) Compensation SHALL NOT SHALL X include Employer contributions,
--- ---
made pursuant to a salary deferral agreement, which are not
includable in the gross income of the Employee under section 125,
402(a)(8), 402(h) or 403(b) of the Code.
-3-
<PAGE> 4
II. CONTRIBUTION PERIOD, SECTION 1.17
The regular Contribution Period for Matching Contributions shall be:
(a) Annual.
---
(b) Monthly.
---
X (c) 4-Weekly.
---
The regular Contribution Period for Nonelective Contributions shall be:
(a) Annual.
---
(b) Monthly.
---
(c) 4-Weekly.
---
The regular Contribution Period for Elective Deferral Contributions,
Required Employee Contributions and/or Voluntary Employee Contributions
shall be:
(a) Monthly.
---
X (b) 4-Weekly.
---
- -------------------------------------------------------------------------------
III. EARLY RETIREMENT BY PARTICIPANTS, SECTION 1.20
Early Retirement by Participants is:
X (a) Not permitted.
---
(b) Permitted. Participants will have a Vesting Percentage of 100% as
---
of
Age _______ (50-64) _________ Years of Service
(Note: Age only or age and years may be selected.)
-4-
<PAGE> 5
IV. EFFECTIVE DATE, SECTION 1.22
The adoption of the CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Non-Standardized Profit Sharing/Thrift Plan with 401(k) Feature shall:
(a) Establish a new Plan effective as of
--- ------------------------
Month Day Year
X (b) Constitute an amendment and restatement in its entirety of a
--- previously established Qualified Plan of the Employer which
was effective 3/31/91 (hereinafter called the "Effective
-------
Date"). The effective date of this amendment and restatement
is 4/1/95.
------
- --------------------------------------------------------------------------------
V. ELIGIBILITY REQUIREMENTS, SECTION 2.5(a), 3.1
A. To become a Participant an Employee must meet the following
requirements:
X (1) Service Requirement.
---
1 Year(s) of Service. (Not to exceed 1 Year if the Plan
---
provides for graded vesting; not to exceed 2 Years if the
Plan provides full and immediate vesting upon participation.
If the Year(s) of Service selected is or includes a
fractional year, a Participant will not be required to
complete any specified number of Hours of Service to receive
credit for such year. If an annual Entry Date is chosen in
Section VI, the Service Requirement may not exceed 1/2 Year
or 1-1/2 years respectively.)
X (2) Age Requirement.
---
The minimum attained age is 21 years. (Not greater than 21
----
years except if an annual Entry Date is chosen in Section
VI, minimum attained age may not exceed 20-1/2 years.
Employees who were employed on or before the initial Effective Date
of the Plan or the effective date of the amendment and restatement
of the Plan, as indicated in Section IV of the Adoption Agreement,
SHALL NOT X SHALL be immediately eligible without regard to
--- ---
any Age and/or Service requirements specified under this
subparagraph A.
-5-
<PAGE> 6
V. ELIGIBILITY REQUIREMENTS (CONT'D)
B. Job Class Requirement.
An Employee must be a member of one or more of the following selected
classifications:
X (1) Salaried.
---
X (2) Hourly.
---
X (3) Clerical.
---
X (4) Employees whose employment is governed by a collective
--- bargaining agreement represented by the following union:
Warehouse Employees Local #169 .
--------------------------------------
X (5) Other:
---
See Attachment #1
--------------------------------------
--------------------------------------
--------------------------------------.
C. Additional Requirement.
An Employee must be in the following designated division(s) of
--- the Employer:
-------------------------------------
-------------------------------------
-------------------------------------.
D. To become a Participant an Employee must NOT be a member of the
following groups:
(1) Employees included in a unit of Employees covered by a
--- collective bargaining agreement between the Employer and
employee representatives, if retirement benefits were the
subject of good faith bargaining and if two percent or less of
the Employees of the Employer who are covered pursuant to that
agreement are professionals as defined in section 1.410(b)-9(g)
of the proposed regulations. For this purpose, the term
"employee representatives" does not include any organization
more than half of whose members are Employees who are owners,
officers, or executives of the Employer.
X (2) Employees who are nonresident aliens and who receive no earned
--- income from the Employer which constitutes income from sources
within the United States.
-6-
<PAGE> 7
ATTACHMENT #1
(TO THE WYNDHAM EMPLOYEE SAVING AND RETIREMENT PLAN)
V.B.5. For purposes of determining eligibility under the Plan, an
Employee shall also include any person who is a common-law
employee subject to control and supervision by Wyndham Hotel
Company, Ltd. (or a member of a controlled group of corporations
or trades or businesses under common control with Wyndham Hotel
Company, Ltd.) in accordance with the terms of a management
contract entered into with Wyndham Hotel Company, Ltd.
For purposes of determining eligibility under this Plan, Employees
included in any unit of Employees not covered by a collective
bargaining agreement named in Section V.B.(4) of this Adoption
Agreement shall not be eligible to participate in this Plan.
<PAGE> 8
V. ELIGIBILITY REQUIREMENTS (CONT'D)
(3) Employees covered by the following designated qualified
--- employee benefit plan(s):
--------------------------------------------
--------------------------------------------.
- --------------------------------------------------------------------------------
VI. ENTRY DATE, SECTION 1.28
An Employee who meets the eligibility requirements may become a
Participant on the Effective Date, or thereafter:
(a) Immediately.
---
(b) The first day of any month.
---
X (c) Quarterly, (i.e., 3 months apart) on each
---
1 1 , or 4 1 , or
-------- ------- ------- -------
Month Day Month Day
7 1 , or 10 1 .
-------- ------- ------- -------
Month Day Month Day
(d) Semiannually, (i.e., 6 months apart) on each
--- , or
-------- ------- ------- -------.
Month Day Month Day
(e) Annually, on each
--- ------- -------.
Month Day
- --------------------------------------------------------------------------------
-7-
<PAGE> 9
VII. NORMAL RETIREMENT AGE, SECTION 1.48
X (a) The date the Participant attains age 65 (not to exceed 65).
--- ----
(b) The later of:
---
(i) The date the Participant attains age ____ (not to exceed 65).
(ii) The _____ (not to exceed 5th) anniversary of the participation
commencement date. If, for Plan Years beginning before January
1, 1988, Normal Retirement Age was determined with reference to
the anniversary of the participation commencement date (more
than 5 but not to exceed 10 years), the anniversary date for
Participants who first commenced participation under the plan
before the first Plan Year beginning on or after January 1,
1988, shall be the earlier of (A) the tenth anniversary of the
date the Participant commenced participation in the Plan (or
such anniversary as had been elected by the Employer, if less
than 10) or (B) the fifth anniversary of the first day of the
first Plan Year beginning on or after January 1, 1988. The
participation commencement date is the first day of the first
Plan Year in which the Participant commenced participation in
the Plan.
- -------------------------------------------------------------------------------
VIII. PLAN ADMINISTRATOR, SECTION 1.55
NAME:
Wyndham Hotel Company, LTD., a Texas Limited Partnership
--------------------------------------------------------
--------------------------------------------------------
ADDRESS:
2001 Bryan Street
-------------------------------------------------------
STREET
Dallas, Texas 75201
-------------------------------------------------------
CITY STATE ZIP
- -------------------------------------------------------------------------------
IX. PLAN YEAR, SECTION 1.56
The Plan Year will mean:
(a) The 12-consecutive month period commencing on ______________ and
---
each anniversary thereof except that the first Plan Year will
commence on ________________.
(Note: This first Plan Year election may be made only for new
plans.)
X (b) The 12-consecutive month period commencing on 1/1
--- -------------
and each anniversary thereof.
-8-
<PAGE> 10
X. NON-TRUSTEED, TRUST, AND TRUSTEE, SECTION 1.47, 1.65, 1.66
The Plan is:
(a) Non-Trusteed;
---
X (b) Trusteed and the Trustee(s) is (are):
---
Name: Title:
CG Trust Co.
--------------------------------------------- --------------------
--------------------------------------------- --------------------
--------------------------------------------- --------------------
Address:
------------------------------------------------------------
Street
Chicago Illinois
------------------------------------------------------------
City State Zip
-9-
<PAGE> 11
XI. VESTING PERCENTAGE, SECTION 1.69
The Vesting Schedule, based on number of Years of Service, shall be as
follows:
(a) Years of Service Percentage
--- No Requirement 100%
(b) Years of Service Percentage
--- 0-3 Years 0%
3 Years 100%
X (c) Years of Service Percentage
--- 1 Year 20%
2 Years 40%
3 Years 60%
4 Years 80%
5 Years 100%
(d) Years of Service Percentage
--- 0-3 Years 0%
3 Years 20%
4 Years 40%
5 Years 60%
6 Years 80%
7 Years 100%
(e) Years of Service Percentage
--- 0-2 Years 0%
2 Years 20%
3 Years 40%
4 Years 60%
5 Years 80%
6 Years 100%
(f) Years of Service Percentage
--- 0-5 Years 0%
5 Years 100%
(g) Years of Service Percentage
--- 1 Year 25%
2 Years 50%
3 Years 75%
4 Years 100%
(h) Other
---
Years of Service Percentage
---------------- ----------
---------------- ----------
---------------- ----------
---------------- ----------
---------------- ----------
---------------- ----------
---------------- ----------
(Note: (h) must be at least as liberal as (a) through (g).)
- ------------------------------------------------------------------------------
-10-
<PAGE> 12
XII. HOURS OF SERVICE, SECTION 2.3
Hours of Service shall be determined:
X (a) On the basis of actual hours for which an Employee is paid or
--- entitled to payment.
(b) On the basis of days worked. An Employee shall be credited with
--- ten (10) Hours of Service if, under Section 2.3 of the Plan,
such Employee would be credited with at least one (1) Hour of
Service during the day.
(c) On the basis of weeks worked. An Employee shall be credited with
--- forty-five (45) Hours of Service if, under Section 2.3 of the
Plan, such Employee would be credited with at least one (1) Hour
of Service during the week.
(d) On the basis of semimonthly payroll periods. An Employee shall
--- be credited with ninety-five (95) Hours of Service if, under
Section 2.3 of the Plan, such Employee would be credited with at
least one (1) Hour of Service during the semimonthly payroll
period.
(e) On the basis of months worked. An Employee shall be credited
--- with one-hundred-ninety (190) Hours of Service if, under Section
2.3 of the Plan, such Employee would be credited with at least
one (1) Hour of Service during the month.
XIII. EXCLUDED YEARS OF SERVICE, SECTION 2.8
The Vesting Percentage shall be based on all Years of Service (i.e.,
completion of 1000 Hours of Service) except that the following periods
shall be excluded:
(a) Years of Service prior to the time the Participant attained age
--- 18.
(b) Years of Service during which the Employer did not maintain the
--- Plan or a predecessor plan.
(c) Years of Service during which a Participant elected not to
--- contribute to a Plan which required Employee Contributions.
X (d) None of the above.
---
XIV. SERVICE WITH OTHER EMPLOYER(S)
An Employee's service with the following subsidiary or affiliated
employer(s) shall be considered as Service for the purpose of this
Plan.
See Attachment #2
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
-11-
<PAGE> 13
ATTACHMENT #2
(TO THE WYNDHAM EMPLOYEE SAVINGS & RETIREMENT PLAN)
XIV. Up to five (5) years of service with Predecessor Employers will be
considered as service with the Employer for all purposes under this
Plan. Predecessor Employer means Trammell Crow Company, the former
employer of employees at the Inn at Semi-ah-Moo, the Checkers
properties, and Dallas Market Center Development Company ("DMC Devco");
provided, however, former employees of DMC Devco shall receive credit
under the Plan for their service with DMC Devco only if such employees
are employed by DMC Devco on December 31, 1995.
<PAGE> 14
XV. SOCIAL SECURITY INTEGRATION LEVEL, SECTION 1.62
X not integrated with Social Security
---
The Social Security Integration Level is:
(a) $_________ (not to exceed the Taxable Wage Base).
---
(b) The Taxable Wage Base in effect on the first day of the Plan Year.
---
(c) ____% of Taxable Wage Base (not to exceed 100%)
---
XVI. CONTRIBUTIONS, SECTION 4.2, 4.8
A. (1) Elective Deferral Contributions
Elective Deferral Contributions will NOT be allowed.
---
Each Participant MAY elect to have his Compensation actually paid
during the Plan Year reduced by:
(a) %
---
X (b) up to 15 %.
--- -----
(c) from ______% to _______%.
---
(d) up to the maximum percentage allowable, not to exceed the
limits of sections 402(g) and 415 of the Code.
Cash bonuses paid within 2-1/2 months after the end of the Plan
Year SHALL NOT SHALL X be subject to the salary deferral
---- -----
election.
(2) Modification, Section 4.2(j)(7) or 4.4 (j)(7)
A Participant may change the amount of Elective Deferral
Contributions that the Participant makes to the Plan (complete
(a), (b) or (c)):
(a) ____ per calendar year (may not be less frequent than once).
---
(b) ____ As of the following date(s) (day/month): 1/1, 4/1,
--- --------------
7/1, 10/1
-----------------------------------------------------------
----------------------------------------------------------.
(c) At any time during the calendar year.
---
B. Required Employee Contributions
X Required Employee Contributions will NOT be made.
---
Required Employee Contributions WILL be made as a condition of
receiving an Employer contribution in the amount of
(a) ____% of Compensation actually paid during the
---
Contribution Period.
(b) Not less than_____%, nor more than _____% of Compensation
---
actually paid during the Contribution Period.
-12-
<PAGE> 15
XVI. CONTRIBUTIONS (CONT'D)
C. Matching Contributions
The Employer will NOT make Matching Contributions
---
For each $1.00 of either Elective Deferral Contributions or Required
Employee Contributions, as selected above, the Employer will
contribute and allocate to each Participant's Matching Contribution
Account an amount equal to:
X (1) $ .25 (e.g., $.50).
--- -------
(2) A discretionary percentage, to be determined by the Employer.
---
The Matching Contribution on behalf of a Participant shall not
exceed:
(1) $_______ for the Plan Year.
---
X (2) 1 % of Participant's Compensation for the Contribution
--- --------
Period.
(3) N/A
---
In addition, at the end of the Plan Year, the Employer may contribute
Additional Matching Contributions to be allocated in the same
proportion that the Matching Contribution made on behalf of each
Participant during the Plan Year bears to the Matching Contribution
made on behalf of all Participants during the Plan Year.
X Yes
---
No
---
D. Nonelective Contributions
(1) Will NOT be made.
---
(2) The contribution for each Contribution Period shall be __%
--- of Considered Net Profits.
(3) The contribution for each Contribution Period shall be __%
--- of Compensation.
(4) For each Contribution Period the Employer will contribute an
--- amount equal to $____________ for each Participant.
X (5) Discretionary.
---
(Note: Complete the following only if (3), (4) or (5) above is
selected.)
Nonelective Contributions SHALL NOT X SHALL ___ be based upon
---
Considered Net Profits.
(Note: If you choose to make a Nonelective Contribution, each
Employee eligible to participate in the Plan and who satisfies the
Allocation Requirements of Section XVIII or XIX, MUST be given an
allocation, regardless of whether they make Elective Deferral
Contributions.)
-13-
<PAGE> 16
XVI. CONTRIBUTIONS (CONT'D)
E. Voluntary Employee Contributions
X (1) Voluntary Employee Contributions will NOT be permitted.
---
(2) Voluntary Employee Contributions WILL be permitted up to
--- _____% of Compensation (not to exceed 10%) actually paid
during the Plan Year.
F. Rollover Contributions
(1) Rollover Contributions will NOT be permitted.
---
X (2) Rollover Contributions WILL be permitted.
---
- -------------------------------------------------------------------------------
XVII. ALLOCATION FORMULA FOR NONELECTIVE CONTRIBUTION, SECTION 4.2(f)
(Note: Complete only if response to Section XVI D. is (2) or (5).)
The Nonelective Contribution will be allocated to Participants who
meet the requirements of Section XVIII or XIX as follows:
X (a) In the same ratio as each Participant's Compensation
--- bears to the total Compensation of all Participants.
(b) Integrated with Social Security. (Select one of the
--- following.)
Step-Rate Method
---
For each Plan Year, the Employer will contribute an amount
equal to _____% of each Participant's Compensation up to the
Social Security Integration Level, plus _____% of each
Participant's Compensation in excess of the Social Security
Integration Level. However, in no event will the excess
contribution percentage exceed the amount specified in
Section 4.2(f)(3)(B) of the Plan.
Maximum Disparity Method
---
For each Plan Year, the Employer's Nonelective Contribution
shall be allocated in the manner stated in the Section
4.2(f)(4) of the Plan in order to maximize permitted
disparity.
- -------------------------------------------------------------------------------
-14-
<PAGE> 17
XVIII. ANNUAL ALLOCATION REQUIREMENTS, SECTION 4.2(g)
An allocation of the annual Nonelective Contribution, annual Matching
Contribution and/or Additional Matching Contribution made by the Employer
will be made to each Participant who:
X (1) Is a Participant on any day during the Plan Year regardless of
--- Hours of Service credited during the Plan Year.
(2) Is credited with 1,000 Hours of Service in the Plan Year for
--- which the contribution is made.
(3) Is a Participant on the last day of the Plan Year.
---
(4) Is credited with 1,000 Hours of Service in the Plan Year for
--- which the contribution is made and is a Participant or the
last day of the Plan Year.
(Note: If (2), (3) or (4) above is selected, nondiscrimination testing
for participation and coverage could be affected.)
(5) In addition, an allocation of the annual Nonelective
--- Contribution, annual Matching Contribution and Additional
Matching Contribution made by the Employer will be made on behalf
of any Participant who retires, dies or becomes disabled during
the Plan Year, regardless of the number of Hours of Service
credited to such Participant and regardless of whether or not
such Participant is a Participant on the last day of the Plan
Year.
- --------------------------------------------------------------------------------
XIX. NONACCRUAL ALLOCATION REQUIREMENTS, SECTION 4.2(g)
An allocation of the nonannual Matching Contribution or nonannual
Nonelective Contribution made by the Employer will be made to each
Participant who:
X (1) Is a Participant on any day of the Contribution Period.
---
(2) Is a Participant as of the last day of the Contribution Period.
---
(3) In addition, an allocation of the nonannual Matching
--- Contribution or nonannual Nonelective Contribution made by the
Employer will be made on behalf of any Participant who retires,
dies, or becomes disabled during the Contribution Period,
regardless of whether or not such Participant is a Participant as
of the last day of the Contribution Period.
(Note: If (2) above is selected, nondiscrimination testing for
participation and coverage could be affected.)
- --------------------------------------------------------------------------------
-15-
<PAGE> 18
XX. LIMITATIONS ON ALLOCATIONS, ARTICLE 5
If you maintain, or at any time maintained, another qualified retirement
plan in which any Participant in this Plan is (or was) a Participant or
could possibly become a Participant, you must complete Part A or B of
this section. You must also complete Part A of this section if you
maintain a welfare benefit fund, as defined in section 419(e) of the
Code, or an individual medical account, as defined in section 415(1)(2)
of the Code, for which amounts are treated as Annual Additions with
respect to any Participant in this Plan.
A. If the Participant is covered by another qualified defined
contribution plan maintained by the Employer, other than a Master
or Prototype plan:
X (1) N/A. The Employer has no other defined contribution plan(s).
---
___ (2) The provisions of Section 5.5 of the Plan will apply, as if
the other plan were a Master or Prototype plan.
___ (3) Provide the method under which the plans will limit total
Annual Additions to the Maximum Permissible Amount, and will
properly reduce any Excess Amounts, in a manner that
precludes Employer discretion.
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
B. If the Participant is or ever has been a Participant in a qualified
defined benefit plan maintained by the Employer:
X (1) N/A. The Employer has no defined benefit plan(s).
---
___ (2) In any Limitation Year, the Annual Additions credited to the
Participant under this Plan may not cause the sum of the
Defined Benefit Plan Fraction and the Defined Contribution
Fraction to exceed 1.0. If the Employer contributions that
would otherwise be allocated to the Participant's account
during such year would cause the 1.0 limitation to be
exceeded, the allocation will be reduced so that the sum of
the fraction equals 1.0. Any contributions not allocated
because of the preceding sentence will be allocated to the
remaining Participants under the allocation formula under
the Plan. If the 1.0 limitation is exceeded because of an
Excess Amount, such Excess Amount will be reduced in
accordance with Section 5.4 of the Plan.
___ (3) Provide the method under which the Plan involved will
satisfy the 1.0 limitation in a manner that precludes
Employer discretion.
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
-16-
<PAGE> 19
XX. LIMITATIONS ON ALLOCATIONS, (CONT'D)
C. Compensation will mean all of each Participant's:
X (1) 415 safe-harbor compensation.
---
(2) Wages, Tips, and Other Compensation Box on
--- Form W-2.
(3) Modified Wages, Tips, and Other Compensation Box
--- on Form W-2.
(4) Section 3401(a) wages.
---
XXI. LIMITATION YEAR, SECTION 5.8(i)
The Limitation Year shall be:
(a) The Calendar Year.
---
X (b) A 12-month period coinciding with the Plan Year.
---
(c) A 12-month period beginning on
--- ------- -------.
Month Day
(Note: If (b) or (c) is selected, a Board of Directors' resolution
is necessary.)
XXII. LIFE INSURANCE, SECTION 7.1
X (a) Participants may NOT elect to purchase Life Insurance.
---
(b) Participants MAY elect to purchase Life Insurance.
---
(Note: If (b) is selected, the Plan must be Trusteed.)
XXIII. FORFEITURES, SECTION 10.1, 10.4
Forfeitures will occur upon a:
(a) 1-Year Break-in-Service (Cash-Out Method).
---
X (b) 5 consecutive 1-Year Breaks-in-Service.
---
Forfeitures will be:
X (a) Used as an Employer Credit.
---
(b) Reallocated to Participants' Accounts.
---
(Note: If (b) immediately above is selected and the Plan provides
Matching Contributions, the Actual Contribution Percentage Test
will be affected.)
-17-
<PAGE> 20
XXIV. INVESTMENT OF PARTICIPANT'S ACCOUNT, SECTION 6.1
___ (a) The Participant shall NOT have the authority to direct the
investment of contributions made by the Employer.
X (b) The Participant SHALL have authority to direct the investment
--- of contributions made by the Employer.
XXV. WITHDRAWALS PRECEDING TERMINATION, ARTICLE 11
A. Required Employee Contributions
___ (1) Withdrawal of Required Employee Contributions will NOT be
allowed.
___ (2) Withdrawal of Required Employee Contributions WILL be
allowed.
On the date the withdrawal election becomes effective, the
Participant will have his contributions suspended pursuant to the
terms of Article IV of the Plan for:
___ (1) N/A
___ (2) 6 months.
___ (3) 12 months.
___ (4) 24 months.
Required Employee Contributions may be withdrawn each:
___ (1) 6 months.
___ (2) 12 months.
___ (3) Other ______________.
B. Voluntary Employee Contributions
___ (1) Withdrawal of Voluntary Employee Contributions will NOT be
allowed.
___ (2) Withdrawal of Voluntary Employee Contributions WILL be
allowed.
Voluntary Employee Contributions may be withdrawn each:
___ (1) 6 months.
___ (2) 12 months.
___ (3) Other ______________.
C. Elective Deferral Contributions
X (1) Withdrawal of Elective Deferral Contributions will NOT be
--- allowed.
___ (2) Withdrawal of Elective Deferral Contributions WILL be
allowed.
(Note: Participant must have attained age 59-1/2.)
-18-
<PAGE> 21
XXV. WITHDRAWALS PRECEDING TERMINATION (CONT'D)
D. Employer Contributions (Matching and/or Nonelective Contributions)
X (1) Withdrawal of the vested portion of Employer contributions,
--- pursuant to Section 11.3 of the Plan, will NOT be allowed.
(2) Withdrawal of the vested portion of Employer contributions,
--- pursuant to Section 11.3 of the Plan, WILL be allowed.
If withdrawals of Employer contributions are permitted, the Participant
must satisfy one of the following conditions:
(Note: You may select one or both. If both are selected, withdrawals may
be taken upon satisfaction of either condition, not both.)
(1) The Participant must have been an Active Participant in the Plan
--- for no less than 60 months.
(2) The Participant must have attained the age of 59-1/2.
---
On the date the withdrawal election under (1) immediately above becomes
effective, such Participant will have his contributions suspended
pursuant to the terms of Article IV for:
(1) N/A
---
(2) 6 months.
---
(3) 12 months.
---
(4) 24 months.
---
Employer contributions may be withdrawn each:
(1) 6 months.
---
(2) 12 months.
---
(3) Other ________________.
---
E. Serious Financial Hardship - Elective Deferral Contributions
(1) Withdrawal for Serious Financial Hardship will NOT be allowed.
---
X (2) Withdrawal for Serious Financial Hardship WILL be allowed.
---
F. Serious Financial Hardship - Other than Elective Deferral Contributions
X (1) Withdrawal for Serious Financial Hardship will NOT be allowed.
---
(2) Withdrawal for Serious Financial Hardship WILL be allowed.
---
G. Rollover Contributions
(1) Withdrawal of Rollover Contributions will NOT be allowed.
---
X (2) Withdrawal of Rollover Contributions WILL be allowed.
---
-19-
<PAGE> 22
XXV. WITHDRAWALS PRECEDING TERMINATION (CONT'D)
If this is a readoption of an existing plan, the following withdrawal
option may apply.
H. Qualified Voluntary Employee Contributions (QVEC/IRP Contributions)
(a) Withdrawal of QVEC/IRP Contributions will NOT be allowed.
---
(b) Withdrawal of QVEC/IRP Contributions WILL be allowed.
---
- --------------------------------------------------------------------------------
XXVI. LOANS TO PARTICIPANTS, ARTICLE 12
Loans to Participants are:
(Note: If loans are permitted, the Plan must be Trusteed.)
(a) Not Permitted.
---
X (b) Permitted.
---
- --------------------------------------------------------------------------------
XXVII. JOINT AND SURVIVOR BENEFITS, ARTICLE 9
A. Distribution Forms
X (1) Cash Only
---
(2) Cash and Annuity
---
B. Qualified Preretirement Survivor Annuity, Section 9.3
(1) 100% Qualified Preretirement Survivor Annuity.
---
(2) 50% Qualified Preretirement Survivor Annuity.
---
- --------------------------------------------------------------------------------
XXVIII. TOP-HEAVY PROVISIONS, SECTION 20.2, 20.3
A. When a non-Key Employee is a Participant in both this Plan and a
defined benefit plan maintained by the Employer, indicate which
method shall be utilized to avoid duplication of Top-Heavy minimum
benefits. (Select one of the following.)
X (1) N/A. The Employer has no other plan(s).
---
(2) A minimum non-integrated allocation of contributions and
--- Forfeitures equal to ______% (not less than 5) of each
non-Key Employee's Compensation, as defined in Section
20.2(b) of the Plan, will be allocated to the non-Key
Employee's Participant Account in this Plan, as specified in
the Plan.
-20-
<PAGE> 23
XXVII. TOP-HEAVY PROVISIONS (CONT'D)
(3) A minimum non-integrated allocation of contributions and
--- Forfeitures equal to 7-1/2% of each non-Key Employee's
Compensation, as defined in Section 20.2(b) of the Plan, will
be allocated to the non-Key Employee's Participant Account in
this Plan, as specified in the Plan. (The Defined Benefit and
Defined Contribution Fractions will be computed using 125% if
this choice is selected, for all Plan Years in which this Plan
is Top-Heavy, but not Super Top-Heavy.)
(4) Enter the name of the plan(s) and specify the method under which
--- the plans will provide Top-Heavy Minimum Benefits for non-Key
Employees that will preclude Employer discretion and avoid
inadvertent omissions (include any adjustments required under
Code section 415(e)).
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
(Note: Complete B. only if response to A. is (2), (3) or (4).)
B. Present value: For purposes of establishing present value to
compute the Top-Heavy Ratio, any benefit shall be discounted only
mortality and interest based on the following:
Interest rate: _______% Mortality Table: ________
Valuation date: For purposes of computing the Top-Heavy Ratio, the
valuation date shall be ______________ of each year.
C. Where a non-Key Employee is a Participant in this Plan and a
Participant in another defined contribution plan(s) of the Employer,
indicate which plan will be utilized to provide the minimum Top-Heavy
contribution to avoid duplication of the Top-Heavy minimum
contribution. (Select one of the following.)
X (1) N/A. The Employer has no other plan(s).
---
(2) The minimum allocation shall be as provided in Section
--- 20.2(a) of the Plan.
(3) The minimum allocation applicable to Top-Heavy plans will be
--- met in the other defined contribution plan. (Enter the name
of the plan(s).)
______________________________
______________________________
-21-
<PAGE> 24
XVIII. TOP-HEAVY PROVISIONS (CONT'D)
D. The Vested Interest of each Participant in his Participant's Account
attributable to Employer contributions shall be determined on the
basis of the following:
(Section 1 or 2.)
--- (1) 100% vesting after _____ (not to exceed 3) Years of Service.
X (2) 20 % vesting after 1 Year of Service.
--- -----
40 % (not less than 20) vesting after 2 Years of Service.
-----
60 % (not less than 40) vesting after 3 Years of Service.
-----
80 % (not less than 60) vesting after 4 Years of Service.
-----
100 % (not less than 80) vesting after 5 Years of Service.
-----
100% vesting after 6 Years of Service.
If the vesting schedule under the Plan shifts in or out of the above
schedule for any Plan Year because of the Plan's Top-Heavy status, such
shift is an amendment to the vesting schedule and the election in
Section 17.1 of the Plan applies.
- -------------------------------------------------------------------------------
XXIX. OTHER ADOPTING EMPLOYER(S), SECTION 22.2
The following Adopting Employer(s) also adopt this Plan and have
executed this Adoption Agreement:
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
(Note: Adopting Employers are limited to entities defined in Section
22.2 of the Plan.)
-22-
<PAGE> 25
The Employer hereby adopts the Connecticut General Life Insurance Company
Defined Contribution Prototype Profit Sharing/Thrift Plan with 401(k) Feature,
including all elections made in this Non-Standardized Adoption Agreement, and
the Employer agrees to be bound by all the terms of the Plan and by all the
terms of this Adoption Agreement and of the Annuity Contract. The Employer
further agrees that it will furnish promptly all information required by the
Trustee, if applicable, the Plan Administrator and the Insurance Company in
order to carry out their functions. The Employer shall notify the Trustee, if
applicable, the Plan Administrator and the Insurance Company promptly of any
changes in the status of the Employer which might affect the Employer's duties
and responsibilities hereunder.
The elections under this Adoption Agreement may be changed by the Employer from
time to time by a written instrument signed by the Employer, the Plan
Administrator and the Trustee, if applicable, and accepted by the Sponsor. The
Employer consents to the exercise by the Sponsor of the right to amend the Plan
and the Annuity Contract from time to time as it may deem necessary or
advisable.
By signing this Adoption Agreement, the Employer specifically acknowledges that
the Insurance Company has no authority: (1) to answer legal questions and that
all such questions shall be answered by legal counsel for the Employer; and (2)
to make determinations involved in the administration of the Plan and that all
such determinations shall be answered by the Employer's Plan Administrator or
other designated representative.
Upon execution of this Adoption Agreement by the Employer, the Plan shall be
effective with respect to that Employer as of the Effective Date specified
herein, provided the Plan Administrator and the Trustee, if applicable, shall
then or thereafter execute this Adoption Agreement to signify their acceptance
of their duties and responsibilities hereunder and provided further, the
Sponsor will indicate its acceptance of the Employer in accordance with its
usual rules and practices.
The adopting Employer may not rely on an opinion letter issued by the National
Office of the Internal Revenue Service as evidence that the Plan is qualified
under Internal Revenue Code section 401. In order to obtain reliance with
respect to plan qualification, the Employer must apply to the appropriate key
district office for a determination letter.
Connecticut General Life Insurance Company will inform the Employer of any
amendments made to the Plan or of the discontinuance or abandonment of such
Plan.
CAUTION: You should very carefully examine the elections you have made in this
Adoption Agreement and discuss them with your legal counsel. Failure to
properly fill out the Adoption Agreement may result in disqualification of your
plan.
-23-
<PAGE> 26
This Adoption Agreement may only be used in conjunction with Basic Plan
Document Number 02.
(Note: The Employer, Plan Administrator and Trustee, if applicable, must all
sign below.)
Executed at Dallas, TX , this 29th day of December , 1995
---------------- ---------- ----------------
Wyndham Hotel Company, LTD., a Texas Limited Partnership
---------------------------------------------------
(Employer's Exact Name)
By: Wyndham Hotel Management Corporation, Its General Partner
/s/ D. G. SWEENEY By (ILLEGIBLE)
- ---------------------------------------------------------------------------
(Witness)
Treasurer of General Partner
----------------------------------------------------
(Title)
----------------------------------------------------
(Additional Adopting Employer's Exact Name)
By
- -----------------------------------------------------------------------------
(Witness)
------------------------------------------------------
(Title)
------------------------------------------------------
(Additional Adopting Employer's Exact Name)
By
- -----------------------------------------------------------------------------
(Witness)
------------------------------------------------------
(Title)
ACCEPTED this day of , 19 .
------ ----------- ------
By
- ------------------------------------------------------------------------------
(Witness) (Administrator)
By
- ------------------------------------------------------------------------------
(Witness) (Administrator)
By
- -------------------------------------------------------------------------------
(Witness) (Administrator)
-24-
<PAGE> 27
By
- -------------------------------------------------------------------------------
(Witness) (Trustee)
By
- -------------------------------------------------------------------------------
(Witness) (Trustee)
By
- -------------------------------------------------------------------------------
(Witness) (Trustee)
ACCEPTED this day of , 19 .
------- ----------- ------
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By:
-------------------------------------------
(Authorized Representative)
-25-
<PAGE> 28
AMENDMENT TO THE ADOPTION AGREEMENT
TO THE
WYNDHAM EMPLOYEE SAVINGS & RETIREMENT PLAN
WHEREAS, Wyndham Hotel Company, LTD., a Texas limited partnership
(hereinafter referred to as the "Employer") previously established the Wyndham
Employee Savings & Retirement Plan (as restated effective April 1, 1995)
(hereinafter referred to as the "Plan"), for the benefit of its eligible
employees and their beneficiaries; and
WHEREAS, the Employer reserved the right to amend the Plan under the terms
thereof; and
WHEREAS, the Employer desires to amend the Plan's Adoption Agreement to
permit the Employer to make Matching Contributions and Nonelective
Contributions at the end of each calendar quarter;
NOW, THEREFORE, effective April 1, 1995, the Adoption Agreement is hereby
amended as follows:
Article II of the Adoption Agreement for the Plan is hereby deleted, and
the following Article II is inserted in lieu thereof:
"II. CONTRIBUTION PERIOD, SECTION 1.17
The regular Contribution Period for Matching Contributions shall
be:
(a) Annual.
---
(b) Monthly.
---
(c) 4-Weekly.
---
X (d) Quarterly.
---
The regular Contribution Period for Nonelective Contributions
shall be:
(a) Annual.
---
(b) Monthly.
---
(c) 4-Weekly.
---
X (d) Quarterly.
---
<PAGE> 29
The regular Contribution Period for Elective Deferral
Contributions, Required Employee Contributions and/or
Voluntary Employee Contributions shall be:
(a) Monthly.
---
X (b) 4-Weekly."
---
IN WITNESS WHEREOF, the Employer, the Administrator and the Trustee
have hereunto affixed their signatures.
EMPLOYER:
WYNDHAM HOTEL COMPANY, LTD., a
Texas limited partnership
By: /s/ JOHN KLUMPH
--------------------------------
Title: Treasurer of General Partner
-----------------------------
PLAN ADMINISTRATOR:
Wyndham Hotel Company, LTD., a Texas
limited partnership
By: /s/ JOHN KLUMPH
--------------------------------
Title: Treasurer of General Partner
-----------------------------
TRUSTEE:
C.G. Trust Company
By:
--------------------------------
Title:
----------------------------
-2-
<PAGE> 30
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
DEFINED CONTRIBUTION PLAN
BASIC PLAN DOCUMENT NUMBER 02
<PAGE> 31
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE CONTENTS PAGE
<S> <C> <C>
I Definitions 1
II Service 16
III Eligibility, Enrollment and Participation 21
IV Contributions and Allocations 24
V Limitations on Allocations 50
VI Annuity Contract and Participant's Account 59
VII Life Insurance Policies 60
VIII Distribution of Benefits 63
IX joint and Survivor Annuity Requirements 73
X Termination of Employment 79
XI Withdrawals 82
XII Loans to Participants 86
XIII Fiduciary Duties and Responsibilities 88
XIV The Plan Administrator 89
XV Participants' Rights 91
XVI The Insurance Company 93
XVII Amendment or Termination of the Plan 94
XVIII Substitution of Plans 97
XIX Miscellaneous 98
XX Top-Heavy Provisions 101
XXI Trust Agreement 106
XXII Adopting Employer 111
</TABLE>
<PAGE> 32
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
GROUP PENSION PROTOTYPE PLAN
BASIC PLAN DOCUMENT NUMBER 02
The Plan set forth herein may be adopted by an Employer and accepted by the
Plan Administrator and, if applicable, the Trustee by executing an Adoption
Agreement, which together shall constitute the Employer's Plan, for the
exclusive benefit of its eligible Employees and their Beneficiaries, as fully
as if set forth in said Adoption Agreement; provided, however, no Employer may
adopt this Plan except with the consent of Connecticut General Life Insurance
Company.
ARTICLE I
DEFINITIONS
1.1 ACCRUED BENEFIT. The term Accrued Benefit means the value on any
applicable date of the Participant's Account and if applicable, of any
Life Insurance Policies on his life.
1.2 ACTIVE PARTICIPANT. The term Active Participant means any Participant
who performs duties as an Employee for the Employer and is not an
Inactive Participant.
1.3 ACTUAL DEFERRAL PERCENTAGE. The term Actual Deferral Percentage (ADP)
shall mean, for a specified group of Participants for a Plan Year, the
average of the ratios (calculated separately for each Participant in
such group) of (1) the amount of Employer contributions actually paid to
the Trust or Insurance Company on behalf of such Participant for the
Plan Year to (2) the Participant's Compensation for such Plan Year.
Employer contributions on behalf of any Participant shall include: (1)
any Elective Deferral Contributions made pursuant to the Participant's
deferral election, including Excess Elective Deferral Contributions of
Highly Compensated Employees, but excluding Elective Deferral
Contributions that are taken into account in the Average Contribution
Percentage (ACP) Test (provided the ADP test is satisfied both with and
without exclusion of these Elective Deferral Contributions); and (2) if
elected by the Employer in the Adoption Agreement, Qualified Nonelective
Contributions and Qualified Matching Contributions. For purposes of
computing the Actual Deferral Percentages, an Employee who would be a
Participant but for the failure to make Elective Deferral Contributions,
shall be treated as a Participant on whose behalf no Elective Deferral
Contributions are made.
1.4 ADDITIONAL MATCHING CONTRIBUTIONS. The term Additional Matching
Contributions shall mean discretionary contributions made to the Plan by
the Employer, as authorized by its Board of Directors by resolution.
Additional Matching Contributions' shall be treated as Matching
Contributions for nondiscrimination testing and allocation purposes.
-1-
<PAGE> 33
1.5 ADOPTION AGREEMENT. The term Adoption Agreement means the prescribed
agreement by which the Employer adopts this Plan, and which sets forth
the elective provisions of this Plan specified by the Employer.
1.6 AGGREGATE LIMIT. The term Aggregate Limit shall mean the sum of (i) 125
percent of the greater of the ADP of the non-Highly Compensated
Employees for the Plan Year or the ACP of non-Highly Compensated
Employees under the plan subject to Code section 401 (m) for the Plan
Year beginning with or within the Plan Year of the CODA and (ii) the
lesser of 200% or two plus the lesser of such ADP or ACP. ""Lesser" is
substituted for "" greater" in ""(i)", above, and ""greater" is
substituted for ""lesser" after ""two plus the in ""(ii)" if it would
result in a larger Aggregate Limit.
1.7 ANNUITY. The term Annuity means a series of payments made over a
specified period of time which, for a Fixed Annuity are equal, specified
amounts, and which for a Variable Annuity increase or decrease to
reflect changes in investment performance of the underlying portfolio.
1.8 ANNUITY CONTRACT. The term Annuity Contract means the group annuity
contract form issued by the Insurance Company to fund the benefits
provided under this Plan, as such contract may be amended from time to
time in accordance with the terms thereof. The Employer will specify in
its Adoption Agreement the types of investments available under this
Plan.
1.9 AVERAGE CONTRIBUTION PERCENTAGE (ACP). The term Average Contribution
Percentage shall mean the average of the Contribution Percentages of the
Eligible Participants in a group.
1.10 BENEFICIARY. The term Beneficiary means the beneficiary or beneficiaries
entitled to any benefits under a Participant's Account hereunder upon
the death of a Participant or Beneficiary or an alternate payee pursuant
to a Qualified Domestic Relations Order as defined in section 414(p) of
the Code. If any Life Insurance Policy is purchased on the life of a
Participant hereunder, the Beneficiary under such Policy shall be
designated separately therein. Beneficiary designations are subject to
the terms of Article IX. A designated Beneficiary must be an individual.
1.11 BOARD OF DIRECTORS. The term Board of Directors means the Employer's
board of directors or other comparable governing body.
1.12 CODE. The term Code means the Internal Revenue Code of 1986, as amended
from time to time.
-2-
<PAGE> 34
1.13 COMPENSATION. The term Compensation shall mean Compensation as that term
is defined in section 5.8(b) of the Plan. For any self-employed
individual covered under the Plan, Compensation will mean earned income.
Compensation shall include only that Compensation which is actually paid
to the Participant during the applicable period. Except as provided
elsewhere in this Plan, the applicable period shall be the period
elected by the Employer in the Adoption Agreement. If the Employer makes
no election, the applicable period shall be the Plan Year.
In lieu of the definition of Compensation in Section 5.8(b) of the Plan,
for purposes of allocating contributions, an Employer may elect in the
Adoption Agreement to use one of the following alternative definitions
of Compensation:
(a) Regular or base salary or wages. Regular or base salary or wages
(excluding overtime and bonuses) received during the applicable
period by the Employee from the Employer. This definition may not
be used by integrated or standardized plans.
(b) Regular or base salary wages plus overtime and/or bonuses. Regular
or base salary or wages, plus either or both overtime and/or
bonuses, as elected by the Employer in the Adoption Agreement,
received during the applicable period by the Employee from the
Employer. This definition may not be used by integrated or
standardized plans.
Notwithstanding the above, if elected by the Employer in the Adoption
Agreement, Compensation shall include any amount which is contributed by
the Employer pursuant to a salary reduction agreement and which is not
includible in the gross income of the Employee under sections 125,
402(a)(8), 402(h) or 403(b) of the Code.
For years beginning after December 31, 1988, the annual Compensation of
each Participant taken into account under the Plan for any year shall
not exceed $200,000. This limitation shall be adjusted by the Secretary
at the same time and in the same manner as under section 415(d) of the
Code, (unless a lesser amount is elected by the Employer in the Adoption
Agreement) except that the dollar increase in affect on January 1 of any
calendar year is effective for years beginning in such calendar year and
the first adjustment to the $200,000 limitation is effected on January
1, 1990. If a plan determines Compensation on a period of time that
contains fewer than 12 calendar months, then the annual Compensation
limit is an amount equal to the annual Compensation limit for the
calendar year in which the compensation period begins multiplied by the
ratio obtained by dividing the number of full months in the period of
12.
-3-
<PAGE> 35
In determining the Compensation of a Participant for purposes of this
limitation, the rules of section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the
spouse of the Participant and any lineal descendants of the Participant
who have not attained age 19 before the close of the year. If, as a
result of the application of such rules the adjusted $200,000 limitation
is exceeded, then (except for purposes of determining the portion of
Compensation up to the integration level if this Plan provides for
permitted disparity), the limitation shall be prorated among the
affected individuals in proportion to each such individual's
Compensation as determined under this Section prior to the application
of this limitation.
If Compensation for any prior Plan Year is taken into account in
determining an Employee's contributions or benefits for the current
year, the Compensation for such prior year is subject to the applicable
annual Compensation limit in effect for that prior year. For this
purpose, for years beginning before January 1, 1990, the applicable
annual Compensation limit is $200,000.
1.14 CONSIDERED NET PROFITS. The term Considered Net Profits means the entire
amount of the accumulated or current operating profits (excluding
capital gains from the sale or involuntary conversion of capital or
business assets) of the Employer after all expenses and charges other
than (1) the Employer contribution to this and any other qualified plan,
and (2) federal or state or local taxes based upon or measured by
income, as determined by the Employer, either on an estimated basis or a
final basis, in accordance with the generally accepted accounting
principles used by the Employer. When the amount of Considered Net
Profits has been determined by the Employer, and the Employer
contribution made on the basis of such determination, for any Plan Year,
such determination and contribution shall be final and conclusive and
shall not be subject to change because of any adjustments in income or
expense which may be required by the Internal Revenue Service or
otherwise. Such determination and Contribution shall not be open to
question by any Participant either before or after the Employer
contribution has been made.
In the case of an entity that is a non-profit entity, including a
government body, the term Considered Net Profits shall mean the entire
amount of the accumulated or current operating surplus (excluding
capital gains from the sale or involuntary conversion of capital or
business assets) of the Employer after all expenses and charges other
than (1) the contribution made by the Employer to the Plan, and (2)
federal or state or local taxes based upon or measured by income, in
accordance with the generally accepted accounting principles used by the
Employer.
A state or local government or political subdivision thereof, or any
agency or instrumentality thereof, or any organization exempt from tax
under Subtitle A of the Code, may not elect a 401(k) option in the
Adoption Agreement.
1.15 CONTRIBUTION PERCENTAGE. The term Contribution Percentage shall mean the
ratio (expressed as a percentage) of the Participant's Contribution
Percentage Amounts to the Participant's Compensation for the Plan Year
(whether or not the Employee was a Participant for the entire Plan
Year).
-4-
<PAGE> 36
1.16 CONTRIBUTION PERCENTAGE AMOUNTS. The term Contribution Percentage Amount
shall mean the sum of the Employee Contributions, Matching
Contributions, Qualified Matching Contributions and Qualified
Nonelective Contributions (to the extent not taken into account for
purposes of the ADP test) made under the Plan on behalf of the
Participant for the Plan Year. Such Contribution Percentage Amounts
shall include forfeitures of Excess Aggregate Contributions or Matching
Contributions allocated to the Participant's Account that shall be taken
into account in the year in which such forfeiture is allocated. The
Employer may elect to use Elective Deferrals in the Contribution
Percentage Amounts so long as the ADP test (as defined in section 4.5
(a)) is met before the Elective Deferrals are used in the ACP test (as
defined in section 4.5(c)) and continues to be met following the
exclusion of those Elective Deferrals that are used to meet the ACP
test.
1.17 CONTRIBUTION PERIOD. The term Contribution Period means that regular
period (not less than four weeks nor more than one year) specified by
the Employer in its Adoption Agreement for which the Employer shall make
Employer contributions, if any, and that regular period (either monthly
or every four weeks) specified by the Employer in its Adoption Agreement
for which Participants may make Employee Contributions, if any. In the
case of a Small Case Product Profit Sharing Plan, the Contribution
Period shall always be annual. The first Contribution Period may be an
irregular period, not longer than one month, commencing not prior to the
Effective Date.
1.18 DISABILITY. The term Disability means a Participant's incapacity to
engage in any substantial gainful activity because of a medically
determinable physical or mental impairment which can be expected to
result in death, or which has lasted or can be expected to last for a
continuous period of not less than 12 months. The performance and degree
of such impairment shall be supported by medical evidence.
1.19 DISABILITY RETIREMENT DATE. The term Disability Retirement Date means
the first day of the month after the Administrator has determined that a
Participant's incapacity is a Disability. A Participant who retires from
the Service of the Employer as of his Disability Retirement Date shall
have a Vesting Percentage of 100% and shall receive a distribution of
the entire value of his Participant's Account and any policies on his
life, or the values thereof, as of his Disability Retirement Date,
subject to the provisions of Article VIII and Article IX.
-5-
<PAGE> 37
1.20 EARLY RETIREMENT DATE. If the Employer has specified in its Adoption
Agreement that Early Retirement is permitted, then the term Early
Retirement Date means the first day of the month coinciding with or next
following the date a Participant is separated from Service with the
Employer for any reason other than death or Disability, provided that on
such date the Participant has attained the conditions specified by the
Employer in its Adoption Agreement and has not attained his Normal
Retirement Age. A Participant who retires from the Service of the
Employer on his Early Retirement Date shall have a Vesting Percentage of
100% and shall receive a distribution of the entire value of his
Participant's Account and any policies on his life, or the values
thereof, as of his Early Retirement Date, subject to the provisions of
Article VIII and Article DC.
If a Participant separates from Service before satisfying the age
requirement for Early Retirement, but has satisfied the service
requirement, the Participant shall be 100% vested and will be entitled
to elect an Early Retirement benefit upon satisfaction of such age
requirement.
1.21 EARNED INCOME. The term Earned Income means the net earnings from
self-employment in the trade or business with respect to which the Plan
is established, for which personal services of the individual are a
material income- producing factor. Net earnings will be determined
without regard to items not included in gross income and the deductions
allocable to such items. Net earnings are reduced by contributions by
the Employer to a qualified plan to the extent deductible under section
404 of the Code.
Net earnings shall be determined with regard to the deductions allowed
to the taxpayer by section 164(f) of the Code for taxable years
beginning after December 31, 1989.
1.22 EFFECTIVE DATE. The term Effective Date means the date specified by the
Employer in its Adoption Agreement as the Effective Date of the Plan
applicable to the Employer.
1.23 ELECTIVE DEFERRAL CONTRIBUTIONS.The term Elective Deferral Contributions
shall mean contributions made by the Employer to the Plan at the
election of the Participant, in lieu of cash compensation, and shall
include contributions made pursuant to a salary deferral agreement or
other deferral mechanism. With respect to any taxable year, a
Participant's elective deferral is the sum of all Employer contributions
made on behalf of such Participant pursuant to an election to defer
under any CODA as described in section 401 (k) of the Code, any
simplified employee pension cash or deferred arrangement as described in
section 402(h)(1)(B), any eligible deferred compensation plan as
described in section 457, any plan described in section 501(c)(18), and
any Employer contributions made on the behalf of a Participant for the
purchase of an annuity contract under section 403(b) pursuant to a
salary reduction agreement.
-6-
<PAGE> 38
1.24 ELIGIBLE PARTICIPANT. The term Eligible Participant shall mean any
Employee who is eligible to make an Employee Contribution, or an
Elective Deferral Contribution (if the Employer takes such contributions
into account in the calculation of the Contribution Percentage), or to
receive a Matching Contribution (including forfeitures) or a Qualified
Matching Contribution. If an Employee Contribution is required as a
condition of participation in the Plan, any Employee who would be a
Participant in the Plan if such Employee made such a contribution shall
be treated as an Eligible Participant on behalf of whom no Employee
Contributions are made.
1.25 EMPLOYEE. The term Employee means any employee of the Employer
maintaining the Plan or any other employer required to be aggregated
with such Employer under sections 414(b), (c), (m), or (o) of the Code.
The term Employee also includes any Leased Employee deemed to be an
Employee of the Employer in accordance with sections 414(n) or (o) of
the Code.
1.26 EMPLOYEE CONTRIBUTIONS. The term Employee Contributions shall mean
contributions to the Plan or any other plan, that are designated or
treated at the time of contribution as after-tax Employee Contributions
and are allocated to a separate account to which the attributable
earnings and losses are allocated. Such term includes Employee
Contributions applied to the purchase of whole life insurance protection
or survivor benefit protection, Required Employee Contributions,
Voluntary Employee Contributions, and contributions formerly made to
this Plan as Participant VIP Contributions.
1.27 EMPLOYER. The term Employer shall mean the employer that adopts this
Plan. In the case of a group of Employers which constitutes a controlled
group of corporations (as defined in Code section 414(b) as modified by
section 415 (h)) or which constitutes trades or businesses (whether or
not incorporated) which are under common control (as defined in section
414(c) as modified by section 415(h)) or which constitutes an affiliated
service group (as defined in section 414(m)), Service with all such
Employers shall be considered Service with the Employer for purposes of
eligibility and vesting. The term Employer shall also mean any Adopting
Employer as defined in Section 22.2.
1.28 ENTRY DATE. The term Entry Date means either the Effective Date or each
applicable date thereafter as specified by the Employer in its Adoption
Agreement), when an Employee who has fulfilled the eligibility
requirements commences participation in the Plan.
If an Employee is not in the active Service of the Employer as of his
initial Entry Date, his subsequent Entry Date shall be the date he
returns to the active Service of the Employer, provided he still meets
the eligibility requirements. If an Employee does not enroll as a
Participant as of his initial Entry Date, his subsequent Entry Date
shall be the applicable Entry Date as specified by the Employer in the
Adoption Agreement when the Employee actually enrolls as a Participant.
-7-
<PAGE> 39
1.29 ERISA. The term ERISA means the Employee Retirement Income Security Act
of 1974 (PL93-406) as it may be amended from time to time, and any
regulations issued pursuant thereto as such Act and such regulations
affect this Plan and Trust.
1.30 EXCESS AGGREGATE CONTRIBUTIONS. The term Excess Aggregate Contributions
shall mean with respect to any Plan Year the excess of:
(a) The aggregate Contribution Percentage Amounts taken into account in
computing the numerator of the Contribution Percentage actually
made on behalf of Highly Compensated Employees for such Plan Year,
over
(b) The maximum Contribution Percentage Amounts permitted by the ACP
test (determined by reducing contributions made on behalf of Highly
Compensated Employees in order of their Contribution Percentages
beginning with the highest of such percentages). Such determination
shall be made after first determining Excess Elective Deferral
Contributions, pursuant to 4.6(a) and then determining Excess
Contributions pursuant to section 4.6(b).
1.31 EXCESS CONTRIBUTIONS. The term Excess Contributions shall mean, with
respect to any Plan Year, the excess of:
(a) The aggregate amount of Employer contributions actually taken into
account in computing the ADP of Highly Compensated Employees for
such Plan year, over
(b) The maximum amount of such contributions permitted by the ADP test
(determined by reducing contributions made on behalf of Highly
Compensated Employees in order of the ADPS, beginning with the
highest of such percentages).
1.32 EXCESS ELECTIVE DEFERRAL CONTRIBUTIONS. The term Excess Elective
Deferral Contributions shall mean those Elective Deferral Contributions
that are includible in a Participant's gross income under section 402(g)
of the Code to the extent such Participant's Elective Deferral
Contributions for a taxable year exceed the dollar limitation under such
Code section. Excess Elective Deferral Contributions shall be treated as
annual additions under the Plan pursuant to Article V.
1.33 FIDUCIARY. The term Fiduciary means any, or all, of the following, as
applicable:
(a) Any Person who exercises any discretionary authority or control
respecting the management of the Plan or its assets;
(b) Any Person who renders investment advice for a fee or other
compensation, direct or indirect, respecting any monies or other
property of the Plan or has authority or responsibility to do so;
(c) Any Person who has discretionary authority or responsibility in the
administration of the Plan;
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<PAGE> 40
(d) Any Person who has been designated by a Named Fiduciary pursuant to
authority granted by the Plan, who acts to carry out a fiduciary
responsibility, subject to any exceptions granted directly or
indirectly by ERISA.
1.34 FIXED ANNUITY. The term Fixed Annuity means an annuity providing a
series of payments that are payable in specified dollar amounts.
1.35 FORFEITURE. The term Forfeiture means the amount, if any, by which the
value of a Participant's Account plus the value of any Life Insurance
Policies on his life exceeds his Vested Interest upon the occurrence of
a 1-Year Break-in-Service or 5 consecutive 1-Year Breaks-in-Service, as
elected by the Employer in its Adoption Agreement pursuant to Section
10.4, following such Participant's Termination of Employment.
1.36 HIGHLY COMPENSATED EMPLOYEE. The term Highly Compensated Employee
includes highly compensated active employees and highly compensated
former employees.
A highly compensated active employee includes any employee who performs
service for the Employer during the determination year and who, during
the look-back year; (1) received Compensation from the Employer in
excess of $75,000 (as adjusted pursuant to section 415(d) of the Code)-,
(2) received compensation from the Employer in excess of $50,000 (as
adjusted pursuant to section 415(d) of the Code) and was a member of the
top-paid group for such year; or (3) was an officer of the Employer and
received compensation during such year that is greater thin 50 percent
of the dollar limitation in effect under section 415 (b) (1) (A) of the
Code. The term Highly Compensated Employee also includes: (1) employees
who are described in the preceding sentence if the term "determination
year" is substituted for the term "look-back year" and who are one of
the 100 employees who received the most compensation from the Employer
during the determination year; and (2) employees who are 5 percent
owners at any time during the look-back year or determination year.
If no officer has satisfied the compensation requirement of (3) above
during either a determination year or look- back year, the highest paid
officer for such year shall be treated as a highly compensated employee.
For this purpose, the determination year shall be the, Plan Year. The
look-back year shall be the twelve-month period immediately preceding
the determination year.
A highly compensated former employee includes any Employee who separated
from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or after
the Employee's 55th birthday.
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If an Employee is, during a determination year or look-back year, a
family member of either a 5-percent owner who is an active or former
Employee or a Highly Compensated Employee who is one of the 10 most
Highly Compensated Employees ranked on the basis of Compensation paid by
the Employer during such year, then the family member and the 5 percent
owner or top-ten Highly Compensated Employee shall be aggregated. In
such case, the family member and 5 percent owner or top-ten Highly
Compensated Employee shall be treated as a single employee receiving
Compensation and Plan contributions or benefits equal to the sum of such
Compensation and contributions or benefits of the family member and 5
percent owner or top-ten highly compensated employee. For purposes of
this section, family member includes the spouse, lineal ascendants and
descendants of the employee or former employee and the spouses of such
lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of the employees in the
top-paid group, the top 100 employees, the number of employees treated
as officers and the compensation that is considered, will be made in
accordance with section 414(q) of the Code and the regulations
thereunder.
Determination year shall mean the Plan Year. The look-back year is the
twelve-month period immediately preceding the Plan Year.
For purposes of this definition, Compensation shall mean compensation as
defined in section 415(c)(3) of the Code.
1.37 INACTIVE PARTICIPANT. The term Inactive Participant means any
Participant who does not currently meet the requirements to be an Active
Participant due to a suspension of the performance of duties for the
Employer. In addition, a Participant who ceases to meet the eligibility
requirements in accordance with Section 3.1 shall be considered an
Inactive Participant.
1.38 INSURANCE COMPANY. The term Insurance Company or sponsor means
Connecticut General Life Insurance Company, a legal reserve life
insurance company of Hartford, Connecticut. If any company other than
Connecticut General Life Insurance Company has issued any Life Insurance
Policy held by the Trustee under the Plan, then with respect to such
Policy only and matters pertaining directly thereto, the term Insurance
Company shall be deemed to refer to such other issuing company.
1.39 IRP CONTRIBUTIONS. The term IRP Contributions formally defined as
IRA/VIP or Tax Deductible Qualified Voluntary Employee Contributions
(QVEC), are voluntary amounts paid by the Participant which the
Participant designated in writing are eligible for a tax deduction under
Code section 219.
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1.40 JOINT AND SURVIVOR ANNUITY. The term joint and Survivor Annuity means an
immediate annuity for the life of the Participant with a survivor
annuity for the life of the Participant's spouse which is not less than
one-half, nor greater than, the amount of the annuity payable during the
joint lives of the Participant and the Participant's spouse. The joint
and Survivor Annuity will be the amount of benefit which can be
purchased with the Participant's account balance. The percentage of the
survivor annuity under the plan shall be 50 percent (unless a different
percentage is elected by the Participant).
1.41 LATE RETIREMENT DATE. The term Late Retirement Date means the first day
of the month coinciding with or next following the date a Participant is
separated from Service with the Employer after his Normal Retirement
Age, for any reason other than death.
1.42 LEASED EMPLOYEE. The term Leased Employee means any person (other than
an employee of the recipient) who, pursuant to an agreement between the
recipient and any other person, (.... leasing organization") has
performed services for the recipient (or for the recipient and related
persons determined in accordance with section 414(n)(6) of the Code) on
a substantially full-time basis for a period of at least one year, and
such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits
provided a Leased Employee by the leasing organization which are
attributable to services performed for the recipient employer shall be
treated as provided by the recipient employer.
A Leased Employee shall not be considered an Employee of the recipient
if: (1) such employee is covered by a money purchase pension plan of the
leasing organization providing: (a) a nonintegrated Employer
contribution rate of at least 10 percent of Compensation, as defined in
section 415 (c) (3) of the Code, but including amounts contributed by
the employer pursuant to a salary reduction agreement which are
excludable from the Employee's gross income under section 125, section
402(a)(8), section 402(h) or section 403(b) of the Code, (b) immediate
participation, and (c) full and immediate vesting; and (2) Leased
Employees do not constitute more than 20 percent of the recipient's
non-highly compensated work force.
1.43 LIFE INSURANCE POLICY. The term Life Insurance Policy (or Policy) means
a policy of individual life insurance purchased from the Insurance
Company on the life of any Participant.
1.44 MATCHING CONTRIBUTIONS. The term Matching Contributions shall mean
contributions made by the Employer to the Plan on behalf of a
Participant on account of either Elective Deferral Contributions or
Employee Contributions. In addition, any Forfeiture reallocated as a
Matching Contribution shall be considered a Matching Contribution for
purposes of this Plan. Matching Contributions shall be made out of
Considered Net Profits in an amount specified by the Employer in its
Adoption Agreement, for each $1.00 contributed as either an Elective
Deferral Contribution or a Required Employee Contribution, as further
specified by the Employer in its Adoption Agreement.
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Matching Contributions shall be reduced by any Forfeiture available as
an Employer credit, if applicable, in accordance with Section 10.4(b).
Should there be insufficient Considered Net Profits of the Employer for
such Employer contribution, the amount of such Contribution may be
diminished to the amount that can be made from the Employer's Considered
Net Profits.
The Employer may designate at the time of contribution that all or a
portion of such Matching Contribution be treated as Qualified Matching
Contributions.
1.45 NAMED FIDUCIARY. The term Named Fiduciary means the Administrator and
any other Fiduciary designated by the Employer, and any successor
thereto.
1.46 NONELECTIVE CONTRIBUTIONS. The term Nonelective Contributions shall mean
contributions made to the Plan by the Employer in accordance with a
definite formula as specified in the Adoption Agreement. The Employer
may designate at the time of Contribution that the Nonelective
Contribution shall be treated as a Qualified Nonelective Contribution.
1.47 NON-TRUSTEED. The term Non-Trusteed means that the Employer has
specified in the Adoption Agreement that there will not be a Trust as a
part of the Plan. Contributions under a Non-Trusteed plan will be made
directly to the Insurance Company. If the Employer specifies in the
Adoption Agreement that the Plan is Non-Trusteed then the terms and
provisions of this Plan relating to the Trust shall be of no force or
effect.
1.48 NORMAL RETIREMENT AGE. The term Normal Retirement Age means the age
selected in the Adoption Agreement. If the Employer enforces a mandatory
retirement age, the Normal Retirement Age is the lesser of that
mandatory age or the age specified in the Adoption Agreement.
Notwithstanding the vesting schedule elected by the Employer in the
Adoption Agreement, an Employee's right to his or her account balance
shall be nonforfeitable upon the attainment of Normal Retirement Age.
1.49 NORMAL RETIREMENT DATE. The term Normal Retirement Date means the first
day of the month coinciding with or next following the date a
Participant attains his Normal Retirement Age. The Normal Retirement
Date for readopting Small Case Product Employers shall be the date
specified in the Adoption Agreement. If a Participant retires from the
Service of the Employer on this Normal Retirement Date, he shall receive
a distribution of the entire value of his Participant's Account, and any
Policies on his life, or the values thereof, as of his Normal Retirement
Date, subject to the Provisions of Article VIII and Article DC.
1.50 OWNER-EMPLOYEE. The term Owner-Employee means an individual who is a
sole proprietor, or who is a partner owning more than 10 percent of
either the capital or profits interest of the partnership.
1.51 PARTICIPANT. The term Participant means any Employee of the Employer,
who does participate under this Plan in accordance with its provisions
and shall include an Active Participant and an Inactive Participant.
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1.52 PARTICIPANT'S ACCOUNT. The term Participant's Account means the sum of
the following sub-accounts maintained on behalf of each Participant.
(a) Nonelective Contributions, if any, and earnings thereon;
(b) Matching Contributions, if any, and earnings thereon-,
(c) Elective Deferral Contributions, if any, and earnings thereon;
(d) Voluntary Employee Contributions, if any, and earnings thereon;
(e) Qualified Nonelective Contributions, if any, and earnings thereon;
(f) Qualified Matching Contributions, if any, and earnings thereon;
(g) Rollover Contributions, if any, and earnings thereon;
(h) Required Employee Contributions, if any, and earnings thereon;
(i) IRP Contributions, if any, and earnings thereon.
A Participant's Account shall be invested in accordance with rules
established by the Plan Administrator that shall be applied in a
consistent and nondiscriminatory manner.
1.53 PERSON. The term Person means any natural person, partnership,
corporation, trust or estate.
1.54 PLAN. The term Plan means this Connecticut General Life Insurance
Company Defined Contribution Plan and the Adoption Agreement as adopted
by the Employer and as both may be amended from time to time.
1.55 PLAN ADMINISTRATOR. The term Plan Administrator means the Person or
Persons designated by the Employer in its Adoption Agreement and any
successor(s) thereto. If more than one Person shall be designated, the
committee thus formed shall be known as the Administrative Committee and
all references in the Plan to the Plan Administrator shall be deemed to
apply to the Administrative Committee. The Plan Administrator shall
signify in writing his acceptance of his responsibility as a Named
Fiduciary.
1.56 PLAN YEAR. The term Plan Year means the 12-consecutive month period
specified by the Employer in the Adoption Agreement.
If the Plan Year shifts to a new 12-consecutive month period, such new
Plan Year shall begin before the end of the old Plan Year. For purposes
of eligibility and vesting, each Participant shall receive credited
service in each year for the overlap period.
1.57 QUALIFIED MATCHING CONTRIBUTIONS. The term Qualified Matching
Contributions shall mean Matching Contributions which are subject to the
distribution and nonforfeitability requirements under section 401(k) of
the Code when made.
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1.58 QUALIFIED NONELECTIVE CONTRIBUTIONS. The term Qualified Nonelective
Contributions shall mean Nonelective Contributions made by the Employer
and allocated to Participants' accounts that the Participants may not
elect to receive in cash until distributed from the Plan; that are
nonforfeitable when made; and that are distributable only in accordance
with the distribution provisions that are applicable to Elective
Deferral Contributions and Qualified Matching Contributions.
1.59 REQUIRED EMPLOYEE CONTRIBUTIONS. The term Required Contributions means
Employee post-tax contributions that the Employer requires as either a
condition of participation, or of receiving an Employer contribution.
1.60 SELF-EMPLOYED INDIVIDUAL. The term Self-Employed Individual means an
individual who has earned income for the taxable year from the trade or
business for which the Plan is established; also, an individual who
would have earned income but for the fact that the trade or business had
no net profits for the taxable year.
1.61 SERIOUS FINANCIAL HARDSHIP. The term Serious Financial Hardship means an
immediate and heavy financial need of the Participant where such
Participant lacks the available resources to meet the hardship. The Plan
Administrator shall make a determination of whether a Serious Financial
Hardship exists.
1.62 SOCIAL SECURITY INTEGRATION LEVEL. The term Social Security Integration
Level means the amount specified by the Employer in the Adoption
Agreement. If the Taxable Wage Base is amended, the Social Security
Integration Level will be deemed to have been amended.
1.63 TAXABLE WAGE BASE. The term Taxable Wage Base means the contribution and
benefit base in effect under section 230 of the Social Security Act of
the beginning of the Plan Year.
1.64 TERMINATION OF EMPLOYMENT. The term Termination of Employment means a
severance of the Employer-Employee relationship which occurs prior to a
Participant's Normal Retirement Age for any reason other than Early
Retirement, Disability, or death.
1.65 TRUST. The term Trust means the trust agreement if the Employer
specifies in the Adoption Agreement that the Plan is Trusteed. The trust
agreement is entered into by the Employer, the Administrator and the
Trustee by completing and signing the Adoption Agreement, which trust
agreement forms a part of, and implements the provisions of the Plan as
it applies to the Employer. If the Employer specifies in the Adoption
Agreement that the Plan is Non- Trusteed then the terms and provisions
of this Plan relating to the Trust shall be of no force and effect.
1.66 TRUSTEE. The term Trustee means the trustee(s) designated by the
Employer in its Adoption Agreement, if applicable, and any successor(s)
thereto.
1.67 VARIABLE ANNUITY. The term Variable Annuity means an annuity providing a
series of payments that increase or decrease to reflect changes in
investment performance of the underlying portfolio.
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1.68 VESTED INTEREST. The term Vested Interest on any date means the
nonforfeitable right to an immediate or deferred benefit in the amount
which is equal to the sum of (a), (b) and (c) below:
(a) The value on that date of that portion of the Participant's Account
and of any Life Insurance Policies on his life that is attributable
to and derived from Employee Contributions, if any;
(b) The value on that date of the portion of the Participant's Account
attributed to Elective Deferral Contributions, if any; Qualified
Nonelective Contributions, if any; and Qualified Matching
Contributions, if any; and
(c) The value on that date of that portion of the Participant's Account
and of any Life Insurance Policies on his life that is attributable
to and derived from contributions made by the Employer (and
Forfeitures, if any) multiplied by his Vesting Percentage
determined on the date applicable.
1.69 VESTING PERCENTAGE. The term Vesting Percentage means the Participant's
nonforfeitable interest in Matching Contributions or Nonelective
Contributions credited to his Participant's Account plus the earnings
thereon computed as of the date of determining such percentage because
of the occurrence of some event in accordance with one of the schedules
listed below, based on Years of Service with the Employer, as specified
by the Employer in its Adoption Agreement:
(a) 100% full and immediate;
(b) 100% after 3 Years of Service;
(c) 20% per Year of Service, 100% at 5 Years of Service;
(d) 20% after 3 Years of Service, 20% per Year of Service thereafter,
100% at 7 Years of Service;
(e) 20% after 2 Years of Service, 20% per Year of Service thereafter,
100% at 6 Years of Service;
(f) 100% after 5 Years of Service;
(g) 25% after 1 Year of Service, 100% after 4 Years of Service;
(h) Other.
1.70 VOLUNTARY EMPLOYEE CONTRIBUTIONS. The term Voluntary Employee
Contributions means post-tax contributions made voluntarily by an
Employee and any contributions formerly made as Participant VIP
Contributions.
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ARTICLE II
SERVICE
2.1 SERVICE. The term Service means active employment with the Employer as
an Employee.
2.2 ABSENCE FROM EMPLOYMENT. Absence from employment on account of a leave
of absence authorized by the Employer pursuant to the Employer's
established leave policy will be counted as employment with the Employer
provided that such leave of absence is of not more than two years'
duration. Absence from employment on account of active duty with the
Armed Forces of the United States will be counted as employment with the
Employer. If the Employee does not return to active employment with the
Employer, his Service will be deemed to have ceased on the date the
Administrator receives notice that such Employer's leave policy shall be
applied in a uniform and nondiscriminatory manner to all Participants
under similar circumstances.
2.3 HOUR OF SERVICE. The term Hour of Service means a period of Service
during which an Employee shall be credited with one Hour of Service as
described in (a), (b), and (c) below:
(a) Each hour for which an Employee is directly or indirectly paid, or
entitled to payment, by the Employer for the performance of duties.
These hours shall be credited to the Employee for the computation
period or periods in which the duties were performed; and
(b) Each hour for which an Employee is paid or entitled to payment, by
the Employer on account of a period of time during which no duties
are performed (irrespective or whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or leave
of absence. No more than 501 Hours of Service will be credited
under this paragraph or a single computation period (whether or not
the period occurs in a single computation period). Hours under this
paragraph will be calculated and credited pursuant to section
2530.200b-2 of the Department of Labor Regulations which are
incorporated herein by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, has been either awarded or agreed to by the Employer. The
same Hours of Service will not be credited under subsection (a) or
subsection (b), as the case may be, and under this subsection (c).
These hours shall be credited to the Employee for the computation
period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or
payment is made; and Hours of Service will be credited for
employment with other members of an affiliated service group (under
Code section 414(m)), a controlled group of corporations (under
Code section 414(b)), or a group of trades or businesses under
common control (under section 414(c) of the Code), of which the
adopting Employer is a member, and any other entity required to be
aggregated with the Employer pursuant to Code section 414(o).
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Hours of Service will also be credited for any individual considered an
Employee for purposes of this Plan under section 414(n) or section
414(o) of the Code.
Solely for purposes of determining whether a Break-in-Service, as
defined in Section 2.4, for participation and vesting purposes has
occurred in a computation period, an individual who is absent from work
for maternity or paternity reasons shall receive credit for the Hours of
Service which would otherwise have been credited to such individual but
for such absence, or in any case in which such hours cannot be
determined, 8 Hours of Service per day of such absence. For purposes of
this paragraph, an absence from work for maternity or paternity reasons
means an absence (1) by reason of the pregnancy of the individual, (2)
by reason of a birth of a child of the individual, (3) by reason of the
placement of a child with the individual in connection with the adoption
of such child by such individual, or (4) for purposes of caring for such
child for a period beginning immediately following such birth or
placement. The Hours of Service credited under this paragraph shall be
credited (1) in the computation period in which the absence begins if
the crediting is necessary to prevent a Break-in-Service in that period,
or (2) in all other cases, in the following computation period.
Service shall be determined on the basis of the method selected in the
Adoption Agreement.
2.4 1-YEAR BREAK-IN-SERVICE. Except as provided in Section 2.6, the term
1-year Break-in-Service means any Plan Year during which an Employee
fails to complete more than 500 Hours of Service.
2.5 YEAR(S) OF SERVICE. The term Year(s) of Service means a 12-consecutive
month period during which an Employee has completed at least 1,000 Hours
of Service.
(a) Eligibility Computation Period. For purposes of determining Years
of Service and Breaks-in-Service for eligibility, the 12-
consecutive month period shall begin with the date on which the
Employee first performed an Hour of Service for the Employer and,
where additional periods are necessary, succeeding anniversaries of
his employment commencement date. The employment commencement date
is the date on which the Employee first performs an Hour of Service
for the Employer maintaining the Plan.
(b) Vesting Computation Period.In computing Years of Service and
Breaks-in-Service for vesting, the 12- consecutive month period
shall be the Plan Year. However, active participation as of the
last day of the Plan Year is not required in order for a
Participant to be credited with a Year of Service for vesting
purposes.
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(c) Contribution Computation Period. If the Employer specifies an
annual Contribution Period in its Adoption Agreement, for the
purpose of determining a Participant's eligibility to receive a
Contribution, the 12- consecutive month period shall be any Plan
Year during which the Active Participant is credited with at least
1,000 Hours of Service. However, when an Employee first becomes a
Participant or resumes active participation in the Plan following a
1-Year Break-in-Service on a date other than the first day of the
Plan Year, all Hours of Service credited to the Participant during
that Plan Year, including those Hours credited prior to the date
the Employee enrolls (or reenrolls) as an Active Participant in the
Plan shall be counted. Furthermore, the Employer may require in
its Adoption Agreement that a Participant be a Participant as of
the last day of the Plan Year in order to be eligible to receive a
contribution for a Plan Year.
(d) If the Employer permits Early Retirement by Participants in its
Adoption Agreement, for the purpose of determining Early Retirement
the 12-consecutive month period shall be the Plan Year. However,
active participation as of the last day of the Plan Year is not
required in order for a Participant to be credited with a Year of
Service.
Service with a predecessor organization of the Employer shall be treated
as Service with the Employer for the purposes of subsections (a), (b)
and (d) above in any case in which the Employer maintains the Plan of
such predecessor organization.
2.6 ELAPSED TIME ELIGIBILITY. If the Employer has selected an eligibility
requirement in the Adoption Agreement that is or includes a fractional
Year(s) of Service requirement, the provisions of this Section shall
apply.
(a) For purposes of determining an Employee's initial or continued
eligibility to participate in the Plan, an Employee will receive
credit for the aggregate of all time period(s) commencing with the
Employee's first day of employment or reemployment and ending on
the date a Break-in-Service (as defined in this Section) begins.
The first day of employment or reemployment is the first day the
Employee performs an Hour of Service. An Employee will also receive
credit for any Period of Severance of less than 12-consecutive
months. Fractional periods of a year will be expressed in terms of
days.
(b) For purposes of this Section, Hour of Service shall mean each hour
for which an Employee is paid or entitled to payment for the
performance of duties for the Employer.
(c) For purposes of this Section, a Break-in-Service is a Period of
Severance of at least 12-consecutive months.
(d) A Period of Severance is a continuous period of time during which
the Employee is not employed by the Employer. Such period begins on
the date the Employee retires, quits or is discharged, or if
earlier, the 12-month anniversary of the date on which the Employee
was otherwise first absent from Service.
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(e) In the case of an individual who is absent from work for maternity
or paternity reasons, the 12-consecutive month period beginning on
the first anniversary of the first day of such absence shall not
constitute a Break-in-Service. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an
absence (1) by reason of the pregnancy of the individual, (2) by
reason of the birth of a child of the individual, (3) by reason of
the placement of a child with the individual in connection with the
adoption of such child by such individual, or (4) for purposes of
caring for such child for a period beginning immediately following
such birth or placement.
(f) If the Employer is a member of an affiliated service group (under
Code section 414(m)), a controlled group of corporations (under
Code section 414(b)), a group of trades or businesses under common
control (under Code section 414(c)) or any other entity required to
be aggregated with the Employer pursuant to Code section 414(o),
Service will be credited for any employment for any period of time
for any other member of such group. Service will also be credited
for any individual required under Code section 414(n) or Code
section 414(o) to be considered an Employee of any Employer
aggregated under Code sections 414(b), (c), or (m) of such group.
Service will also be credited for any individual required under
Code section 414(n) or Code section 414(o) to be considered an
Employee of any Employer aggregated under Code sections 414(b),
(c), or (m).
2.7 DETERMINING VESTING PERCENTAGE. Vesting credit shall be given for each
Year of Service except those periods specifically excluded in the
Adoption Agreement.
If a Participant completes less than 1,000 Hours of Service during a
Plan Year while remaining in the Service of the Employer, his Vesting
Percentage shall not be increased for such Plan Year. However, at such
time as the Participant again completes at least 1,000 Hours of Service
in any subsequent Plan Year, his Vesting Percentage shall then take into
account all Years of Service with the Employer except those specifically
excluded in the Adoption Agreement.
If an individual who ceases to be an Employee and is subsequently
rehired as an Employee enrolls (or reenrolls) in the Plan, upon his
participation (or reparticipation) his Vesting Percentage shall then
take into account all Years of Service except those specifically
excluded in the Adoption Agreement.
In the case of a Participant who has 5 consecutive 1-Year
Breaks-in-Service, all Years of Service after such Breaks-in-Service
will be disregarded for the purpose of vesting the Employer-derived
account balance that accrued before such breaks. In the case of a
Participant who has 5 consecutive 1-Year Breaks-in-Service, both
pre-break and post-break service will count for the purpose of vesting
the Employer-derived account balance that accrues after such
Breaks-in-Service. In the case of a Participant who does not have
5-consecutive 1-Year Breaks- in-Service, both the pre-break and
post-break Service will count in vesting both the pre-break and
post-break Employer-derived account balance.
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Separate accounts will be maintained for the Participant's pre-break and
post-break Employer-derived account balance. Both accounts will share in
the earnings and losses of the fund. For purposes of this
subsection,.... Employer-derived account balance" shall mean that
portion of a Participant's Account attributable to (1) Matching
Contributions; (2) Nonelective contributions; (3) Qualified Nonelective
Contributions; or (4) Qualified Matching Contributions.
2.8 EXCLUDED YEARS OF SERVICE. In determining the Vesting Percentage of an
Employee, all Years of Service with the Employer(s) maintaining the Plan
shall be taken into account, except that the following periods may be
excluded, as specified by the Employer in its Adoption Agreement:
(a) Years of Service prior to the time a Participant attained age 18;
(b) Years of Service during which the Employer did not maintain the
Plan or a predecessor plan;
(c) Years of Service during a period for which the Employee made no
Required Contributions;
For the purposes of this Section a predecessor plan shall mean a plan of
the Employer that was terminated within five years preceding or
following the Effective Date of this Plan.
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ARTICLE III
ELIGIBILITY, ENROLLMENT AND PARTICIPATION
3.1 ELIGIBILITY. Each Employee shall be eligible to become a Participant as
of the day he meets the following requirements, if any, specified by the
Employer in its Adoption Agreement, relating to:
(a) Required service;
(b) Minimum attained age;
(c) job class requirements;
In addition to the eligibility conditions stated above, the Employer may
specify in the Adoption Agreement certain groups of Employees who are
not eligible to participate in the Plan.
Notwithstanding the foregoing, if the Employer's Plan as set forth
herein, replaces or amends a preceding plan, then those Employees
participating under the Plan as written prior to such replacement or
amendment, shall be eligible to be Participants hereunder without regard
to length of Service, or minimum attained age otherwise required herein.
3.2 ENROLLMENT A-ND PARTICIPATION. Each eligible Employee may enroll as of
his Entry Date, by completing and delivering to the Plan Administrator
an enrollment form, and if applicable, a payroll deduction
authorization.
3.3 REEMPLOYED PARTICIPANT. In the case of an individual who ceases to be an
Employee and is subsequently rehired as an Employee, the following
provisions shall apply in determining eligibility to again participate
in the Plan:
(a) If the Employee had met the eligibility requirements as specified
in Section 3.1, such Employee will become an Active Participant in
the Plan in accordance with Section 3.2 as of the date he is
reemployed as an Employee.
(b) If the Employee had not formerly met the eligibility requirements
specified in Section 3.1, such Employee will become an Active
Participant in the Plan after meeting the requirements of Section
3.1 in accordance with Section 3.2.
3.4 ELIGIBLE CLASS. If a Participant becomes ineligible to participate
because he is no longer a member of an eligible class of Employees, such
Employee shall participate immediately upon his return to an eligible
class of Employees. If such Participant incurs a Break-in-Service,
eligibility will be determined under the Break-in- Service rules of the
Plan.
If an Employee who is not a member of the eligible class of Employees
becomes a member of the eligible class, such Employee shall participate
immediately if such Employee has satisfied the minimum age and Service
requirements and would have previously become a Participant had he been
in the eligible class. If such Participant incurs a Break-in-Service,
eligibility will be determined under the Break-in-Service rules of the
Plan.
-21-
<PAGE> 53
3.5 WAIVER OF PARTICIPATION. Notwithstanding any provision of the Plan to
the contrary, any Employee in accordance with the rules of the Plan may
decline to become a Participant or cease to be an Active Participant by
filing a written waiver of participation with the Administrator in the
manner it prescribes. Such waiver must be filed prior to the date such
Employee is eligible to become a Participant, or in the case of an
Active Participant, in the last month of the Plan Year immediately
preceding the Plan Year for which he wishes to cease being an Active
Participant.
Any Employee who files such a waiver shall not become a Participant, or
if an Active Participant, shall elect to cease to be such as of the
first day of the succeeding Plan Year; and such Employee shall not
receive any additional Compensation or other sums by reason of his
waiver of participation.
Any such waiver may be rescinded by an Employee effective on the first
day of the first Plan Year following one or more Plan Years commencing
after the filing of such waiver in which he was not an Active
Participant, in which event he shall become a Participant, or again
become an Active Participant, as the case may be, effective as of such
date.
No Employee who is eligible to participate in a standardized plan may
waive participation or voluntarily reduce his/her Compensation for
purposes of this Plan.
3.6 OWNER-EMPLOYEES. If this Plan provides contributions or benefits for one
or more Owner-Employees who control both the business for which this
Plan is established and one or more other trades or businesses, this
Plan and the plan established for other trades or businesses must, when
looked at as a single plan, satisfy sections 401 (a) and (d) of the Code
for the Employees of this and all other trades or businesses. If the
plan provides contributions or benefits for one or more Owner-Employees
who control one or more other trades or businesses, the employees of the
other trades or businesses must be included in a plan which satisfies
sections 401(a) and (d) of the Code and which provides contributions and
benefits not less favorable than provided for Owner-Employees under this
Plan.
If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits of the
employees under the plan of the trades or businesses which are
controlled must be as favorable as those provided for him under the most
favorable plan of the trade or business which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee or two or
more Owner-Employees, will be considered to control a trade or business
if the Owner-Employee, or two or more Owner-Employees together:
(1) own the entire interest in an unincorporated trade or business, or
(2) in the case of a partnership, own more than 50 percent of either
the capital interest or the profits interest in the partnership.
-22-
<PAGE> 54
For purposes of the preceding sentence, an Owner-Employee or two or more
Owner-Employees shall be treated as owning any interest in a partnership
which is owned, directly or indirectly, by a partnership which such
Owner- Employee, or such two or more Owner-Employees, are considered to
control within the meaning of the preceding sentence.
-23-
<PAGE> 55
ARTICLE IV
CONTRIBUTIONS AND ALLOCATIONS
4.1 MONEY PURCHASE PENSION PLAN.
(a) Contributions - Employer. The Employer shall contribute an amount,
as specified in its Adoption Agreement, equal to a fixed percentage
of each Participant's Compensation or a flat dollar amount in
accordance with (1), (2) or (3) below:
(1) Formula A: Not Integrated with Social Security. An amount equal
to a percentage from 1% to 25% of the Compensation of each
Participant, subject to the Limitations on Allocations in
accordance with Article V.
(2) Formula B: Flat Dollar Amount. An amount, as elected by the
Employer in the Adoption Agreement. Formula B may not be
elected by a standardized plan.
(3) Formula C: Integrated with Social Security.
Base Contribution: An amount equal to a percentage (as
specified in the Adoption Agreement) of Compensation of each
Participant up to the Social Security Integration Level;
Excess Contribution: In addition, an amount equal to a
percentage (as specified in the Adoption Agreement) of the
Participant's Compensation which is in excess of the Social
Security Integration Level, subject to the Limitations on
Allocations in accordance with Article V. This Excess
Contribution percentage shall not exceed the lesser of:
(A) twice the Base Contribution or
(B) the Base Contribution plus the greater of:
(i) old age insurance portion of the Old Age Survivor
Disability (OASDI) tax rate; or
(ii) 5.7%.
If the Employer has elected in the Adoption Agreement to
use a Social Security Integration Level that in any Plan
Year is the greater of $10,000 or 20% but less than 100%
of the Taxable Wage Base, then the 5.7% limitation
specified in 4.1(a)(3)(B)(ii) shall be adjusted in
accordance with the following table:
-24-
<PAGE> 56
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
IF THE SOCIAL SECURITY INTEGRATION LEVEL
---------------------------------------------------------------------
is more but not more
than THAN
---------------------------------------------------------------------
<S> <C> <C>
the greater of $ 10,000 or 80% of the Taxable Wage 4.3%
20% of the Taxable Wage Base
Base
80% of the Taxable Wage 100% of the Taxable 5.4%
Base Wage Base
---------------------------------------------------------------------------------
</TABLE>
(b) Contributions - Participant.
The Plan Administrator will not accept Required Employee
Contributions or Voluntary Employee Contributions which are made
for Plan Years beginning after the Plan Year in which this Plan is
being adopted by the Employer. Required Employee Contributions and
Voluntary Employee Contributions for Plan Years beginning after
December 31, 1986 will be limited so as to meet the
nondiscrimination test of section 401(m) of the Code as provided in
Section 4.5(c).
(c) Contribution - Timing.
Contributions made on other than an annual basis shall be paid to
the Trust or Insurance Company, as applicable, not less frequently
than monthly or every four weeks. Contributions made on an annual
basis shall be paid to the Trust or the Insurance Company, as
applicable, at the end of the Plan Year, or as soon as possible on
or after the last day of such Plan Year, but in any event not later
than the date prescribed by law for filing the Employer's income
tax return, including any extension thereof. To the extent that
contributions are used to purchase Life Insurance Policies, then
such contributions for any Plan year maybe paid to the Trust when
premiums for such Policies are due during the Plan Year.
(d) Contribution - Allocation.
Employer contributions shall be allocated to the accounts of
Participants in accordance with the allocation requirements as
specified by the Employer in the Adoption Agreement. If the
Employer has adopted a Standardized Adoption Agreement, the
allocation of any nonannual contribution made by the Employer shall
be made for each Participant who is a Participant on any day of the
Contribution Period regardless of Hours of Service.
-25-
<PAGE> 57
(e) Forfeitures.
Forfeitures will be used in the manner elected in the Adoption
Agreement as follows:
(1) used to reduce Employer contributions, pay Plan expenses, or
(2) allocated in the same manner elected in the Adoption Agreement
for the allocation of Employer contributions.
(f) Expenses.
The Employer may contribute to the Plan the amount necessary to pay
any applicable expense charges and administration charges. In lieu
of the Employer contributing the amount necessary to pay such
charges, these expenses may be paid from Plan ASSETS.
4.2 PROFIT SHARING/THRIFT PLAN WITH 401(K) FEATURE
(a) Contributions - Employer.
For each Plan Year, as specified in the Adoption Agreement, the
Employer shall make one or more of the following contributions.
(1) Elective Deferral Contributions.
(2) Matching Contributions.
(3) Additional Matching Contributions.
(4) Nonelective Contributions.
(b) Contributions - Participant.
For each Plan Year, as specified in the Adoption Agreement, each
Participant may elect to make Required Employee Contributions
and/or Voluntary Employee Contributions.
(c) Fail-Safe Contribution.
The Employer reserves the right to make a discretionary Nonelective
Contribution to the Plan for any Plan Year, if the Employer
determines that such a contribution is necessary to ensure the
Actual Deferral Percentage Test or the Actual Contribution
Percentage Test will be satisfied for that Plan Year. Such amount
shall be designated by the Employer at the time of contribution as
a Qualified Nonelective Contribution and shall be known as a
Fail-Safe Contribution.
-26-
<PAGE> 58
The Fail-Safe Contribution shall be made on behalf of all eligible
non-Highly Compensated Employees who are Participants and who are
considered under the Actual Deferral Percentage Test or, if
applicable, the Actual Contribution Percentage Test and shall be
allocated to the Participant's Account of each such Participant in
an amount equal to a fixed percentage of such Participant's
Compensation. The fixed percentage shall be equal to the minimum
fixed percentage necessary to be contributed by the Employer on
behalf of each eligible non-Highly Compensated Employee who is a
Participant so that the Actual Deferral Percentage Test or, if
applicable, the Actual Contribution Percentage Test is satisfied.
The Fail-Safe Contribution shall be made on behalf of all eligible
non-Highly Compensated Employees who are Participants and who are
considered under the Actual Deferral Percentage Test or, if
applicable, the Actual Contribution Percentage Test and shall be
allocated to the Participant's Account of each such Participant in
an amount equal to a fixed percentage of such Participant's
Compensation. The fixed percentage shall be equal to the minimum
fixed percentage necessary to be contributed by the Employer on
behalf of each eligible non-Highly Compensated Employee who is a
Participant so that the Actual Deferral Percentage Test or, if
applicable, the Actual Contribution Percentage Test is satisfied.
(d) Contribution - Changes.
For each Plan Year, a Participant may change the amount of his
Required Employee Contributions, Voluntary Employee Contributions
and/or Elective Deferral Contributions as often as the Plan
Administrator allows (on a consistent and nondiscriminatory basis),
on certain dates prescribed by the Plan Administrator.
(e) Contributions - Timing.
(1) Elective Deferral Contributions shall be paid by the Employer
to the Trust or the Insurance Company, not less frequently than
monthly or four weekly, but never later than 90 days following
the date of deferral.
-27-
<PAGE> 59
(2) Matching Contributions made on other than an annual basis shall
be paid to the Trust or Insurance Company, as applicable, not
less frequently than monthly or every four weeks. Matching
Contributions and/or Additional Matching Contributions made on
an annual basis shall be paid to the Trust or the Insurance
Company, as applicable, at the end of the Plan Year, or as soon
as possible on or after the last day of such Plan Year, but in
any event not later than the date prescribed by law for filing
the Employer's income tax return, including any extension
thereof. To the extent that Matching Contributions are used to
purchase Life Insurance Policies, then such contributions for
any Plan year may be paid to the Trust when premiums for such
Policies are due during the Plan Year.
(3) Nonelective Contributions made on other than an annual basis
shall be paid to the Trust or Insurance Company, as applicable,
not less frequently than monthly or every four weeks.
Nonelective Contributions made on an annual basis shall be paid
to the Trust or the Insurance Company, as applicable, at the
end of the Plan Year, or as soon as possible on or after the
last day of such Plan Year, but in any event not later than the
date prescribed by law for filing the Employer's income tax
return, including any extension thereof. To the extent that
Nonelective Contributions are used to purchase Life Insurance
Policies, then such contributions for any Plan year may be paid
to the Trust when premiums for such Policies are due during the
Plan Year.
(4) Employee Contributions shall be transferred by the Employer to
the Trust or the Insurance Company, not less frequently than
monthly or four weekly, but never later than 90 days following
the date such contributions are made by the Employee.
(5) The Fail-Safe Contribution for any Plan Year as determined
above shall be paid to the Insurance Company at the end of the
Plan Year, or as soon as possible on or after the last day of
such Plan Year, but in no event later than the date which is
prescribed by law for filing the Employer's income tax return,
including any extensions thereof.
(f) Contributions - Allocations.
The allocation of Nonelective Contributions shall be made in
accordance with (1), (2), (3) or (4) below, as specified by the
Employer in the Adoption Agreement.
(1) Formula A: Compensation Ratio - Not Integrated with Social
Security.
The allocation to each Participant shall be made in the
proportion that the Compensation paid to each Participant
eligible to receive an allocation bears to the Compensation
paid to all Participants eligible to receive an allocation; or
-28-
<PAGE> 60
(2) Formula B: Flat Dollar Amount.
The allocation to each Participant shall be a flat dollar
amount as elected by the Employer in the Adoption Agreement.
Formula B may not be elected by a standardized plan.
(3) Formula C: Integrated with Social Security - Step Rate Method.
Base Contribution: An amount equal to a percentage (as
specified in the Adoption Agreement) of Compensation of each
Participant up to the Social Security Integration Level; Excess
Contribution: In addition, an amount equal to a percentage (as
specified in the Adoption Agreement) of the Participant's
Compensation which is in excess of the Social Security
Integration Level, subject to the Limitations on Allocations in
accordance with Article V. This Excess Contribution percentage
shall not exceed the lesser of:
(A) twice the Base Contribution or
(B) the Base Contribution plus the greater of:
(i) the old age insurance portion of the Old Age
Survivor Disability (OASDI) tax rate; or
(ii) 5.7%.
If the Employer has elected in the Adoption Agreement to
use a Social Security Integration Level that in any Plan
Year is the greater of $10,000 or 20% but less than 100%
of the Taxable Wage Base, then the 5.7% limitation
specified in 4.2(f)(3)(B)(ii) shall be adjusted in
accordance with the following table:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
IF THE SOCIAL SECURITY INTEGRATION LEVEL
---------------------------------------------------------------------
is more but not more
than THAN
---------------------------------------------------------------------
<S> <C> <C>
the greater of $10,000 or 80% of the Taxable Wage 4.3%
20% of the Taxable Wage Base
Base
80% of the Taxable Wage 100% of the Taxable 5.4%
Base Wage Base
---------------------------------------------------------------------------------
</TABLE>
-29-
<PAGE> 61
(4) Formula C: Integrated with Social Security - Maximum Disparity
Method.
Subject to the Limitations on Allocations specified in Article
V, for each Plan Year the contributions shall be allocated in
accordance with the following:
(A) An amount equal to 5.7% of the sum of each Participant's
total Compensation plus Compensation that is in excess of
the Social Security Integration Level shall be allocated
to each Participant's Account. If the Employer does not
contribute such amount for all Participants, an amount
shall be allocated to each Participant's Account equal to
the same proportion that each Participant's total
Compensation plus Compensation that is in excess of the
Social Security Integration Level bears to the total
Compensation plus Compensation in excess of the Social
Security Integration Level of all Participants in the
Plan.
If the Employer has elected in the Adoption Agreement to
use a Social Security Integration Level that in any Plan
Year is the greater of $10,000 or 20% but less than 100%
of the Taxable Wage Base, then the 5.7% limitation
specified in this Section shall be adjusted in accordance
with the following table:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
IF THE SOCIAL SECURITY INTEGRATION LEVEL
---------------------------------------------------------------------
is more but not more
than Than
---------------------------------------------------------------------
<S> <C> <C>
the greater of $10,000 or 80% of the Taxable Wage 4.3%
20% of the Taxable Wage Base
Base
80% of the Taxable Wage 100% of the Taxable 5.4%
Base Wage Base
---------------------------------------------------------------------------------
</TABLE>
(B) The balance of the contribution made by the Employer (if
any), shall be allocated to the Participant's Account in
the proportion that each Participant's Compensation bears
to the total Compensation of all Participants.
(g) Allocation Requirements.
Employer contributions shall be allocated to the accounts of
Participants in accordance with the allocation requirement as
specified by the Employer in its Adoption Agreement. If the
Employer has adopted a Standardized Adoption Agreement, the
allocation of any nonannual contribution made by the Employer shall
be made to each Participant who is a Participant on any day of the
Contribution Period regardless of Hours of Service.
-30-
<PAGE> 62
(h) Forfeitures.
Forfeitures will be used in the manner elected in the Adoption
Agreement as follows:
(1) Forfeitures will be used to reduce Employer contributions, pay
Plan expenses, or
(2) Forfeitures will be allocated in accordance with the allocation
formula in the Plan.
(i) Expenses.
The Employer may contribute to the Plan the amount necessary to pay
any applicable expense charges and administration charges. In lieu
of the Employer contributing the amount necessary to pay such
charges, these expenses may be paid from Plan assets.
(j) Special Rules - Elective Deferral Contributions.
(1) Each Participant may elect to defer his Compensation in an
amount specified in the Adoption Agreement, subject to the
limitations of this Section. A deferral election (or
modification of an earlier election) may not be made with
respect to Compensation which is currently available on or
before the date the Participant executed such election, or if
later, the latest of the date the Employer adopts this cash or
deferred arrangement, or the date such arrangement first
becomes effective. Any elections made pursuant to this Section
shall become effective as soon as is administratively feasible.
(2) If elected by the Employer in the Adoption Agreement, each
Participant may elect to defer and have allocated for a Plan
Year all or a portion of any cash bonus attributable to
services performed by the Participant for the Employer during
such Plan Year and which would have been received by the
Participant on or before two and one-half months following the
end of the Plan Year but for the deferral. A deferral election
may not be made with respect to cash bonuses which are
currently available on or before the date the Participant
executed such election. Notwithstanding the foregoing, cash
bonuses attributable to services performed by the Participant
during a Plan Year but which are to be paid to the Participant
later than two and one-half months after the close of such Plan
Year will be subject to whatever deferral election is in effect
at the time such cash bonus would have otherwise been received.
(3) Elective Deferral Contributions will be allocated to the
Participant's Account and shall be one hundred percent (100%)
vested and non-forfeitable at all times.
-31-
<PAGE> 63
(4) No Participant shall be permitted to have Elective Deferral
Contributions made under this plan, or any other qualified plan
maintained by the Employer, during any taxable year, in excess
of the dollar limitation contained in section 402(g) of the
Code in effect at the beginning of such taxable year.
(5) Elective Deferral Contributions which are not in excess of the
limits described in subsection (4) above, shall be subject to
the limitations on allocations in accordance with Article V.
Elective Deferral Contributions which are in excess of the
limits described in (4) above shall also be subject to the
Article V limitations.
(6) An Employee's eligibility to make Elective Deferral
Contributions under a CODA may not be conditioned upon the
completion of more than one (1) Year-of-Service or the
attainment of more than age twenty-one (21).
(7) A Participant may modify the amount of Elective Deferral
Contributions such Participant makes to the Plan as often as
the Administrator allows, as specified in the Adoption
Agreement, but in no event not less frequently than once per
calendar year. Such modification may be made by filing a
written notice with the Administrator within the time period
prescribed by the Administrator.
4.3 PROFIT SHARING PLAN. (Small Case Product)
(a) Contributions - Employer.
For each Plan Year, as specified in the Adoption Agreement, the
Employer shall make Nonelective Contributions.
(b) Contributions - Participant.
The Plan Administrator will not accept Voluntary Employee
Contributions which are made for Plan Years beginning after the
Plan Year in which this Plan is being adopted by the Employer.
Voluntary Employee Contributions for Plan Years beginning after
December 31, 1986 will be limited so as to meet the
nondiscrimination test of section 401(m) of the Code.
(c) Contributions - Timing.
Contributions shall be paid to the Trust or the Insurance Company,
as applicable, at the end of the Plan Year, or as soon as possible
on or after the last day of such Plan Year, but in any event not
later than the date prescribed by law for filing the Employer's
income tax return, including any extension thereof. To the extent
that Nonelective Contributions are used to purchase Life Insurance
Policies, then such contributions for any Plan year may be paid to
the Trust when premiums for such Policies are due during the Plan
Year.
-32-
<PAGE> 64
(d) Contributions - Allocations.
The allocation of Nonelective Contributions shall be made in
accordance with (1) or (2) below, as specified by the Employer in
the Adoption Agreement.
(1) Formula A: Compensation Ratio. The allocation to each
Participant shall be made in the proportion that the
Compensation paid to each Participant eligible to receive an
allocation bears to the Compensation paid to all Participants
eligible to receive an allocation; or
(2) Formula B: Flat Dollar Amount. The allocation to each
Participant shall be a flat dollar amount as elected by the
Employer in the Adoption Agreement. Formula B may not be
elected by a standardized plan.
(e) Allocation Requirements.
Employer contributions shall be allocated to the accounts of
Participants in accordance with the allocation requirement as
specified by the Employer in its Adoption Agreement.
(f) Forfeitures.
Forfeitures will be used in the manner elected in the Adoption
Agreement as follows:
(1) used to reduce Employer contributions, pay Plan expenses, or
(2) allocated in the same manner elected in the Adoption Agreement
for the allocation of Employer contributions. If the Plan is
integrated, forfeitures must be allocated pursuant to the
integrated formula.
(g) Expenses.
The Employer may contribute to the Plan the amount necessary to pay
any applicable expense charges and administration charges. In lieu
of the Employer contributing the amount necessary to pay such
charges, these expenses may be paid from Plan assets.
4.4 THRIFT PLAN WITH 401(k) FEATURE. (SMALL CASE PRODUCT)
(a) Contributions - Employer.
For each Plan Year, as specified in the Adoption Agreement, and
subject to the terms of Article V, the Employer shall make one or
more of the following contributions:
(1) Elective Deferral Contributions
(2) Matching Contributions
(3) Nonelective Contributions
-33-
<PAGE> 65
(b) Contributions - Participant.
For each Plan Year, as specified in the Adoption Agreement, each
Participant may elect to make Employee Contributions.
(c) Fail-Safe Contribution.
The Employer reserves the right to make a discretionary Nonelective
Contribution to the Plan for any Plan Year, if the Employer
determines that such a contribution is necessary to ensure the
Actual Deferral Percentage Test or the Actual Contribution
Percentage Test will be satisfied for that Plan Year. Such amount
shall be designated by the Employer at the time of contribution as
a Qualified Nonelective Contribution and shall be known as a
Fail-Safe Contribution.
The Fail-Safe Contribution shall be made on behalf of all eligible
non-Highly Compensated Employees who are Participants and who are
considered under the Actual Deferral Percentage Test or, if
applicable, the Actual Contribution Percentage Test and shall be
allocated to the Participant's Account of each such Participant in
an amount equal to a fixed percentage of such Participant's
Compensation. The fixed percentage shall be equal to the minimum
fixed percentage necessary to be contributed by the Employer on
behalf of each eligible non-Highly Compensated Employee who is a
Participant so that the Actual Deferral Percentage Test or, if
applicable, the Actual Contribution Percentage Test is satisfied.
(d) Contribution - Changes.
A Participant may change the amount of his Voluntary Employee
Contributions and/or Elective Deferral Contributions as often as
the Plan Administrator allows (on a consistent and
nondiscriminatory basis), on certain dates prescribed by the Plan
Administrator.
(e) Contributions - Timing.
(1) Elective Deferral Contributions shall be paid by the Employer
to the Trust or the. Insurance Company, not less frequently
than monthly or four weekly, but never later than 90 days
following the date of deferral.
-34-
<PAGE> 66
(2) Matching Contributions made on other than an annual basis shall
be paid to the Trust or Insurance Company, as applicable, not
less frequently than monthly or every four weeks. Matching
Contributions made on an annual basis shall be paid to the
Trust or the Insurance Company, as applicable, at the end of
the Plan Year, or as soon as possible on or after the last day
of such Plan Year, but in any event not later than the date
prescribed by law for filing the Employer's income tax return,
including any extension thereof. To the extent that Matching
Contributions are used to purchase Life Insurance Policies,
then such contributions for any Plan year may be paid to the
Trust when premiums for such Policies are due during the Plan
Year.
(3) Nonelective Contributions made on other than an annual basis
shall be paid to the Trust or Insurance Company, as applicable,
not less frequently than monthly or every four weeks.
Nonelective Contributions made on an annual basis shall be paid
to the Trust or the Insurance Company, as applicable, at the
end of the Plan Year, or as soon as possible on or after the
last day of such Plan Year, but in any event not later than the
date prescribed by law for filing the Employer's income tax
return, including any extension thereof To the extent that
Nonelective Contributions are used to purchase Life Insurance
Policies, then such contributions for any Plan year may be paid
to the Trust when premiums for such Policies are due during the
Plan Year.
(4) Employee Contributions shall be transferred by the Employer to
the Trust or the Insurance Company, not less frequently than
monthly or four weekly, but never later than 90 days following
the date such contributions are made by the Employee.
(5) The Fail-Safe Contribution for any Plan Year as determined
above shall be paid to the Insurance Company at the end of the
Plan Year, or as soon as possible on or after the last day of
such Plan Year, but in no event later than the date which is
prescribed by law for filing the Employer's income tax return,
including any extensions thereof
(f) Contributions - Allocations.
The allocation of Nonelective Contributions shall be made in
accordance with (1) or (2) below, as specified by the Employer in
the Adoption Agreement.
(1) Formula A: Compensation Ratio. The allocation to each
Participant shall be made in the proportion that the
Compensation paid to each Participant eligible to receive an
allocation bears to the Compensation paid to all Participants
eligible to receive an allocation or
-35-
<PAGE> 67
(2) Formula B: Flat Dollar Amount. The allocation to each
Participant shall be a flat dollar amount as elected by the
Employer in the Adoption Agreement. Formula B may not be
elected by a standardized plan.
(g) Allocation Requirements.
In the case of a Non-Standardized Plan, Employer contributions
shall be allocated to the accounts of Participants in accordance
with the allocation requirement as specified by the Employer in the
Adoption Agreement. In the case of a Standardized Plan, Employer
contributions shall be allocated to the accounts of Participants
who are Participants on any day of the Contribution Period
regardless of Hours of Service.
(h) Forfeitures.
Forfeitures will be used to reduce Employer contributions or pay
Plan expenses.
(i) Expenses.
The Employer may contribute to the Plan the amount necessary to pay
any applicable expense charges and administration charges. In lieu
of the Employer contributing the amount necessary to pay such
charges, these expenses may be paid from plan assets.
(j) Special Rules - Elective Deferral Contributions.
(1) Each Participant may elect to defer his Compensation in an
amount specified in the Adoption Agreement, subject to the
limitations of this Section. A deferral election (or
modification of an earlier election) may not be made with
respect to Compensation which is currently available on or
before the date the Participant executed such election, or if
later, the latest of the date the Employer adopts this cash or
deferred arrangement, or the date such arrangement first
becomes effective. Any elections made pursuant to this Section
shall become effective as soon as is administratively feasible.
-36-
<PAGE> 68
(2) If elected by the Employer in the Adoption Agreement, each
Participant may elect to defer and have allocated for a Plan
Year all or a portion of any cash bonus attributable to
services performed by the Participant for the Employer during
such Plan Year and which would have been received by the
Participant on or before two and one-half months following the
end of the Plan Year but for the deferral. A deferral election
may not be made with respect to cash bonuses which are
currently available on or before the date the Participant
executed such election. Notwithstanding the foregoing, cash
bonuses attributable to services performed by the Participant
during a Plan Year but which are to be paid to the Participant
later than two and one-half months after the close of such Plan
Year will be subject to whatever deferral election is in effect
at the time such cash bonus would have otherwise been received.
(3) Elective Deferral Contributions will be allocated to the
Participant's Account and shall be one hundred percent (100%)
vested and non-forfeitable at all times.
(4) No Participant shall be permitted to have Elective Deferral
Contributions made under this plan, or any other qualified plan
maintained by the Employer, during any taxable year, in excess
of the dollar limitation contained in section 402(g) of the
Code in effect at the beginning of such taxable year.
(5) Elective Deferral Contributions which are not in excess of the
limits described in subsection (4) above, shall be subject to
the limitations on allocations in accordance with Article V.
Elective Deferral Contributions which are in excess of the
limits described in (4) above shall also be subject to the
Article V limitations.
(6) An Employee's eligibility to make Elective Deferral
Contributions under a CODA may not be conditioned upon the
completion of more than one (1) Year-of-Service or the
attainment of more than age twenty-one (21).
(7) A Participant may modify the amount of Elective Deferral
Contributions such Participant makes to the Plan as often as
the Administrator allows, as specified in the Adoption
Agreement, but in no event not less frequently than once per
calendar year. Such modification may be made by filing a
written notice with the Administrator within the time period
prescribed by the Administrator.
4.5 NONDISCRIMINATION TESTS.
If the Employer has elected in its Adoption Agreement to provide for
Elective Deferral Contributions, then paragraphs (a) and (b) shall
apply.
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(a) Actual Deferral Percentage Test. The Actual Deferral Percentage for
Participants who are Highly Compensated Employees for each Plan
year and the ADP for Participants who are non-Highly Compensated
Employees for the same Plan Year must satisfy one of the following
tests:
(1) The ADP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ADP for Participants who
are non-Highly Compensated Employees for the same Plan year,
multiplied by 1.25; or
(2) The ADP for Participants who are Highly Compensated Employees
for the Plan year shall not exceed the ADP for Participants who
are non-Highly Compensated Employees for the same Plan year,
multiplied by 2.0, provided that the ADP for Participants who
are Highly Compensated Employees does not exceed the ADP for
Participants who are non-Highly Compensated Employees by more
than two (2) percentage points.
(b) Special Rules - ADP
(1) The ADP for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have Elective
Deferral Contributions (and Qualified Nonelective Contributions
or Qualified Matching Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP test) allocated to
his accounts under two or more arrangements described in
section 401(k) of the Code, that are maintained by the
Employer, shall be determined as if such Elective Deferral
Contributions (and, if applicable, such Qualified Nonelective
Contributions or Qualified Matching Contributions, or both)
were made under a single arrangement. If a Highly Compensated
Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or
deferred arrangements ending with or within the same calendar
year shall be treated as a single arrangement.
(2) If this plan satisfies the requirements of section 401 (k), 401
(a) (4), or 410(b) of the Code only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such sections of the Code only if aggregated
with this Plan, then this section shall be applied by
determining the ADP of employees as if all such plans were a
single plan. For Plan Years beginning after December 31, 1989,
plans may be aggregated in order to satisfy section 401(k) of
the Code only if they have the same Plan Year.
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(3) For purposes of determining the ADP of a participant who is a
5-percent owner or one of the ten most highly-paid Highly
Compensated Employees, the Elective Deferral Contributions (and
Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, if treated as Elective Deferral
Contributions for purposes of the ADP test) and Compensation of
such Participant shall include the Elective Deferral
Contributions (and, if applicable Qualified Nonelective
Contributions and Qualified Matching Contribution, or both) and
Compensation for the Plan Year of Family Members (as defined in
section 414(q)(6) of the Code). Family Members, with respect to
such Highly Compensated Employees, shall be disregarded as
separate employees in determining the ADP both for Participants
who are non-Highly Compensated Employees and for Participants
who are Highly Compensated Employees.
(4) For purposes of determining the ADP test, Elective Deferral
Contributions, Qualified Nonelective Contributions and
Qualified Matching Contributions must be made before the last
day of the twelve-month period immediately following the Plan
Year to which contributions relate.
(5) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified
Nonelective Contributions or Qualified Matching Contributions,
or both, used in such test.
(6) The determination and treatment of the ADP amounts of any
Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
If the Employer has elected in its Adoption Agreement to
provide for Employee Contributions and/or Matching
Contributions, then subparagraphs (c) and (d) shall apply. In
addition, subparagraphs (c) and (d) shall apply to Employee
Contributions and/or Matching Contributions required to be
tested under Code section 401 (m).
(c) Actual Contribution Percentage Test.
The Actual Contribution Percentage for Participants who are Highly
Compensated Employees for each Plan Year and the ACP for
Participants who are non-Highly Compensated Employees for the same
Plan Year must satisfy one of the following tests:
(1) The ACP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ACP for Participants who
are non-Highly Compensated Employees for the same Plan Year
multiplied by 1.25; or
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(2) The ACP for Participants who are Highly Compensated Employees
for the Plan Year shall not exceed the ACP for Participants who
are non-Highly Compensated Employees for the same Plan Year
multiplied by two (2), provided that the ACP for Participants
who are Highly Compensated Employees does not exceed the ACP
for Participants who are non-Highly Compensated Employees by
more than two (2) percentage points.
(d) Special Rules - ADP/ACP.
(1) Multiple Use: If one or more Highly Compensated Employees
participate in a plan or plans subject to both the ADP and ACP
tests, and the sum of the ADP and ACP of those Highly
Compensated Employees subject to either or both tests exceeds
the Aggregate Limit, then the ACP of those Highly Compensated
Employees who also participate in a CODA will be reduced
(beginning with such Highly Compensated Employee whose ACP is
the highest) so that the limit is not exceeded. The amount by
which each Highly Compensated Employee's Contribution
Percentage Amount is reduced shall be treated as an Excess
Aggregate Contribution. The ADP and ACP of the Highly
Compensated Employees are determined after any corrections
required to meet the ADP and ACP tests. Multiple use does not
occur if both the ADP and ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the ADP and ACP of
the non-Highly Compensated Employees.
(2) For purposes of this section, the Contribution Percentage for
any Participant who is a Highly Compensated Employee and who is
eligible to have Contribution Percentage Amounts allocated to
his account under two or more plans described in section 401(a)
of the Code, or arrangements described in section 401(k) of the
Code that are maintained by the Employer, shall be determined
as if the total of such Contribution Percentage Amount was made
under each plan. If a Highly Compensated Employee participates
in two or more cash or deferred arrangements that have
different plan years, all cash or deferred arrangements ending
with or within the same calendar year shall be treated as a
single arrangement.
(3) In the event that this Plan satisfies the requirements of
sections 401(m), 401 (a) (4) or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such sections of the
Code only if aggregated with this Plan, then this section shall
be applied by determining the Contribution Percentage of
employees as if all such plans were a single plan. For Plan
Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy section 401 (m) of the Code only
if they have the same Plan Year.
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(4) For purposes of determining the Contribution percentage of a
participant who is a five-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation for such Participant shall
include the Contribution Percentage Amounts and Compensation
for the Plan Year of Family Members (as defined in section
414(q)(6) of the Code). Family Members, with respect to Highly
Compensated Employees, shall be disregarded as separate
employees in determining the Contribution percentage both for
Participants who are non-Highly Compensated Employees and for
Participants who are Highly Compensated Employees.
(5) For purposes of determining the ACP test, Employee
Contributions are considered to have been made in the Plan Year
in which contributed to the Trust. Matching Contributions and
Qualified Nonelective Contributions are considered made for a
Plan Year if made no later than the end of the 12-month period
beginning on the day after the close of the Plan Year.
(6) Matching Contributions that have been made in the applicable
Plan Year and are forfeited either to correct Excess Aggregate
Contributions or because the contributions to which they relate
are Excess Deferrals, Excess Contributions, or Excess Aggregate
Contributions shall not be considered.
(7) The employer shall maintain records sufficient-to demonstrate
satisfaction of the ACP test and the amount of Qualified
Nonelective Contributions or Qualified Matching Contributions,
or both, used in such test.
(8) The determination and treatment of the Contribution Percentage
of any Participant shall satisfy such other requirements as may
be prescribed by the Secretary of the Treasury.
4.6 TREATMENT OF EXCESSES
(a) Excess Elective Deferral Contributions.
(1) In the event that Elective Deferral Contributions made during a
calendar year exceed the limit specified in Section 4.2(j)(4)
or 4.4(j)(4), then the excess amount plus earnings thereon
shall be distributed to the Participant by the April 15
following the calendar year in which such amount was
contributed, provided that the Participant notifies the Plan
Administrator no later than 30 days in advance of his intent to
withdraw such excess deferral, or is deemed to notify the Plan
Administrator. A Participant is deemed to notify the Plan
Administrator of any Excess Elective Deferrals that arise by
taking into account only those Elective Deferrals made to this
plan and any other plans of this Employer. The spousal consent
provisions of Article IX shall not apply to any distribution of
excess deferrals.
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(2) Excess Elective Deferrals shall be adjusted for any income or
loss for the Employee's tax year. The income or loss allocable
to excess Elective Deferral Contributions is an amount
determined by multiplying the sum of the income or loss
allocable to the Participant's Elective Deferral Contribution
account for the taxable year by a fraction, the numerator of
which is such Participant's excess Elective Deferral
Contributions for the taxable year, and the denominator of
which is equal to the sum of the Participant's account balance
attributable to Elective Deferral Contributions as of the
beginning of the taxable year plus the Participant's Elective
Deferral Contributions for the taxable year. Income for the gap
period (the period from the end of the taxable year to the date
of distribution) shall not be allocated to Excess Elective
Deferral Contributions.
(3) Matching Contributions, as defined in section 1.44, that are
attributable to Excess Elective Deferral Contributions, shall
be forfeited, and as such, shall be applied to reduce Employer
contributions or pay Plan expenses.
(b) Excess Contributions.
(1) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of
each Plan Year to Participants to whose accounts such Excess
Contributions were allocated for the preceding Plan Year. If
such excess amounts are distributed more than 2-1/2 months
after the last day of the Plan Year in which such excess
amounts arose, a 10 percent excise tax will be imposed on the
Employer maintaining the Plan with respect to such amounts.
Such distributions shall be made to Highly Compensated
Employees on the basis of the respective portions of the Excess
Contributions attributable to each of such Employees.
The distribution of Excess Contributions made to the Family
Members of a family group that was combined for purposes of
determining a Highly Compensated Employee's Actual Deferral
Percentage shall be allocated among the Family Members in
proportion to the Elective Deferral Contribution (including any
amounts required to be taken into account under subparagraphs
(b)(1) and (b)(2) of Section 4.5 of the plan) of each Family
Member that is combined to determine the Actual Deferral
Percentage.
(2) Excess Contributions shall be treated as annual additions under
the Plan in the Plan Year in which they arose.
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(3) Excess Contributions shall be adjusted for any income or loss
for the Plan Year. The income or loss allocable to Excess
Contributions is an amount determined by multiplying the sum of
the income or loss allocable to the Participant's Elective
Deferral Contribution Account (and, if applicable, the
Qualified Nonelective Contribution Account or the Qualified
Matching Contribution Account or both) for the Plan Year, by a
fraction, the numerator of which is such Participant's Excess
Contributions for the Plan Year and the denominator of which is
equal to the sum of the Participant's account balance
attributable to Elective Deferral Contributions (and Qualified
Nonelective Contributions, or Qualified Matching Contributions,
or both, if any of such contributions are included in the ADP
test) as of the beginning of the plan year plus the
Participant's Elective Deferral Contributions for the plan year
(and Qualified Nonelective Contributions, or Qualified Matching
Contributions, or both, if any of such contributions are
included in the ADP test). Income for the gap period (the
period from the end of the Plan Year to the date of
distribution) shall not be allocated to Excess Contributions.
(4) Excess Contributions shall be distributed from the
Participant's Elective Deferral Contribution Account and
Qualified Matching Contribution Account (if applicable) in
proportion to the Participant's Elective Deferral Contributions
and Qualified Matching Contributions (to the extent used in the
ADP test) for the Plan Year. Excess Contributions shall be
distributed from the Participant's Qualified Nonelective
Contribution Account only to the extent that such Excess
Contributions exceed the balance in. the Participant's Elective
Deferral Contribution account and Qualified Matching
Contribution account.
(5) Matching Contributions, as defined in section 1.44, that are
attributable to Excess Contributions, shall be forfeited, and
as such, shall be applied to reduce Employer contributions or
pay Plan expenses.
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(c) Excess Aggregate Contributions.
(1) Notwithstanding any other provision of this Plan, Excess
Aggregate Contributions, plus any income and minus any loss
allocable thereto, shall be forfeited, if forfeitable, or if
not forfeitable, distributed no later than the last day of each
Plan Year to Participants to whose accounts such Excess
Aggregate Contributions were allocated for the preceding Plan
Year. Excess Aggregate Contributions shall be allocated to
participants who are subject to the family member aggregation
rules of section 414(q)(6) of the Code in the manner prescribed
by the regulations. If such Excess Aggregate Contributions are
distributed more than 2-1/2 months after the last day of the
Plan Year in which such excess amounts arose, a 10 percent
excise tax will be imposed on the employer maintaining the Plan
with respect to those amounts. Excess Aggregate Contributions
shall be treated as annual additions under the Plan.
The distribution of Excess Aggregate Contributions made to the
Family Members of a family group that was combined for purposes
of determining a Highly Compensated Employee's Actual
Contribution Percentage shall be allocated among the Family
Members in proportion to the Employee and Matching
Contributions, Qualified Matching Contributions (if any, and if
all amounts therein are not used in -the ADP test) and, if
applicable, Qualified Nonelective Contributions and Elective
Deferral Contributions (including any amounts required to be
taken into account under subparagraphs (d)(1) and (d)(2) of
Section 4.5 of the plan) of each Family Member that is combined
to determine the Actual Contribution Percentage.
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(2) Excess Aggregate Contributions shall be adjusted for any income
or loss for the Plan Year. The income or loss allocable to
Excess Aggregate Contributions is an amount determined by
multiplying the sum of the income or loss allocable to the
Participant's Employee Contribution Account, Matching
Contribution Account, Qualified Matching Contribution Account
(if any, and if all amounts therein are not used in the ADP
test) and, if applicable, Qualified Nonelective Contribution
Account and Elective Deferral Contribution account for the Plan
Year by a fraction, the numerator of which is such
Participant's Excess Aggregate Contributions for the Plan Year,
and the denominator of which is equal to the sum of the
Participant's account balance attributable to Employee
Contributions, Matching Contributions, Qualified Matching
Contributions (if any, and if all amounts therein are not used
in the ADP test) and, if applicable, Qualified Nonelective
Contributions and Elective Deferral Contributions as of the
beginning of the Plan Year plus the Participant's Employee
Contributions, Matching Contributions, Qualified Matching
Contributions (if any, and if all amounts therein are not used
in the ADP test) and, if applicable, Qualified Nonelective
Contributions and Elective Deferral Contributions, for the Plan
Year. Income for the gap period (the period from the end of the
Plan Year to the date of distribution) shall not be allocated
to Excess Aggregate Contributions.
(3) Forfeitures of Excess Aggregate Contributions shall be applied
to reduce Employer contributions or pay Plan expenses.
(4) Excess Aggregate Contributions shall be forfeited, if
forfeitable or distributed on a pro-rata basis from the
Participant's Employee Contribution Account, Matching
Contribution Account, and Qualified Matching Contribution
Account (and, if applicable, the Participant's Qualified
Nonelective Contribution Account or Elective Deferral
Contribution Account, or both).
(5) Matching Contributions, as defined in section 1.44, that are
attributable to Excess Aggregate Contributions, shall be
forfeited, and as such, shall be applied to reduce Employer
contributions or pay Plan expenses.
4.7 IRP CONTRIBUTIONS.
The Plan Administrator will not accept IRP Contributions which are made
for a taxable year beginning after December 31, 1986. Contributions made
prior to that date will be maintained in a separate Account that will be
nonforfeitable at all times. No part of the IRP Contribution portion of
the Participant's Account will be used to purchase life insurance.
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4.8 ROLLOVER CONTRIBUTIONS.
Without regard to the limitations imposed under Article V, if elected by
the Employer in the Adoption Agreement the Employer may receive on
behalf of a Participant all or a portion of the entire amount of (a) any
distribution from a terminated pension or profit sharing plan meeting
the requirements of section 401(a) of the Code; or (b) any lump sum
distribution theretofore received by such Participant from a pension or
profit sharing plan meeting the requirements of section 401(a) of the
Code, provided that the amounts to be rolled over are in no way
attributable to contributions made while a Key Employee in a Top-Heavy
Plan and are attributable solely to Employer contributions and earnings
thereon, earnings on Employee Contributions, and Employee contributions
which were eligible for a tax deduction under section 219 of the Code,
and earnings thereon.
If Rollover Contributions are elected by the Employer in the Adoption
Agreement, they may be received from an Employee who is not otherwise
eligible to participate in the Plan. Rollover Contributions may be
withdrawn by such Employee pursuant to the provisions of the Adoption
Agreement and Article M. In addition, such Employee may direct the
investment and transfer of amounts in his Participant's Account pursuant
to the terms of Article VI. Upon Termination of Employment, such
Employee shall be entitled to a distribution of his Participant's
Account.
4.9 TRANSFERS.
With regard to the Limitations on Allocations imposed in Article V, the
Trustee may receive, directly from another qualified pension or profit
sharing plan meeting the requirements of Code section 401(a), all or
part of the entire amount distributable on behalf of a Participant from
such Plan. Likewise, the Trustee may receive Transfers representing the
assets of any Predecessor plan.
Transfers may be invested in any manner authorized under the provisions
of this Plan.
4.10 SUSPENSION OF REQUIRED EMPLOYEE CONTRIBUTIONS BY PARTICIPANTS.
The following provisions shall apply with respect to suspension of
Required Employee Contributions by Participants. Any reference to
Voluntary Employee Contributions shall apply only if the Participant is
making such Voluntary Employee Contributions. In the event that a
Participant suspends his Required Employee Contributions he shall become
an Inactive Participant for the period of suspension and shall
automatically have his Voluntary Employee Contributions suspended for
the same period of time.
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(a) Voluntary Suspension. An Active Participant may elect to suspend
his payroll deduction order for his Required Employee Contributions
by filing a written notice thereof with the Plan Administrator.
Such notice shall be effective, and his applicable contributions
shall be suspended, on the date specified in such notice, which
date must be at least 15 days after such notice is filed. The
notice shall specify the period for which such suspension shall be
effective. For all but Small Case Product readopting plans, such
period must be a minimum of three months and may extend
indefinitely. For Small Case Product readopting plans, there is no
minimum period and the suspension may extend indefinitely.
(b) Suspension for Leave. A Participant who is absent from employment
on account of an authorized leave of absence or military leave
shall have his payroll deduction order for Required Employee
Contributions suspended during such leave. Such suspension of
contributions shall be effective on the date payment of
Compensation by the Employer to him ceases, and shall remain in
effect until payment of Compensation is resumed.
(c) Withdrawal Suspension. An Active Participant who elects a
withdrawal in accordance with Article XI may have his Required
Employee Contributions suspended on the date such election becomes
effective. Such suspension shall remain in effect for the number of
months specified therein.
(d) Involuntary Suspension. An Active Participant who ceases to meet
the eligibility requirements as specified in Section 3.1 but who
remains in the employ of the Employer, shall have his Required
Employee Contributions suspended, effective as of the date he
ceases to meet the eligibility requirements. Such suspension shall
remain in effect until he again meets such eligibility
requirements.
The Participant may elect to reactivate his payroll deduction order by
filing a written notice thereof with the Plan Administrator. The payroll
deduction order shall be reactivated following the expiration of the
suspension period described above.
4.11 SUSPENSION OF VOLUNTARY EMPLOYEE CONTRIBUTIONS BY PARTICIPANTS. The
following provisions apply with respect to suspension of Voluntary
Employee Contributions by Participants.
(a) Voluntary Suspension. An Active Participant may elect to suspend
his payroll deduction order for his Voluntary Employee
Contributions by filing a written notice thereof with the Plan
Administrator. Such notice shall be effective, and his applicable
contributions shall be suspended, on the date specified in such
notice, which date must be at least 15 days after such notice is
filed. The notice shall specify the period for which such
suspension shall be effective. For all but Small Case Product
readopting plans, such period must be a minimum of three months and
may extend indefinitely. For Small Case Product readopting plans,
there is no minimum period and the suspension may extend
indefinitely.
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(b) Suspension for Leave. A Participant who is absent from employment
on account of an authorized leave of absence or military leave
shall have his payroll deduction order for Voluntary Employee
Contributions suspended during such leave. Such suspension of
contributions shall be effective on the date payment of
Compensation by the Employer to him ceases, and shall remain in
effect until payment of Compensation is resumed.
(c) Withdrawal Suspension. An Active Participant who elects a
withdrawal in accordance with Article XI may have his Voluntary
Employee Contributions suspended on the date such election becomes
effective. Such suspension shall remain in effect for the number of
months specified therein.
(d) Involuntary Suspension. An Active Participant who ceases to meet
the eligibility requirements as specified in Section 3.1 but who
remains in the employ of the Employer, shall have his Voluntary
Employee Contributions suspended, effective as of the date he
ceases to meet the eligibility requirements. Such suspension shall
remain in effect until he again meets such eligibility
requirements.
The Participant may elect to reactivate his payroll deduction order by
filing a written notice thereof with the Plan Administrator. The payroll
deduction order shall be reactivated following the expiration of the
suspension period described above.
4.12 SUSPENSION OF ELECTIVE DEFERRAL CONTRIBUTIONS. The following provisions
shall apply with respect to suspension of Elective Deferral
Contributions.
(a) Elective Suspension. An Active Participant may elect to suspend his
salary deferral agreement for Elective Deferral Contributions by
filing a written notice thereof with the Plan Administrator. The
salary deferral agreement shall be suspended on the date specified
in such notice, which date must be at least 15 days after such
notice is filed. The notice shall specify the period for which such
suspension shall be effective. For all but Small Case Product
readopting plans, such period must be a minimum of three months and
may extend indefinitely. For Small Case Product readopting plans,
there is no minimum period and the suspension may extend
indefinitely.
(b) Suspension for Leave. A Participant who is absent from employment
on account of an authorized leave of absence or military leave
shall have his salary deferral agreement suspended during such
leave. Such suspension of contributions shall be effective on the
date payment of Compensation by the Employer to him ceases, and
shall remain in effect until payment of Compensation is resumed.
(c) Withdrawal Suspension. An Active Participant who elects a
withdrawal in accordance with Article XI may have his salary
deferral agreement suspended on the date such election becomes
effective. Such suspension shall remain in effect for the number of
months specified therein.
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(d) Non-Elective Suspension. An Active Participant who ceases to meet
the eligibility requirements as specified in Section 3.1 but who
remains in the employ of the Employer, shall have his salary
deferral agreement suspended, effective as of the date he ceases to
meet the eligibility requirements. Such suspension shall remain in
effect until he again meets such eligibility requirements.
The Participant may elect to reactivate his salary deferral agreement
for Elective Deferral Contributions by filing a written notice thereof
with the Plan Administrator. The salary deferral agreement shall be
reactivated following the expiration of the suspension period described
above.
4.13 If the plan sponsor is not the Plan Administrator, the sponsor shall:
(a) Maintain records that enable it to monitor the adopting Employer's
compliance with the requirements of section 401(m) of the Code;
(b) Perform the section 401(m) actual contribution percentage test for
the employer on an annual basis; and
(c) Notify the Employer if it is required to correct Excess Aggregate
Contributions.
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ARTICLE V
LIMITATIONS ON ALLOCATIONS
5.1 If the Participant does not participate in, and has never participated
in another qualified plan maintained by the Employer or a welfare
benefit fund, as defined in section 419(e) of the Code maintained by the
Employer, or an individual medical account, as defined in section 415
(1) (2) of the Code, maintained by the Employer which provides an Annual
Addition as defined in section 5.8(a), the amount of Annual Additions
which may be credited to the Participant's Account for any limitation
year will not exceed the lesser of the maximum permissible amount or any
other limitation contained in this Plan. If the Employer contribution
that would other-wise be contributed or allocated to the Participant's
Account would cause the Annual Additions for the limitation year to
exceed the maximum permissible amount, the amount contributed or
allocated will be reduced so that the Annual Additions for the
limitation year will equal the maximum permissible amount.
5.2 Prior to determining the Participant's actual Compensation for the
limitation year, the Employer may determine the maximum permissible
amount for a Participant on the basis of a reasonable estimation of the
Participant's Compensation for the limitation year, uniformly determined
for all Participants similarly situated.
5.3 As soon as administratively feasible after the end of the limitation
year, the maximum permissible amount for the limitation year will be
determined on the basis of the Participant's actual Compensation for the
limitation year.
5.4 If, pursuant to section 5.3 or as a result of the allocation of
Forfeitures, there is an excess amount, the excess will be disposed of
using any of the following methods:
(a) Employee Contributions or Elective Deferral Contributions, or both,
to the extent they would reduce the excess amount, will be returned
to the Participant. The Contributions returned in accordance with
the preceding shall include any gains or losses attributable to
such contributions.
Employee Contributions so returned will be disregarded with respect
to the Actual Contribution Percentage Test. The Elective
Deferral Contributions so returned will be disregarded with respect
to the elective deferral limitation described in Section 4.2(j)(4)
of the plan and the Actual Deferral Percentage Test.
(b) If the Participant is covered by the Plan at the end of the
limitation year, the excess amount in the Participant's Account,
other than Employee Contributions and Elective Deferral
Contributions, will be used to reduce Employer contributions
(including any allocation of Forfeitures) for such Participant in
the next limitation year, and each succeeding limitation year, if
necessary.
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(c) If the Participant is not covered by the Plan at the end of a
limitation year, the excess amount will be held unallocated in a
suspense account. The suspense account will be applied to reduce
future Employer contributions (including allocation of any
Forfeiture) for all remaining participants in the next limitation
year, and each succeeding limitation year if necessary.
(d) If a suspense account is in existence at any time during the
limitation year pursuant to this section, it will not participate
in the allocation of the Trust or Insurance Company's gains and
losses. If a suspense account is in existence at any time during a
particular limitation year, all amounts in the suspense account
must be allocated and reallocated to the Participants' Account
before any Employer or any Employee Contributions may be made to
the Plan for that limitation year. Excess amounts may not be
distributed to Participants or former Participants.
5.5 (a) This Section applies if, in addition to this Plan, the Participant
is covered under another qualified master or prototype defined
contribution plan maintained by the Employer, or a welfare benefit
fund, as defined in section 419(e) of the Code, maintained by the
Employer or an individual medical account as defined in section 415
(1) (2) of the Code, maintained by the Employer, which provides an
Annual Addition as defined in section 5.8(a), during any limitation
year. The Annual Additions which may be credited to a Participant's
account under this Plan for any such limitation year will not
exceed the maximum permissible amount reduced by the Annual
Additions credited to a Participant's Account under the other plans
and welfare benefit funds for the same limitation year. If the
Annual Additions with respect to the Participant under other
defined contribution plans and welfare benefit funds maintained by
the Employer are less than the maximum permissible amount and the
Employer contribution that would other-wise be contributed or
allocated to the Participant's Account under this Plan would cause
the Annual Additions for the limitation year to exceed this
limitation, the amount contributed or allocated will be reduced so
that the Annual Additions under all such plans and funds for the
limitation year will equal the maximum permissible amount. If the
Annual Additions with respect to the Participant under such other
defined contribution plans and welfare benefit funds in the
aggregate are equal to or greater than the maximum permissible
amount, no amount will be contributed or allocated to the
Participant's Account under this Plan for the limitation year.
(b) Prior to determining the Participant's actual compensation for the
limitation year, the Employer may determine the maximum permissible
amount for a Participant in the manner described in Section 5.2.
(c) As soon as is administratively feasible after the end of the
limitation year, the maximum permissible amount for the limitation
year will be determined on the basis of the Participant's actual
Compensation for the limitation year.
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(d) If, pursuant to Section 5.5(c), or as a result of the allocation of
forfeitures, a Participant's Annual Additions under this Plan and
such other plans would result in an excess amount for a limitation
year, the excess amount will be deemed to consist of the annual
additions last allocated, except that Annual Additions attributable
to welfare benefit fund or individual medical account will be
deemed to have been allocated first regardless of the actual
allocation date.
(e) If an excess amount was allocated to a Participant on an allocation
date of this Plan which coincides with an allocation date of
another plan, the excess amount attributed to this Plan will be the
product of:
(1) the total excess amount allocated as of such date, times
(2) The ratio of (i) the annual additions allocated to the
Participant for the limitation year as of such date under this
Plan to (ii) the total annual additions allocated to the
Participant for the limitation year as of such date under this
and all the other qualified master or prototype defined
contribution plans.
(f) Any excess amount attributed to this Plan will be disposed in the
manner described in Section 5.4.
5.6 If the Participant is covered under another qualified defined
contribution plan maintained by the Employer which is not a master or
prototype plan, Annual Additions which may be credited to the
Participant's Account under this Plan for any limitation year will be
limited in accordance with Section 5.5 as though the other plan were a
master or prototype plan unless the employer provides other limitations
in the Limitations on Allocations section of the Adoption Agreement.
5.7 If the Employer maintains, or at any time maintained, a qualified
defined benefit plan covering any Participant in this Plan, the sum of
the Participant's defined benefit plan fraction and defined contribution
plan fraction will not exceed 1.0 in any limitation year. The Annual
Additions which may be credited to the Participant's Account under this
Plan for any limitation year will be limited in accordance with the
Limitations on Allocations section of the Adoption Agreement.
5.8 Definitions. The following definitions apply.for purposes of Article V.
(a) Annual Additions: The sum of the following amounts credited to a
Participant's Account for the limitation year:
(1) All contributions made by the Employer which shall include:
Elective Deferral Contributions;
Matching Contributions;
Nonelective Contributions;
Qualified Nonelective Contributions;
Qualified Matching Contributions;
(2) Employee Contributions;
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(3) Forfeitures; and
(4) Amounts allocated, after March 31, 1984, to an individual
medical account, as defined in section 415 (1) (2) of the Code,
which is part of a pension or annuity plan maintained by the
Employer, are treated as Annual Additions to a defined
contribution plan. Also, amounts derived from contributions
paid or accrued after December 31, 1985, in taxable years
ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate
account of a Key Employee, as defined in internal Revenue Code
section 419A(d)(3), under a welfare benefit fund, as defined in
section 419(e) of the Code, maintained by the Employer, are
treated as Annual Additions to a defined contribution plan.
For this purpose, any excess amount applied under Sections 5.4
or 5.5(f) in the limitation year to reduce Employer
contributions will be considered Annual Additions for such
limitation year.
(b) Compensation: As selected by the Employer in the Adoption
Agreement, Compensation shall mean all of a participant's
(1) Wages, Tips, and Other Compensation Box on Form W-2.
Compensation is defined as wages as defined in Section 3401(a)
and all other payments of compensation to an employee by the
employer (in the course of the employer's trade or business)
for which the employer is required to furnish the employee a
written statement under Section 6041(d) and 6051(a)(3) of the
Code. Compensation must be determined without regard to any
rules under Section 3401(a) that limit the remuneration
included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Section 3401 (a) (2)).
(2) Modified Wages, Tips, and Other Compensation Box on Form W-2.
Compensation is defined as wages as defined in Section 3401(a)
and all other payments of compensation to an employee by the
employer (in the course of the employer's trade or business)
for which the employer is required to furnish the employee a
written statement under Section 6041(d) and 6051(a)(3) of the
Code. Compensation must be determined without regard to any
rules under Section 3401(a) that limit the remuneration
included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Section 3401(a)(2)).
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Notwithstanding the foregoing, the compensation described above
shall exclude amounts paid or reimbursed by the Employer for
moving expenses incurred by an Employee, but only to the extent
that at the time of the payment it is reasonable to believe
that these amounts are deductible by the Employee under Section
217 of the Code.
(3) Section 3401(A) wages. Wages as defined in section 3401(a) of
the Code for the purposes of income tax withholding at the
source but determined without regard to any rules that limit
the remuneration included in wages based on the nature or
location of the employment or the services performed (such as
the exception for agricultural labor in section 3401(a)(2) of
the Code).
(4) 415 safe-harbor compensation. Wages, salaries, and fees for
professional services and other amounts received (without
regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of employment
with the employer maintaining the plan to the extent that the
amounts are includable in gross income (including, but not
limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions
on insurance premiums, tips, bonuses, fringe benefits,
reimbursements and expense allowances), and excluding the
following:
(A) Employer contributions to a plan of deferred compensation
which are not includable in the Employee's gross income
for the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan to
the extent such contributions are deductible by the
Employee, or any distributions from a plan of deferred
compensation;
(B) Amounts realized from the exercise of a non-qualified
stock option, or when restricted stock (or property) held
by the Employee either becomes freely transferable or is
no longer subject to a substantial risk of forfeiture;
(C) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock
option; and
(D) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an
annuity described in section 403(b) of the Code (when ther
or not the amounts are actually excludable from the gross
income of the Employee).
For any Self-Employed Individual, Compensation will mean Earned
Income.
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For limitation years beginning after December 31, 1991, for
purposes of applying the limitations of this article,
Compensation for a limitation year is the Compensation actually
paid or includable in gross income during such limitation year.
Notwithstanding the preceding sentence, Compensation for a
Participant in a defined contribution plan who is permanently and
totally disabled (as defined in section 22(e)(3) of the Code) is
the Compensation such participant would have received for the
limitation year if the Participant had been paid at the rate of
Compensation paid immediately before becoming permanently and
totally disabled; such imputed Compensation for the disabled
Participant may be taken into account only if the Participant is
not a Highly Compensated Employee (as defined in section 414(q) of
the Code) and contributions made on behalf of such Participant are
nonforfeitable when made.
(c) Defined benefit fraction: A fraction, the numerator of which is the
sum of the Participant's projected annual benefits under all the
defined benefit plans (whether or not terminated) maintained by the
Employer, and the denominator of which is the lesser of 125 percent
of the dollar limitation determined for the limitation year under
section 415(b) and (d) of the Code, or 140 percent of the highest
average compensation including any adjustments under section 415(b)
of the Code.
Notwithstanding the above if the Participant was a Participant as
of the first day of the limitation year beginning after December
31, 1986, in one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the denominator of
this fraction will not be less than 125 percent of the sum of the
annual benefits under such plans which the Participant had accrued
as of the later of the close of the last limitation year beginning
before January 1, 1987, disregarding any changes in the terms and
conditions of the Plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of section 415 of the Code for
all limitation years beginning before January 1, 1987.
Notwithstanding the foregoing, for any Top-Heavy Plan Year, 100
shall be substituted for 125 unless the extra minimum allocation is
being made pursuant to the Employer's election in the Adoption
Agreement. However, for any Plan Year in which this Plan is a
Super Top-Heavy Plan, 100 shall be substituted for 125 in any
event.
(d) Defined contribution dollar limitation: $30,000 or if greater,
one-fourth of the defined benefit dollar limitation set forth in
section 415 (b) (1) of the Code as in effect for the limitation
year.
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(e) Defined contribution fraction: A fraction, the numerator of which
is the sum of the Annual Additions to the Participant's account
under all the defined contribution plans (whether or not
terminated) maintained by the Employer for the current and all
prior limitation years (including the Annual Additions attributable
to the Participant's nondeductible employee contributions to all
defined benefit plans, whether or not terminated, maintained by the
Employer, and the Annual Additions attributable to all welfare
benefit funds, as defined in section 419(e) of the Code, and
individual medical accounts, as defined in section 415(l)(2) of the
Code, maintained by the Employer), and the denominator of which is
the sum of the maximum aggregate amounts for the current and all
prior limitation years of service with the Employer (regardless of
whether a defined contribution plan was maintained by the
Employer). The maximum aggregate amount in any limitation year is
the lesser of 125 percent of the dollar limitation determined under
sections 415 (b) and (d) of the Code in effect under sections 415
(c) (1) (A) of the Code or 35 percent of the Participant's
Compensation for such year.
If the employee was a Participant as of the end of the first day of
the first limitation year beginning after December 31, 1986, in one
or more defined contribution plans maintained by the Employer which
were in existence on May 6, 1986, the numerator of this fraction
will be adjusted if the sum of this fraction and the defined
fraction would otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment, an amount equal to the product of (1) the
excess of the sum of the fractions over 1.0 times (2) the
denominator of this fraction, will be permanently subtracted from
the numerator of this fraction. The adjustment is calculated using
the fractions as they would be computed as of the end of the last
limitation year beginning before January 1, 1987, and disregarding
any changes in the terms and conditions of the Plan made after May
5, 1986, but using the section 415 limitation applicable to the
first limitation year beginning on or after January 1, 1987.
Notwithstanding the foregoing, for any Top-Heavy Plan Year, 100
shall be substituted for 125 unless the extra minimum allocation is
being made pursuant to the Employer's election in the Adoption
Agreement. However, for any Plan Year in which this Plan is a
Super Top-Heavy Plan, 100 shall be substituted for 125 in any
event.
The Annual Addition for any limitation year beginning before
January 1, 1987 shall not be recomputed to treat all Employee
Contributions as Annual Additions.
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(f) Employer: For purposes of this Article, Employer shall mean the
employer that adopts this Plan, and all members of a controlled
group of corporations (as defined in Code section 414(b) as
modified by section 415 (h)), all commonly controlled trades or
businesses (as defined in Code section 414(c) as modified by
section 415 (h)) or affiliated service groups (as defined in Code
section 414(m)) of which the adopting Employer is a part and any
other entity required to be aggregated with the Employer pursuant
to regulations under section 414(o) of the Code.
(g) Excess Amount: The excess of the Participant's Annual Additions for
the limitation year over the maximum permissible amount.
(h) Highest Average Compensation: The average compensation for the
three consecutive years of service with the Employer that produces
the highest average. A year of service with the Employer is the
12-consecutive month period defined in Section 1.56.
(i) Limitation Year: A calendar year, or the 12-consecutive month
period elected by the Employer in the Limitation Year section of
the Adoption Agreement. All qualified plans maintained by the
employer must use the same limitation year. If the limitation year
is amended to a different 12-consecutive month period, the new
limitation year must begin on a date within the limitation year in
which the amendment is made.
(j) Master or Prototype Plan: A plan the form of which is the subject
of a favorable opinion letter from the Internal Revenue Service.
(k) Maximum Permissible Amount: The lesser of $30,000 (or, beginning
January 1, 1988, such larger amount determined by the Commissioner
for the limitation year). The maximum Annual Addition that may be
contributed or allocated to a Participant's Account under the Plan
for any limitation year shall not exceed the lesser of:
(a) the defined contribution dollar limitation, or
(b) 25 percent of the Participant's Compensation for the
limitation year.
The Compensation limitation referred to in (b) shall not apply to
any contribution for medical benefits (within the meaning of
section 401(h) or section 419A(f)(2) of the Code which is otherwise
treated as an Annual Addition under section 415(1)(1) or 419A(d)(2)
of the Code.
If a short limitation year is created because of an amendment
changing the limitation year to a different 12-consecutive month
period, the maximum permissible amount will not exceed the defined
contribution dollar limitation multiplied by the following
fraction:
Number of months in the short limitation year
---------------------------------------------
12
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(l) Projected Annual Benefit: The annual retirement benefit (adjusted
to an actuarially equivalent straight life annuity if such benefit
is expressed in a form other than a straight life annuity or
Qualified Joint and Survivor Annuity) to which the Participant
would be entitled under the terms of the Plan assuming:
(1) the Participant will continue employment until normal
retirement age under the Plan (or current age, if later), and
(2) the Participant's Compensation for the current limitation year
and all other relevant factors used to determine benefits under
the Plan will remain constant for all future limitation years.
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ARTICLE VI
ANNUITY CONTRACT AND PARTICIPANT'S ACCOUNT
6.1 PARTICIPANT'S ACCOUNT. A Participant's Account shall be maintained on
behalf of each Participant until such account is distributed in
accordance with the terms of this Plan.
Each Participant shall have the exclusive authority to direct the
investment of contributions made by the Employee, including Elective
Deferral Contributions, IRP Contributions and Rollover Contributions, if
applicable, from among the investment options selected by the Employer.
The Participant shall elect, by written notice to the Plan
Administrator, to have a minimum of 1% of such amounts invested in one
such investment fund, with the balance invested in multiples of 1%,
among the other such investment funds, such that the total of each
Participant's investment choices as allocated under the terms of the
Plan add up to 100%.
If selected by the Employer in its Adoption Agreement, the Participant
additionally shall have the exclusive authority to direct the investment
of contributions made by the Employer from among the investment choices
selected by the Employer.
The Plan Administrator or the Participant, as the case may be, may
change such amounts as often as the Plan Administrator may allow in
accordance with the terms of the investment funds in which the
Participant's Account is being invested.
6.2 INVESTMENT TRANSFERS. Each Participant shall have the exclusive
authority to direct the transfer of amounts between the investment funds
designated by the Employer, attributable to his Employee Contributions,
including Elective Deferral Contributions, IRP Contributions and
Rollover Contributions, if applicable.
If the Employer selects in its Adoption Agreement to grant the
Participant exclusive authority to direct the investment - of
contributions made by the Employer, the Participant shall also have the
exclusive authority to transfer contributions made by the Employer from
among the investment choices selected by the Employer.
The transfer of amounts between investment funds shall be subject to the
rules of the investment funds in which the Participant's Account is
invested or is to be invested.
6.3 A Participant's Account shall be maintained on behalf of each
Participant until such Account is distributed in accordance with the
terms of this Plan. At least once per year, as of the last day of the
Plan Year, each Participant's Account shall be adjusted, in the ratio
that such amount balance bears to all account balances, for any
earnings, gains, losses, contributions, withdrawals, expenses, and loans
attributable to such Plan Year, in order to obtain a new valuation of
the Participant's Account. The assets of the trust will be valued
annually at fair market value as of the last day of the Plan Year.
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ARTICLE VII
LIFE INSURANCE POLICIES
7.1 OPTIONAL PURCHASE OF LIFE INSURANCE. If the Employer in its Adoption
Agreement shall permit the purchase of life insurance on the lives of
all Participants hereunder, each Active Participant may elect that in
lieu of the entire Contribution on his behalf being credited to his
Participant's Account, a portion of such Contribution shall be applied
to the purchase of a Life Insurance Policy or Policies on his life. The
application for each Policy shall be signed by the Participant and by
the Trustee and shall conform to the requirements of the Insurance
Company, including any requested evidence of insurability, and the
requirements of this section. All Life Insurance Policies shall be
issued so as to permit a common billing date. Any Policy on the life of
a Participant who can qualify for Waiver of Premium thereunder and
Participant Account Contribution Disability Benefits thereunder may
include such benefits if applied for by the Participant. The
Administrator may adopt reasonable rules regarding the purchase of Life
Insurance Policies provided such rules are administered in a consistent
and nondiscriminatory manner. No application shall be made hereunder for
any Life Insurance Policy on the life of a Participant acceptable to the
Insurance Company at standard premium rates for a face amount of less
that $1,000 for the first, or any additional policy issued on the
Participant's life.
7.2 PREMIUMS ON LIFE INSURANCE POLICIES. The premiums on all Life Insurance
Policies on the life of a Participant shall be paid from the portion of
his Participant's Account attributable to contributions made by the
Employer, to the extent sufficient therefor, otherwise in one of the
following manners:
(a) by a loan against the Participant's Policy or Policies, under the
Automatic Premium Loan Provision thereof, or
(b) by payment out of his Participant's Account; or
If the Participant is not acceptable to the Insurance Company as a
standard risk at standard rates, a Policy with the same premium but a
lesser death benefit may be purchased.
7.3 LIMITATIONS ON PREMIUMS. In no case shall the cumulative total premiums
paid on all policies held on the life of a Participant hereunder exceed
an amount equal to the applicable percentage set forth below of all
Contributions (other than Employee Contributions) and Forfeitures
thereto for allocated or currently due on his behalf:
(a) 49% in the case of ordinary life insurance or similar policies.
(b) 25% in the case of term insurance policies or a combination of
policies, with premiums on ordinary life insurance or similar
policies being given half weight.
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If such cumulative total premiums would otherwise exceed this amount,
the necessary steps to avoid this result shall be taken by reduction of
the Participant's life insurance coverage by changing all or a portion
of his coverage to paid-up life insurance or by selling the excess
portion to the Participant.
The payment of life insurance premiums shall be further subject to the
terms and conditions of Article V.
7.4 A Participant who no longer wishes to have any part of his allocable
share of Contributions used to pay the premiums for any Life Insurance
Policy or Policies may withdraw a prior election by written notice to
the Trustee to that effect. Any Policy shall be disposed of in
accordance with its provisions as the Trustee shall direct, and the
Contributions on the Participant's behalf which would otherwise be used
to pay the premiums for said Policy shall thereafter be credited to the
Participant's Account.
7.5 RIGHTS UNDER POLICIES. Each policy shall provide that the Trustee shall
have the right to receive any of all payments that may be due during the
Participant's lifetime. Any death benefit shall be payable directly to
the Beneficiary named in the policy and the Participant shall have the
right, either directly or through the Trustee, to change the Beneficiary
from time to time and to elect settlement options under the policy for
the benefit of the Beneficiary. The Trustee shall have the right to
exercise all other options and privileges contained in the policy and
shall exercise such rights and privileges in a manner consistent with
the terms of the Plan.
7.6 LOANS. No loans shall be made against any of the policies hereunder
either from the Insurance Company or any other source unless such loans
are made in order to pay amounts then due as premiums thereon.
7.7 CONDITIONS OF COVERAGE. Except as may be otherwise provided in any
conditional or binding receipt issued by the Insurance Company, there
shall be no coverage and no death benefit payable under any policy to be
purchased from the Insurance Company until such policy shall have been
delivered and the premium therefor shall have been paid to the Insurance
Company as a premium for that policy. Neither the Employer nor the
Trustee shall have any responsibility as to the effectiveness of any
Life Insurance Policy purchased from the Insurance Company hereunder nor
be under any liability or obligation to pay any amount to any
Participant or his Beneficiary by reason of any failure or refusal by
the Insurance Company to make such payment.
7.8 POLICY NOT YET IN FORCE. If at the death of any Participant, the Trustee
shall be holding any amount intended for the purchase of any Life
Insurance Policy on the Participant's life, but coverage under such
policy shall not yet be in force, the Trustee shall credit such amount
to the Participant's Account to be disposed of as a portion thereof.
7.9 VALUE OF POLICY. The value of any policy on the life of a living
Participant for any purpose under this Plan shall be that amount which
the Insurance Company would pay upon surrender of such policy in
accordance with its usual rules and practices.
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7.10 DIVIDENDS. If dividends are allowed on any Life Insurance Policy, they
shall be used to provide additional benefits under the policy.
7.11 No life insurance protection shall continue in force under the Plan
subsequent to a Participant's retirement or Termination of Employment,
whichever occurs first. As of such date, any Life Insurance Policy shall
be distributed to the Participant in accordance with its terms and the
terms of Section 8.3.
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ARTICLE VIII
DISTRIBUTION OF BENEFITS
8.1 PAYMENT OF BENEFITS. The rules and procedures for electing the timing
and form of distribution effective for each Participant or Beneficiary
shall be formulated and administered by the Plan Administrator in a
consistent manner for all Participants in similar circumstances. The
distribution shall normally be made in the form of an Annuity.
Each Participant may elect a distribution in the form of cash or a
combination of cash and Annuity. All distributions are subject to the
provisions of Article DC, joint and Survivor Annuity Requirements.
If the Participant's Vested Interest exceeds (or at the time of any
prior distribution exceeded) $3500, and such amount is immediately
distributable, the Participant and the Participant's Spouse (or where
either the Participant or the Spouse has died, the survivor) must
consent to any distribution of such account balance. The consent of the
Participant and the Participant's Spouse shall be obtained in writing
within the 90-day period ending on the annuity starting date. The
annuity starting date is the first day of the first period for which an
amount is paid as an annuity or any other form. The Plan Administrator
shall notify the Participant and the Participant's Spouse of the right
to defer any distribution until the Participant's account balance is no
longer immediately distributable. Such notification shall include a
general description of the material features, and an explanation of the
relative values of, the optional forms of benefit available under the
Plan in a manner that would satisfy the notice requirements of section
417(a)(3) of the Code, and shall be provided no less than 30 days and no
more than 90 days prior to the annuity starting date.
Notwithstanding the foregoing, only the Participant need consent to the
commencement of a distribution in the form of a Qualified joint and
Survivor Annuity while the account balance is immediately distributable.
(Furthermore, if payment in the form of a Qualified joint and Survivor
Annuity is not required with respect to the Participant pursuant to
section 9.6 of the Plan, only the Participant need consent to the
distribution of an account balance that is immediately distributable.)
Neither the consent of the Participant nor the Participant's Spouse
shall be required to the extent that a distribution is required to
satisfy section 401(a)(9) or section 415 of the Code. In addition, upon
termination of this Plan if the Plan does not offer an annuity option
(purchased from a commercial provider) and if the Employer or any entity
within the same controlled group as the Employer does not maintain
another defined contribution plan (other than an employee stock
ownership plan as defined in section 4975(e)(7) of the Code), the
Participant's account balance will, without the Participant's consent,
be distributed to the Participant. However, if any entity within the
same controlled group as the Employer maintains another defined
contribution plan (other than an employee stock ownership plan as
defined in section 4975(e)(7) of the Code then the Participant's account
balance will be transferred, without the Participant's consent, to the
other plan if the Participant does not consent to an immediate
distribution.
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For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first
Plan Year beginning after December 31, 1988, the Participant's vested
account balance shall not include amounts attributable to accumulated
deductible employee contributions within the meaning of section
72(o)(5)(B) of the Code.
The terms of any annuity contract purchased and distributed by the Plan
to a Participant or Spouse shall comply with the requirements of this
Plan.
An account balance is considered immediately distributable if any part
of the account balance could be distributed to the Participant (or
Surviving Spouse) before the Participant attains or would have attained
if not deceased) the later of Normal Retirement Age or age 62.
8.2 COMMENCEMENT OF BENEFITS. Unless the Participant elects otherwise,
distribution of benefits will begin no later than the 60th day after the
latest of the close of the Plan Year in which:
(a) the Participant attains age 65 (or Normal Retirement Age, if
earlier);
(b) the 10th anniversary of the year in which the Participant commenced
participation in the Plan occurs; or,
(c) the Participant terminates service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and Spouse
to consent to a distribution while a benefit is immediately
distributable, within the meaning of Section 8.1 of the Plan, shall be
deemed to be an election to defer commencement of payment of any benefit
sufficient to satisfy this section.
However, in no event shall distribution of that portion of a
Participant's Account attributable to Elective Deferral Contributions,
Qualified Matching Contributions, and/or Qualified Nonelective
Contributions, be made prior to the earliest of the Participant's
Retirement, death, Disability, Serious Financial Hardship, Termination
of Employment or attainment of age 59-1/2, unless such distribution is
made on account of
(a) The Employer's sale of its interest in a subsidiary and the
Participant continues employment with the subsidiary; or
(b) The Employer's sale of substantially all assets used in its trade
or business and the Participant continues employment with the
employer acquiring such assets or
(c) The termination of the Plan, as provided in Section XVII, without
the establishment of a successor defined contribution plan pursuant
to section 401 (k) (10) (A) (i) of the Code, within the same Plan
Year.
8.3 FROM LIFE INSURANCE POLICIES. The Trustee shall arrange with the
Insurance Company any distribution due to any Participant during his
lifetime from any Life Insurance Policy or Policies on his life. The
manner of distribution shall be a transfer of the values of said Policy
or Policies to the Participant's Account for distribution as a portion
thereof in accordance with this Article.
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Subject to Article IX, joint and Survivor Annuity Requirements, the
contracts on a Participant's life will be converted to cash or an
annuity or distributed to the Participant upon commencement of benefits.
In the event of any conflict between the terms of this Plan and the
terms of any insurance contract purchased hereunder, the Plan provisions
shall control.
8.4 DISTRIBUTION REQUIREMENTS.
(a) Except as otherwise provided in Article IX, joint and Survivor
Annuity Requirements, the requirements of Sections 8.4, 8.6, 8.7
and 8.8 shall apply to any distribution of a Participant's Accrued
Benefit and will take precedence over any inconsistent provisions
of this Plan. Unless otherwise specified, the provisions of this
section apply to calendar years beginning after December 31, 1984.
(b) All distributions required under this Article shall be determined
and made in accordance with the Income Tax Regulations under
section 401(a)(9), including the minimum distribution incidental
benefit requirement of section 1.401(a)(9)-2 of the regulations.
The entire interest of a Participant must be distributed or begin
to be distributed no later than the Participant's required
beginning date.
(c) Limits on Settlement Options. Distributions, if not made in a lump
sum, may only be made over one of the following periods:
(1) the life of the Participant,
(2) the life of the Participant and a designated beneficiary,
(3) a period certain not extending beyond the life expectancy of the
Participant, or
(4) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a designated
beneficiary.
(d) Minimum Amounts to be Distributed.
(1) If the Participant's entire interest is to be distributed over
(1) a period not extending beyond the life expectancy of the
Participant or the joint life and last survivor expectancy of
the Participant and the Participant's designated beneficiary or
(2) a period not extending beyond the life expectancy of the
designated beneficiary, the amount required to be distributed
for each calendar year, beginning with distributions for the
first distribution calendar year, must at least equal the
quotient obtained by dividing the Participant's benefit by the
applicable life expectancy.
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(2) For calendar years beginning before January 1, 1989, if the
Participant's Spouse is not the designated beneficiary, the
method of distribution selected must assure that at least 50%
of the present value of the amount available for distribution
is paid within the life expectancy of the Participant.
(3) For calendar years beginning after December 31, 1988, the
amount to be distributed each year, beginning with
distributions for the first distribution calendar year shall
not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the applicable life
expectancy or (2) if the Participant's Spouse is not the
designated beneficiary, the applicable divisor determined from
the table set forth in Q&A-4 of section 1.401 (a) (9)-2 of the
Income Tax Regulations. Distributions after the death of the
Participant shall be distributed using the applicable life
expectancy in section 8.4 (d)(i) above as the relevant divisor.
without regard to regulations section 1.401(a)(9)-2.
(4) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the
Participant's required beginning date. The minimum distribution
for other calendar years, including the minimum distribution
for the distribution calendar year in which the Employee's
required beginning date occurs, must be made on or before
December 31 of that distribution calendar year.- - - -
(e) Other Forms. If the Participant's benefit is distributed in the
form of an annuity purchased from an insurance company,
distributions thereunder shall be made in accordance with the
requirements of section 401 (a) (9) of the Code and the regulations
thereunder.
8.5 NONTRANSFERABLE. Any annuity contract distributed herefrom must be
nontransferable.
8.6 DEATH DISTRIBUTION PROVISIONS. Upon the death of the Participant, the
following distribution provisions shall take effect:
(a) If the Participant dies after distribution of his interest has
begun, the remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of distribution
being used prior to the Participant's death.
(b) If the Participant dies before distribution of his interest begins,
distribution of the Participant's entire interest shall be
completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death except to the extent that an
election is made to receive distributions in accordance with (1) or
(2) below:
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(1) If any portion of the Participant's interest is payable to a
designated Beneficiary, distributions may be made over the life
expectancy of the Designated Beneficiary commencing on or
before December 31 of the calendar year immediately following
the calendar year in which the Participant died;
(2) If the designated Beneficiary is the Participant's Surviving
Spouse, the date distributions are required to begin in
accordance with (1) above shall not be earlier than the later
of (i) December 31 of the calendar year immediately following
the calendar year in which the Participant died and (ii)
December 31 of the calendar year in which the Participant would
have attained age 70-1/2.
If the Participant has not made an election pursuant to this
Section 8.6(b) by the time of his or her death, the Participant's
Designated Beneficiary must elect the method of distribution no
later than the earlier of (1) December 31 of the calendar year in
which distributions would be required to begin under this section,
or (2) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Participant. If the
Participant has no Designated Beneficiary, or if the designated
beneficiary does not elect a method of distribution, distribution
of the Participant's entire interest must be completed by December
31 of the calendar year containing the fifth anniversary of the
Participant's death.
(c) For purposes of Section 8.6(b), if the Surviving Spouse dies after
the Participant, b ut before payments to such Spouse begin, the
provisions of this Section, with the exception of paragraph (b)(2)
therein, shall be applied as if the Surviving Spouse were the
Participant.
(d) For purposes of this Section, any amount paid to a child of the
Participant will be treated as if it had been paid to the Surviving
Spouse if the amount becomes payable to the Surviving Spouse when
the child reaches the age of majority.
(e) For purposes of this Section, distribution of a Participant's
interest pursuant to Section 8.6(b) is considered to begin on the
Participant's required beginning date (or, if paragraph (c) above
is applicable, the date distribution is required to begin to the
Surviving Spouse). If distribution in the form of an Annuity
irrevocably commences to the Participant before the required
beginning date, the date distribution is considered to begin is the
date distribution actually commences.
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8.7 DEFINITIONS.
(a) Applicable Life Expectancy. The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the
Participant (or Designated Beneficiary) as of the Participant's (or
Designated Beneficiary's) birthday in the applicable calendar year
reduced by one for each calendar year which has elapsed since the
date life expectancy was first calculated. If life expectancy is
being recalculated, the applicable life expectancy shall be the
life expectancy so recalculated. The applicable calendar year shall
be the first distribution calendar year, and if life expectancy is
being recalculated such succeeding calendar year.
(b) Designated Beneficiary. The individual who is designated as the
beneficiary under the Plan in accordance with section 401 (a) (9)
and the regulations thereunder.
(c) Distribution Calendar Year. A calendar year for which a minimum
distribution is required. For distributions beginning before the
Participant's death, the first distribution calendar year is which
the calendar year immediately preceding the calendar year which
contains the Participant's required beginning date. For
distributions beginning after the Participant's death, the first
distribution calendar year is the calendar year in which
distributions are required to begin pursuant to Section 8.6 above.
(d) Life Expectancy. Life expectancy and-joint and last survivor
expectancy are computed by use of the expected return multiples in
Table V and VI of section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Participant (or Spouse, in the case
of distributions described in Section 8.6(b) (2) by the time
distributions are required to begin,) life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Participant (or Spouse) and shall apply to all subsequent years.
The life expectancy of a non-spouse Beneficiary may not be
recalculated.
(e) Participant's Benefit.
(1) The account balance as of the last valuation date in the
calendar year immediately preceding the distribution calendar
year (valuation calendar year) increased by the amount of any
contributions or Forfeitures allocated to the account balance
as of dates in the valuation calendar year after the valuation
date and decreased by distributions made in the valuation
calendar year after the valuation date.
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(2) Exception for second distribution calendar year. For purposes
of paragraph (i) above, if any portion of the minimum
distribution for the first distribution calendar year is made
in the second distribution calendar year on or before the
required beginning date, the amount of the minimum distribution
made in the second distribution calendar year shall be treated
as if it had been made in the immediately preceding
distribution calendar year.
(f) Required Beginning Date.
(1) General Rule. The first required beginning date of a
Participant is the first day of April of the calendar year
following the calendar year in which the Participant attains
age 70-1/2.
(2) Transitional Rules. The required beginning date of a
Participant who attains age 70-1/2 before January 1, 1988,
shall be determined in accordance with (A) or (B) below:
(A) Non-5-Percent Owners. The required beginning date of a
Participant who is not a 5-percent owner is the first day
of April of the calendar year following the calendar year
in which the later of retirement or attainment of age
70-1/2 occurs.
(B) 5-Percent Owners. The required beginning date of a
Participant who is a 5-percent owner during any year
beginning after December 31, 1979, is the first day of
April following the later of-
(i) the calendar year in which the Participant attains
age 70-1/2, or
(ii) the earlier of the calendar year with or within
which ends the Plan Year in which the Participant
becomes a 5-percent owner, or the calendar year in
which the Participant retires.
The Required Beginning Date of a Participant who is not a
5 -percent owner who attains age. 70-1/2 during 1988 and
who has not retired as of January 1, 1989, is April 1,
1990.
(3) 5-Percent Owner. A Participant is treated as a 5-percent owner
for purposes of this section if such Participant is a 5-percent
owner as defined in section 416(i) of the Code (determined in
accordance with section 416 but without regard to whether the
plan is Top-Heavy) at any time during the Plan Year ending with
or within the calendar year in which such owner attains age
66-1/2 or any subsequent plan year.
(4) Once distributions have begun to a 5-percent owner under this
section, they must continue to be distributed, even if the
Participant ceases to be a 5-percent owner in a subsequent
year.
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8.8 TRANSITIONAL RULE.
(a) Notwithstanding the other requirements of this Article and subject
to the requirements of Article DC, joint and Survivor Annuity
Requirements, distribution on behalf of any employee, including a
5-percent owner, may be made in accordance with all of the
following requirements (regardless of when such distribution
commences):
(1) The distribution by the Plan is one which would not have
disqualified such Plan under section 401(a)(9) of the Code as
in effect prior to amendment by the Deficit Reduction Act of
1984.
(2) The distribution is in accordance with a method of distribution
designated by the Employee whose interest in the Trust is being
distributed or, if the Employee is deceased, by a Beneficiary
of such Employee.
(3) Such designation was in writing, was signed by the Employee or
the Beneficiary, and was made before January 1, 1984.
(4) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(5) The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made, and
in the case of any distribution upon the Employee's death, the
Beneficiaries of the Employee listed in order of priority.
(b) A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the
required information described above with respect to the
distribution to be made upon the death of the Employee.
(c) For any distribution which commences before January 1, 1984, but
continues after December 31, 1983, the Employee, or the
Beneficiary, to whom such distribution is being made, will be
presumed to have designated the method of distribution under which
the distribution is being made if the method of distribution was
specified in writing and the distribution satisfies the
requirements in subsections (a) (1) and (5).
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(d) If a designation is revoked, any subsequent distribution must
satisfy the requirements of section 401(a)(9) of the Code and the
regulations thereunder. If a designation is revoked subsequent to
the date distributions are required to begin, the Plan must
distribute by the end of the calendar year following the calendar
year in which the revocation occurs the total amount not yet
distributed which would have been required to have been distributed
to satisfy section 401 (a) (9) of the Code and the regulations
thereunder, but for the section 242(b)(2) election. For calendar
years beginning after December 31, 1988, such distributions must
meet the minimum distribution incidental benefit requirements in
section 1.401 (a) (9)-2 of the Income Tax Regulations. Any changes
in the designation will be considered to be a revocation of the
designation. However, the mere substitution or addition of another
Beneficiary (one not named in the designation) under the
designation will not be considered to be a revocation of the
designation, so long as such substitution or addition does not
alter the period over which distributions are to be made under the
designation, directly or indirectly (for example, by altering the
relevant measuring life). In the case in which an amount is
transferred or rolled from one plan to another plan, the rules in
Q&AJ-2 and Q&AJ-3 shall apply.
8.9 ALTERNATE PAYEE SPECIAL DISTRIBUTION. Distributions pursuant to Section
19.6 may be made without regard to the age or employment status of the
Participant.
8.10 DIRECT ROLLOVERS.
(a) This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary
that would otherwise limit a Distributee's election under this
Section, a Distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct Rollover,
except as otherwise provided by the Employer's administrative
procedures as permitted by regulations. In addition, a
Distributee's election of a Direct Rollover shall be subject to the
following requirements:
(1) If the Distributee elects to have only a portion of an Eligible
Rollover Distribution paid to an Eligible Retirement Plan in a
Direct Rollover, that portion must be equal to at least $500.
(2) If the entire amount of a Distributee's Eligible Rollover
Distribution is $500 or less, the distribution may not be
divided. Instead, the entire amount must either be paid to the
Distributee or to an Eligible Retirement Plan in a Direct
Rollover.
(3) A Distributee may not elect a Direct Rollover if the
Distributee's Eligible Rollover Distributions during a year are
reasonably expected by the Plan Administrator to total less
than $200 (or any lower minimum amount specified by the Plan
Administrator).
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(4) A Distributee may not elect a Direct Rollover of an Offset
Amount.
(5) A Distributee's election to make or not make a Direct Rollover
with respect to one payment in a series of periodic payments
shall apply to all subsequent payments in the series, except
that a Distributee shall be permitted at any time to change,
with respect to subsequent payments in the series of periodic
payments, a previous election to make or not make a Direct
Rollover. A change of election shall be accomplished by the
Distributee notifying the Plan Administrator of the change.
Such notice must be in the form and manner prescribed by the
Plan Administrator.
(b) Definitions.
(1) Direct Rollover: A Direct Rollover is a payment by the plan to
the Eligible Retirement Plan specified by the Distributee.
(2) Distributee: A Distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse
who is the alternate payee under a qualified domestic relations
order, as defined in section 414(p) of the Code, are
Distributees with regard to the interest of the spouse or
former spouse.
(3) Eligible Retirement Plan: An Eligible Retirement Plan is an
individual retirement account described in section 408(a) of
the code, an individual retirement annuity described in section
408(b) of the Code, an annuity plan described in section 403(a)
of the Code, or a qualified trust described in section 401 (a)
of the Code, that accepts the Distributee's Eligible Rollover
Distribution. However, in the case of an Eligible Rollover
Distribution to the surviving spouse, an Eligible Retirement
Plan is an individual retirement account or an individual
retirement annuity.
(4) Eligible Rollover Distribution: An Eligible Rollover
Distribution is any distribution of all or any portion of the
balance to the credit of the Distributee, except that an
Eligible Rollover Distribution does not include: any
distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the
Distributee's designated beneficiary, or for a specified period
of ten years or more; any distribution to the extent such
distribution is required under section 401 (a) (9) of the Code;
and the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer
securities).
(5) Offset Amount: An Offset Amount is the amount by which a
Participant's Account is reduced to repay a loan from the Plan
(including the enforcement of the Plan's security interest in
the Participant's Account).
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ARTICLE IX
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
9.1 Except as provided with respect to certain plans in Section 9.6, the
provisions of this Article shall apply to any Participant who is
credited with at least one Hour of Service with the Employer on or after
August 23, 1984, and such other Participants as provided in Section 9.7.
9.2 QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless an optional form of benefit
is selected pursuant to a Qualified Election within the 90-day period
ending on the Annuity Starting Date, a married Participant's Vested
Account Balance will be paid in the form of a Qualified Joint and
Survivor Annuity and an unmarried Participant's vested account balance
will be paid in the form of a life Annuity. The Participant may elect to
have such Annuity distributed upon attainment of the Earliest Retirement
Age under the Plan.
9.3 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. Unless an optional form of
benefit has been selected within the Election Period pursuant to a
qualified election, if a Participant dies before the Annuity Starting
Date then no less than 50 percent (or 100 percent if so elected in the
Adoption Agreement) of the Participant's Vested Account Balance shall be
applied toward the purchase of an Annuity for the life of the Surviving
Spouse. If less than 100 percent is selected, then the remaining portion
of the account balance shall be paid to the Participant's Beneficiary.
To the extent less than 100 percent of the account balance is paid to
the Surviving Spouse, the amount of Employee Contributions allocated to
the Surviving Spouse will be in the same proportion as the Employee
Contributions bears to the total account balance of the Participant. The
Surviving Spouse may elect to have such Annuity distributed within a
reasonable period after the Participant's death.
9.4 DEFINITIONS. The following definitions shall apply to this Article IX.
(a) Election Period: The period which begins on the first day of the
Plan Year in which the Participant attains age 35 and ends on the
date of the Participant's death. If a Participant separates from
service prior to the first day of the Plan Year in which age 35 is
attained, with respect to the account balance as of the date of
separation, the election period shall begin on the date of
separation.
Pre-age 35 waiver: A Participant who will not yet attain age 35 as
of the end of any current Plan Year may make a special Qualified
Election to waive the Qualified Preretirement Survivor Annuity for
the period beginning on the date of such election and ending on the
first day of the Plan Year in which the Participant will attain age
35. Such election shall not be valid unless the Participant
receives a written explanation of the Qualified Preretirement
Survivor Annuity in such terms as are comparable to the explanation
required under section 9.5(a). Qualified Preretirement Survivor
coverage will be automatically reinstated as of the first day of
the Plan Year in which the Participant attains age 35. Any new
waiver on or after such date shall be subject to the full
requirements of this Article.
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(b) Earliest Retirement Age: The earliest date on which, under the
Plan, the Participant could elect to receive retirement benefits.
(c) Qualified Election: A waiver of a Qualified Joint and Survivor
Annuity or a Qualified Preretirement Survivor Annuity. Any waiver
of a Qualified joint and Survivor Annuity or a Qualified
Preretirement Survivor Annuity shall not be effective unless: (a)
the Participant's Spouse consents in writing to the election; (b)
the election designates a specific Beneficiary, including any class
of beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the Spouse expressly permits
designations by the Participant without any further spousal
consent); (c) the Spouse's consent acknowledges the effect of the
election; and (d) the Spouse's consent is witnessed by a Plan
representative or notary public.
Additionally, a Participant's waiver of the Qualified Joint and
Survivor Annuity shall not be effective unless the election
designates a form of benefit payment which may not be changed
without spousal consent (or the Spouse expressly permits
designations by the Participant without any further spousal
consent). If it is established to the satisfaction of a Plan
representative that there is no Spouse or that the Spouse cannot be
located, a waiver will be deemed a Qualified Election.
Any consent by a Spouse obtained under this provision (or
establishment that the consent of a Spouse may not be obtained)
shall be effective only with respect to such Spouse. A consent that
permits designations by the Participant without any requirement of
further consent by such Spouse must acknowledge that the Spouse has
the right to limit consent to a specific Beneficiary, and a
specific form of benefit where applicable, and that the Spouse
voluntarily elects to relinquish either or both of such rights. A
revocation of a prior waiver may be made by a Participant without
the consent of the Spouse at any time before the commencement of
benefits. The number of revocations shall not be limited. No
consent obtained under this provision shall be valid unless the
Participant has received notice as provided in Section 9.5 below.
(d) Qualified Joint and Survivor Annuity: An immediate Annuity for the
life of the Participant with a survivor Annuity for the life of the
Spouse which is not less than 50 percent and not more than 100
percent of the amount of the Annuity which is payable during the
joint lives of the Participant and the Spouse and which is the
amount of benefit which can be purchased with the Participant's
Vested Account Balance. The percentage of the survivor annuity
under the Plan shall be 50 percent (unless a different percentage
is elected by the Employer in the Adoption Agreement).
(e) Spouse (Surviving Spouse): The Spouse or Surviving Spouse of the
Participant, provided that a former spouse will be treated as the
Spouse or Surviving Spouse to the extent provided under a qualified
domestic relations order as described in section 414(p) of the
Code.
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(f) Annuity Starting Date: The first day of the first period for which
an amount is paid as an Annuity or any other form.
(g) Vested Account Balance: The aggregate value of the Participant's
vested account balances derived from contributions made by both the
Participant and Employer, including the proceeds of insurance
contracts, if any, on the Participant's life and Rollover
Contributions. The provisions of this Article shall apply to a
Participant who is vested in amounts attributable contributions
made under this Plan at the time of death or distribution.
9.5 NOTICE REQUIREMENTS.
(a) In the case of a Qualified Joint and Survivor Annuity, the Plan
Administrator shall no less than 30 days and no more than 90 days
prior to the Annuity Starting Date provide each Participant with a
written explanation of: (i) the terms and conditions of a Qualified
Joint and Survivor Annuity; (ii) the Participant's right to make
and the effect of an election to waive the Qualified Joint and
Survivor Annuity form of benefit; (iii) the rights of a
Participant's Spouse; and (iv) the right to make, and the effect
of, a revocation of a previous election to waive the Qualified
Joint and Survivor Annuity.
(b) In the case of a Qualified Preretirement Survivor Annuity, the Plan
Administrator shall provide each Participant within the applicable
period for such Participant a written explanation of the Qualified
Preretirement Survivor Annuity in such terms and in such manner as
would be comparable to the explanation provided for meeting the
requirements of Section 9.5(a) applicable to a Qualified Joint and
Survivor Annuity.
(c) The applicable period for a Participant is whichever of the
following periods ends last: (i) the period beginning with the
first day of the Plan Year in which the Participant attains age 32
and ending with the close of the Plan Year preceding the Plan Year
in which the Participant attains age 35; (ii) a reasonable period
ending after the individual becomes a Participant; (iii) a
reasonable period ending after the Qualified joint and Survivor
Annuity is no longer fully subsidized; (iv) a reasonable period
ending after this Article first applies to the Participant.
Notwithstanding the foregoing, notice must be provided within a
reasonable period ending after separation from service before
attaining age 35.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (ii), (iii)
and (iv) is the end of the two-year period beginning one year prior
to the date the applicable event occurs, and ending one year after
that date. In the case of a Participant who separates from service
before the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning one year prior to
separation and ending one year after separation. If such a
Participant thereafter returns to employment with the Employer, the
applicable period for such Participant shall be redetermined.
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(d) The Surviving Spouse may elect to have distribution of the vested
account balance commence within the 90-day period following the
date of the Participant's death. The account balance shall be
adjusted for gains or losses occurring after the Participant's
death in accordance with the provisions of the Plan governing the
adjustment of account balances for other types of distributions.
9.6 SAFE HARBOR RULES.
(a) This section shall apply to a Participant in a profit sharing plan,
and to any distribution, made on or after December 31, 1988, from
or under a separate account attributable solely to accumulated
deductible employee contributions, as defined in section
72(o)(5)(B) of the Code, and maintained on behalf of a Participant
in a money purchase pension plan (including a target benefit plan),
if the following conditions are met: (1) the Participant does not
or cannot elect payments in the form of a life annuity; and (2)
with respect to a Participant in a profit sharing plan, the plan is
not a direct or indirect transferee of a defined benefit plan,
money purchase pension, target benefit plan, or a stock bonus or
profit sharing plan which is subject to the survivor annuity
requirements of section 401(a)(11) and section 417 of the Code with
respect to that Participant.
(b) On the death of a Participant, the Participant's vested account
balance will be paid to the Participant's surviving spouse, but if
there is no SURVIVING spouse, or if the surviving spouse has
consented in a manner conforming to a Qualified Election, then to
the Participant's designated Beneficiary. The surviving spouse may
elect to have distribution of the vested account balance commence
within the 90-day period following the date of the Participant's
death. The account balance shall be adjusted for gains or losses
occurring after the Participant's death in accordance with the
provisions of the Plan governing the adjustment of account balances
for other types of distributions.
(c) The Participant may waive the spousal death benefit described in
this Section 9.6 at any time provided that no such waiver shall be
effective unless IT satisfies the conditions of Section 9.4(c)
(other than the notification requirement referred to therein) 'that
would apply to the Participant's waiver of the Qualified
Preretirement Survivor Annuity.
(d) If this Section 9.6 is operative, then the provisions of this
Article, other than Section 9.7, shall be inoperative.
(e) For purposes of this Section 9.6, vested account balance shall
mean, in the case of a money purchase pension plan or a target
benefit plan, the Participant's separate account balance
attributable solely to accumulated deductible employee
contributions within the meaning of section 72(o)(5)(B) of the
Code. In the case of a profit sharing plan, vested account balance
shall have the same meaning as provided in Section 9-4(g).
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9.7 TRANSITIONAL RULES.
(a) Any living Participant not receiving benefits on August 23, 1984,
who would otherwise not receive the benefits prescribed by the
previous sections of this Article must be given the opportunity to
elect to have the prior sections of this Article apply if such
Participant is credited with at least one Hour of Service under
this Plan or a predecessor plan in a Plan Year beginning on or
after January 1, 1976, and such Participant had at least 10 years
of vesting service when he separated from Service.
(b) Any living Participant not receiving benefits on August 23, 1984,
who was credited with at least one Hour of Service under this Plan
or a predecessor plan on or after September 2, 1974, and who is not
otherwise credited with any Service in A Plan Year beginning on or
after January 1, 1976, must be given the opportunity to have his
benefits paid in accordance with Section 9.7(d).
(c) The respective opportunities to elect (as described in Sections
9.7(a) and 9.7(b) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and
ending on the date benefits would otherwise commence to said
Participants.
(d) Any Participant who has elected pursuant to Section 9.7(b) of this
Article and any Participant who does not elect under Section 9.7(a)
or who meets the requirements of Section 9.7(a) except that such
Participant does not have at least 10 years of vesting service when
he separates from service, shall have his benefits distributed in
accordance with all of the following requirements if benefits would
have been payable in the form of a life Annuity:
(1) Automatic joint and Survivor Annuity. If benefits in the form
of a life Annuity become payable to a married Participant who:
(A) begins to receive payments under the Plan on or after
Normal Retirement Age; or
(B) dies on or after Normal Retirement Age while still working
for the Employer; or
(C) begins to receive payments on or after the qualified early
retirement age; or
(D) separates from Service on or after attaining Normal
Retirement Age (or the qualified early retirement age) and
after satisfying the eligibility requirements for the
payment of benefits under the Plan and thereafter dies
before beginning to receive such benefits;
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then such benefits will be received under this Plan in the form
of a Qualified Joint and Survivor Annuity, unless the
Participant has elected otherwise during the Election Period.
The Election Period must begin at least 6 months before the
Participant attains qualified early retirement age and end not
more than 90 days before the commencement of benefits. Any
election hereunder will be in writing and may be changed by the
Participant at any time.
(2) Election of early survivor annuity. A Participant who is
employed after attaining the qualified early retirement age
will be given the opportunity to elect, during the Election
Period, to have a survivor Annuity payable on death. If the
Participant elects the survivor Annuity, payments under such
Annuity must not be less than the payments which would have
been made to the Spouse under the Qualified Joint and Survivor
Annuity if the Participant had retired on the day before his or
her death. Any election under this provision will be in writing
and may be changed by the Participant at any time. The Election
Period begins on the later of (1) the 90th day before the
Participant attains the qualified early retirement age, or (2)
the date on which participation begins, and ends on the date
the Participant terminates employment.
(3) For purposes of this Section 9.7(d):
(A) Qualified early retirement age is the latest of:
(i) the earliest date, under the Plan, on which the
Participant may elect to receive retirement
benefits,
(ii) the first day of the 120th month beginning before
the Participant reaches Normal Retirement Age, or
(iii) the date the Participant begins participation.
(B) Qualified Joint and Survivor Annuity is an Annuity for the
life of the Participant with a survivor Annuity for the
life of the Spouse as described in Section 9.4(d).
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ARTICLE X
TERMINATION OF EMPLOYMENT
10.1 DISTRIBUTION. A Participant who terminates employment shall be entitled
to receive a distribution of his entire Vested Interest. Such
distribution shall be further subject to the terms and conditions of
Article DC.
(a) 1-Year Break-in-Service (Cash-Out Method).
The following section (a) shall apply in determining when the
non-vested portion of a Participant's Account becomes a Forfeiture,
unless the provisions of section (b) have been specified by the
Employer in its Adoption Agreement.
If at the time of his Termination of Employment the Participant is
not 100% vested and does not take a distribution from the portion
of his Vested Interest that is attributable to contributions made
by the Employer, the non-vested portion of his Participant's
Account shall be placed in a separate account and will become a
Forfeiture upon the date such terminated Participant incurs 5
consecutive 1-Year Breaks-in-Service.
However, if at the time of his Termination of Employment the
Participant is not 100% vested and does take a distribution from
the portion of his Vested Interest that is attributable to
contributions made by the Employer, or if the Participant is 0%
vested, the non-vested portion of his Participant's Account shall
be placed in a separate account and will become a Forfeiture upon
the date such terminated Participant incurs a 1-Year
Break-in-Service.
If a terminated Participant, whose separate account became a
Forfeiture in accordance with the terms of the preceding paragraph,
is later rehired by the Employer and re-enrolls in the Plan before
incurring 5 consecutive 1-Year Breaks-in-Service, then the amount
of the Forfeiture shall be restored by the Employer.
In addition, such rehired Participant shall be entitled to repay
the distribution that was made at his Termination of Employment
attributable to contributions made by the Employer. Such repayment
must be made before the Participant has incurred 5 consecutive
1-Year Breaks-in-Service following the date he received the
distribution or 5 years after the Participant is reemployed by the
Employer, whichever date is earlier.
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Until the time a reemployed Participant repays the distribution
made at his Termination of Employment in accordance with the
preceding terms of this Section, or if the Participant does not
repay such distribution or had not taken a distribution, the
Participant's vested or nonforfeitable portion of the separate
account established in accordance with this Section shall, at any
relevant time, be equal to an amount determined by the following
formula:
X = P[AB+(R x D)] - (R x D)
For the purposes of applying this formula:
P = The Participant's Vesting Percentage at the relevant time.
AB= The account balance at the relevant time.
R = The ratio of the account balance at the relevant time to the
account balance after the distribution.
D = The amount of the distribution.
(b) 5 Consecutive 1-Year Breaks-in-Service.
As of a Participant's Termination of Employment, he shall be
entitled to receive a distribution of his entire Vested Interest.
Such distribution shall be further subject to the terms and
conditions of Article IX.
If at the time of his Termination of Employment the Participant is
not 100% vested, the non-vested portion of his Participant's
Account shall be placed in a separate account and will become a
Forfeiture upon the date the terminated Participant incurs 5
consecutive 1-Year Breaks-in-Service.
If a terminated Participant is later rehired by the Employer and
re-enrolls in the Plan prior to incurring 5 consecutive 1-Year
Breaks-in-Service, his vested or nonforfeitable portion of this
separate account shall, at any relevant time, be equal to an amount
("X") determined by the following formula:
X = P [AB + (R x D)] - (R x D)
For the purposes of applying this formula:
P = The Participant's Vesting Percentage at the relevant time.
AB= The account balance at the relevant time.
R = The ratio of the account balance at the relevant time to the
account balance after the distribution.
D = The amount of the distribution.
10.2 LIFE INSURANCE POLICY. If all or any portion of the value of any Life
Insurance Policy on the Participant's life will become a Forfeiture, the
Participant shall have the right to buy such Policy from the Trustee for
the then value of such Policy less the value of any Vested Interest
therein, within 30 days after written notice from the Trustee is mailed
to his last known address.
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10.3 NO FURTHER RIGHTS OR INTEREST. A Participant shall have no further
interest in or any rights to any portion of his Participant's Account
that becomes a Forfeiture due to his Termination of Employment once the
Participant incurs 5 consecutive 1-Year Breaks-in-Service in accordance
with Section 2.4.
10.4 FORFEITURE. Any Forfeiture arising in accordance with the provisions of
Section 10.1 shall be treated as follows:
Any amount of Forfeitures shall be used in accordance with (a) or (b)
below, in the manner set forth in Article IV.
(a) Reallocation. Forfeitures shall be allocated in accordance with the
allocation formula of the Plan.
(b) Employer Credit. Forfeitures shall be used by the Employer to
reduce and in lieu of the Employer contribution next due under
Article IV, or to pay Plan expenses, at the earliest opportunity
after such Forfeiture becomes available.
Notwithstanding anything to the contrary, if Forfeitures are generated
upon the occurrence of a 1-Year Break-in- Service, and if a former
Participant returned to employment with the Employer after the
occurrence of a 1-Year Break-in-Service and prior to the occurrence of 5
consecutive 1-Year Breaks-in-Service Forfeitures, if any, will first be
used to make whole the nonvested account of the Participant, equal to
the value of the nonvested account at the time the Participant
terminated Service with the Employer. In the event that the available
Forfeitures are not sufficient to make whole the nonvested account, the
Employer will make an additional contribution sufficient to make the
nonvested account whole.
10.5 If a benefit is forfeited because the Participant or Beneficiary cannot
be found, such benefit will be reinstated if a claim is made by the
Participant or Beneficiary.
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ARTICLE la
WITHDRAWALS
11.1 WITHDRAWAL-EMPLOYEE CONTRIBUTIONS.
(a) Required Employee Contributions. If the Employer has elected in its
Adoption Agreement to allow for a withdrawal of Required Employee
Contributions and earnings thereon, then a Participant may elect to
withdraw from his Participant's Account an amount equal to a
percentage of Required Employee Contributions. On the date the
election becomes effective, the Participant shall be suspended from
making any further contributions to the Plan, and from having' any
Matching Contributions made on his behalf for a period, as elected
by the Employer in its Adoption Agreement.
(b) Voluntary Employee Contributions. If the Employer has elected in
ITS Adoption Agreement to allow for withdrawal of Voluntary
Employee Contributions and earnings thereon, then a Participant may
elect to withdraw from his Participant's Account an amount which is
equal to any whole percentage (not exceeding 100%) of the value of
that portion of his Participant's Account attributable to Voluntary
Employee Contributions and earnings thereon.
If a Participant elects a withdrawal under the provisions of this
section, he may not elect another withdrawal under this section for an
additional period specified by the Employer in its Adoption Agreement.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election
shall be effective as of the date specified in such notice, which date
must be at least 15 days after notice is filed.
No Forfeitures will occur solely as A result of an Employee's withdrawal
of Employee Contributions.
11.2 WITHDRAWAL - ELECTIVE DEFERRAL CONTRIBUTIONS. If the Participant has
attained the age of 59-1/2, and if selected by the Employer in its
Adoption Agreement, the Participant may elect to withdraw from his
Participant's Account an amount which is equal to any whole percentage
(not exceeding 100%) of his Vested Interest in his Participant's Account
attributable to his Elective Deferral Contributions and earnings
thereon.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election
shall be effective as of the date specified in such notice, which date
must be at least 15 days after notice is filed.
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11.3 WITHDRAWAL - EMPLOYER CONTRIBUTIONS. If the Employer has specified in
its Adoption Agreement that withdrawals of Matching Contributions and
Nonelective Contributions, if applicable, are permitted, a Participant
who has been an Active Participant for at least 60 consecutive months
may elect to withdraw from his Participant's Account an amount equal to
a whole percentage (not to exceed 100%) of his Vested Interest in his
Participant's Account attributable to Matching Contributions (and
Forfeitures, if applicable) and Nonelective Contributions, if applicable
along with earnings. On the date the election becomes effective, the
Participant shall be suspended from making Employee Contributions and
Elective Deferral Contributions, if any, and from having Employer
Contributions made on his behalf for a period of time, as selected by
the Employer in its Adoption Agreement. In lieu of the 60-month of
Participation requirement, the Employer may specify in the Adoption
Agreement that withdrawal of contributions made by the Employer, to the
extent vested, shall be available upon or following the attainment of
age 59-1/2.
In the event a Participant's suspension period occurs during a year (or
years) when no Employer contributions are made, such suspension shall be
taken into account when the next Employer contribution(s) is made.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election
shall be effective as of the date specified in such notice, which date
must be at least 15 days after notice is filed.
11.4 WITHDRAWAL FOR SERIOUS FINANCIAL HARDSHIP OF CONTRIBUTIONS OTHER THAN
ELECTIVE DEFERRAL CONTRIBUTIONS. If the plan is a profit sharing plan or
a thrift plan, and if the Employer has elected in its Adoption Agreement
to permit withdrawals due to the occurrence of events that constitute
Serious Financial Hardships to a Participant, such Participant may
withdraw all or a portion of his Vested Interest (excluding Elective
Deferral Contributions, Qualified Nonelective Contributions, Qualified
Matching Contributions, and earnings). Such Serious Financial Hardship
must be shown by positive evidence submitted to the Plan Administrator
that the hardship is of sufficient magnitude to impair the Participant's
financial security. Withdrawals shall be determined in a consistent and
nondiscriminatory manner, and shall not affect the Participant's rights
under the Plan to make additional withdrawals or to continue to be an
Active Participant.
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11.5 WITHDRAWAL FOR SERIOUS FINANCIAL HARDSHIP OF ELECTIVE DEFERRAL
CONTRIBUTIONS. If the Employer has selected in its Adoption Agreement, a
distribution may be made on account of Serious Financial Hardship if
subparagraphs (a) and (b) of this section are satisfied. The funds
available for withdrawal shall be the portion of a Participant's Account
attributable to Elective Deferral Contributions, including pre-1989
earnings on such contributions, and if applicable, the remainder of the
vested portion of his Participant's Account excluding Qualified Matching
Contributions, Qualified Nonelective Contributions, and any earnings
attributable to Qualified Matching Contributions, and/or Qualified
Nonelective Contributions. Post-1988 earnings on Elective Deferral
Contributions shall also be excluded. For purposes of this section, a
distribution may be made on account of a hardship only if the
distribution both is made on account of an immediate and heavy financial
need of the employee and is necessary to satisfy the financial need.
(a) The following are the only financial needs considered immediate and
heavy for purposes of this section:
(i) Expenses for medical care described in section 213(d) of the
Code previously incurred by the Employee, the Employee's
spouse, or any dependents of the Employee (as defined in
section 152 of the Code) or necessary for these persons to
obtain medical care described in section 213(d) of the Code;
(ii) Payment of tuition and related educational fees for the next
12 months of post-secondary education for the Employee, his
or her spouse, children, or dependents (as defined in section
152 of the Code);
(iii) Costs directly related to the purchase of a principal
residence for the Employee (excluding mortgage payments); or
(iv) Payments necessary to prevent the eviction of the Employee
from the Employee's principal residence or foreclosure on the
mortgage on that residence.
(b) To the extent the amount of distribution requested does not exceed
the amount required to relieve the Participant's financial need,
such distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Participant only if:
(i) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans under all
plans maintained by the Employer;
(ii) All plans maintained by the Employer provide that the
Participant's Elective Deferral Contributions and if
applicable, Employee Contributions, will be suspended for 12
months after the receipt of the hardship distribution.
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(iii) All plans maintained by the Employer provide that the
Participant may not elect Elective Deferral Contributions for
the Participant's taxable year immediately following the
taxable year of the hardship distribution in excess of the
applicable limit under section 402(g) of the Code for such
taxable year less the amount of such Participant's Elective
Deferral Contributions for the taxable year of the hardship
distribution.
11.6 WITHDRAWAL - IRP CONTRIBUTIONS and ROLLOVER CONTRIBUTIONS. If selected
by the Employer in its Adoption Agreement, a Participant may elect to
withdraw from his Participant's Account once during each Plan Year, any
amount up to 100% of the value of that portion of his Participant's
Account attributable to his IRP Contributions and/or Rollover
Contributions along with earnings.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election
shall be effective as of the date specified in such notice, which date
must be at least 15 days after notice is filed.
11.7 NOTIFICATION. The Participant shall notify the Administrator in writing
of his election to make a withdrawal under Article M. Any such election
shall be effective as of the date specified in such notice, which date
must be at least 15 days after such notice is filed. Payment of the
withdrawal shall be subject to the terms and conditions of Article VIII.
All withdrawals made under the provisions of Article XI shall be subject
to the spousal consent requirements of Article DC, as applicable.
11.8 VESTING CONTINUATION. In the event a partially vested Participant takes
a withdrawal of less than 100% of his Vested Interest in accordance with
Section 11.3 or 11.4 or 11.5, the remaining portion of his Account
attributable to Employer contributions shall vest according to the
formula as set forth in Section 10.1.
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ARTICLE XII
LOANS
12.1 LOANS TO PARTICIPANTS. If the Employer has specified in its Adoption
Agreement that loans are permitted, then the Plan Administrator may make
a bona fide loan to a Participant, in an amount which, when added to the
outstanding balance of all other loans to the Participant from all
qualified plans of the Employer, does not exceed the lesser of $50,000
reduced by the excess of the Participant's highest outstanding loan
balance during the 12 months preceding the date on which the loan is
made over the outstanding loan balance on the date the new loan is made,
or 50% of the Participant's Vested Interest in his Participant's
Account. Notwithstanding any provision in this paragraph to the
contrary, loans may not exceed a Participant's Vested Interest
attributable to such contributions.
In the event of default, foreclosure on the note and attachment of
security will not occur until a distributable event occurs in the Plan.
No loans will be made to any shareholder-employee or Owner Employee. For
purposes of this requirement, a shareholder employee means an employee
or officer of an electing small business (Subchapter S) corporation who
owns (or is considered as owning within the meaning of section 318(a)
(1) of the Code), on any day during the taxable year of such
corporation, more than 5% of the outstanding stock of the corporation.
The loan shall be made under such terms, security interest, and
conditions as the Plan Administrator deems appropriate, provided,
however, that all loans granted hereunder:
(a) are available to all Participants and Beneficiaries, who are
parties-in-interest (as defined in ERISA), on a reasonably
equivalent basis; and
(b) are not made available to Highly Compensated Employees on a basis
greater than the basis made available to other Employees; and
(c) bear a reasonable rate of interest; and
(d) are adequately secured; and
(e) unless the provisions of Section 9.6 apply to a Participant, are
made only after a Participant obtains the consent of his spouse, if
any, to use his Participant's Account as security for the loan.
Spousal consent shall be obtained no earlier than the beginning of
the 90-day period that ends on the date on which the loan is to be
so secured. The consent must be in writing, must acknowledge the
effect of the loan, and must be witnessed by a Plan representative
or notary public. Such consent shall thereafter be binding with
respect to the consenting spouse or any subsequent spouse with
respect to that loan. A new consent shall be required if the
Participant's Account is used for renegotiation, extension, renewal
or other revision of the loan; and
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(f) are made in accordance with and subject to all of the provisions of
this Article.
If a valid spousal consent has been obtained in accordance with (e),
then, notwithstanding any other provision of this Plan, the portion of
the Participant's vested account balance used as a security interest
held by the Plan by reason of a loan outstanding to the Participant
shall be taken into account for purposes of determining the amount of
the account balance payable at the time of death or distribution, but
only if the reduction is used as repayment of the loan. If less than
100% of the Participant's vested account balance (determined without
regard to the preceding sentence) is payable to the Surviving Spouse,
then the account balance shall be adjusted by first reducing the vested
account balance by the amount of the security used as repayment of the
loan, and then determining the benefit payable to the Surviving Spouse.
12.2 LOAN PROCEDURES. The Plan Administrator shall establish a written set of
procedures, set forth in the summary plan description or any other
established set of procedures, which becomes a part of such Plan by
which all loans will be administered. Such rules, which are incorporated
herein by reference, will include, but not be limited to the following:
(a) the person or persons authorized to administer the loan program,
identified by name or position;
(b) the loan application procedure;
(c) the basis for approving or denying loans;
(d) any limits on the types of loans permitted;
(e) the procedure for determining a ""reasonable" interest rate;
(f) acceptable collateral;
(g) default conditions; and
(h) steps which will be taken to preserve plan assets in the event of
default.
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ARTICLE XIII
FIDUCIARY DUTIES AND RESPONSIBILITIES
13.1 GENERAL FIDUCIARY STANDARD OF CONDUCT. Each Fiduciary of the Plan shall
discharge his duties hereunder solely in the interest of the
Participants and their Beneficiaries and for the exclusive purpose of
providing benefits to Participants and their Beneficiaries and defraying
reasonable expenses of administering the Plan. Each Fiduciary shall act
with the care, skill, prudence and diligence under the circumstances
that a prudent man acting in a like capacity and familiar with such
matters would use in conducting an enterprise of like character and with
like aims, in accordance with the documents and instruments governing
this Plan, insofar as such documents and instruments are consistent with
this standard.
13.2 SERVICE IN MULTIPLE CAPACITIES. Any Person or group of Persons may serve
in more than one Fiduciary capacity with respect to this Plan,
specifically including service both as Trustee and Administrator.
13.3 LIMITATIONS ON FIDUCIARY LIABILITY. Nothing in this Plan shall be
construed to prevent any Fiduciary from receiving any benefit to which
he may be entitled as a Participant or Beneficiary in this Plan, so long
as the benefit is computed and paid on a basis which is consistent with
the terms of this Plan as applied to all other Participants and
Beneficiaries. Nor shall this Plan be interpreted to prevent any
Fiduciary from receiving any reasonable compensation for services
rendered, or for the reimbursement of expenses properly and actually
incurred in the performance of his duties with the Plan; except that no
Person so serving who already receives full-time pay from an Employer
shall receive compensation from this Plan, except for reimbursement of
expenses properly and actually incurred.
13.4 INVESTMENT MANAGER. If an Investment Manager has been appointed pursuant
to Section 14.7 of this Plan, he is required to acknowledge in writing
that he has undertaken a Fiduciary responsibility with respect to the
Plan. The Insurance Company's liability as a Fiduciary is limited to
that arising from its management of any assets of the Plan held by the
Insurance Company in its Separate Account.
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ARTICLE NW
THE PLAN ADMINISTRATOR
14.1 DESIGNATION AND ACCEPTANCE. The Employer shall designate a Person or
Persons to serve as Plan Administrator under the Plan and such Person,
by joining in the execution of the Adoption Agreement, accepts such
appointment and agrees to act in accordance with the terms of the Plan.
14.2 DUTIES AND RESPONSIBILITY. The Plan Administrator shall administer the
Plan for the exclusive benefit of the Participants and their
Beneficiaries in a nondiscriminatory manner subject to the specific
terms of the Plan. The Plan Administrator shall perform all such duties
as are necessary to operate, administer, and manage the Plan in
accordance with the terms thereof This shall include notification to the
Insurance Company of any adjustment made to a Participant's Account as a
result of excess amounts as defined in Section 5.5 (f).
The Plan Administrator shall comply with the regulatory provisions of
ERISA and shall furnish to each Participant (a) a summary plan
description, (b) upon written request, a statement of his total benefits
accrued and his vested benefits if any and (c) the information necessary
to elect the benefits available under the Plan. The Plan Administrator
shall also file the appropriate annual reports and any other data which
may be required by appropriate regulatory agencies.
Furthermore, the Plan Administrator shall take the necessary steps to
notify the appropriate interested parties whenever an application is
made to the Secretary of the Treasury for a determination letter in
accordance with Code section 7476 as amended.
14.3 EXPENSES AND COMPENSATION. The expenses necessary to administer the Plan
shall be taken from Participants' Accounts unless paid by the Employer,
including but not limited to those involved in retaining necessary
professional assistance from an attorney, an accountant, an actuary, or
an investment advisor. Nothing shall prevent the Plan Administrator from
receiving reasonable compensation for services rendered in administering
this Plan, provided the Plan Administrator is not a full-time Employee
of any Employer adopting this Plan.
14.4 INFORMATION FROM EMPLOYER. To enable the Plan Administrator to perform
his functions, the Employer shall supply full and timely information to
the Administrator on all matters relating to this Plan as the Plan
Administrator may require.
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14.5 ADMINISTRATIVE COMMITTEE; MULTIPLE SIGNATURES. In the event that more
than one Person has been duly nominated to serve on the Administrative
Committee and has signified in writing the acceptance of such
designation, the signature(s) of one or more Persons may be accepted by
an interested parry as conclusive evidence that the Administrative
Committee has duly authorized the action therein set forth and as
representing the will of and binding upon the whole Administrative
Committee. No Person receiving such documents or written instructions
and acting in good faith and in reliance thereon shall be obliged to
ascertain the validity of such action under the terms of this Plan. The
Administrative Committee shall act by a majority of its members at the
time in office and such action may be taken either by a vote at a
meeting or in writing without a meeting.
14.6 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. The Plan
Administrator, or any member of the Administrative Committee, may resign
at any time by delivering to the Employer a written notice of
resignation, to take effect at a date specified therein, which shall not
be less than 30 days after the delivery thereof, unless such notice
shall be waived.
The Plan Administrator may be removed with or without cause by the
Employer by delivery of written notice of removal, to take effect at a
date specified therein, which shall be not less than thirty (30) days
after delivery thereof, unless such notice shall be waived.
The Employer, upon receipt of or giving notice of the resignation or
removal of the Plan Administrator, shall promptly designate a successor
Plan Administrator who must signify acceptance of this position in
writing. In the event no successor is appointed, the Board of Directors
of the Employer will function as the Administrative Committee until a
new Plan Administrator has been appointed and has accepted such
appointment.
14.7 INVESTMENT MANAGER. The Plan Administrator may appoint, in writing, an
Investment Manager or Managers to whom is delegated the authority to
manage, acquire, invest or dispose of all or any part of the Plan, or
Trust assets. With regard to the assets entrusted to his care, the
Investment Manager shall provide written instructions and directions to
the Employer or Trustee, as applicable, who shall in turn be entitled to
rely upon such written direction. This appointment and delegation shall
be evidenced by a signed written agreement.
14.8 DELEGATION OF DUTIES. The Plan Administrator shall have the power, to
the extent permitted by law, to delegate the performance of such
Fiduciary and non-Fiduciary duties, responsibilities and functions as
the Administrator shall deem advisable for the proper management and
administration of the Plan in the best interests of the Participants and
their Beneficiaries.
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ARTICLE XV
PARTICIPANTS' RIGHTS
15.1 GENERAL RIGHTS OF PARTICIPANTS AND BENEFICIARIES. The Plan is
established and the Plan or Trust assets are held for the exclusive
purpose of providing benefits for such Employees and their Beneficiaries
as have qualified to participate under the terms of the Plan.
15.2 FILING A CLAIM FOR BENEFITS. A Participant or Beneficiary or the
Employer acting in his behalf, shall notify the Administrator of a claim
of benefits under the Plan. Such request shall be in writing to the
Administrator and shall set forth the basis of such claim and shall
authorize the Administrator to conduct such examinations as may be
necessary to determine the validity of the claim and to take such steps
as may be necessary to facilitate the payment of any benefits to which
the Participant or Beneficiary may be entitled under the terms of the
Plan.
15.3 DENIAL OF CLAIM. Whenever a claim for benefits by any Participant or
Beneficiary has been denied by a Plan Administrator, a written notice,
prepared in a manner calculated to be understood by the Participant,
must be provided, setting forth (1) the specific reasons for the denial;
(2) the specific reference to pertinent Plan provisions on which the
denial is based; (3) a description of any additional material or
information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary; and (4)
an explanation of the Plan's claim -review procedure.
15.4 REMEDIES AVAILABLE TO PARTICIPANTS. A Participant or Beneficiary (1) may
request a review by a Named Fiduciary, other than the Plan
Administrator, upon written application to the Plan; (2) may review
pertinent Plan documents; and (3) may submit issues and comments in
writing to a Named Fiduciary. A Participant or Beneficiary shall have 60
days after receipt by the claimant of written notification of a denial
of a claim to request a review of a denied claim.
A decision by a Named Fiduciary shall be made promptly and not later
than 60 days after the Named Fiduciary's receipt of a request for
review, unless special circumstances require an extension of the time
for processing in which case a decision shall be rendered as soon as
possible, but not later than 120 days after receipt of a request for
review. The decision on review by a Named Fiduciary shall be in writing
and shall include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific references to
the pertinent Plan provisions on which the decision is based.
A Participant or Beneficiary shall be entitled, either in his own name
or in conjunction with any other interested parties, to bring such
actions in law or equity or to undertake such administrative actions or
to seek such relief as may be necessary or appropriate to compel the
disclosure of any required information, to enforce or protect his
rights, to recover present benefits due to him or to clarify his rights
to future benefits under the Plan.
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15.5 LIMITATION OF RIGHTS. Participation hereunder shall not grant any
Participant the right to be retained in the Service of the Employer or
any other rights or interest in the Plan or Trust fund other than those
specifically herein set forth.
15.6 PARTICIPANT CONTRIBUTIONS. Each Participant, regardless of his length of
Service with the Employer, shall be fully vested (100%) at all times in
any portion of his Participant's Account attributable to the following
contributions, as applicable:
(a) Employee Contributions and earnings thereon;
(b) Rollover Contributions and earnings thereon;
(c) IRP Contributions and earnings thereon.
15.7 MERGERS OR TRANSFERS. In the case of any merger with or transfer of
assets or liabilities to any other qualified plan after September 2,
1974, the following conditions must be met:
(a) The sum of the account balances in each plan shall equal the fair
market value (determined as of the date of the merger or transfer
as if the plan had then terminated) of the entire plan assets.
(b) The assets of each plan shall be combined to form the assets of the
plan as merged (or transferred) and each Participant in the plan
merged (or transferred) shall have an Account balance equal to the
sum of the Account balances the Participant had in the plans
immediately prior to the merger (or transfer).
(c) Immediately after the merger (or transfer), each Participant in the
plan merged (or transferred) shall have an Account balance equal to
the sum of the Account balances the Participant had in the plans
immediately prior to the merger (or transfer).
(d) Immediately after the merger (or transfer) each Participant in the
plan merged (or transferred) shall be entitled to the same optional
benefit forms as they were entitled to immediately prior to the
merger (or transfer).
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ARTICLE XVI
THE INSURANCE COMPANY
16.1 DUTIES A-ND RESPONSIBILITIES. The Insurance Company shall issue the
Annuity Contract and any Policies hereunder and thereby assumes all the
duties and responsibilities set forth therein. The terms of the Annuity
Contract may be changed as provided therein without amending this Plan,
provided such changes shall conform (1) to the requirements for
qualification under Code section 401(a), as amended from time to time
and (2) to ERISA, as amended from time to time.
16.2 RELATION TO EMPLOYER, PLAN ADMINISTRATOR AND PARTICIPANTS. The Insurance
Company may receive the statement of the Plan Administrator or, if the
Plan Administrator so designates, the Employer or the Trustee, as
conclusive evidence of any of the matters decided in the Plan and the
Insurance Company shall be fully protected in taking or permitting any
action on the basis thereof and shall incur no liability or
responsibility for so doing. The Insurance Company shall not be required
to look into the terms of the Plan as to question any action by the
Employer or the Plan Administrator or any Participant nor to determine
that such action is properly taken under the Plan. The Insurance Company
shall be fully discharged from any and all liability with respect to any
payment to any Participant hereunder in accordance with the terms of the
Annuity Contract or of any Policies under the Plan. The Insurance
Company shall not be required to take any action contrary to its normal
rules and practices.
16.3 RELATION TO TRUSTEE. The Insurance Company shall not be required to look
into the terms of the Plan or question any action of the Trustee and the
Insurance Company shall not be responsible for seeing that any action of
the Trustee is authorized by the terms hereof. The Insurance Company
shall be under no obligation to take notice of any change in Trustee
until evidence of such change satisfactory to the Insurance Company
shall have been given to the Insurance Company in writing at its home
office.
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ARTICLE XVII
AMENDMENT OR TERMINATION OF THE PLAN
17.1 AMENDMENT OF ELECTIONS UNDER ADOPTION AGREEMEN BY EMPLOYER. The Employer
shall have the right from time to time to change the elections under its
Adoption Agreement in a manner consistent with the Plan, by a written
instrument signed by the Employer, the Plan Administrator and the
Trustee and accepted by the Sponsor. Upon any such change in the
Elections under the Adoption Agreement the Plan Administrator, the
Trustee and the Sponsor shall be furnished a copy thereof If the Plan's
vesting schedule is amended, or the Plan is amended in any way that
directly or indirectly affects the computation of the Participant's
nonforfeitable percentage or if the Plan is deemed amended by an
automatic change to or from a top-heavy vesting schedule, each
Participant with at least 3 years of service with the employer may
elect, in writing, within a reasonable period after the adoption of the
amendment or change, to have the nonforfeitable percentage computed
under the Plan without regard to such amendment or change. For
Participants who do not have at least I hour of service in any Plan Year
beginning after December 31, 1988, the preceding sentence shall be
applied by substituting.... 5 years of service" for.... 3 years of
service" where such language appears.
The period during which the election must be made by the Participant
shall begin -no later than the date the Plan amendment is adopted and
end no later than after the latest of the following dates:
(a) The date which is 60 days after the day the amendment is adopted;
(b) The date which is 60 days after the day the amendment becomes
effective;
(c) The date which is 60 days after the day the Participant is issued
written notice of the amendment by the Employer or Plan
Administrator.
Such written election by a Participant shall be made to the
Administrator, who shall then give written notice to the Insurance
Company.
No amendment to the Plan shall be effective to the extent that it has
the effect of decreasing a Participant's Accrued Benefit.
Notwithstanding the preceding sentence, a Participant's account balance
may be reduced to the extent permitted under section 412 (c) (8) of the
Code. For purposes of this paragraph, a Plan amendment which has the
effect of decreasing a Participant's account balance or eliminating an
optional form of benefit, with respect to benefits attributable to
service before the amendment shall be treated as reducing an Accrued
Benefit. Furthermore, if the vesting schedule of a plan is amended, in
the case of an Employee who is a Participant as of the later of the date
such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such
Employee's Employer-derived Accrued Benefit will not be less than the
percentage computed under the Plan without regard to such amendment.
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An adopting Employer may amend the Plan by adding overriding plan
language to the adoption agreement where such language is necessary to
satisfy Code section 415 or 416 because of the required aggregation of
multiple plans under these sections. An adopting Employer may amend the
Plan by adding language to allow the Plan to operate under a waiver of
the minimum funding requirements.
17.2 AMENDMENT OF PLAN, TRUST, AND FORM OF ADOPTION AGREEMENT. The Sponsor
may amend this Plan and Trust, and the form of the Adoption Agreement,
and the Employer in adopting this Plan and the Plan Administrator and
the Trustee in accepting appointment as Plan Administrator and as
Trustee, shall be deemed to have consented to any such amendment by
executing the Adoption Agreement, provided that the written consent of
the Trustee and the Plan Administrator to any change affecting their
duties or responsibilities shall first be obtained. Upon any such
amendment by the Sponsor, the Plan Administrator, the Employer and the
Trustee shall be furnished with a copy thereof.
The Employer may (1) change the choice of options in the Adoption
Agreement, (2) add overriding language in the Adoption Agreement when
such language is necessary to satisfy section 415 or section 416 of the
Code because of the required aggregation of multiple plans, and (3) add
certain model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as individually designed. An Employer that amends the Plan for
any other reason, including a waiver of the minimum funding requirements
under section 412(d) of the Code, will no longer participate in this
prototype plan and will be considered to have an individually designed
plan.
17.3 CONDITIONS OF AMENDMENT. Neither the sponsor nor the Employer shall make
any amendment which would cause the Plan to lose its status as a
qualified plan within the meaning of section 401(a) of the Code.
17.4 TERMINATION OF THE PLAN. The Employer intends to continue the Plan
indefinitely for the benefit of its Employees, but reserves the right to
terminate the Plan at any time by resolution of its Board of Directors.
Upon such termination, the liability of the Employer to make Employer
contributions hereunder shall terminate. The Plan shall terminate
automatically upon complete discontinuance of Employer contributions
hereunder, if the Plan is a Profit Sharing Plan or a Thrift Plan.
17.5 FULL VESTING. Upon the termination or partial termination of the Plan,
or upon complete discontinuance of Employer contributions, the rights of
all affected Participants in and to the amounts credited to each such
Participant's Account and to any Policies on each Participant's life
shall be 100% vested and nonforfeitable. Thereupon, each Participant
shall receive a total distribution of his Participant's Account
(including any amounts in the Forfeiture Account allocated in accordance
with Section 17.6) in accordance with the terms and conditions of
Article VIII. If the Plan terminates, the assets will be distributed
from the Trust as soon as administratively feasible.
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17.6 APPLICATION OF FORFEITURES. Upon the termination of the Plan, any amount
in the Forfeiture Account which has not been applied as of such
termination to reduce the Employer contribution or has not been
allocated as of such termination shall be credited on a pro-rata basis
to each Participant's Account of the then Active Participants in the
same manner as the last Employer contribution made under the Plan.
17.7 APPROVAL BY THE INTERNAL REVENUE SERVICE. Notwithstanding any other
provisions of this Plan, the Employer's adoption of this Plan is subject
to the condition precedent that the Employer's Plan shall be approved
and qualified by the Internal Revenue Service as meeting the
requirements of Code section 401 (a) and, if applicable, that the Trust
established hereunder shall be entitled to exemption under the
provisions of Code section 501 (a). In the event the Plan initially
fails to qualify and the Internal Revenue Service issues a final ruling
that the Employer's Plan or Trust fails to so qualify as of the
Effective Date, all liability of the Employer to make further Employer
contributions hereunder shall cease. The Insurance Company, Plan
Administrator, Trustee and any other Named Fiduciary shall be notified
immediately by the Employer, in writing, of such failure to qualify.
Upon such notification, the value of the Participants' Accounts and the
then value of any Life Insurance Policies shall be distributed in cash
subject to the terms and conditions of Article VII. That portion of such
distribution which is attributable to Participant's Employee
Contributions, if any, shall be paid to the Participant, and the balance
of such distribution shall be paid to the Employer. Upon the death of
any Participant prior to the actual surrender of a Life Insurance Policy
or Policies on his life, the death benefit shall be payable to the
Participant's Beneficiary.
If the Employer's Plan fails to attain or retain qualification, such
Plan will no longer participate in this prototype plan and will be
considered an individually designed plan.
17.8 SUBSEQUENT UNFAVORABLE DETERMINATION. If the Employer is notified
subsequent to initial favorable qualification that the Plan is no longer
qualified within the meaning of Code section 401(a) or, if applicable,
that the Trust is no longer entitled to exemption under the provisions
of Code section 501(a), and if the Employer shall fail within a
reasonable time to make any necessary changes in order that the Plan
shall so qualify, the Participants' Accounts and any Life Insurance
Policies or the values thereof shall be fully vested and nonforfeitable
and shall be disposed of in the manner set forth in Sections 17.5 and
17.6 above.
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ARTICLE XVIII
SUBSTITUTION OF PLANS
18.1 SUBSTITUTION OF PLANS. Subject to the provisions of Section 15.7 the
Employer may substitute an individually designed plan or a master or
another prototype plan for this Plan without terminating this Plan as
embodied herein and this shall be deemed to constitute an amendment and
restatement in its entirety of this Plan as heretofore adopted by the
Employer; provided, however that the Employer shall have certified to
the Insurance Company and the Trustee, if applicable, that this Plan is
being continued on a restated basis which meets the requirements of
Internal Revenue Code section 401(a) and ERISA.
Any such changes shall be subject to the provisions of Sections 17.1 and
17.2 of the Plan.
18.2 TRANSFER OF ASSETS. Upon 90 days' written notification from the Employer
and the Trustee (unless the Insurance Company shall accept a shorter
period of notification) that a different plan meeting the requirements
set forth in Section 18.1 above has been executed and entered into by
the Administrator and the Employer, and after the Insurance Company and
the Trustee have been furnished the Employer's certification in writing
that the Employer intends to continue the Plan as a qualified plan under
Internal Revenue Code section 401(a) and ERISA, the Insurance Company
shall transfer the value of all Participants' Accounts under the Annuity
Contract in accordance with the terms of the Annuity Contract, to the
Trustee or such person or persons as may be entitled to receive the
same, and the Trustee shall likewise make a similar transfer, including
all Life Insurance Policies, or the values thereof, to such person or
persons as may be entitled to receive same. The Insurance Company and
the Trustee may rely fully on the representations or directions of the
Employer with respect to any such transfer and shall be fully protected
and discharged with respect to any such transfer made in accordance with
such representations, instructions, or directions.
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ARTICLE
MISCELLANEOUS
19.1 NONREVERSION. This Plan has been adopted by the Employer for the
exclusive benefit of the Participants and their Beneficiaries. Except as
other-wise provided in Section 17.7 and Section 19.9, under no
circumstances shall any funds contributed hereunder at any time revert
to or be used by the Employer, nor shall any such funds or assets of any
kind be used other than for the benefit of the Participants or their
Beneficiaries.
19.2 GENDER AND NUMBER. When necessary to the meaning hereof, and except when
other-wise indicated by the context, either the masculine or the neuter
pronoun shall be deemed to include the masculine, the feminine, and the
neuter, and the singular shall be deemed to include the plural.
19.3 REFERENCE TO THE INTERNAL REVENUE CODE AND ERISA. Any reference herein
to any section of the Internal Revenue Code, ERISA, or to any other
statute or law shall be deemed to include any successor law of similar
import.
19.4 GOVERNING ]LAW. The Plan and Trust, if applicable, shall be governed and
construed in accordance with the laws of the state where the Employer or
Trustee has its principal office.
19.5 COMPLIANCE WITH THE INTERNAL REVENUE CODE AND ERISA. This Plan is
intended to comply with all requirements for qualification under the
Internal Revenue Code and ERISA, -and if any provision hereof is subject
to more than one interpretation or any term used herein is subject to
more than one construction, such ambiguity shall be resolved in favor of
that interpretation or construction which is consistent with the Plan
being so qualified. If any provision of the Plan is held invalid or
unenforceable, such invalidity or unenforceability shall not affect any
other provisions, and this Plan shall be construed and enforced as if
such provision had not been included.
19.6 NON-ALIENATION. It is a condition of the Plan, and all rights of each
Participant shall be subject thereto, that no right or interest of any
Participant in the Plan shall be assignable or transferable in whole or
in part, either directly or by operation of law or otherwise, including,
but without limitation, execution, levy, garnishment, attachment,
pledge, bankruptcy or in any other manner, and no right or interest of
any Participant in the Plan shall be liable for or subject to any
obligation or liability of such Participant. The preceding sentence
shall also apply to t he creation, assignment, or recognition of a right
to any benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined to be
qualified domestic relations order, as defined in Code section 414(p). A
domestic relations order entered before January 1, 1985, will be treated
as a qualified domestic relations order if payment of benefits pursuant
to the order has commenced as of such date, and may be treated as a
qualified domestic relations order if payment of benefits has not
commenced as of such date, even though the order does not satisfy the
requirements of Code section 414(p).
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19.7 SUBSTITUTION FOR PRE-EXISTING MASTER OR PROTOTYPE PLAN. This Plan is
designed:
(a) For adoption by an Employer not previously covered under a master
or prototype plan sponsored by Connecticut General Life Insurance
Company; or
(b) For adoption by an Employer in substitution for a pre-existing
master or prototype plan sponsored by Connecticut General Life
Insurance Company.
If this Plan is adopted in substitution for such a pre-existing master
or prototype plan, it shall be deemed to amend the Employer's prior plan
in its entirety effective as of the date specified in the Employer's
Adoption Agreement. The Employer's plan as so amended shall continue in
full force and effect and no termination thereof shall be deemed to have
occurred.
19.8 The Trustee shall apply for and will be the owner of any Life Insurance
Policy purchased under the terms of this Plan. The Life Insurance
Policy(ies) must provide that proceeds will be payable to the Trustee.
However, the Trustee shall be required to pay over all proceeds of the
Life Insurance Policy(ies) to the Participant's designated beneficiary
in accordance with the distribution provisions of this Plan. A
Participant's spouse will be the designated Beneficiary of the proceeds
in all circumstances unless a qualified election has been made in
accordance with Section 9.4(c), joint and Survivor Annuity Requirements.
Under no circumstances shall the Trust retain any part of the proceeds.
In the event of any conflict between the provisions of this Plan and any
Life Insurance Policies or annuity contracts issued pursuant to the
Plan, the Plan provisions shall control.
19.9 CONTRIBUTION RECAPTURE. Notwithstanding any other provisions of this
Plan, (1) in the case of a contribution which is made by an Employer by
a mistake of fact, Section 19.1 shall not prohibit the return of such
contribution to the Employer within one year after the payment of the
contribution, and (2) if a contribution is conditioned upon the
deductibility of the contribution under Code section 404, then, to the
extent the deduction is disallowed, Section 19.1 shall not prohibit the
return to the Employer of such contribution (to the extent disallowed)
within one year after the disallowance of the deduction. The amount
which may be returned to the Employer is the excess of (1) the amount
contributed over (2) the amount that would have been contributed had
there not occurred a mistake of fact or a mistake in determining the
deduction. Earnings attributable to the excess contribution may not be
returned to the Employer, but losses attributable thereto must reduce
the amount to be so returned. Furthermore, if the withdrawal of the
amount attributable to the mistaken contribution would cause the balance
of the individual account of any Participant to be reduced to less than
the balance which would have been in the account had the mistaken amount
not been contributed, then the amount to be returned to the Employer
would have to be limited so as to avoid such reduction.
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In the event that the Commissioner of the Internal Revenue determines
that the Plan is not initially qualified under the Internal Revenue
Code, any contribution made incident to that initial qualification by
the Employer must be returned to the Employer within one year after the
date the initial qualification is denied, but only if the application
for the qualification is made by the time prescribed by law for filing
the Employer's is return for the taxable year in which the Plan is
adopted, or such later date AS the Secretary of the Treasury may
prescribe.
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ARTICLE XX
TOP-HEAVY PROVISIONS
20.1 DEFINITIONS.
(a) Key Employee: Any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the
determination period was:
(1) an officer of the Employer if such individual's annual
compensation exceeds 50 percent of the dollar limitation
under Code section 415(b)(1) (A),
(2) an owner (or considered an owner under Code section 318) of
one of the ten largest interests in the Employer if such
individual's compensation exceeds 100 percent of the dollar
limitation under section 415(c)(1) (A) of the Code,
(3) a 5-percent owner of the Employer, or
(4) a 1-percent owner of the Employer who has an annual
compensation of more than $150,000.
Annual Compensation means Compensation as defined in section
415(c)(3) of the Code, but including amounts contributed by the
Employer pursuant to a salary reduction agreement which are
excludible from the Employee's gross income under section 125,
section 402(a)(8), section 402(h) or section 403(b) of the Code.
The determination period is the Plan Year containing the
determination date and the four preceding Plan Years. The
determination of who is a Key Employee will be made in accordance
with Code section 416(i)(1) and the regulations thereunder.
(b) Top-Heavy Plan: For any Plan Year beginning after December 31,
1983, this Plan is Top-Heavy if any of the following conditions
exists:
(1) If the Top-Heavy Ratio for this Plan exceeds 60 percent and
this Plan is not part of any required aggregation group or
permissive aggregation group of plans.
(2) If this Plan is a part of a required aggregation group of
plans but not part of a permissive aggregation group and the
Top-Heavy Ratio for the group of plans exceeds 60 percent.
(3) If this Plan is a part of a required aggregation group and
part of a permissive aggregation group of plans and the
Top-Heavy Ratio for the permissive aggregation group exceeds
60 percent.
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(c) Top-Heavy Ratio:
(1) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan) and
the Employer has not maintained any defined benefit plan
which during the 5-year period ending on the determination
date(s) has or has had accrued benefits, the Top-Heavy Ratio
for this Plan alone or for the required or permissive
aggregation group as appropriate is a fraction, the numerator
of which is the sum of the account balances of ALL Key
Employees as of the determination date(s) (including any part
of any account balance distributed in the 5-year period
ending on the determination date(s)), and the denominator of
which is the sum of all account balances (including any part
of any account balance distributed in the 5-year period
ending on the determination date(s)), both computed in
accordance with Code section 416 and the regulations
thereunder. Both the numerator and denominator of the
Top-Heavy Ratio are increased to reflect any contribution not
actually made as of the determination date, but which is
required to be taken into account on that date under Code
section 416 and the regulations thereunder.
(2) If the Employer--maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan) and
the Employer maintains or has maintained one or more defined
benefit plans which during the 5-year period ending on the
determination date(s) has or has had any accrued benefits,
the Top-Heavy Ratio for any required or permissive
aggregation group as appropriate is a fraction, the numerator
of which is the sum of account balances under the aggregated
defined contribution plan or plans for all Key Employees,
determined in accordance with (1) above, and the present
value of accrued benefits under the aggregated defined
benefit plan or plans for all Key Employees as of the
determination date(s), and the denominator of which is the
sum of the account balances under the aggregated defined
contribution plan or plans for all Participants, determined
in accordance with (1) above, and the present value of
accrued benefits under the defined benefit plan or plans for
all Participants as of the determination date(s), all
determined in accordance with Code section 416 and the
regulations thereunder. The accrued benefits under a defined
benefit plan in both the numerator and denominator of the
Top-Heavy Ratio are increased for any distribution of an
accrued benefit made in the 5-year period ending on the
determination date.
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(3) For purposes of (1) and (2) above the value of account
balances and the present value of accrued benefits will be
determined as of the most recent valuation date that falls
within or ends with the 12-month period ending on the
determination date, except as provided in Code section 416
and the regulations thereunder for the first and second plan
years of a defined benefit plan. The account balances and
accrued benefits of a Participant (i) who is not a Key
Employee but who was a Key Employee in a prior year, or (ii)
who has not been credited with at least one Hour of Service
with any Employer maintaining the Plan at any time during the
5-year period ending on the determination date will be
disregarded. The calculation of the Top-Heavy Ratio, and the
extent to which distributions, rollovers, and transfers are
taken into account will be made in accordance with Code
section 416 and the regulations thereunder. Deductible
employee contributions will not be taken into account for
purposes of computing the Top-Heavy Ratio. When aggregating
plans the value of account balances and accrued benefits will
be calculated with reference to the determination dates that
fall within the same calendar year.The Accrued Benefit of a
Participant other than a Key Employee shall be determined
under (a) the method, if any, that uniformly applies for
accrual purposes under all defined benefit plans maintained
by the Employer, or (b) if there is no such method, as if
such benefit accrued not more rapidly than the slowest
accrual rate permitted under the fractional rule of section
411(b)(1)(C) of the Code.
(d) Permissive aggregation group: The required aggregation group of
plans plus any other plan or plans of the Employer which, when
considered as a group with the required aggregation group, would
continue to satisfy the requirements of Code sections 401 (a) (4)
and 410.
(e) Required aggregation group: (1) Each qualified plan of the employer
in which at least one Key Employee participates or participated at
any time during the determination period (regardless of whether the
plan has terminated), and (2) any other qualified plan of the
Employer which enables a plan described in (1) to meet the
requirements of Code sections 401(a)(4) or 410.
(f) Determination date: For any Plan Year subsequent to the first Plan
Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that year.
(g) Valuation date: The date specified in Section 6.3 as of which
account balances or accrued benefit are valued for purposes of
calculating the Top-Heavy Ratio.
(h) Present Value: Present Value shall be based only on the interest
and mortality rates specified in the Adoption Agreement.
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20.2 MINIMUM ALLOCATION. For any Plan Year in which the Plan is Top-Heavy,
the following will apply:
(a) Except as otherwise provided in (c) and (d) below, the Employer
contributions and Forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the
lesser of three percent of such Participant's compensation or in
the case where the employer has no defined benefit plan which
designates this Plan to satisfy Code section 401, the largest
percentage of employer contributions and forfeitures, as a
percentage of the first $200,000 of the Key Employee's
Compensation, allocated on behalf of any Key Employee for that
year. The minimum allocation is determined without regard to any
Social Security contribution. This minimum allocation shall be made
even though, under other Plan provisions, the Participant would not
otherwise be entitled to receive an allocation, or would have
received a lesser allocation of the year because of (1) the
Participant's failure to complete 1,000 Hours of Service (or any
equivalent provided in the Plan), or (2) the Participant's failure
to make mandatory employee contributions to the plan, or (3)
Compensation less than a stated amount.
(b) For purposes of computing the minimum allocation, Compensation
shall mean Compensation as defined in Section 5.8(b) of the Plan.
Notwithstanding the above, if elected by the Employer in the
Adoption Agreement, Compensation shall include any amount which is
contributed by the Employer pursuant to a salary reduction
agreement and which is not includible in the gross income of the
Employee under sections 125, 401(a)(8), 402(h) or 403(b) of the
Code.
(c) The provision in (a) above shall not apply to any Participant who
was not employed by the Employer on the last day of the Plan Year.
(d) The provision in (a) above shall not apply to any Participant to
the extent the Participant is covered under any other plan or plans
of the Employer and the Employer has provided in the Top-Heavy
Provisions section of the Adoption Agreement that the minimum
allocation or benefit requirement applicable to Top-Heavy plans
will be met in the other plan or plans.
(e) The minimum allocation required (to the extent required to be
nonforfeitable under Code section 416(b)) may not be forfeited
under Code sections 411(a)(3)(B) or 411(a)(3)(D).
(f) Neither Elective Deferral Contributions nor Matching Contributions
may be taken into account for the purpose of satisfying the minimum
Top-Heavy contribution requirement.
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20.3 MINIMUM VESTING SCHEDULE. For any Plan Year in which this Plan is
Top-Heavy, one of the minimum vesting schedules as elected by the
Employer in the adoption agreement will automatically apply to the Plan.
The minimum vesting schedule applies to all benefits within the meaning
of Code section 411(a)(7) except those attributable to Employee
Contributions, including benefits accrued before the effective date of
Code section 416 and benefits accrued before the Plan became Top-Heavy.
Further, no decrease in a Participant's nonforfeitable percentage may
occur in the event the Plan's status as Top-Heavy changes for any Plan
Year. However, this section does not apply to the account balances of
any Employee who does not have an Hour of Service after the Plan has
initially become Top-Heavy and such Employee's account balance
attributable to Employer contributions and Forfeitures will be
determined without regard to this section.
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ARTICLE XXI
TRUST AGREEMENT
This AGREEMENT entered into by and among the Employer, the Administrator and
the Trustee pursuant to the Adoption Agreement completed and signed by the
Employer, the Administrator and Trustee, hereby establishes the Trust with the
following provisions to form a part of and implement the provisions of the
Plan:
21.1 CREATION AND ACCEPTANCE OF TRUST. The Trustee, by joining in the
execution of the Adoption Agreement, accepts the Trust hereby created
and agrees to act in accordance with the express terms and conditions
herein stated.
21.2 TRUSTEE CAPACITY; CO-TRUSTEES. The Trustee may be A Bank, Trust Company
or other corporation possessing TRUST powers under applicable State or
Federal law or one or more individuals or any combination thereof.
When two or more persons serve as Trustee, they are specifically
authorized, by a written agreement between themselves, to allocate
specific responsibilities, obligations or duties among themselves. An
original copy of such written agreement is to be delivered to the
Administrator.
21.3 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE. Any Trustee
may resign at any time by delivering to the Administrator a written
notice of resignation, to take effect at a date specified therein, which
shall not be less than 30 days after the delivery thereof, unless such
notice shall be waived.
The Trustee may be removed with or without cause by the Board of
Directors by delivery of a written notice of removal, to take effect at
a date specified therein, which shall not be less than 30 days after
delivery thereof, unless such notice shall be waived.
In the case of the resignation or removal of a Trustee, the Trustee
shall have the right to a settlement of its account, which may be made,
at the option of the Trustee, either (1) by judicial settlement in an
action instituted by the Trustee in a court of competent jurisdiction,
or (2) by written agreement of settlement between the Trustee and the
Administrator.
Upon such settlement, all right, title and interest of such Trustee in
the assets of the Trust and all rights and privileges under this
Agreement theretofore vested in such Trustee shall vest in the successor
Trustee, and thereupon all future liability of such Trustee shall
terminate; provided, however, that the Trustee shall execute,
acknowledge and deliver all documents and written instruments which are
necessary to transfer and convey the right, title and interest in the
Trust assets, and all rights and privileges to the successor Trustee.
The Board of Directors, upon receipt of notice of the resignation or
removal of the Trustee, shall promptly designate a successor Trustee,
whose appointment is subject to acceptance of this Trust in writing and
shall notify in writing the Insurance Company of such successor Trustee.
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<PAGE> 138
21.4 TAXIES, EXPENSES AND COMPENSATION OF TRUSTEE. The Trustee shall deduct
from and charge against the Trust fund any taxes paid by it which may be
imposed upon the Trust fund or the income thereof or which the Trustee
is required to pay with respect to the interest of any person therein.
The Employer shall pay the Trustee annually its expenses in
administering the Trust and a reasonable compensation for its service as
Trustee hereunder if the Trustee is not an Employee of the Plan, at a
rate to be agreed upon from time to time. The reasonable compensation
shall include that for any extraordinary services.
21.5 TRUSTEE ENTITLED TO CONSULTATION. The Trustee shall be entitled to
advice of counsel, which may be counsel for the Plan or the Employer, in
any case in which the Trustee shall deem such advice necessary. With the
exception of those powers and duties specifically allocated to the
Trustee by the express terms of this Plan, it shall not be the
responsibility of the Trustee to interpret the terms of the Plan or
Trust and the Trustee may request, and is entitled to receive guidance
and written direction from the Administrator on any point requiring
construction or interpretation of the Plan documents.
21.6 RIGHTS, POWERS AND DUTIES OF TRUSTEE. The Trustee shall have the
following rights, powers, and duties:
(a) The Trustee shall be responsible for the safekeeping and
administering of the assets of this Plan and Trust in accordance
with the provisions of this Agreement and any amendments thereto.
The duties of the Trustee under this Agreement shall be determined
solely by the express provisions of this Agreement and no other
further duties or responsibility shall be implied. Subject to the
terms of this Plan and Trust, the Trustee shall be fully protected
and shall incur no liability in acting in reliance upon the written
instructions or directions of the Administrator or a duly
designated Investment Manager or any other Named Fiduciary.
(b) The Trustee shall have all powers necessary or convenient for the
orderly and efficient performance of its duties hereunder,
including but not limited to those specified in this Section. The
Trustee may appoint one or more administrative agents or contract
for the performance of such administrative and service functions as
it may deem necessary for the effective installation and operation
of the Plan and Trust.
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<PAGE> 139
(c) The Trustee shall have the power to collect and receive any and all
monies and other property due hereunder and to give full discharge
and acquittance therefor; to settle, compromise or submit to
arbitration any claims, debts or damages due or owing to or from
the Trust; to commence or defend suits or legal proceedings
wherever, in its judgment, any interest of the Trust requires it;
and to represent the Trust in all suits or legal proceedings in any
court of law or equity or before any other body of tribunal. It
shall have the power generally to do all acts, whether or not
expressly authorized, which the Trustee in the exercise of its
Fiduciary responsibility may deem necessary or desirable for the
protection of the Trust and the assets thereof.
(d) The Trustee shall make application to the Insurance Company for the
Annuity Contract required hereunder and shall take all necessary
steps to obtain any Life Insurance Policies elected on the lives of
Participants hereunder. In applying for the Annuity Contract, the
Trustee may indicate that, unless it directs the Insurance Company
otherwise, it shall be entitled to receive all cash payments for
further distribution to Participants and Beneficiaries.
(e) The Trustee may temporarily hold cash balances and shall be
entitled to deposit any such funds received in a bank account or
bank accounts in the name of the Trust in any bank or banks
selected by the Trustee, including the banking department of the
Trustee, pending disposition of such funds in accordance with the
Trust. Any such deposit may be made with or without interest.
(f) The Trustee shall obtain and deal with any Life Insurance Policies
or other assets of this Trust held or received under this Plan only
in accordance with the written directions from the Administrator.
The Trustee shall be under no duty to determine any facts or the
propriety of any action taken or omitted by it in good faith
pursuant to instructions from the Administrator.
(g) All Contributions made to the Trust fund under this Plan shall be
paid by the Trustee to the Insurance Company under the Annuity
Contract within 30 days after the date such Contributions were due
under the Plan. However, in lieu of holding any Contributions made
to the Trust fund, the Trustee may direct that all such
Contributions be made directly to the Insurance Company under the
Annuity Contract or any Life Insurance Policy. The Employer shall
keep the Trustee informed of all Contributions made directly to the
Insurance Company in accordance with the Trustee's instructions.
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<PAGE> 140
(h) If the whole or any part of the Trust shall become liable for the
payment of any estate, inheritance, income or other tax which the
Trustee shall be required to pay, the Trustee shall have full power
and authority to pay such tax out of any monies or other property
in its hands for the account of the person whose interest hereunder
is so liable. Prior to making any payment, the Trustee may require
such releases or other documents from any lawful taxing authority
as it shall deem necessary. The Trustee shall not be liable for any
nonpayment of tax when it distributes an interest hereunder on
instructions from the Administrator.
(i) The Trustee shall keep a full, accurate and detailed record of all
transactions of the Trust which the Administrator shall have the
right to examine at any time during the Trustee's regular business
hours. Following the close of the fiscal year of the Trust, or as
soon as practical thereafter, the Trustee shall furnish the
Administrator with a statement of account. This account shall set
forth all receipts, disbursements and other transactions effected
by the Trustee during said year.
The Administrator shall promptly notify the Trustee in writing of
its approval or disapproval of the account. The Administrator's
failure to disapprove the account within 60 days after receipt
shall be considered an approval. The approval by the Administrator
shall be binding as to all matters embraced in any statement to the
same extent as if the account of the Trustee had been settled by
judgment or decree of a court of competent jurisdiction under which
the Trustee, Administrator, Employer and all persons having or
claiming any interest in the Trust were parties; provided, however,
that the Trustee may have its account judicially settled if it so
desires.
(j) If, of any time, there shall be a dispute as to the person to whom
payment or delivery of monies or property should be made by the
Trustee, or regarding any action to be taken by the Trustee, the
Trustee may postpone such payment, delivery or action, retaining
the funds or property involved, until such dispute shall have been
resolved in a court of competent jurisdiction or the Trustee shall
have been indemnified to its satisfaction or until it has received
written direction from the Administrator.
(k) Anything in this instrument to the contrary notwithstanding, it
shall be understood that the Trustee shall have no duty or
responsibility with respect to the determination of matters
pertaining to the eligibility of any Employee to become or remain a
Participant hereunder, the amount of benefit to which any
Participant or Beneficiary shall be entitled hereunder, all such
responsibilities being vested in the Administrator. The Trustee
shall have no duty to collect any Contribution from the Employer
and shall not be concerned with the amount of any Contribution nor
the application of the Contribution formula.
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<PAGE> 141
21.7 EVIDENCE OF TRUSTEE ACTION. In the event that the Trustee comprises two
or more Trustees, then those Trustees may designate one such Trustee to
transmit all decisions of the Trustee and to sign all necessary notices
and other reports on behalf of the Trustee. All notices and other
reports bearing the signature of the individual Trustee so designated
shall be deemed to bear the signatures of all the individual Trustees
and all parties dealing with the Trustee are entitled to rely on any
such notices and other reports as authentic and as representing the
action of the Trustee.
21.8 INVESTMENT POLICY. This Plan has been established for the sole purpose
of providing benefits to the Participants and their Beneficiaries. In
determining its investments hereunder, the Trustee shall take account of
the advice provided by the Administrator as to funding policy and the
short and long-range needs of the Plan based on the evident and probable
requirements of the Plan as to the time benefits shall be payable and
the requirements therefor.
21.9 PERIOD OF THE TRUST. If it shall be determined that the applicable State
law requires a limitation on the period during which the Employer's
Trust shall continue, then such Trust shall not continue for a period
longer than 21 years following the death of the last of those
Participants including future Participants who are living at the
Effective Date hereof. At least 180 days prior to the end of the
twenty-first year as described in the first sentence of this Section the
Employer, the Administrator and the Trustee shall provide for the
establishment of a successor trust and transfer of Plan assets to the
trustee. If applicable State law requires no such limitation then this
Section-shall not be operative.
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<PAGE> 142
ARTICLE =I
ADOPTING EMPLOYER
22.1 ELECTION TO BECOME ADOPTING EMPLOYER. With the consent of the Employer
and Trustee, if any, any employer, which along with the Employer is
included in a group of employers which constitute a controlled group of
corporations (as defined in Code section 414(h) as modified by section
415(h)) or which constitutes trade or businesses (whether or not
incorporated) which are under common control (as defined in section
414(c) as modified by section 415(h)) or which constitutes an
affiliated service group as defined in section 414(m) and is identified
as an Adopting Employer in the Adoption Agreement, may adopt this Plan
and all of its provisions.
22.2 DEFINITION. Any employer eligible to adopt this Plan under the
provisions of Section 22.1 and which adopts this Plan and all of its
provisions shall be known as an Adopting Employer and shall be included
within the term Employer, as defined in Section 1.27.
22.3 EFFECTIVE DATE OF PLAN. The effective date of the Plan for an Adopting
Employer on other than the date specified in the Adoption Agreement
shall be the first day of the Plan Year in which such Adopting Employer
adopts this plan.
22.4 FORFEITURES. Forfeitures of any nonvested portion of a Participant's
Account, as selected by the Employer in the Adoption Agreement, shall
be allocated only to other Participants who are employed by the
Adopting Employer who made the contributions to such Participant's
Account, or shall be used as a credit only for such Adopting Employer.
22.5 CONTRIBUTIONS. All contributions made by an Adopting Employer shall be
determined separately by each Adopting Employer and shall be paid to
and held by the Plan for the exclusive benefit of the Employees of such
Adopting Employer and the Beneficiaries of such Employees, subject to
all the terms and conditions of this Plan. The Administrator shall keep
separate books and records concerning the affairs of each Adopting
Employer and as to the accounts and credits of the Employees of each
Adopting Employer.
22.6 EXPENSES. Subject to Section 14.3, the expenses necessary to administer
the Plan of any Adopting Employer shall be taken from accounts of
Participants who are Employees of such Adopting Employer unless paid
for by such Adopting Employer. The expenses necessary to administer the
Plan for each Adopting Employer shall be determined by the ratio of the
value of all Participants' Accounts of such Adopting Employers to the
total value of all Participants' Accounts of each Adopting Employer.
22.7 SUBSTITUTION OF PLANS. Subject to the provisions of Section 15.7, and
Article XVIII, any Adopting Employer shall be permitted to withdraw
from its participation in this Plan. The consent of the Employer or any
other Adopting Employer shall not be required.
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<PAGE> 143
22.8 TERMINATION OF PLANS. If any Adopting Employer elects to terminate its
Plan pursuant to Sections 17.4, 17.5 and 17.6, such termination shall
in no way affect the Plan of any other Adopting Employer.
22.9 AMENDMENT. Amendment of this Plan by the Employer or any Adopting
Employer shall only be by the written consent of the Employer and each
and every Adopting Employer and with the consent of the Trustee, if
any, where such consent is necessary in accordance with the terms of
this Plan.
22.10 ADMINISTRATOR'S AUTHORITY. The Administrator shall have authority to
make any and all necessary rules or regulations, binding upon all
Adopting Employers and all Participants, to effectuate the purpose of
this Article.
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<PAGE> 1
EXHIBIT 10.23
May 9, 1996
Wyndham Hotel Company Ltd.
2001 Bryan Street
Suite 2300
Dallas, Texas 75201
Attn: James D. Carreker
Re: Promissory Note dated March 8, 1995, payable by Almo Hotel
Company, Ltd. and Airportel, Inc. to Wyndham Hotel Company
Ltd. in the original principal amount of $4,560,000 (the
"Promissory Note")
Ladies and Gentlemen:
This letter evidences our agreement concerning the above-referenced
Promissory Note. Upon execution of this letter by you and us, we will pay to
you, in cash, $4,560,000, which is the face amount of the Promissory Note. You
and we acknowledge that the Promissory Note evidences the "Improvement Loan"
provided for under the terms of the Management Agreement dated March 1, 1995
concerning your management of the hotel known as the Wyndham at Los Angeles
Airport (the "Management Agreement"). The Promissory Note is subject to
repayment in accordance with its terms and the terms of the Management
Agreement.
In consideration of our $4,560,000 payment to you, you agree to pay to
us, promptly upon receipt, any and all payments that you receive from the
payors, or in respect of the payors' obligations, under the Promissory Note.
You also agree that you will continue to own and hold the Promissory Note and
will not transfer, assign or pledge to any third party the Promissory Note or
any of your right, title and interest therein or thereunder; provided, however,
that the Promissory Note may be pledged or collaterally assigned in connection
with any senior credit facility obtained by you or in connection with any
replacement or refinancing thereof.
In addition to the foregoing, you acknowledge that, as of the date
hereof, you have advanced the principal sum of $2,167,060 under the Improvement
Loan and that you are obligated to advance, in accordance with the terms of the
Management Agreement, an additional $2,392,940 under the Improvement Loan. You
agree that, in consideration of our paying to you the full $4,560,000 face
amount of the Promissory Note as of the date hereof, you will pay to us
interest on the portion of the Improvement Loan that from time to time remains
unfunded after the date of our payment to you. Such interest will accrue from
time to time at a rate per annum equivalent to the rate of interest that you
earn from time to time
<PAGE> 2
Wyndham Hotel Company Ltd.
May 9, 1996
Page 2
on the cash collateral account maintained by you with Bank One Texas, N.A. (or
any other financial institution) in support of the letter of credit that has
been issued (and any replacement letter of credit subsequently issued) for the
purpose of funding, or securing the funding of, the Improvement Loan. Accrued
interest will be payable each July 31, October 31, January 31 and April 30 and
within thirty days after your funding of the final installment of the
Improvement Loan. The periodic payment of interest will cover interest earned
through the end of the preceding calendar month, and the final payment of
interest will cover all accrued and unpaid interest.
References in this letter to "you" or "your" are to Wyndham Hotel
Company Ltd., and to "us," "our" or "we" are to WHC LAX Associates, L.P. This
letter agreement shall be governed by, and construed in accordance with, the
substantive laws of the State of Texas.
Please acknowledge your agreement to the foregoing by executing an
original of this letter in the space provided below and returning the executed
original to the undersigned.
Very truly yours,
WHC LAX ASSOCIATES, L.P.
By: WHC LAX Associates I, Inc.,
its General Partner
By: /s/ ERIC A. DANZIGER CSM
----------------------------
Name: Eric A. Danziger
--------------------------
Title: V.P.
-------------------------
Acknowledged and agreed
this 9th day of May, 1996.
WYNDHAM HOTEL COMPANY LTD.,
a Texas limited partnership
By: Wyndham Hotel Management
Corporation, a Texas corporation,
General Partner
By: /s/ JAMES D. CARREKER CSM
----------------------------------
Name: James D. Carreker
--------------------------------
Title: President
-------------------------------
<PAGE> 1
EXHIBIT 10.27
[PATRIOT AMERICAN LOGO]
April 10, 1996
Wyndham Hotels and Resorts
Attention: Ms. Anne L. Raymond
Executive Vice President & CFO
2001 Bryan Street, Suite 2300
Dallas, Texas 75201-3075
Re: Strategic alliance to acquire and lease Wyndham hotels
Dear Ms. Raymond:
This letter of intent outlines a three-stage strategic alliance between Patriot
American Hospitality, Inc. ("Patriot") and Wyndham Hotels and Resorts
("Wyndham").
1. Stage I. Initially, Patriot's operating partnership subsidiary, Patriot
American Hospitality Partnership, L.P. (the "Operating Partnership") will
acquire the Stage I Hotels from affiliates of Wyndham that hold title (the
"Sellers") and lease the Stage I Hotels to an affiliate of Wyndham ("Lessee").
The principal terms of the Contracts of Sale and the Leases for the Stage I
Hotels are stated in this letter of intent. The "Stage I Hotels" are:
191-Room Wyndham Midtown Atlanta, Georgia
168-Room Wyndham Las Colinas, Irving, Texas
148-Room Wyndham Novi, Detroit, Michigan
162-Room Wyndham Wood Dale, Chicago, Illinois
473-Room Wyndham Greenspoint, Houston, Texas
2. Stage II. As Contracts of Sale are being negotiated for the Stage I
Hotels. Wyndham and Patriot will proceed in good faith to reach agreement on
purchase and lease terms for the following hotels (the "Stage Hotels"):
239-Room Wyndham Bristol, Washington, D.C.
408-Room Wyndham Northwest Chicago, Illinois
410-Room Wyndham Palm Springs, California
300-Room Wyndham Harbour Island, Tampa, Florida
3. Stage III. Finally Patriot and Wyndham contemplate joining in an
agreement whereby in the future, proposed additions to Wyndham's portfolio of
luxury, full-service hotels will be presented to Patriot on some preferred
basis.
4. Press Releases. None of Patriot, Wyndham, Seller, or Lessee will issue
any public statement about this transaction or relationship without providing
the others a copy of the proposed statement and receiving their prior written
approval of the content; provided, however, such approval right may not be
exercised in any manner that prevents any disclosure required by law or by the
rules of any stock exchange on which securities of any party are traded.
PATRIOT AMERICAN HOSPITALITY, INC.
Suite 1500 3030 LBJ Freeway Dallas, Texas 75234 214/888-8000 Fax 214/688-8029
<PAGE> 2
Wyndham Hotels and Resorts
April 10, 1996
Page 2
5. Purchase Price. A total of $96,000,000 for the Stage I Hotels allocated
as follows:
Wyndham Midtown Atlanta $16,730,000
Wyndham Las Colinas $16,120,000
Wyndham Novi $5,770,000
Wyndham Wood Dale $13,380,000
Wyndham Greenspoint $44,000,000
Except as provided in Paragraph 8(b), the purchase price will be payable
in cash.
6. Performance Payments. The total purchase price may increase if the
following "Performance Payments" are earned:
(a) If the Net Rent for the Wyndham Midtown Atlanta equals or exceeds
11% of Invested Capital for calendar 1996 on an annualized basis and 12% of
Invested Capital for calendar year 1997, the Seller of that hotel will earn a
Performance Payment of $2,000,000 payable in cash. "Net Rent" means in the case
of the Wyndham Midtown Atlanta, total rent paid under the Lease of the Wyndham
Midtown Atlanta (without subsidy through reduction of management fees or other
contributions by Lessee or its affiliates) less any amounts payable by the
Operating Partnership for taxes, insurance, and capital reserves, which
reserves will equal 4% of gross revenues. "Invested Capital" means in the case
of the Wyndham Midtown Atlanta, (i) $18,730,000, plus (ii) all costs and
expenses incurred by Patriot or its affiliates in connection with the
acquisition and leasing of the Wyndham Midtown Atlanta (not to exceed
$250,000), plus (iii) expenditures to carry out the initial renovation budget
for the Wyndham Midtown Atlanta, which unless otherwise agreed by Patriot and
the Seller of the Wyndham Atlanta will not exceed $500,000.
(b) If the Net Rent for the Wyndham Greenspoint equals or exceeds 11% of
Invested Capital for calendar 1996 on an annualized basis and 12% of Invested
Capital for calendar year 1997, the Seller of that hotel will earn a
Performance Payment of $1,000,000 payable in cash. "Net Rent" means in the case
of the Wyndham Greenspoint, total rent paid under the Lease of the Wyndham
Greenspoint (without subsidy through reduction of management fees or other
contributions by Lessee or its affiliates) less any amounts payable by the
Operating Partnership for taxes, insurance, and capital reserves, which
reserves will equal 4% of gross revenues. "Invested Capital" means in the case
of the Wyndham Greenspoint, (i) $45,000,000, plus (ii) all costs and expenses
incurred by Patriot or its affiliates in connection with the acquisition and
leasing of the Wyndham Greenspoint (not to exceed $250,000), plus (iii)
expenditures to carry out the initial renovation budget for the Wyndham
Greenspoint, which unless otherwise agreed by Patriot and the Seller of the
Wyndham Greenspoint will not exceed $500,000.
7. Lease Terms. When the Contracts of Sale for the Stage I Hotels are
signed by the Sellers, Lessee will sign an agreement to enter into Leases for
each of the Stage I Hotels with the Operating Partnership when the closings
under the Contracts of Sale occur. The identity, ownership, and management of
Lessee must be acceptable to Patriot, and the Leases must comply fully with
federal income tax requirements applicable to real estate investment trusts.
Subject to the foregoing, the Leases will provide that:
<PAGE> 3
Wyndham Hotels and Resorts
April 10, 1996
Page 3
(a) Lessee's initial minimum net worth will be $3,000,000. During
the terms of the Leases thereafter, Lessee will maintain a minimum net worth
equal to 20% of the aggregate pro forma annual rents each year under the Leases
and any future leases between Lessee and the Operating Partnership or other
affiliates of Patriot. Up to 50% of the required minimum net worth may consist
of demand notes from Wyndham or other shareholders of Lessee acceptable to
Patriot, and the balance of the required minimum net worth will consist of cash
and other working capital. Once the portfolio of hotels leased by Lessee from
the Operating Partnership includes at least 1,585 hotel guest rooms, the
minimum net worth maintenance requirement will be changed to 17.5% of the pro
forma annual rents each year for so long thereafter as the number of leased
hotel guest rooms exceeds 1,585; provided, however, such change will not result
in the reduction of the required minimum net worth in effect immediately prior
thereto.
(b) Rent will equal the greater of base rent or percentage rent,
plus additional rent, and will be determined as follows:
(i) Base rent will equal the sum of (A) 10% of the Rent
Computation Amount, plus (B) ad valorem taxes, insurance premiums payable by
the Operating Partnership, and capital reserves at 4% of gross revenues, all as
mutually agreed on a pro forma basis for calendar year 1996 on an annualized
basis. The Operating Partnership will be responsible for paying ad valorem
taxes, certain insurance premiums, and capital expenditures up to the amount of
the 4% capital reserve. The "Rent Computation Amount" for each Stage I Hotel
will equal (C) the purchase price paid for the hotel, plus (D) all costs and
expenses incurred by Patriot or its affiliates in connection with the
acquisition and leasing of the hotel (but no more than $250,000 per hotel),
plus (E) renovation expenditures actually incurred during the first Lease year
(i.e., the first 12 months from closing) at each Stage I Hotel in accordance
with the renovation budget, which will not exceed $1,900,000 in the aggregate
unless otherwise agreed by Patriot and Wyndham.
(ii) Base rent will be adjusted as follows:
(A) Initially, base rent will be set using a Rent
Computation Amount based on estimated renovation expenditures for 1996 in
accordance with the first Lease year's renovation budget, and at the end of
1996, an appropriate reconciliation will be made based on actual expenditures in
1996. In 1997, base rent will be set using a Rent Computation Amount based on
the expenditure of the full agreed amount of the first Lease year's renovation
budget, and at the end of 1997, an appropriate reconciliation will be made based
on total actual expenditures in accordance with such renovation budget.
(B) If the Performance Payment for the Wyndham
Midtown Atlanta is earned, base rent for that hotel will increase in 1998 for
that year and all future years by $200,000 (10% of the applicable Performance
Payment). If the Performance Payment for the Wyndham Greenspoint is earned, base
rent for that hotel will increase in 1998 for that year and all future years by
$100,000 (10% of the applicable Performance Payment).
(C) Base rent will be adjusted annually beginning
in 1997 to reflect increases in the consumer price index.
<PAGE> 4
Wyndham Hotels and Resorts
April 10, 1996
Page 4
(iii) Percentage rent and break points (including annual
adjustments based on changes in the consumer price index plus any applicable
margin) will be determined as shown on Schedule I to this letter.
(iv) It is anticipated that as the result of the sale of the Stage
I Hotels, the amount of annual taxes on the Stage I Hotels may increase or
decrease from the annual taxes assumed in the lease model used to develop
Schedule I to this letter). The annual taxes assumed in the lease model are
reflected on Schedule II to this letter. This one-time increase or decrease
from assumed taxes as the result of the sale of the Stage I Hotels will occur
in 1996 or 1997, depending on the schedule followed by each taxing authority.
When the amount of such one-time increase or decrease in annual taxes is
determined for a particular Stage I Hotel, either (A) the annual base rent will
be adjusted downwards by the amount of such decrease in annual taxes, or (B)
additional rent equal to the amount of such increase in annual taxes will begin
to be payable; provided, however, the arithmetic sum of the downward
adjustments in base rent pursuant to clause (A) plus the additional rent
pursuant to clause (B), expressed in each case on an annualized basis, will not
exceed an aggregate annual amount of $150,000, such limitation to be applied
among the Stage I Hotels at which additional rent may be payable in a
reasonable manner to be agreed to before the Contracts of Sale are signed. For
example, if at two of the hotels there are downward adjustments in base rent of
$25,000 and $50,000 per annum and if at the other three hotels, additional rent
begins to accrue at the rate of $125,000, $75,000, and $50,000 per annum, the
arithmetic sum is $175,000, resulting in the application of such $150,000
aggregate limit to additional rent payable at three hotels. Once additional rent
begins, it will continue to be payable throughout the remainder of the 10-year
primary term of the applicable Lease; but both the amount of the additional
rent and the $150,000 aggregate limitation will be adjusted annually once each
goes into effect to reflect increases in the consumer price index.
(c) Patriot will fund a renovation budget for the Stage I Hotels, which
will not exceed an aggregate of $1,900,000 in the first Lease year unless
otherwise agreed by Patriot and Wyndham. The budgeted amount will be allocated
among the Stage I Hotels as determined by Patriot based on renovation needs.
(d) The term of each Lease will expire in 10 years. Each Lease will
provide two 5-year extension options that may be exercised by Lessee at its
sole option if the performance standards in Paragraph 7(g) have been met for the
particular hotel at the time each option is exercised. Base rent in each
extension term will be adjusted upwards by (i) 10% of any capital expenditures
from sources other than the 4% capital reserve that have not previously been
included in the calculation of base rent, (ii) any budgeted increase in ad
valorem taxes and insurance premiums for the initial year of the extension term
over the amounts for each item previously included in the calculation of base
rent, and (iii) the amount by which 4% of budgeted gross revenue for the
initial year of the extension term exceeds the amount of the capital reserve
previously included in the calculation of base rent. Percentage rent during
each extension term will be calculated as provided during the 10-year primary
term except that any change in breakpoints from year to year will be computed
based on changes in the consumer price index without any additional marginal
percentage. Additional rent during each extension term will equal the amount
by which ad valorem taxes exceeds the amount of taxes included in base rent
during that extension term. In all other respects, the terms of the Leases will
remain unchanged during any extension term.
<PAGE> 5
Wyndham Hotels and Resorts
April 10, 1996
Page 5
(e) The Stage I Hotels will be operated and managed as "Wyndham" or
"Wyndham Garden" hotels for fees and on other terms reasonably satisfactory to
Patriot. The management agreements will be subordinated (i.e., both in terms of
termination and management fee payment as to base rent only to the Leases.
(f) Nonpayment of rent or any other breach of one Lease will be a
breach of all other Leases (including any future leases between the Operating
Partnership and Lessee).
(g) If in any year a hotel fails to achieve at least 90% of budgeted
annual room revenues, if the RevPAR yield index (RevPAR of the hotel as a
percentage of the RevPAR of the hotel's initial competitive set [to be mutually
agreed to] as reflected in Smith Travel Research reports) decreases by more
than 10 percentage points from the initial RevPAR yield index, or if the ratio
of gross operating profit to gross revenues decreases by more than 5 percentage
points, Lessee will have until the end of next year in which to achieve the
performance standards described above for such year. If a performance standard
is not achieved by the end of such year, the Operating Partnership may, as its
sole and exclusive remedy, terminate the Lease of the underperforming hotel
unless Lessee has taken appropriate actions to achieve the performance
standards and the inability to achieve the same is the result primarily of
circumstances outside the control of Lessee, including without limitation,
general market decline or new competition entering the market.
(h) A Lease may be terminated if the hotel is sold during the term. If
such termination occurs during the initial 10-year term, Lessee will be
entitled to receive (i) reimbursement for reasonable and customary costs paid
to parties unaffiliated with Wyndham because of the termination, (ii)
reimbursement for the costs of relocation for any executive level employees of
the hotel, including reasonable relocation costs and costs of temporary
housing (not to exceed 30 days), and (iii) the fair market value of the
profits it would have derived from the leasehold for the unexpired balance of
the initial term either through a cash payment or through a substitute lease at
another hotel that can reasonably be expected to provide equivalent profits. In
computing fair market value for this purpose, a 15% per annum discount rate
will apply, and Lessee's profit will be deemed to equal 75% of Lessee's
leakage. For this purpose, "leakage" will be computed in the manner reflected in
the economic model prepared by Patriot from which Schedule I to this letter was
derived, which model in general terms computes "leakage" as Lessee's net
revenue from operation of a hotel after payment of rent owing to the Operating
Partnership and operating expenses of the hotel other than management fees. The
parties agree that 25% of Lessee's leakage reasonably approximates the costs of
leasing and management that would normally be charged against leakage for
computing profit. Lessee will be responsible for paying termination fees or
charges, if any, payable under any hotel management contract with Wyndham or
its affiliates.
(i) Based on the understanding that inventory and cash-on-hand (other
than reserves for FF&E and for taxes and insurance) will be included in the
purchase price, the Operating Partnership will provide to Lessee any inventory
and cash-on-hand received from the Sellers without reimbursement or additional
charge to Lessee. Cash reserves for FF&E, taxes, and insurance will remain the
property of Sellers. On termination or expiration of any Lease, the hotel must
include an equivalent inventory.
<PAGE> 6
Wyndham Hotels and Resorts
April 10, 1996
Page 6
(j) There will be no noncompetition provision that keeps Wyndham or
its affiliates (other than Lessee) from becoming lessees of hotels owned by
other real estate investment trusts.
8. Contract of Sale Terms. Patriot's subsidiary, PAH Acquisition Corporation
("Purchaser"), will enter into Contracts of Sale with the Sellers on the
following terms:
(a) The purchase price will include the land on which the hotel is
situated and all improvements, fixtures, and tangible and intangible personal
property associated with a hotel (including inventory and cash-on-hand other
than cash reserves for FF&E, taxes, and insurance). Except as otherwise
provided in Paragraph 8(b), each hotel will be conveyed free and clear of all
debt and liens.
(b) Prior to closing, the Seller of the Wyndham Greenspoint will have
received a $500,000 cash capital contribution, and at closing, a $500,000
portion of the purchase price for the Wyndham Greenspoint will be paid by the
issuance of units of limited partnership interest in the Operating Partnership
("OP Units") to the Seller of the Wyndham Greenspoint. One OP Unit will be
deemed to have the same value as the average closing price of one share of
Patriot's common stock on the New York Stock Exchange for the five trading days
immediately preceding closing. If the parties agree before the Contract of Sale
is signed, the amount of such capital contribution and the corresponding amount
of OP Units may be increased. Accordingly, the following special provisions
apply to the Wyndham Greenspoint transaction;
(i) The Wyndham Greenspoint will be conveyed to the Operating
Partnership at closing subject to debt that is immediately payable or
prepayable without premium or other charge in an amount of no more than
$43,000,000. The existing debt will immediately be retired by the Operating
Partnership and replaced by the debt required pursuant to Paragraph 8(b)(ii).
(ii) As a condition to closing, the Operating Partnership must
have obtained and closed a loan in an amount of at least $22,000,000 that is
without recourse to any partner of the Operating Partnership and that is
secured by the Wyndham Greenspoint. The required loan may consist of a portion
of the Patriot's line of credit so long as (A) such portion of the line of
credit is a nonrecourse liability of the Operating Partnership for purposes of
IRC Section 752 and Treasury Regulation Section 1.752-1(a)(2), (B) is secured
only by the Wyndham Greenspoint, and (C) is cross-defaulted with the entire
line of credit; provided, however, if default occurs with respect to such loan,
the Operating Partnership will cure the default or replace such loan with other
nonrecourse debt. All legal fees, loan fees, and other out-of-pocket costs and
expenses of providing such loan will be funded at closing by the Seller of the
Wyndham Greenspoint.
(iii) The Operating Partnership will agree that as of the end of
each calendar year through 1999, it will have debt meeting the criteria in
Paragraph 8(b)(ii). The Operating Partnership will agree not to dispose of the
Wyndham Greenspoint during any calendar year through 1999, unless (A) such
disposition is structured as a tax-free like-kind exchange under Section 1031
of the Internal Revenue Code of 1986 (which exchange will not include any cash
consideration in excess of that necessary to defray usual and customary legal
and closing costs and expenses incurred by the Operating Partnership in
connection with such exchange), and (B) the replacement property received is
encumbered as of the end of each calendar year through 1999 by debt meeting the
criteria in Paragraph 8(b)(ii). The Operating Partnership will elect to
<PAGE> 7
Wyndham Hotels and Resorts
April 10, 1996
Page 7
use the so-called "remedial method" for computing allocations of income, gain,
loss, and deductions attributable to the Wyndham Greenspoint as set forth in
Treasury Regulation section 1.704-3(d).
(iv) The Operating Partnership must receive appropriate evidence and
assurances that OP Units may be issued to the Seller of the Wyndham Greenspoint
at closing without registration under Federal or state securities laws. The
Operating Partnership will permit the OP Units issued to the Seller of the
Wyndham Greenspoint to be distributed to partners of the Seller after closing
if all legal and contractual conditions and requirements of the Operating
Partnership with respect to such distribution have been satisfied. The limited
partnership agreement of the Operating Partnership provides that on certain
terms and conditions after the expiration of a one-year holding period from
issuance, holders of OP Units will have the option to redeem OP Units for cash,
or at Patriot's sole option, for common stock issued by Patriot. If Patriot
elects to issue common stock in redemption of OP Units, the stock will not be
registered. Patriot will, however, enter into a registration rights agreement
on its standard form providing that subject to any limitations that may be
imposed by Patriot's underwriters, such stock may be included in any subsequent
registration statement that Patriot otherwise elects to put into effect. All
legal fees and other direct expenses of Patriot for the Operating Partnership
in issuing OP Units to the Seller of the Wyndham Greenspoint will be funded at
closing by the Seller of the Wyndham Greenspoint.
THIS IS NOT AN OFFER TO SELL OP UNITS. ANY SUCH OFFER WILL BE MADE,
IF AT ALL, ONLY AFTER RECEIPT OF APPROPRIATE CERTIFICATIONS ABOUT
EACH SELLER'S STATUS AS AN ACCREDITED INVESTOR AND AFTER APPROPRIATE
DISCLOSURE OF CONDITIONS AND RISKS ASSOCIATED WITH OP UNITS. NO
REPRESENTATION IS MADE ABOUT THE TAX, LEGAL, OR ECONOMIC CONSEQUENCES
OF THE ACQUISITION, OWNERSHIP, OR DISPOSITION OF OP UNITS, AS TO
WHICH ANYONE CONSIDERING OWNING OP UNITS IS ENCOURAGED TO CONSULT ITS
OWN INDEPENDENT ADVISORS.
(v) Neither Patriot, the Operating Partnership, nor any other
affiliate of Patriot will make any warranty or representation with respect to
the tax treatment desired to be achieved by the Seller of the Wyndham
Greenspoint or any of its partners, and will require appropriate releases from
such Seller and its partners.
(vi) Before the Contract of Sale for the Wyndham Greenspoint is
signed, the Seller of the Wyndham Greenspoint will furnish to the Operating
Partnership any information about itself and its partners that is reasonably
necessary to evaluate and implement the tax structure of the transaction
envisioned by these special provisions. When such Contract of Sale is signed,
the Operating Partnership and the Seller of the Wyndham Greenspoint will also
enter into mutually satisfactory written agreements intended to effectuate
these special provisions.
(c) Once the Sellers and Purchaser enter into the Contracts of Sale,
Purchaser will deposit in escrow with Commonwealth Land Title Insurance
Company, 717 North Harwood, Suite 2610, Dallas, Texas, demand notes executed
by Patriot to the order of the Sellers in the aggregate principal sum of
$750,000. If the Contracts of Sale are not terminated by Purchaser, then at the
end of the Inspection Period the demand notes will be replaced with an equal
amount of cash, and the demand notes will be cancelled and returned to
Purchaser. If a closing fails to occur solely as the result of an uncured
default by Purchaser under a Contract of Sale, the Seller will be entitled to
the cash on deposit as its sole and exclusive remedy. If a closing fails to
occur
<PAGE> 8
Wyndham Hotels and Resorts
April 10, 1996
Page 8
for any other reason, the cash on deposit will be returned to Purchaser, who
will thereafter have no further liability to that Seller, Wyndham, or any
affiliate of Wyndham in connection with that Contract of Sale (except for
liabilities, such as property inspection indemnities, that are expressly to
survive in such event). If an uncured default by any Seller occurs under a
Contract of Sale at or before closing. Purchaser's sole and exclusive remedies
will be (i) either to terminate the Contract of Sale or specifically enforce the
Contract of Sale, and (ii) in the case of termination, to recover out-of-pocket
costs and expenses (including legal fees and disbursements) relating to the
transactions contemplated by this letter of intent up to, but not in excess of
$750,000 in the aggregate; provided, however, such limitation will not apply to
legal fees and disbursements incurred in Purchaser's enforcing its remedies
under the Contracts of Sale, which will be recoverable either in the event of
termination or in the event Purchaser enforces specific performance.
(d) Purchaser's obligation to purchase the Stage I hotels will be
contingent on its inspection and discretionary approval of (i) the structural,
mechanical, and environmental condition of the hotels, (ii) financial and
operating records, leases, contracts, licenses, permits, and other information
pertaining to the hotels or their operation, (iii) the status of title, and
(iv) all other matters that Purchaser considers relevant. Purchaser will have
45 days after the date on which the Contracts of Sale are signed (the
"Inspection Period") to complete its inspections and to elect whether to
terminate the Contracts of Sale. If Purchaser elects to terminate a Contract of
Sale, the escrowed demand note under that Contract of Sale will be returned to
Purchaser, and none of the parties to that Contract of Sale will have any
further liability to the other parties or to Wyndham or any affiliate of
Wyndham in connection with that Contract of Sale (except for liabilities, such
as property inspection indemnities, that are expressly to survive such
termination). During the Inspection Period, an accounting firm selected by
Purchaser may conduct audits of the Stage I Hotels at Purchaser's expense. The
Sellers will make necessary books and records available to the auditors, and
will cooperate as reasonably necessary to complete the audits before the end of
the Inspection Period.
(e) Closing will occur no later than 15 days after the end of the
Inspection Period. Purchaser will have the unrestricted right to assign the
Contracts of Sale to the Operating Partnership or other affiliates of Patriot.
Before the Contracts of Sale for the Stage I Hotels are signed, Purchaser and
the Sellers will agree on conditions addressing the interdependence of the
closings among the separate Contracts of Sale, which must include the condition
that unless closing occurs under the Contract of Sale for the Wyndham
Greenspoint, Purchaser will not be obligated to close under any other Contract
of Sale for any other Stage I Hotel.
(f) At their expense, the Sellers will furnish commitments for title
insurance (including any necessary abstracts or title opinions), copies of all
title exceptions, uniform commercial code filing searches, current certified
as-built surveys acceptable to Purchaser, and ALTA owner policies of title
insurance issued by Commonwealth Land Title Insurance Company in the amount of
the purchase price. The owner policies of title insurance must insure title
subject only to those matters approved by Purchaser in its review of title and
must include endorsements and deletions typically required by institutional
real property investors.
(g) Ad valorem taxes, occupancy rents, operating expenses, revenues, and
the like will be prorated as of the closing date. All state, county, and local
transfer taxes will be paid by the
<PAGE> 9
Wyndham Hotels and Resorts
April 10, 1996
Page 9
Sellers, if that is generally the custom in the states where such taxes apply,
and all other recording fees, escrow charges, and other similar closing costs
will be allocated between the Sellers and Purchaser in the manner customary for
transactions of this nature in the states where the hotels are located. Each
party will pay the fees and expenses of the attorneys, accountants, and other
consultants that it employs.
(h) The Sellers will pay all brokerage and other similar commissions
and fees, if any, relating to the sale of the Stage I Hotels. Each of Patriot,
Wyndham, and the Sellers represents and warrants that it has not contracted with
any broker or agent to whom a fee or commission would be payable in connection
with the transactions contemplated by this letter of intent.
9. Negotiation Period. Patriot and Wyndham will attempt in good faith to
cause binding Contracts of Sale and Leases for the Phase I Hotels to be
negotiated and signed before May 15, 1996. Before then neither Wyndham nor any
of the Sellers or other affiliates of Wyndham will solicit, make, negotiate,
or accept any other offer to purchase any of the Stage I Hotels.
10. Confidentiality. The terms of this letter of intent and any nonpublic
information furnished by one party to the other must be kept confidential.
Except as may be required by law or as determined to be necessary or
appropriate by Patriot or Wyndham to satisfy disclosure and reporting
obligations of Patriot or Wyndham or their respective affiliates, confidential
information may not be disclosed by one party without the other's prior
written consent except to (a) officers, directors, employees, and partners of
Wyndham, the Sellers, Patriot, or affiliates of Patriot, (b) Patriot's line of
credit lender, and (c) employees, agents, and representatives of the foregoing.
11. Letter of Intent. None of the Sellers, Wyndham, or Patriot or any of its
affiliates will have any obligation to buy, sell, or lease any of the Stage I
Hotels or any other hotel referred to in this letter of intent unless and until
binding Contracts of Sale and Leases are fully executed by all appropriate
parties. Before entering into the Contracts of Sale, each of the Sellers must
have obtained all necessary consents and approvals from their respective
partners, and the execution of such agreements will not occur unless such
consents and approvals are obtained. Except for the provisions of Paragraphs 4,
9, and 10, neither Patriot nor any of its affiliates will have any liability or
obligation to the Sellers, Wyndham, or any affiliate of any of them by virtue
of this letter of intent or any reliance thereon; and subject to the same
exceptions, neither Wyndham nor any of its affiliates will have any liability
or obligation to Patriot or any affiliate of Patriot by virtue of this letter
of intent or any reliance thereon.
To reflect your agreement, please sign and return a copy of this letter to
Patriot at the address shown above no later than 5:00 p.m. on April 16, 1996,
failing which this offer will terminate at that time without further notice.
Sincerely,
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/ THOMAS W. LATTIN
---------------------------------
Thomas W. Lattin, President
<PAGE> 10
Wyndham Hotels and Resorts
April 10, 1996
Page 10
AGREED TO ON ___________________________:
WYNDHAM HOTELS AND RESORTS
By: /s/ ANNE L. RAYMOND
-------------------------------------
Anne L. Raymond, Vice President & CFO
Seller -- Wyndham Midtown Atlanta
ATLANTA MIDTOWN ASSOCIATES,
a Texas general partnership
By: Atlanta Midtown Partners,
its general partner
By:_______________________________________
Harlan R. Crow, General Partner
Seller -- Wyndham Las Colinas
CLC LIMITED PARTNERSHIP,
a Texas limited partnership
By: LB-4, Inc.,
its general partner
By:_______________________________________
Trammell Crow, President
<PAGE> 11
Wyndham Hotels and Resorts
April 10, 1996
Page 10
AGREED TO ON ________________________________:
WYNDHAM HOTELS COMPANY LTD.
By: Wyndham Hotel Management Corporation, General Partner
By:__________________________________________
Anne L. Raymond, Vice President & CFO
Seller -- Wyndham Midtown Atlanta
ATLANTA MIDTOWN ASSOCIATES,
a Texas general partnership
By: Atlanta Midtown Partners,
its general partner
By: /s/ HARLAN R. CROW
-----------------------------------
Harlan R. Crow, General Partner
Seller -- Wyndham Las Colinas
CLC LIMITED PARTNERSHIP,
a Texas limited partnership
By: LB-4, Inc.,
its general partner
By: /s/ HARLAN R. CROW
-----------------------------------
Harlan R. Crow
<PAGE> 12
Wyndham Hotels and Resorts
April 10, 1996
Page 11
Seller -- Wyndham Novi
NOVI GARDEN HOTEL ASSOCIATES,
a Texas general partnership
By: Novi Garden Hotel Partners,
its general partner
By: Novi Garden Hotel Corporation,
its general partner
By: /s/ HARLAN R. CROW
--------------------------------
Harlan R. Crow, President
Seller -- Wyndham Wood Dale
WOOD DALE GARDEN HOTEL PARTNERSHIP,
a Texas general partnership
By: CBP Wood Dale Partnership,
its general partner
By: TCF Hotels, L.P.,
its general partner
By: Mill Spring Holdings, Inc.,
its general partner
By: /s/ S.T. GROENTEMAN
--------------------------------
S.T. Groenteman, Vice President
<PAGE> 13
Wyndham Hotels and Resorts
April 10, 1996
Page 12
Seller -- Wyndham Greenspoint
HOUSTON GREENSPOINT HOTEL ASSOCIATES,
a Texas limited partnership
By: Greenspoint Associates, Ltd.,
its general partner
By: The New Greenspoint Hotel Corporation,
its general partner
By: /s/ HARLAN R. CROW
----------------------------------------
Harlan R. Crow, President
<PAGE> 1
EXHIBIT 10.28
COMPUTERIZED RESERVATIONS
SERVICES AGREEMENT
This Agreement is made as of the _____ day of _______________________,
1996, between ISIS 2000, a Texas limited partnership, having a principal office
address at ____________________________________ ("ISIS 2000") and Wyndham Hotel
Corporation, a Delaware corporation, having a principal office address at
___________________________________________ ("Wyndham").
WHEREAS, Wyndham is in the business of owning and operating hotels;
WHEREAS, ISIS 2000 is developing and will operate a centralized
reservations system and facility;
WHEREAS, ISIS 2000 also provides equipment and software that can be
linked to the centralized reservation facility to form a reservation network;
WHEREAS, Wyndham desires to have ISIS 2000 provide Wyndham with its
services in this regard;
NOW, THEREFORE, ISIS 2000 and Wyndham agree as follows:
I. OPERATION OF THE ISIS 2000 SYSTEM.
1.1 Services Provided by ISIS. ISIS 2000 shall provide to and on
behalf of Wyndham, and Wyndham shall accept the following services (the "ISIS
Services"):
1.1.1 the data processing services and data base support
services set forth on Schedule 1.1.1 hereof;
1.1.2 the telephone sales services set forth on Schedule 1.1.2
hereof;
1.1.3 a data network for Wyndham Locations and Sites;
1.1.4 a single image property management system.
1.1.5 The ISIS Services provided under Sections 1.1.1,
<PAGE> 2
1.1.2 and 1.1.3 will be provided beginning on the Cutover Date; the ISIS
Services described in Section 1.1.4 will be provided commencing in 1997.
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<PAGE> 3
1.2 In order to provide the ISIS Services, ISIS 2000 shall install a
network of central computers connected by means of dedicated data access to
ISIS Workstations located at Wyndham Locations that will provide the
functionality described in Section 1.2 (the "ISIS System").
1.3 Services Support. In connection with the provision of the ISIS
Services, the parties will have the following rights and obligations:
1.3.1 ISIS 2000 shall provide the hardware, software, supplies,
utilities, facilities and staff, including a Dedicated Reservations Staff, for
the operation of the ISIS System and the ISIS Services, provided that the
software, equipment configuration and any changes thereto shall be at the sole
discretion of ISIS 2000. No change to the software or equipment shall affect
ISIS 2000's service obligations under Article 1.1.
1.3.2 ISIS 2000 shall provide toll-paid service to the
Reservation Center. In addition, ISIS 2000 shall provide telephone numbers that
can access the Reservations System using long distance services billed to the
caller, with at least one number to be available for use by Wyndham's customers
to make reservations and at least one number to be available for use by Wyndham
Properties for administrative purposes. The toll-paid numbers and the telephone
number provided for Wyndham's customers shall be defined as "TRC Numbers" and
calls to the Reservations Center, shall be defined herein as "TRC-number
Calls." Collect calls to the Reservations Center will not be accepted.
1.3.3 Wyndham will advertise, at no expense to ISIS 2000, the
TRC Numbers. All of Wyndham's advertising and promotional material shall bear
the TRC Numbers in size, placement and type style equal to or more prominent
than that of other information numbers on such materials, and Wyndham will use
its best efforts to cause the Hotel Property's advertising and promotional
material to conform to such standard. ISIS 2000 agrees that the TRC Numbers
will at all times remain proprietary to Wyndham. Wyndham will license all
current Wyndham toll-free numbers to ISIS 2000 for use with the ISIS Services.
Except as specifically directed by Wyndham in writing, ISIS 2000 will not
change or allow to be changed any TRC Number during the term of
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<PAGE> 4
this Agreement, but Wyndham will not withhold such direction for changes
mandated by ISIS 2000's telecommunications carriers or regulatory authorities.
At the termination of this Agreement for any reason, ISIS will transfer to
Wyndham all TRC Numbers then in service.
1.3.4 ISIS 2000 will notify Wyndham, via certified mail, of the
availability of ISIS System as set forth in this Agreement. Wyndham will have 5
business days after receipt of this letter to verify the system functionality
and to verify the initial Wyndham data base. The verification procedure will
consist of (1) a single test of each of the functions to certify that all
functions are accounted for, (2) a test of the connecting and interaction
functions of the Equipment based at the Properties with the Reservation Center
and (3) a comparison of the initial data base to the manual records to certify
the accuracy of data entry. ISIS 2000 shall use all commercially reasonable
efforts to complete any necessary correction as soon as possible, but in any
event, within days of the verification process. The commencement of ISIS
Services will begin upon 1) the expiration of the five-day period, or the
completion of the verification procedure, whichever is earlier; or 2) if the
verification procedure results in the need for material corrections,
immediately following the verification procedure for such material corrections.
Verification of the ISIS System or the failure to object to the commencement of
the ISIS Services shall each constitute acceptance by Wyndham of the
Reservations Center and the ISIS Services for purposes of commencing the ISIS
Services.
1.3.5 In the event the ISIS System is not operational by the
last permitted Cutover Date, Wyndham may terminate this Agreement without
liability.
1.4 System Performance and Integrity
1.4.1 ISIS 2000 shall provide adequate capacity in the central
computer of the ISIS System ("ISIS Central") for the ISIS Services so as to
maintain service levels as set forth in Schedules 1.1.1 and 1.1.2.
1.4.2 The ISIS System will meet scheduled available performance
standards set forth in Schedules 1.1.1 and 1.1.2.
- 4 -
<PAGE> 5
ISIS 2000 may from time to time schedule downtime in order to accomplish normal
system maintenance and certain software implementations. Scheduled downtime
will normally occur on weekends and U.S. holidays. ISIS 2000 will provide
Wyndham with reasonable advance notice of any scheduled downtime and will
coordinate such downtime with Wyndham to allow Wyndham to make appropriate
plans.
1.4.3 After receipt of a written notice from Wyndham, ISIS 2000
shall correct, within a commercially reasonable period, any performance
standard under this Agreement not fulfilled by ISIS 2000. Urgency of repair
shall be determined by ISIS 2000 in accordance with the severity of the
problem.
1.4.4 Upon reasonable advance notice to ISIS 2000, copies of
operating logs and performance reports maintained in connection with the
services herein performed will be available for Wyndham's review during
business hours at ISIS Central, or shall be sent by mail to Wyndham at its
request.
1.4.5 Wyndham acknowledges and agrees that ISIS 2000 has not
undertaken to perform any verification of any sort of the Wyndham Data Base,
and that ISIS 2000's function hereunder is solely to perform the services set
forth in Section 1.1 and to provide the equipment and software necessary for
the ISIS System, including software providing the functionality described in
Schedule 1.2 and the Equipment described in Section 2.1.
1.5 Maintenance.
1.5.1 ISIS 2000, either itself or through third-party vendors,
will maintain the ISIS Central hardware and software.
1.6 Failure or Delay of Service.
1.6.1 ISIS 2000 shall maintain a disaster recovery plan, a copy
of which will be provided to Wyndham, as it pertains to Wyndham, within a
reasonable time after execution of this Agreement.
II. COMPUTER SERVICES
- 5 -
<PAGE> 6
2.1 Distributed Computer Equipment and Software. By the Cutover Date,
or by such other date which the parties may mutually agree, ISIS 2000 will
provide each Wyndham Location one or more ISIS Workstation(s) and peripheral
equipment on a nonexclusive and nontransferable basis, and each Property shall
enter into a license and lease agreement substantially in the form attached
hereto as Schedule 2.1 and made a part hereof (the "License Agreement"). ISIS
2000 will provide each Property dedicated data access to ISIS Central upon the
installation at its premises of ISIS Workstations and peripheral equipment
2.1.1 Access to ISIS Central using the ISIS Workstation and
peripheral equipment will be provided at Hotel Properties and Sites that
Wyndham shall designate from time to time (i) but only to the extent not
prevented by governmental, technical or communications delays or problems not
within ISIS 2000's control; (ii) provided that upon its enrollment, the
Property satisfies all of its obligations hereunder, including causing its
applicable employees to be properly trained in the use of ISIS System and;
(iii) provided that ISIS 2000's data base information forms for the enrolling
Hotel Property are properly completed by the Hotel Property and delivered to
ISIS 2000.
2.1.2 Wyndham shall not and shall cause the Hotel Property not
to remove or alter any identifying names, logos, service marks or information
from any Equipment, software, documents or other materials provided by ISIS
2000.
2.2 Interfaces.
2.2.1 ISIS Central and the distributed ISIS Workstations will
interface so as to communicate property management and reservation information
between them. Initially, those communications will occur on a completed
transaction basis, but no later than December 31, 1997, ISIS 2000 will upgrade
the software to permit real time communication.
2.2.2 ISIS 2000 will cause connection of ISIS Central through
computer interfaces to GDS Vendors set forth in Schedule 2.2 attached hereto,
and made a part hereof and to other electronic reservation services that become
available from time to time to which Wyndham requests an interface. It is
expressly
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<PAGE> 7
understood and agreed that: (a) ISIS Central's capabilities are limited by the
capabilities and functions of the particular GDS Vendor, electronic service or
property management system used and by that GDS Vendor, electronic service or
its system's interface to ISIS Central; and (b) implementation of such GDS or
electronic service interface is subject to final agreement between ISIS 2000
and a particular GDS Vendor or electronic service provider and upon certain
technological and other requirements contained in such agreement.
2.2.3 Wyndham shall pay any fees, including but not limited to
booking fees, associated with Bookings received from GDS Vendors and Bookings
received through other electronic reservation services.
2.3 Help Desk. ISIS 2000 will make available a telephone assistance
desk in a location within the United States determined solely by ISIS 2000
staffed by knowledgeable employees who will provide assistance to Wyndham at no
additional charge, regarding: (1) the use and operation of the ISIS
Workstation; (2) Equipment diagnostics; (3) network communication diagnostics;
and (4) GDS booking assistance.
III. DATABASE SERVICES
3.1 ISIS 2000 and Wyndham will jointly establish the initial data
base for Wyndham properties within the current functionality of the ISIS
System.
3.1.1 Wyndham must accurately and fully complete or cause to be
accurately and fully completed ISIS 2000 data base information forms, based
upon which ISIS 2000 will initially input Hotel Property data into ISIS
Central. With data links provided through ISIS Workstations, Wyndham will: (a)
automatically modify and update room availability status band rates for Hotel
Properties by directly inputting such modification or update into ISIS Central
via ISIS Workstations; and (b) with regard to GDS Vendors to which ISIS Central
is connected: (i) automatically communicate rate changes or other descriptive
information in the GDS data base for their properties, after which the ISIS
System will perform a quality control check and directly input such rate or
descriptive information change into the GDS Vendor as soon as reasonably
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practicable; and (ii) automatically modify and update room availability status
for their properties by directly inputting such modification or update into
ISIS Central via an ISIS Workstation, which will then be automatically
communicated to the GDS Vendor. ISIS 2000 shall be responsible for accurately
inputting information that Wyndham requests ISIS 2000 to enter into the ISIS
System. ISIS 2000 shall not be responsible for the timeliness or accuracy of
data base entries which Wyndham enters or causes to be entered into the ISIS
System.
3.1.2 For Properties not using ISIS Workstations, ISIS 2000 will
update Wyndham's data base in a timely manner at Wyndham's request. Information
to be updated includes property descriptions, property status, name changes and
any other information included in the existing system functionality or any
future enhancements. ISIS 2000 and Wyndham mutually agree to develop procedures
to control and document data base change requests and updates.
3.1.3 For Properties not using ISIS Workstations, ISIS 2000 will
update airline data bases through the GDS Vendors listed in Schedule 2.2 in a
timely manner to reflect changes in room rates, property descriptions and
property status pursuant to the terms and conditions between GDS Vendors and
Wyndham. ISIS 2000 will provide similar services using other third party
electronic reservation services that ISIS 2000 and Wyndham mutually agree to
utilize.
3.2 Maintenance and Storage of Data
3.2.1 ISIS 2000 will maintain the Wyndham Data Base in the
Reservations Data Base. Except as set forth in Article 8.2.2, the Wyndham Data
Base shall be the sole property of Wyndham and only mutually agreed upon
terminals shall have access to the Wyndham Data Base; provided, however, that
ISIS 2000's personnel, including its third party contractors, shall have access
to the Wyndham Data Base to ensure the integrity and performance of the
Reservations Services, to measure Bookings, to make Enhancements, or for any
other purpose consistent with the terms of this Agreement. Any such access
shall be subject to Article VIII.
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3.2.2 ISIS 2000 will store data from the Wyndham Data Base for
such periods as set forth in Schedule 3.2.2, at which time ISIS 2000 may delete
it from the Reservations Data Base. At Wyndham's request, ISIS 2000 will store
such data for longer periods, subject to appropriate price adjustments to
reflect any increased costs.
IV. USER PROFICIENCY.
4.1 Training. Wyndham will be provided with two all day (7 hours)
training courses at a "train the trainer" level on the use of ISIS Workstations
to each Property within a reasonable period of time after that Property
connects to the ISIS System.
4.2 Manuals. ISIS 2000 will also provide Wyndham with a reasonable
number of manuals on the use of the ISIS Workstation and the ISIS System.
4.3 Wyndham Responsibility. Wyndham will take all reasonable steps to
ensure that all of their employees who are authorized to use ISIS Workstations
have been trained appropriately and are proficient in such use. In the event
Wyndham requests additional training or ISIS 2000 and Wyndham determine that
users lack the requisite proficiency, Wyndham will arrange for users or
trainers to receive additional training at an additional charge to Wyndham
reasonably based on ISIS 2000's cost of providing such training.
V. OTHER SERVICES.
5.1 Services. ISIS 2000 may, from time to time, agree to provide
other services to Wyndham, including but not limited to the services described
in Schedule 5.1.
VI. ENHANCEMENTS.
6.1 System Changes. In its sole discretion, and at any time, ISIS
2000 may replace or relocate the software, hardware or other equipment or
technology, or any portion thereof, used to provide the ISIS Services. ISIS
2000 will have the right to change or substitute any parts, programs or systems
of the ISIS Workstation and peripheral equipment and to implement ISIS
Workstation Enhancements at any time in its discretion, which
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changes, substitutions and Enhancements Wyndham must accept.
6.2 Effect of Changes. No replacement, relocation, change,
substitution or Enhancement permitted under Section 6.1 shall affect the terms
of this Agreement, including, but not limited to, ISIS 2000's service
obligation under Article 1.1, nor shall it have a material adverse effect on
performance or functionality of the ISIS System or the ISIS Workstation, or
result in any material increase in the charges payable to ISIS 2000 hereunder
unless such change results in the establishment of a new function therein not
previously available hereunder, in which case ISIS 2000 shall offer such new
functionality to Wyndham for a fee reasonably related to ISIS 2000's cost as
determined by ISIS 2000 in its sole discretion, but in any event not greater
than the fee charged to similarly situated customers for the same service.
ISIS 2000 will give Wyndham, if affected by such changes, reasonable advance
notice thereof. Should an Enhancement be implemented that results in a
substantial change in ISIS Workstation operation, ISIS 2000 will provide to
Wyndham up to one (1) day of training on such Enhancement at no additional cost
to Wyndham.
6.3 Implementation of Enhancements. ISIS 2000 will provide,Wyndham
with prior notice of the scheduled implementation of any Enhancements to the
ISIS System that, to ISIS 2000's knowledge, will materially affect Wyndham's
own operations. Wyndham may elect not to implement any such Enhancements.
6.4 Wyndham Enhancements. From time to time, Wyndham may request that
ISIS 2000 develop Enhancements to the ISIS System or the ISIS Workstation.
6.4.1 If ISIS 2000 is willing to develop such an Enhancement,
ISIS 2000 will provide Wyndham with a price quote, including rights to use
Enhancement after termination of the Agreement and maintenance costs, based on
whether the Enhancement is proprietary to Wyndham, and on time, materials and
operational expenses associated with both (i) the development, testing and
implementation of the Enhancement and (ii) its on-going operation and
maintenance, and a tentative schedule for developing the Enhancement. Within
forty-five (45) days following the submission of the price quote and schedule
to Wyndham, Wyndham will approve or cancel its request for the proposed
Enhancement. If
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Wyndham does not respond to the price quote within such fortyfive day period,
it shall expire.
6.4.2 If Enhancements added to the ISIS System at the request of
another customer are generally offered to customers of the ISIS Services, they
will be offered to Wyndham provided that charges, if any, for such Enhancement
will be i) mutually agreed upon by Wyndham and ISIS 2000 and ii) comparable to
the charges to such other customers for such Enhancement. Enhancements to the
ISIS System that are added without Wyndham's consent shall not affect any of
Wyndham's fees under Article 7.
6.5 Availability of Enhancements.
6.5.1 ISIS 2000 will make Enhancements available to Wyndham on a
nonexclusive, nontransferable basis at the same time or prior to other ISIS
2000 customers, except that programs developed by ISIS 2000 on an exclusive
basis for anyone other than Wyndham will not be available to Wyndham.
Enhancements developed by or for ISIS 2000 upon request of Wyndham on an
exclusive basis for Wyndham will not be made available to other customers of
ISIS 2000
VII. FEES.
7.1 Basic Fees. Pursuant to the terms of this Agreement, ISIS 2000
will charge and Wyndham will pay to ISIS 2000, as applicable: (1) Initiation
Fee; (2) Booking Fees; and (3) Data and Equipment Fees; and (4) Other Service
Fees, at rates set forth below.
7.1.1 For each Property that connects to the ISIS System that is
not a Wyndham Property on the Cutover Date, Wyndham will pay an initiation fee
of $10,000 prior to its connection to the ISIS System.
7.1.2 For the ISIS Services, Wyndham shall pay ISIS 2000 a fee
for each net Booking made through the ISIS System. The number of net Bookings
for a particular month shall be the total number of Bookings less the number of
Cancellations. Counting functions of the ISIS System will be used to determine
the number of Bookings, Cancellations and Booking Fees. The Booking Fee will be
determined in accordance with Schedule 7.1.2.
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7.1.3 Wyndham shall pay ISIS 2000 monthly fees of $1,000 per
Site for Equipment and software utilized by Wyndham at Sites and for the data
communication network. Any Property using the public-switched telephone network
for communicating with ISIS Central, whether by dial-in or dial-out computer
connection, fax, or voice, will be responsible for the cost of these
communications.
7.1.4 In the event that Wyndham desires ISIS 2000 to provide any
or-her services pursuant to Article V, and ISIS 2000 agrees to do so, such
services will be provided at fees reasonably related to costs agreed on by the
parties. If the parties are unable to negotiate a mutually acceptable fee, ISIS
2000 will have no obligation to provide such services.
7.2 Adjustments to Fees. At the end of each twelve-month period of
this Agreement, ISIS 2000 may increase any fees fixed herein in order to offset
any cumulative increases in ISIS 2000's total direct or indirect costs of
providing the ISIS System, but in no event shall the increase pursuant to this
Article 7.2 exceed eight percent (8%) per annum. ISIS 2000 shall give Wyndham
30 days' notice of any such fee increase, during which period ISIS 2000 shall
allow Wyndham to review, during reasonable business hours and at ISIS 2000's
place of business, documentation establishing that ISIS 2000's costs have been
increased.
7.3 Invoices and Payment. ISIS 2000 shall submit an itemized invoice
to Wyndham covering all charges under this Agreement for the previous month,
based upon reports generated by the ISIS System. Wyndham shall pay the amount
of such invoice by a single check to ISIS 2000 within seven days from the date
of such invoice. The payment of invoice amounts shall be the sole
responsibility of Wyndham, and shall not be dependent upon payment, approval or
audit by any third party, including any Affiliate of Wyndham. However, upon
reasonable notice to ISIS 2000 and during reasonable business hours, Wyndham
shall have the right to audit ISIS 2000's books and records used in connection
with preparing any such invoice. Any invoice that is not paid by Wyndham within
seven (7) days from the date of such invoice shall accrue interest at a rate of
five (5) percentage points above the prime rate of interest announced from time
to time by Bank One, Texas, N.A., or the highest lawful rate of interest,
whichever is
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lower.
7.3.1 By the last day of each Calendar Quarter, ISIS 2000 will
estimate the Booking Fees for the next ensuing Calendar Quarter, and ISIS will
invoice Wyndham for services rendered during that Calendar Quarter at rates
based on such estimates. Within 45 days following the end of each Calendar
Quarter, the parties will conduct a true up comparing the fees that were earned
based on costs and the payments made based on the estimates. If the true up
establishes that Wyndham owes ISIS 2000 additional Booking Fees, Wyndham shall
remit such additional Booking Fees by the end of the 45-day true up period; if
the true up establishes that ISIS 2000 was overpaid Booking Fees during the
Calendar Quarter, the amount of the overpayment will be credited against the
next invoice rendered for Booking Fees.
7.4 Taxes.
7.4.1 Wyndham covenants and agrees to pay when due or reimburse
and indemnify and hold ISIS 2000 harmless from and against all taxes, fees, or
other charges of any nature whatsoever (together with any related interest or
penalties, except such interest or penalties resulting solely from the failure
of ISIS 2000 to timely file personal property tax returns with respect to
Equipment leased to Wyndham) now or hereafter imposed or assessed by any
Federal, state, county, local or foreign governmental authority with respect to
services performed or equipment or software supplied by ISIS 2000 (whether by
sale, license, lease or otherwise) under this Agreement, or upon the ordering,
purchase, sale, ownership, delivery, leasing, possession, use, operation,
return or other disposition of such equipment, software or services, or upon
the rents, receipts or earnings arising there from (excepting only Federal,
state and local taxes based on or measured by the taxable income of ISIS 2000).
7.4.2 Any sales, use or other taxes levied on the ISIS Services,
ISIS Workstation, or any other services provided by ISIS 2000 to Wyndham
pursuant to this Agreement (other than taxes calculated on the basis of the net
income of ISIS 2000) may be paid by ISIS 2000 on Wyndham's behalf, to the
applicable taxing authority in which case ISIS 2000 will include the amount of
any such taxes in its monthly invoice to Wyndham, or by
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Wyndham directly to such taxing authority, in which case ISIS 2000 shall have
no obligation to calculate, collect or pay any such taxes.
7.4.3 Notwithstanding the foregoing, ISIS 2000 will be
responsible for the filing of all personal property tax returns with respect to
Equipment leased to Wyndham and will pay all taxes indicated thereon. Wyndham
will reimburse ISIS 2000 for all such taxes within thirty (30) days of receipt
of ISIS 2000's invoice therefor.
7.5 Most Favored Nations. ISIS 2000 will not enter into an agreement
on or after the effective date of this Agreement, pursuant to which 'ISIS 2000
will charge another customer of the ISIS Services, with total average net
Bookings per month equal to or fewer than those of Wyndham, a better fee
structure for the same services provided to Wyndham, without offering such
better fee structure to Wyndham, commencing with the commencement date of such
other agreement.
VIII. CONFIDENTIALITY OBLIGATION
8.1 Trade Secrets Information.
8.1.1 Title and full ownership and proprietary rights of a Trade
Secret Owner's Trade Secrets, trademarks, and Equipment shall be and remain
with that party. A Trade Secret Owner's Trade Secrets are agreed to be that
person's proprietary information and trade secret whether or not any portion
thereof is or may be validly copyrighted or patented. Trade Secrets provided to
a party pursuant to this Agreement in any form and any and all copies thereof,
and any parts or abstracts thereof which may be furnished to a party, are for
the use of that party for the limited purposes set forth herein, and will not
be disclosed or made available to any other person, firm, corporation or
governmental entity not granted the right to use such Trade Secrets under this
Agreement, in whole or in part or in any form or manner whatsoever by a party
who is not the Trade Secret owner or any of its officers, directors, agents,
employees, shareholders, representatives, affiliates, or other persons or
entities acting in concert with that party without the prior written consent of
the Trade Secret Owner.
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8.1.2 Wyndham and ISIS 2000 each will use its best efforts to
ensure that its employees, agents, consultants, and suppliers are aware of,
recognize, and agree that the terms of this Agreement and each party's Trade
Secrets acquired by virtue of or in connection with this Agreement, are
proprietary in nature and, therefore, are not to be disclosed by the other
party to third parties without the prior written consent of the owner thereof,
and may not be used by such other party for any purpose except to carry out its
obligations or to assert a right under this Agreement. Wyndham and ISIS 2000
each shall use its best efforts to ensure that all individuals having access to
software contained in the Reservations Data Base under this Agreement shall
observe this non-disclosure covenant and treat all data and materials of the
other party covered by this Agreement in a confidential manner.
8.2 Wyndham Information.
8.2.1 Notwithstanding anything herein to the contrary, it is
agreed that Wyndham will have sole ownership rights and title to its Database
and rate, pricing and inventory information ("Wyndham Trade Secrets"). Wyndham
Trade Secrets will not be disclosed by ISIS 2000 to any third party or to any
ISIS 2000 employees not directly connected with the services to be provided
hereunder or who have no need to know same without the prior written consent of
Wyndham.
8.2.2 Nothing in this Agreement will be construed to prohibit
ISIS 2000's use, for any purpose, of statistical information or data obtained
through the ISIS System, as long as such statistics are not identifiably
related solely to Wyndham or any Wyndham Property.
8.2.3 In the event that ISIS 2000 provides reservations services
to third parties, such third parties will not be allowed access to the Wyndham
Data Base or other information provided by Wyndham pursuant to this Agreement,
without Wyndham's prior written approval.
8.3 Subpoenaed Information. Each party agrees that it will treat
Trade Secrets provided to it pursuant to this Agreement as it would treat its
own most sensitive trade secrets or confidential information. If any party
receives a subpoena,
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court order or directive, or discovery request (collectively referred to as
"Subpoena") pursuant to litigation, government inquiry, or otherwise,
concerning any Trade Secrets provided to it pursuant to this Agreement, such
party will immediately notify the Trade Secret Owner who will be permitted, at
its option and expense, to interpose objections or defenses to such Subpoena.
In no event may any party turn over, disclose, produce or discuss any Trade
Secrets provided to it pursuant to this Agreement for any purpose whatsoever
without notifying the party who is the Trade Secret Owner of the Subpoena and
without the first to occur of: (i) prior timely notice by the Trade Secret
Owner waiving its rights to object or defend as set forth above; or (ii) final,
binding, non-appealable court order or decree obtained in an action in which
the Trade Secret Owner has timely elected to defend, be a party or intervenor.
Failure of a Trade Secret owner to give notice of waiver, or to object, defend,
join or intervene in the action prior to the production date set forth in the
Subpoena will be deemed waiver of rights to object or defend. In the event that
a Subpoena directs production in less than seven (7) days of receipt, the
recipient of the Subpoena will attempt to obtain extension and otherwise use
its best efforts to notify the Trade Secret Owner and permit the Trade Secret
Owner to object, defend, join or intervene the action. In all events, the Trade
Secret Owner will be responsible for all legal fees and expenses incurred by
the other party or parties in connection with a Subpoena concerning the Trade
Secret Owner's Trade Secrets.
8.4 Return of Materials. Upon termination of this Agreement for any
cause or reason, Wyndham agrees to deliver to ISIS 2000 all materials or
information supplied by ISIS 2000 pertaining to software contained in the
Reservations Data Base, and shall, after a due diligent search, certify to ISIS
2000 that all such copies have been returned to ISIS 2000 or destroyed.
8.5 Public Announcement. Neither party will make a public
announcement regarding this Agreement or the provision of Reservations Services
provided for herein, nor will either party use any name, logo, tradename,
trademark or service mark of the other party, without the other party's prior
written approval which may not be unreasonably withheld.
IX. REPRESENTATIONS AND WARRANTIES OF WYNDHAM. Wyndham repre-
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sents and warrants to ISIS 2000 as follows:
9.1 Organization of Wyndham. Wyndham is a corporation duly organized,
validly existing and in good standing under the laws of Delaware. The execution
and delivery of this Agreement and the performance by Wyndham of its
obligations hereunder have been duly authorized by all necessary action on the
part of Wyndham. This Agreement is a legal, valid and binding obligation of
Wyndham enforceable against Wyndham in accordance with its terms except that
the enforceability hereof and thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors, rights generally. Neither the execution and delivery of this
Agreement nor the performance by Wyndham of any of its obligations hereunder
nor the consummation of any of the transactions contemplated hereby will
violate any agreement to which Wyndham is a party or by which Wyndham or any of
its property may be bound, or any provision of Wyndham's Certificate of
Incorporation or By-Laws, or any applicable law, regulation, rule, judgment,
order or decree. No consent, approval or authorization of, or registration,
declaration or filing with, any governmental authority on the part of Wyndham
is required as a condition to the valid execution, delivery and performance of
any of this Agreement by Wyndham pursuant hereto except for such as have been
duly made or obtained.
9.2 Employees and Affiliates, etc. Wyndham does not have any
outstanding contracts with officers, employees, agents, consultants, advisers,
salesmen, sales representatives, distributors or dealers connected with
providing services similar to or interchangeable with the ISIS Services that
are not cancelable by Wyndham on a schedule coordinated with the Cutover Date
without liability, penalty or premium.
9.3 Collective Bargaining Agreements. There are no collective
bargaining agreements of Wyndham with any labor union or other representative
of employees connected with the provision of services similar to or
interchangeable with the ISIS Services (including local agreements, amendments,
supplements, letter and memoranda of understanding of any kind).
9.4 Authorization to Execute. The undersigned signatory has authority
to execute this Agreement on behalf of Wyndham.
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X. REPRESENTATIONS AND WARRANTIES OF ISIS 2000. ISIS 2000 represents and
warrants to Wyndham as follows:
10.1 Organization of ISIS 2000. ISIS 2000 is a limited partnership
duly organized, validly existing and in good standing under the laws of Texas
and has full power to conduct its business as it is now being conducted and to
own and operate the properties and assets now owned and operated by it. The
execution and delivery of this Agreement and the performance by ISIS 2000 of
its obligations hereunder have been duly authorized by all necessary action on
the part of ISIS 2000. This Agreement is a legal, valid and binding obligation
of ISIS 2000 enforceable against ISIS 2000 in accordance with its terms except
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditor's rights generally. Neither the execution and delivery of this
Agreement nor the performance by ISIS 2000 of any of its obligations hereunder
or the consummation of any of the transactions contemplated hereby will violate
any material agreement to which ISIS 2000 is a party or by which ISIS 2000 or
its properties may be bound or any provision of ISIS 2000's Partnership
Agreement or By-Laws or any applicable law, regulation, rule, judgment, order
or decree.
10.2 Authorization to Execute. The undersigned signatory has authority
to execute this Agreement on behalf ISIS 2000.
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XI. COVENANTS OF WYNDHAM.
11.1 Access to Information. Wyndham will give to ISIS 2000, its
programmers, consultants, counsel, employees and other representatives full
access to all of the properties, books, contracts, commitments, and reports and
records of Wyndham that relate to the implementation of the ISIS System and
will furnish to ISIS 2000 all such documents, records and information with
respect to its reservation system and copies of any working papers relating to
its reservation system as ISIS 2000 may from time to time reasonably request.
Wyndham shall cooperate with ISIS 2000 to facilitate the commencement of the
operation of the ISIS Services by ISIS 2000. In accordance with the foregoing,
Wyndham and ISIS 2000 agree to work together on a schedule for such
commencement and to keep each other adequately informed as to its progress.
ISIS 2000 will be entitled to maintain as many of its employees as is
reasonably necessary on the premises of Wyndham for the purposes of carrying
out this Agreement. If this Agreement is terminated prior to the Cutover Date
for any reason, all data, information, files, records and copies of documents,
work sheets and other materials obtained by ISIS 2000 in connection with this
Agreement shall be returned to Wyndham as soon as practicable after written
request therefor.
11.2 Notification. Wyndham will give notice to ISIS 2000 promptly upon
becoming aware of (a) any inaccuracy of a representation or warranty made by
Wyndham herein or (b) any event or state of facts that, if it had occurred or
existed on or prior to the date of this Agreement, would have caused any such
representation or warranty to be inaccurate, and any such notice will describe
such inaccuracy, event or state of facts in reasonable detail.
11.3 Honor Reservation. The availability of accommodations, any
inventory of accommodations or rates for such accommodations to be included in
the Reservations Data Base shall be no more restricted or limited than a
Wyndham Customer would encounter by contacting directly an individual Wyndham
Property. Wyndham shall cause the management of each Wyndham Property to honor
confirmed reservations effected via the ISIS System and shall provide the
accommodations thereby reserved and confirmed by ISIS 2000. If Wyndham is
unable to honor a confirmed reservation or to offer the accommodations reserved
due to oversales of
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accommodations, Wyndham shall be responsible for any resulting liabilities,
including the Booking Fee for such reservation. In the event that an oversale
of accommodation is due solely to the negligence or willful misconduct of ISIS
2000, Wyndham's sole remedy shall be recovery of any Booking Fee for the
reservation. Wyndham shall, on request, certify the accuracy of all data
pertaining to it or its operations which has been supplied to ISIS 2000 or put
into the Reservations Data Base.
XII. FORCE MAJEURE; SUSPENSION AND TERMINATION
12.1 Effect of Force MaJeure. In the event that either party is unable
to perform any of its obligations under this Agreement or to enjoy any of its
benefits because of Force Majeure, the party who has been so affected
immediately shall give notice to the other party and shall do everything
possible to resume performance. Upon receipt of such notice, the obligations
under this Agreement, except as otherwise set forth herein, shall immediately
be suspended. If the period of nonperformance exceeds thirty (30) days from the
receipt of notice of the Force Majeure event, the party whose ability to
perform has not been so affected may by giving written notice to the other
party terminate this Agreement. However, delays in delivery of the Equipment or
software due to Force Majeure events shall automatically extend the delivery
date for a period equal to the duration of such event. Neither party will be
relieved of the obligation to maintain confidentiality of Trade Secrets by the
occurrence of Force Majeure, and Wyndham will not be relieved of the
obligations to make payments to ISIS 2000 regardless of the occurrence of Force
Majeure, to the extent that such payments are for services received prior to
the event of Force Majeure.
XIII. LIMITED ISIS 2000 WARRANTY
13.1 ISIS Services. ISIS 2000 MAKES NO WARRANTY WITH REGARD TO THE
ISIS SERVICES OR ANY EQUIPMENT OR SOFTWARE FURNISHED HEREUNDER, INCLUDING ANY
WARRANTY OF FITNESS FOR INTENDED PURPOSE OR OF MERCHANTABILITY. ISIS 2000 WILL
ENFORCE, ON BEHALF OF WYNDHAM, ANY WARRANTIES IT HAS RECEIVED IN CONNECTION
WITH SOFTWARE OR HARDWARE SUPPLIED TO WYNDHAM.
XIV. LIMITATION OF ISIS 2000 LIABILITY
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14.1 Exclusive Remedy. ISIS 2000's sole and exclusive liability for a
failure or delay in the performance of the ISIS System, including, without
limitation, any ISIS Workstation or implementation of Enhancements, or for any
limitation placed upon the functional capabilities or the data volumes of the
ISIS System, shall be as set forth in Schedule 14.1. ISIS 2000 shall have no
liability if such failure or delay was caused directly or indirectly by
Wyndham.
14.2 Other Claims. ISIS 2000'S LIABILITY FOR ANY AND ALL OTHER CLAIMS,
EXCEPT FOR CLAIMS RESULTING FROM THE INTENTIONAL TORT OR NEGLIGENCE OF ISIS
2000 OR ONE OF ITS AUTHORIZED EMPLOYEES, SHALL, IN THE AGGREGATE, NOT EXCEED
THREE MONTHS' AVERAGE BILLING TO THE DAMAGED PROPERTY TAKEN OVER THE 12 MONTHS
PRECEDING THE MONTH IN WHICH THE DAMAGE OR INJURY IS ALLEGED TO HAVE OCCURRED,
BUT IF THIS AGREEMENT HAS NOT BEEN IN EFFECT FOR 12 MONTHS PRECEDING SUCH DATE,
THEN OVER SUCH FEWER NUMBER OF PRECEDING MONTHS AS THE AGREEMENT HAS BEEN IN
EFFECT.
14.3 No Consequential Damages. EXCEPT IN CONNECTION WITH SUCH CLAIMS
FOR WHICH ISIS 2000 SHALL BE LIABLE AS INDEMNITOR PURSUANT TO ARTICLE XV
HEREOF, ISIS 2000 WILL NOT BE LIABILE FOR, AND WYNDHAM HEREBY WAIVES AND
RELEASES ALL CLAIMS AGAINST ISIS 2000 FOR SPECIAL, INCIDENTAL, OR CONSEQUENTIAL
DAMAGES, INCLUDING LOST REVENUES, LOST PROFITS, OR LOSS OF PROSPECTIVE ECONOMIC
ADVANTAGE, OR ANY CLAIMS OF THIRD PARTIES, INCLUDING BUT NOT LIMITED TO WYNDHAM
CUSTOMERS, WYNDHAM FRANCHISEES, AGENTS OF WYNDHAM OR ANY OTHER AFFILIATE OF
WYNDHAM RESULTING FROM PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT.
XV. INDEMNIFICATION.
15.1 Indemnification by Wyndham. Wyndham shall indemnify and hold
harmless ISIS 2000, and shall reimburse ISIS 2000 for any loss, liability,
claim, damage, expense (including, but not limited to, costs of investigation
and defense and reasonable attorney's fees) or diminution of value
(collectively, "Damages") arising from or in connection with liabilities
arising out of any failure by Wyndham to comply with its obligations under this
Agreement, any inaccuracy in any of the representations or warranties of
Wyndham in this Agreement, or any action by any third party with respect to the
functioning of the ISIS System or
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any of the services provided hereunder, except for any actions resulting
directly or indirectly from ISIS 2000's negligence.
15.2 Indemnification by ISIS 2000. ISIS 2000 shall indemnify and hold
harmless Wyndham, and shall reimburse Wyndham for any Damages arising out of
any failure by ISIS 2000 to comply with its obligations under Article 14.1 of
this Agreement, or any inaccuracy in any of the representations or warranties
of ISIS 2000 in this Agreement, other than Damages for lost profits, or
incidental or consequential damages or Damages arising out OF any action by any
third party with respect to the functioning of the ISIS System or any of the
services provided hereunder.
15.3 Patent Indemnity. ISIS 2000 shall indemnify and hold Wyndham
harmless against any Damages incurred by or against Wyndham as a result of or
in connection with any claim made or alleged that the ISIS System infringes any
United States patent, copyright, trade secret, trademark or other intellectual
property rights of any third party, conditioned on the following:
(A) That ISIS 2000 shall be notified promptly in writing by Wyndham
of any notice of such claims; and
(B) That ISIS 2000 shall have the sole control of the defense of any
action on such claim and all negotiations for its settlement or
compromise.
Should any aspect of the ISIS System be held, or in ISIS 2000's opinion
be likely to be held, to infringe such intellectual property rights, ISIS 2000
shall, at its expense, (i) procure for Wyndham the right to continue using the
ISIS System, or (ii) replace or modify the same so that it becomes
non-infringing but still provides substantially the same functions as provided
prior to replacement or modification.
XVI. TERM; CANCELLATION OF CERTAIN SERVICES.
16.1 Base Term. This Agreement is effective upon execution and has an
initial term ending on the date five years from the Cutover Date, and will be
renewed for any number of consecutive one year terms unless terminated (a) by
either party by written notice to the other party at least 120 days prior to
the end of the then current term of the Agreement or (b) pursuant to Section
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16.2 or Article XVII hereof. Articles VIII, XIII, XIV and xv, and Sections
18.1, 18.4, 18.7 and 18.15 will survive termination of this Agreement.
16.2 Early Termination. Wyndham may elect to terminate this Agreement
upon one year's written notice given to ISIS 2000. if Wyndham so elects, it
will pay all costs ISIS 2000 has incurred through the date of termination in
setting up and providing service under this Agreement, including, without
limitation, financing costs, other than costs that have been recovered by ISIS
2000 through charges to Wyndham.
XVII. TERMINATION.
17.1 Breach. In the event of a material breach of the terms and
conditions of this Agreement, the non-breaching party may terminate this
Agreement without further liability upon thirty (30) prior written notice to
the other party (which notice shall describe, with as much particularity as
possible, the alleged material breach) provided, however, that the breaching
party shall have thirty (30) days to correct such breach following receipt of
such notice. In the event that a cure requires more than thirty (30) days to
complete, it shall be deemed sufficient if a cure is promptly commenced,
thereafter, is diligently prosecuted, and in any event cured within ninety (90)
days of the receipt of the original notice.
17.2 Non-Payment. If Wyndham does not make any payment to ISIS 2000
when it is due, which shall not be less than _____ days from the date an
invoice is received, then ISIS 2000 may immediately terminate this Agreement
upon ten (10) days written notice to Wyndham, unless Wyndham makes such payment
to ISIS 2000 on or before the expiration of such ten (10) day default, notice
17.3 Insolvency. If either party becomes insolvent, or ceases or
suspends operations related to the ISIS Services for reasons other than a Force
Majeure event or action or omission of the other party, then the other party
may immediately terminate this Agreement.
17.4 Bankruptcy. If bankruptcy proceedings are commenced with respect
to either party hereto, and, if this Agreement has
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<PAGE> 24
not otherwise terminated, then the non-filing party may suspend all further
performance of this Agreement until the defaulting party assumes or rejects
this Agreement pursuant to Section 365 of the Bankruptcy Code or any similar or
successor provision. Any such suspension of further performance by the
non-filing party pending the defaulting party's assumption or rejection will
not be a breach of this Agreement and will not affect the nonfiling party's
right to pursue or enforce any of its rights under this Agreement or otherwise.
17.5 Obligations Upon Termination.
17.5.1 Upon termination of this Agreement, ISIS 2000 will provide
a tape capture of the Wyndham Data Base to Wyndham at a mutually agreed upon
reasonable date and in a form to be reasonably agreed upon between the parties
in order to assist Wyndham in an efficient migration to another reservations
system. ISIS 2000 will provide good faith assistance to Wyndham as requested by
Wyndham for six (6) months from the date the Agreement is terminated. ISIS 2000
will invoice Wyndham, and Wyndham will pay ISIS 2000, monthly for the
assistance provided at ISIS 2000's cost plus 20%.
17.5.2 Termination by ISIS 2000 in accordance with the provisions
of this Article XVII will be treated as an early termination by Wyndham under
Section 16.2 and will entitle ISIS 2000 to recover the payment provided in that
section.
XVIII. GENERAL.
18.1 Expenses. Except as expressly provided herein, each of the
parties hereto will pay its own fees and expenses, including its own counsel
fees and accountants' fees, incurred in connection with the transaction
contemplated by this Agreement.
18.2 Exclusivity. ISIS 2000 will provide service exclusively to
Wyndham for two years following the Cutover Date. Wyndham understands and
agrees that this is a non-exclusive agreement after two years and that after
that time ISIS 2000 may provide similar services to other third parties.
Wyndham agrees until this Agreement is terminated that ISIS 2000 shall be sole
supplier to Wyndham and its Affiliates of services of the type provided under
this Agreement.
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<PAGE> 25
18.3 Competition. During the term of this Agreement, Wyndham will not,
in any manner directly or indirectly, (i) compete with or (ii) own, manage,
operate, join, control, participate in or be connected as a partner, advisor,
consultant, trustee or otherwise, with any system, business or business entity
that competes or could compete with, the activities of ISIS 2000 in connection
with the ISIS Services.
18.4 Governing Law This Agreement shall be construed ALL interpreted
according to the laws of the State of Texas.
18.5 Amendment and Modification. The parties hereto may amend, modify
and supplement this Agreement in such manner as may be agreed upon by them in
writing.
18.6 Assignment and Subcontracting. This Agreement and all of the
provisions hereof are and will be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, including a
purchaser of all or substantially all of the assets or outstanding stock of
Wyndham, but this Agreement and the rights, interests or obligations hereunder
may not be assigned by any of the parties hereto without the consent of the
other parties, except that either party may assign this Agreement or any
portion hereof to a subsidiary or Affiliate, or may subcontract any of its
obligations hereunder, without such consent.
18.7 Third Parties' Rights. No provision of this Agreement is intended
to create any rights in persons or entities other than the parties hereto,
their successors and assigns.
18.8 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
18.9 Headings. The headings of the sections of this Agreement are for
convenience only and do not constitute a part hereof.
18.10 Security. Various levels of restricted access will be
incorporated into ISIS Central and ISIS Workstation by password
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<PAGE> 26
duty code, individual sign-in code, job duty code, workstation location and
computer terminal access. It will be Wyndham's responsibility to assign
password duty codes to all persons using the ISIS Workstation on behalf of
Wyndham.
18.11 Waiver. No waiver or breach of any provisions of this Agreement
shall constitute a waiver of any subsequent breach of the same or any other
provision hereof and no waiver shall be effective unless made in writing.
18.12 Independent Contractors. Nothing in this Agreement is intended or
will be construed to create or establish any agency, partnership or joint
venture relationship between the parties hereto.
18.13 Severability. In case any one or more of the provisions of this
Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but such provision or
provisions shall be ineffective only to the extent of such invalidity,
illegality or unenforceability without invalidating the remainder of such
provision or provisions or the remaining provisions of this Agreement, and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein, unless the deletion of
such provision or provisions would result in such a material change as to cause
performance by a party to be unreasonable.
18.14 Entirety of Agreement. The terms and conditions of this Agreement
including the exhibits hereto, and the License Agreement, constitute the entire
agreement between the parties and supersede those of any previous agreement,
oral or written, between Wyndham and ISIS 2000 with respect to the subject
matter of this Agreement. There are no restrictions, promises, warranties,
covenants or undertakings, other than those expressly set forth herein.
18.15 Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be valid and sufficient if dispatched either (i)
by hand delivery, (ii) by telex, cable or facsimile transceiver, with
confirming letter mailed promptly
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<PAGE> 27
thereafter in accordance with clause (iv) hereof, (iii) by reputable overnight
express courier or (iv) by certified mail, postage prepaid, return receipt
requested, deposited in any post office in the United States, in any case,
addressed to the addresses set forth on the first page of this Agreement, or
such other addresses as may be provided from time to time in the manner set
forth above. When sent by cable or facsimile as aforesaid, notices given as
herein provided shall be considered to have been received when sent during
normal business hours; otherwise, notices shall be considered to have been
received only upon delivery or attempted delivery during normal business hours.
18.16 Use of Mark. ISIS 2000 grants Wyndham the right and license to
use the "ISIS 2000" name and mark in its promotional and marketing efforts,
subject to ISIS 2000's prior written approval of the use of any ISIS 2000
trademark, which approval shall not be unreasonably withheld.
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<PAGE> 28
XIX. DEFINITIONS. As used herein, the following terms have the following
meanings:
Accommodation Segment--a portion of the GNR containing Property, room type, and
guest stay dates. Each different Reservation entry in the ISIS System, per
Property, room type, or guest stay date or dates, constitutes an Accommodation
Segment.
Affiliate-Any person or entity which, directly or indirectly, controls or is
controlled by one of the parties to this Agreement, or under common control
with such party or any partnership in which one of the parties to the Agreement
has at least a 5% interest.
Booking-A Reservation made through the ISIS System for a continuous stay in one
room or suite at a Wyndham Property.
Booking Fee-The fee charged for a Booking.
Calendar Quarter-a 3-month period beginning January 1, April 1, July 1 or
October 1.
Cancellation-The cancellation of a Booking in its entirety through the ISIS
System.
Cutover Date--the date ISIS Services commence in accordance with Section 1.3.4,
which the parties plan to occur on or about, 1996, but which in no event shall
be later than December 31, 1996.
Dedicated Reservations Staff-A group of people, the individual members of which
may vary from time to time, that is solely dedicated to providing Reservations
Services for Wyndham.
Dollars and $--U.S. Dollars.
Enhancement-Any addition to the functionality of the ISIS System, including but
not limited to ad hoc report changes, beyond the functionality of the ISIS
System on the Cutover Date, -including an ISIS Workstation programming or
Equipment modification, improvement or addition to an existing program or
Equipment.
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<PAGE> 29
Equipment--computer hardware, including personal computer terminals, screens,
keypads, fileservers, gateways and modems.
Force Majeure--any cause reasonably beyond a party's control, including,
without limitation, weather, acts of God, public enemies, war, insurrection,
third party labor disputes and strikes, acts or orders of governmental
authorities, electrical or power outage or interruption, fire, flood or
explosion.
GDS Booking-A Booking from a GDS Vendor.
GDS Vendor-Global Distribution System computerized reservation vendor.
Guest Name Record or GNR--identifying information and reservation information
regarding a particular guest or guests of a Property entered into the ISIS
System.
Hotel Property or Property--the hotel, resort and condominium which is owned,
operated, managed by or contractually related to Wyndham or with regard to
which Wyndham has control over Reservations.
ISIS 2000-See the opening paragraph of this Agreement.
ISIS Central-the centralized computer hardware and software from which ISIS
Services are performed and through which the ISIS Workstations are
interconnected.
ISIS System-the interconnected computerized reservation and hotel management
system at ISIS Central and Wyndham Sites, including proprietary software
therefor, owned by ISIS 2000 and operating from ISIS' central computer system.
which performs the functions including hotel room booking and inventory
functions, set forth in Schedule 1.2 attached hereto and made a part hereof.
ISIS Workstations--dedicated reservation workstations connected via dedicated
telecommunication lines to ISIS Central, including the proprietary software
package used by ISIS 2000, and related
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<PAGE> 30
Equipment, that produces an intelligent workstation and provides expanded
booking and office management functionality.
Location--one of Wyndham's Properties or Sites.
Party--ISIS 2000, Wyndham or Hotel Property, as appropriate.
Reservation--the entry of an Accommodation Segment in the ISIS System.
Reservation Center--means the facility from which the ISIS Services are
performed.
Reservations Data Base-Information stored in the ISIS System.
Scripts or Macros--a stored sequence of computer screens that direct
reservation agent dialogue with Wyndham customers or travel agent and assist
the reservation agent in inputting data regarding a booking.
Site--a business location of Wyndham which is not a Hotel Property but which is
connected to the ISIS System.
Terminal Booking-a Booking made through an ISIS Workstation.
Termination--termination of this Agreement.
Trade Secrets of a party ("Trade Secret Owner")--all confidential or
proprietary software, documentation, source code, screen display designs,
procedures, technical or financial materials, Wyndham lists, pricing, business
plans, technology and inventions developed in whole, or in part, by that party
and utilized or disclosed to the other party in connection with performance
under this Agreement. "Trade Secrets" do not include any materials or
information which is or becomes publicly known through no wrongful act of the
party who is not the Trade Secret Owner.
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<PAGE> 31
TRC Number--the toll-paid and toll telephone numbers ISIS 2000 makes available
for customers to call to make reservations through the Central Reservations
System.
TRC-Number Booking-a Booking on a TRC-number Call.
TRC-Number Call-See Article 1.3.2.
United States--the fifty (50) United States of America and the District of
Columbia.
Wyndham-See the first paragraph of this Agreement.
Wyndham Customer-Any person or entity who calls the Reservations Center for the
purpose of making a Booking or a Cancellation, or for any other reason related
to Wyndham.
Wyndham Data Base-Information stored in the Reservations Data Base relating to
Wyndham Properties or Wyndham Customers.
All definitions set forth herein apply to all exhibits hereto, and all
definitions set forth in exhibits hereto apply to the body of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the date first written above.
WYNDHAM HOTEL CORPORATION
By:
-----------------------------------
Its:
----------------------------------
ISIS 2000
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<PAGE> 32
By:
-----------------------------------
General Partner
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<PAGE> 33
SCHEDULE 1.1.1
INFORMATION SYSTEM DATA BASE AND DATA NETWORK SERVICES
ISIS 2000 will provide the following Information System and
Data Network Services to Wyndham:
1. Single Image Central Reservation System
2. Global Distribution System Reservation Services
3. Property Management System Interface to and from the ISIS System for
hotels automated with an existing "Fidelio" PMS
4. Guest History Data Base
5. Yield and Room Merchandising Support System
6. Other systems as agreed by ISIS 2000 and Wyndham
ISIS Central Reservation System will he available at least 98% of scheduled
hours based upon monthly averages.
ISIS will develop and maintain a back-up manual reservation process.
<PAGE> 34
SCHEDULE 1.1.2
TELEPHONE SALES AND SUPPORT SERVICES
1. Telephone Sales Services - ISIS will handle telephone sales on Wyndham's
behalf with the general public and travel agents
2. Telephonic Support and Sales for Wholesaler's designated by Wyndham
3. Customer Service Calls from Wyndham's Customers
4. Brochure request handling - Fulfillment of these requests will -be by
Wyndham or another Wyndham contracted Service
5. Help Desk for Wyndham Hotel Properties and other Wyndham locations
During the first three months of the agreement, telephone answering service
levels will be 70%. answered within 20 seconds, thereafter 80% within 20
seconds
ISIS 2000 will maintain a dedicated group of reservation sales agents to
provide service to Wyndham
ISIS 2000 and Wyndham will jointly develop the approach to handling sales via
the Telephone Sales Service
ISIS 2000 will provide music on hold and promotional announcements
ISIS will provide Wyndham with reports which measure actual telephone sales
performance
ISIS will provide Wyndham with the ability to access the reservation sales data
base report
<PAGE> 35
ISIS 2000 will provide wholesaler Reservations Services to Wyndham. The
Wholesaler Reservations Services are defined as:
a. Processing and delivering reservations booked by Wholesalers to
Wyndham Properties through an 800-number to be provided by ISIS
2000;
b. Processing guarantees of reservations through vouchers, advanced
deposits and/or rooming lists, in accordance with the written
instructions provided to ISIS 2000;
c. Updating availability status between Wyndham Properties and
Wholesalers by opening and closing rooms inventory;
d. Administering guidelines established for Wholesalers as related
to availability, cut-off periods and room allotment;
e. Coordination with Wyndham Properties sales departments as related
to Wholesaler contract information, negotiated rates and
guarantee policies.
<PAGE> 36
SCHEDULE 1.2
ISIS SYSTEM CAPABILITIES
ISIS 2000 System Architecture
ISIS 2000 uses the Oracle data base management system and the Oracle Developer
2000 tool kit. ISIS Central runs under the UNIX operating system. Windows 95 is
used as the operating system on ISIS Workstations. WindowsNT will be used in
local system servers.
SCREEN Information AND NAVIGATION CAPABILITIES
The sales agent is be presented with information screens and a method of
navigation between screens that provides flexible and rapid support for the
information needs of the telephone sales agent.
USE OF WINDOWS AND COLOR
Multiple "windows" of information are be available to the sales agent. These
multiple windows are presented on the screen to allow the agent to rapidly
access information required to support the specific nature of the telephone
sales call that is being handled
Color is used on the screen to enhance the ease of intuitive understanding by
the sales agent, as well as to call the agent's attention to important
information and to assist in navigation between screens throughout the sales
transaction
RESERVATION SALES DISPLAY
The sales agent can capture and retain information about the sale throughout
the call to avoid redundant data entry Typical information that is captured in
this manner includes:
o Arrival & Departure Dates
o Frequent guest number
o Airline frequent flier number
<PAGE> 37
o Guest name and Address
o Name of person making the reservation
o Number of guests
o Number of rooms requested
o Characteristics or type of room requested
o Amenity requirements
o Travel agency name or IATA number
o Affiliation with a group or convention
o Eligibility for special rate programs
o Corporate affiliation
o City or hotel requested
For those fields that require the guest or his agent to remember a number, such
as frequent guest number or IATA number, a look-up feature is available to
allow the sales agent to find the frequent guest record based upon other
information that the guest has available.
Whenever a data field which has associated information in the data base, such
as Frequent Guest Number or IATA number or Corporate Identifier, is entered,
applicable information available from the data base is automatically filled in
for the sales agent.
CITY INFORMATION
This Information includes:
o Availability display of Wyndham hotels in the specified city and for the
guest's requested dates, room requirements, and amenity requirements.
o Location of hotels within the city
o Location relative to airports, business centers and points of interest
o Descriptions of nearby attractions
HOTEL PROPERTY INFORMATION
The sales agent has the ability to access well organized information about a
specific Wyndham hotel. This information includes:
o Hotel management
o Address and phone numbers/fax numbers
<PAGE> 38
o A description of the hotel
o Descriptions of specific room types
o Recreational facilities at the hotel or available to hotel guests
o Banquet and meeting facilities/restaurants
o Amenities and services offered by the hotel
o Driving directions from the airport, major highways and business centers
o Description of hotel policies
o Fire/Safety
o Handicap access
o Smoking/non-smoking rooms
Wyndham has the ability to add new information categories as needed.
AVAILABILITY AND RATE DISPLAY
The ISIS System provides an integrated availability and rate display for the
hotel which allows the agent to rapidly scan a range of dates for rates or
room-types that are available for sale.
Special rate plans are displayed only if the sales agent has previously
identified an attribute of the customer that allows eligibility for the rate
plan. These special rate plans could include group and convention rates,
negotiated corporate rates, special marketing program rates, package plans, and
negotiated travel agency consortia rates.
The availability of rates displayed for sale on the screen are limited by the
following parameters, which are controlled by the hotel:
o Minimum length of stay
o Date of arrival
o Date of departure
o Advance booking requirement
o Participation in a group or convention
o Eligibility for a special rate program
Special booking requirements, such as advance deposit
<PAGE> 39
requirements or refundability limitations, can be presented when applicable to
allow the agent to discuss the restriction with the guest before progressing
with a booking.
If the hotel requested by the guest is not available for the dates requested,
other Wyndham Properties that are available in the city are identified to the
sales agent so that they can be offered to the guest.
<PAGE> 40
The ISIS System maintains current IATA and ARC travel agency names and
addresses to allow automatic insertion of the name and address data for travel
agencies when the IATA number is entered. Wyndham can add to this list
additional travel agents or distributors that are proprietary to Wyndham and
which are maintained separately by Wyndham. These proprietary distributors will
not be modified or deleted when an updated IATA file is loaded.
In addition to automatic insertion of the above information, a guest profile is
available for those customers that Wyndham chooses to designate in advance as
frequent guests. The guest profile allows for the automatic transfer of the
necessary name, address, telephone, corporate affiliation and special guest
requests information into the Guest Name Record (GNR).
The ISIS System is capable of capturing special service requests that the guest
may require, notifying the property of the request and storing the requests
with the GNR.
REGRETS AND DENIALS
If a telephone sales call does not result in a sale the ISIS System presents
the sales agent with a "Regrets and Denials" screen that captures the reason,
in the opinion of the sales agent, that the sale was lost. The categories of
regret and denial reasons are flexible, allowing Wyndham to add and delete
categories as desired. The city or hotel requested and the guest's requested
length of stay are captured automatically.
Wyndham has the ability to add, delete or modify regret and denial reason
codes.
The regrets and denials information is collected as a part of a forced wrap-up
at the close of each sales dialogue.
GUEST DATA
Each sale results in the storage in the data base Reservations Data Base of
information about the sale and the guest. The GNR will store the necessary
information to document the sale that has been made and to provide the
<PAGE> 41
Hotel Property with the necessary information about the guest and the terms of
sale. The guest name record includes:
o Record identifier or confirmation number
o Guest name
o Guest address
o Guest telephone Number
o Guest business telephone number
o Name of person making the reservation
o Date of arrival
o Date of departure
o Rate-tier, rate-type confirmed
o Room-type confirmed
o Source of sale
o Travel agency IATA number
o Travel agency name and address and phone number
o Wholesaler identifier and name
o Reservation Center sales agent ID
o GDS system and agent identifier if a GDS sale
o Hotel property sales agent ID
o Any special service request
o Any free-form comments entered by the sales agent that
will be conveyed to the hotel property
With the exception of the free-form comments, which can be stored as unedited
text, this information is structured data that is edited for accuracy and
validity.
ROOM-TYPE AND RATE-TYPE
There is no technical limit to the number of room-types or rate-types that can
be offered by a hotel. The rates can be associated with a rate tier allows all
rates in a tier to have their sales restrictions modified as part of a single
data base update transaction.
The ISIS System allows both inventory allocation and status/restriction
capabilities to manage availability. The status restrictions on display for
sale include:
o Length of stay based upon either arrival date or stay through
<PAGE> 42
o Closed to arrival
o Closed to departure
o Advance booking
o Day of week
The ISIS System can automatically price for quotation by the sales agent to the
guests
o Additional charges for:
Additional guests
Children by age category
o Meal plans
o Rollaway beds
o Taxes & service charges
The ISIS System can automatically enforce maximum room occupancy rules by room
type and hotel.
DATA BASE
The data base of rates and availability can be accessible from the Hotel
Property. This access, with appropriate security control, must be possible via
the following methods:
o Dial-up access from a personal computer at the property An ISIS
Workstation on property connected via ISIS 2000's network
o An automatic update, received over a dedicated or shared network, from a
property management system that is controlling a property's inventory
o An update made by a data base agent at the Reservation Center on
instruction from the property.
The rate and availability data base maintain an inventory and or status for
each room-type and rate tier. The ability to maintain an inventory for group or
wholesaler blocks is provided. These blocks are room-type specific to meet the
needs of certain wholesalers and run of the house for others.
A history of the changes made to inventory levels, ratetiers, rate-types, and
room-types is saved on the ISIS
<PAGE> 43
System to allow for resolution of any problems with a hotel's status. This
history will include the change made, the date and time of the transaction and
the security sign in code of the individual making the change.
The ISIS System is capable of acting as a single data base for all reservation
activity. The central data base can be used as one consistent source of
availability, rate and guest reservation information for Wyndham.
The central data base is capable of providing support for several critical
objectives:
o A single point of complete control of all inventory and price offerings
o The ability to manage inventory and price across all distribution
channels
o The ability to provide a consistent source of information for sales
reporting and analysis
o A source of information for a customer direct marketing data base
The ISIS System will be able to link to existing Fidelio property management
systems via a two-way reservation link. The new single-image Property
Management System will allow for a replicated copy of a hotel's reservation and
customer data locally.
GDS SYSTEM INTERFACE THROUGH THISCO'S ULTRASWITCH
The ISIS System has the capability to "link" to the various Global Distribution
Systems (GDS). This will include links with:
o Sabre - Including "Direct Connect Availability"
o Galileo's RoomMaster - Including Inside availability
o Worldspan
o Amadeus
o System One
Wyndham may also establish links with other GDSs.
AVAILABILITY STATUS MESSAGES
<PAGE> 44
The ISIS System is capable of automatically generating and sending availability
status messages to each Global Distribution System and notifying the GDS of
changes in availability status of a hotel property's room-type or rate- level
inventory.
The ISIS System provides the ability to translate, via flexible translation
tables, the room-types and rate-levels used by Wyndham to the allowable
structures for room-types and rate-levels within each GDS.
GDS RATE UPDATE
The ISIS System can automatically pass updated rate information to GDS in
conjunction with the use of the LANYON RATES system.
<PAGE> 45
PROPERTY MANAGEMENT SYSTEM
An automated two way interface will be available for the Fidelio property
management systems ("PMS") currently installed at Wyndham. It is Wyndham's
intention to move to a centralized data base for all hotels. This will occur in
two steps:
o Automated Two way Interfaces with Fidelio PMSs. This will include the
actual guest stay data from the hotel PMS
o New "single image" property management system to be installed beginning
in 1997
During transition to Wyndham's new system and when Wyndham first takes over a
Property, there is a need to operate the ISIS System connection to the Property
with the following alternatives:
o The ISIS System is capable of sending reservations, modifications and
cancellations to the property via automated FAX. The nature of
modifications made to an existing reservation will be clearly
highlighted on this form to allow local reservation personnel to
accurately modify their local PMS data base.
o A second option for Properties without a PMS interface is to download
reservations, cancellations and modifications to a personal computer at
the Property on either a dial-in basis or a dial-out basis.
Wyndham intends to utilize the network which will grow as a result of
interfacing PMSs to the ISIS System as the basis for establishing a corporate
network which will support a number of functions which will includes:
o Customer data base, the ISIS System will be capable of receiving a daily
upload of actual guest stay information following completion of the
property's night audit.
o Guest Recognition
o Guest History - Direct marketing
o Management Information
<PAGE> 46
YIELD MANAGEMENT SYSTEM ROOMS MERCHANDISING
While Wyndham does not currently utilize an automated yield management system,
a manual process is used to assess current advanced booking patterns relative
to a comparable period in the prior years. This comparison of advanced booking
levels is considered along with other market and competitive factors known by
property management to determine which rate tiers will be restricted on which
future dates.
To effectively manage yield, information about the sales build progress for all
sources or bookings needs to be accumulated for review, not simply sales from
the Reservation Center and GDS. As such, the only current source at Wyndham for
complete yield management data is the property management system at the hotel.
However, the ISIS System, using either a two-way link to Fidelio or the new
ISIS "Single-Image" property management system, will be used as the single data
base for all reservation activity. As such, the ISIS System will be the source
of information to support the yield management process for some Wyndham
Properties.
The following data will be captured in this process to assist in the yield
management and room merchandising process:
o Hotel identifier
o Date at which status file was produced
o For each rate tier and room type combination at the property:
The number of un-cancelled and currently residing bookings for each
future date up to a future date defined by the hotel property.
It is anticipated that this future date will be at least 26 weeks out.
o For each future date, type of customer and source of sale
The number of new bookings
The number of cancellations
<PAGE> 47
The number of modifications
o The booking restrictions in place for each future date, rate tier and
room-type.
A system that supports Wyndham's room merchandising process will be developed
using this data.
WHOLESALER REQUIREMENTS
Wyndham uses a number of wholesalers to support its sales and marketing effort.
Most capabilities required to support wholesalers, such as the ability to
inventory a block of rooms for a wholesaler, are covered elsewhere in this
requirement document. The following section highlights additional capabilities
that are provided to support wholesalers:
o Wyndham may wish to enter reservations from wholesalers from any
designated Wyndham sales office or property.
o Wyndham's headquarters staff or sales office(s) will be able to view
inventory build for a particular wholesaler block.
o An ability to request a specific room from a Hotel Property and note the
status of the request as confirmed or denied in the reservation detail.
Confirmations will be printed when designated by a sales agent. The
confirmation includes:
o The hotel booked and its address and phone number
o The dates of arrival and departure
o Package or rate booked
o Package description
o Add ons or taxes
o Details of any special service requirements promised to the guest
CUSTOMER DATA BASE
Wyndham will, as a second step following the activation of the ISIS System,
have the ability to establish a Customer Data Base that can be used flexibly
for direct marketing
<PAGE> 48
purposes. The ISIS System will provide an ability store the sales and checkout
record for each guest. These records will be matched to link the various stays
of a guest across all Wyndham hotels. "Key data elements" will be used to match
a customer and will include: customer name, address, phone number, business
phone number, credit card type and number(s), frequent guest number, airline
frequent flier number(s). The source of booking for the customer will also be
identified in the customer data base. The ISIS System will also be capable of
capturing, and passing to the Customer Data Base, a corporate identifier for
those sales that are made against a corporate agreement.
MARKETING INFORMATION QUERY AND ANALYSIS
Marketing information will be available by standard screen queries, and if need
printed via a flexible query. Information available in query will include:
o Source of Sale for each Hotel Property:
By geographic area
By mode of distribution:
Direct from customer
Travel agency via telephone
Travel agency via GDS
Wholesalers
By individual travel agency
By travel agency group or consortia
By Wholesaler
o Sales received via the telephone from either a customer or travel agency
further reported as resulting from:
Sales made by a Hotel Property and booked in the ISIS System
Sales made by the Reservation Center
Sales made by an overseas sales office that has booking access to
the ISIS System.
o The above information for a property will also be available in regional,
division and corporate summaries as defined by Wyndham.
<PAGE> 49
o Based upon the regret and denial categories established by Wyndham;
daily, weekly and monthly summaries of regrets and denials will be
available for each hotel. This summary will include the number of calls
resulting in a regret or denial for each reason defined and each date.
Regrets and denials will be reported for each Property and be summarized
by region, division and corporate. The categories of regrets and denials
to be reported will be defined by Wyndham and be flexibly changed as
required.
TELEPHONE SALES
The ISIS System will produce reports that measure the productivity of the
telephone sales operation. These reports will also provide operational
information useful to Reservation Center and Hotel Property management in
day-today management of the reservation operation. These reports or displays
will include:
o Telephone sales agent booking performance:
Number of hours that the agent was signed in with sales agent
duty code.
Number of bookings
Gross
Net of cancellations
o The ISIS System will be capable of exporting a file of telephone sales
activity by sales agent to a personal computer for analysis of sales
conversion rates on an agent by agent basis. Alternatively, the ISIS
System will be capable of accepting a file from the Automated Call
Director (ACD) for production of sales conversion rate reports.
DATA BASE
Queries summarizing activity by each data base agent will be produced. This
activity will include the number of transactions of each type entered by the
data base agent and the number of hours signed in with the data base agent duty
code.
<PAGE> 50
Displays or reports will be available that allow an audit of the changes made
for each hotel and by each data base agent to the availability/rate levels and
restrictions, These reports will show the time that the change was entered into
the ISIS System, the agent that made the change and the specific change that
was made. These will be displayable both by agent and by Property.
SECURITY
The ISIS System will provide a security system which allows for assignment of
security access from a central point, either at Wyndham's headquarters or the
Reservation Center. Security access will be granted in proportion to the job
responsibilities and location of the individual who is granted the access
The ISIS System will append to each transaction the security access code of the
individual making a transaction and, if possible, an identifier of the location
from which the transaction was made.
FREQUENT GUEST RECOGNITION/REWARD PROGRAM
Wyndham may wish to reward frequent guests in a variety of manners in the
future. In order to achieve this objective the ISIS System will provide the
capability to track frequent guests using the customer data base as previously
described The frequent guest program will allow for a related customer profile
in the ISIS System providing information about the guest that can be used
during the reservation process, as well as provide information about the
guest's previous stay history with Wyndham.
VIDEO AND MAP DATABASE AND DISPLAY
The ISIS System will maintain a data base of video images of the hotel and
related facilities and points of interest. In addition maps to the property can
be scanned into the ISIS System and stored. These images and maps can be
presented to the sales agent to assist in the sale and providing help to the
guest.
<PAGE> 51
EXHIBIT 2.1
ISIS WORKSTATION LICENSE AND LEASE AGREEMENT
This Agreement is made and entered into this _____ day of ________________
199_, by and between ISIS 2000, a limited partnership formed under the laws of
the State of Texas, with off ices at ____________________ ("ISIS 2000"), and
Wyndham Hotel Corporation, a corporation incorporated under the laws of the
State of Delaware with offices at ____________________ ("Wyndham").
W I T N E S S E T H:
WHEREAS, ISIS 2000 is willing to make ISIS Workstations available to Wyndham by
providing Wyndham with certain equipment and software; and
WHEREAS, Wyndham desires to utilize ISIS Workstations and desires therefore to
install and utilize certain related equipment and software; and
WHEREAS, Wyndham desires to lease the equipment and license the software
specified herein;
NOW, THEREFORE, in consideration of the premises and the mutual obligations
hereinafter set forth, ISIS 2000 and Wyndham hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement: All definitions set forth in the
Centralized Reservations Service Agreement executed between the parties hereto
on ____________________ ("Service Agreement") are applicable hereto and
incorporated by reference herein.
2. INSTALLATION
A. ISIS 2000 will, pursuant to the Service Agreement, lease and
install or cause to be installed the applicable Equipment as detailed in
Exhibit A at the location or locations
<PAGE> 52
set forth on Exhibit B attached hereto and made a part hereof and additional
locations to be requested by Wyndham at additional prices to be agreed upon
between the parties, and will interconnect the Equipment to ISIS Central.
B. Each Wyndham Location will be reviewed by a ISIS 2000
representative to determine what, if any, physical modifications will be
required to support the ISIS Workstation at the Wyndham designated spot(s).
After the placement review is completed, ISIS 2000 will issue a placement
survey for each Wyndham location. The placement survey will detail the layout
of all terminals, cables, and back room support for Equipment (e.g., CPUs and
modems). At its own cost and expense, Wyndham will undertake the responsibility
to implement any physical modification required by the placement survey,
including without limitation, the furnishing of electrical power, the
installation of data cables, and access to telephone lines.
C. Wyndham will not relocate any installed Equipment further than
the length of the wire installed by ISIS 2000 that connects such Equipment
without first obtaining ISIS 2000's written consent. Any approved relocation
must be accomplished by ISIS 2000 or its designee at Wyndham's sole cost and
expense.
D. ISIS 2000 will use its best efforts to install and interconnect
the Equipment at the Wyndham locations by the respective dates set forth on
Exhibit A, or in the event of subsequently requested locations, by dates to be
agreed upon.
E. Wyndham warrants and represents that each location at which the
Equipment is to be installed is owned or controlled by Wyndham and that it has
authority to enter into this Agreement on behalf of each said location.
3. TRAINING
Only qualified personnel who have satisfactorily completed ISIS 2000's
training program, as described in the Service Agreement, will be permitted to
operate any Equipment or access ISIS Central.
4. SOFTWARE LICENSE - RESTRICTIONS
<PAGE> 53
ISIS 2000 hereby grants Wyndham a nonexclusive license to the software
resident in the ISIS Workstation in connection with Wyndham's use of the ISIS
Workstation. The software may not be used, in whole or in part, by Wyndham on
other than the Equipment set forth on Exhibit A to this Agreement or
subsequently designated Equipment as agreed to by the parties, without the
prior written consent of ISIS 2000. This license will terminate upon
termination of this Agreement.
It is expressly understood and agreed that all provisions the Service
Agreement regarding title, ownership and nondisclosure apply to this Lease
Agreement and are incorporated herein by reference.
Except with the prior written consent of ISIS 2000, Wyndham will not use
ISIS Workstation for any functions other than those set forth in the ISIS
Workstation operations manuals.
ISIS 2000 provides ISIS Workstation pursuant to license agreements with
various third party software providers. Certain of these providers may require
ISIS 2000 to obtain Wyndham's agreement to and compliance with software
sublicenses, and Wyndham agrees to abide by all such sublicenses. If Wyndham
fails to agree to or abide by a sublicense, ISIS 2000 may refuse to install, or
may deinstall, ISIS Workstation.
Wyndham will not sell, lease, or otherwise transfer Macros that have
been created by ISIS 2000 or by Wyndham.
5. THIRD PARTY-PROVIDED SOFTWARE
A. Wyndham may not use software that is provided by any party other
than ISIS 2000 in connection with Wyndham's use of the ISIS Workstation, unless
Wyndham obtains ISIS 2000's prior written consent to the use of such third
party-provided software ("Third Party Software"). If ISIS 2000 consents to
Wyndham's use of Third Party Software, ISIS 2000 will have no liability for any
associated license or sub-license fees and will have no responsibility for
loading the software. In addition, regardless of whether it has provided its
prior consent to Wyndham's use of Third Party Software, ISIS 2000 will have no
liability to Wyndham if subsequent enhancements or modifications of the ISIS
<PAGE> 54
Workstation render the Third Party Software incompatible with the ISIS
Workstation.
B. Regardless of whether ISIS 2000 has provided its prior consent to
Wyndham's use of Third Party Software, ISIS 2000 will have no liability
whatsoever to Wyndham for, and Wyndham releases ISIS 2000 from any
responsibility for, any defects, malfunctions, failure to perform, and errors
of any kind by the Third Party Software. In addition, ISIS 2000's consent to
Wyndham's use of Third Party Software will not obligate ISIS 2000 to provide
support services of any kind for Third-Party Software.
C. Regardless of whether ISIS 2000 has provided its prior consent to
Wyndham's use of Third Party Software, ISIS 2000 will have no liability
whatsoever to Wyndham for, and Wyndham releases ISIS 2000 from any
responsibility for, any malfunction, interruption, or failure to perform of the
ISIS Workstation or Equipment caused by the Third Party Software.
D. Regardless of whether ISIS 2000 has provided its prior consent to
Wyndham's use of Third Party Software, Wyndham will be liable to ISIS 2000 for
any loss or damage to the ISIS Workstation or ISIS Central that is caused by
the Third Party Software's performance or failure to perform, including all
costs incurred by ISIS 2000 in connection with the service and repair required
to restore Wyndham Is interconnection to ISIS Central.
E. Regardless of whether ISIS 2000 has provided its prior consent to
Wyndham's use of Third Party Software, Wyndham will indemnify and hold harmless
ISIS 2000 and its partners, officers, directors, agents, and employees against
and from any and all liabilities, damages, losses, expenses, claims, demands,
suits, fines or judgments, including, but not limited to, attorneys' fees,
costs and expenses incident thereto, which may be suffered by, accrue against,
be charged to, or be recovered from ISIS 2000, its partners, officers,
directors, agents, or employees, by reason of any injuries to or deaths of
persons, the loss of, damage to, or destruction of property, including loss of
the use thereof, or economic loss arising out of or in connection with (i) any
act, error or omission of Wyndham, its officers, directors, agents, or
employees in the installation and operation of the Third Party Software, (ii)
any act, error, or omission of the provider of the Third Party Software in the
<PAGE> 55
installation and operation of the Third Party Software, (iii) any defect,
malfunction, failure to perform, and error of any kind by the Third Party
Software; and (iv) any misuse or negligent use of, or failure to adhere to
operating guidelines and procedures with respect to the Third Party Software by
Wyndham, its agents or employees; and (v) any damage or loss to the Wyndham
Database.
6. THIRD PARTY-PROVIDED HARDWARE
A. Wyndham may not use hardware that is provided by any party other
than ISIS 2000 in connection with Wyndham's use of the ISIS Workstation or ISIS
Central, unless Wyndham obtains ISIS 2000's prior written consent to the use of
such third-party provided hardware ("Third Party Hardware"). If ISIS 2000
consents to Wyndham's use of such Third Party Hardware, ISIS 2000 will have no
liability whatsoever for the costs associated with Wyndham's use of same and
will have no responsibility for installing the Third Party Hardware. If
Wyndham's existing Equipment must be reconfigured to accommodate the Third
Party Hardware, ISIS 2000 will perform or cause to be performed such
reconfiguration, at Wyndham's expense. In addition, regardless of whether it
has provided its prior consent to Wyndham's use of Third Party Hardware, ISIS
2000 will have no liability to Wyndham if subsequent enhancements or
modifications of the ISIS Workstation System render the Third Party Hardware
incompatible with the ISIS Workstation.
B. Regardless of whether ISIS 2000 has provided its prior consent to
Wyndham's use of Third Party Hardware, ISIS 2000 will have no liability
whatsoever to Wyndham for, and Wyndham releases ISIS 2000, its partners,
officers, directors, employees and agents from any and all responsibility for,
any defects, malfunctions, failure to perform, and errors of any kind by the
Third Party Hardware. In addition, ISIS 2000's consent to Wyndham's use of
Third Party Hardware will not obligate ISIS 2000 to provide repair and
maintenance services of any kind in connection with said Third Party Hardware.
C. Regardless of whether ISIS 2000 has provided its prior consent to
Wyndham's use of Third Party Hardware, ISIS 2000 will have no liability
whatsoever to Wyndham for, and Wyndham releases ISIS 2000, its partners,
officers, directors, employees and agents from any and all responsibility for,
any malfunction,
<PAGE> 56
interruption, or failure to perform of ISIS Workstation caused by the Third
Party Hardware.
D. Regardless of whether ISIS 2000 has provided its prior consent to
Wyndham's use of Third Party Hardware, Wyndham will be liable to ISIS 2000 for
any loss or damage to the ISIS Workstation that is caused by the Third Party
Hardware's performance or failure to perform, including all costs incurred by
ISIS 2000 in connection with the service and repair required to restore
Wyndham's interconnection to ISIS Workstation.
E. Regardless of whether ISIS 2000 has provided its prior consent to
Wyndham's use of Third Party Hardware, Wyndham will indemnify and hold harmless
ISIS 2000, its partners, officers, directors, agents, and employees against and
from any and all liabilities, damages, losses, expenses, claims, demands,
suits, fines or judgments, including, but not limited to, attorneys, fees,
costs and expenses incident thereto, which may be suffered by, accrue against,
be charged to, or be recovered from ISIS 2000, its partners, officers,
directors, agents, or employees, by reason of any injuries to or deaths of
persons, the loss of, damage to, or destruction of property, including loss of
the use thereof, or economic loss arising out of or in connection with (i) any
act, error or omission of Wyndham, its officers, directors, agents, or
employees in the installation and operation of the Third Party Hardware, (ii)
any act, error, or omission of the provider of the Third Party Hardware in the
installation and operation of the Third Party Hardware, and (iii) any defect,
malfunction, failure to perform, and error of any kind by the Third Party
Hardware.
7. REPAIR AND MAINTENANCE
A. ISIS 2000 will provide or cause to be provided to Wyndham certain
repair and maintenance services required for the Equipment during normal
business hours.
B. Neither Wyndham nor any third party, other than a third party
designated by ISIS 2000, will perform or attempt to perform maintenance, repair
work, alterations or modifications, of any nature whatsoever, to the Equipment
or the ISIS Workstation.
<PAGE> 57
C. Except where damage results from the fault or negligence of ISIS
2000 or its designated agent, maintenance and repair services set forth in this
Article 7 do not apply to:
(i) any damage resulting from (a) accident, transportation,
neglect or misuse, (b) failure or variation of electrical power, (c) failure to
properly maintain the installation site, air conditioning or humidity control,
or (d) causes other than ordinary use; and
(ii) any damage resulting from any maintenance, parts,
attachments or modification to the Equipment or software performed or provided
by anyone other than ISIS 2000 or its designated agent.
D. Any repair or maintenance required because of any damages as
described in Article 7C will be performed by ISIS 2000 or its designated agent
at Wyndham's sole cost and expense.
8. OPERATION OF EQUIPMENT, INDEMNITY AND INSURANCE
A. (i) The ISIS Workstation must be used and operated (a) in strict
accordance with operating instructions provided by ISIS 2000 in the procedures
manuals and materials, and (b) solely for the performance of the specific
business functions designated in the procedures manuals and materials. Any
undesignated business use and all nonbusiness uses are strictly prohibited.
(ii) Wyndham will take all precautions necessary to prevent
unauthorized operation or use of ISIS Workstation.
B. Wyndham will take all necessary precautions to protect the ISIS
Workstation.
C. (i) At its own cost, Wyndham must procure and maintain insurance,
from an insurer and on terms and conditions acceptable to ISIS 2000, insuring
the Equipment against all risk of loss or damage, including, without
limitation, the risks of fire, theft and such other risks as are customarily
insured in a standard all-risk policy. Such insurance shall also provide the
following:
<PAGE> 58
(a) Full replacement value coverage for the Equipment
which value is stipulated to be not less than the Insurance value
as specified on Exhibit A attached hereto;
(b) An endorsement naming ISIS 2000 as a coinsured and
as a loss payee to the extent of its interest in the Equipment;
and
(c) An endorsement requiring the insurer to give ISIS
2000 at least 30 days' prior written notice of any intended
cancellation, nonrenewal, material change in coverage or any
default in the payment of a premium.
(ii) Prior to the installation of the Equipment, ISIS 2000 must
receive from the insurer certificates of insurance evidencing the insurance and
endorsements specified in Article 8C(i) hereof.
(iii) If Wyndham fails to maintain or pay the premium on the
insurance required in Article 8C(i) hereof, then ISIS 2000 may secure
equivalent insurance coverage or pay any delinquent premium. If ISIS 2000
elects to do so, then ISIS 2000 may, at its option:
(a) Demand that Wyndham immediately reimburse ISIS 2000
to the extent of ISIS 2000's cost of such equivalent insurance or
delinquent premium payment plus interest at the rate of eighteen
percent (18%) per annum or the maximum amount permitted by law,
whichever is less, from the date of ISIS 2000's expenditure until
the date of reimbursement to ISIS 2000 and Wyndham will
immediately pay all such amounts to ISIS 2000, or
(b) Deduct from amounts due to Wyndham from ISIS 2000
an amount equal to ISIS 2000's cost of such equivalent insurance
or delinquent premium payment.
D. (i) Notwithstanding anything stated herein to the contrary,
Wyndham will be liable to ISIS 2000 for any loss or damage to the Equipment,
regardless of the cause thereof, occurring while leased to Wyndham or while in
the possession, custody, or control of Wyndham.
<PAGE> 59
(ii) if any Equipment is lost, totally destroyed, damaged
beyond repair, or so damaged to constitute a constructive total loss, then,
within 60 days after such loss or damage, Wyndham will pay to ISIS 2000 an
amount equal to the replacement value of such equipment on the date of such
loss or damage less any insurance proceeds paid to ISIS 2000 in accordance with
Article 8C hereof.
9. ENTRY AND INSPECTION
ISIS 2000 or its designee will have the right to enter upon any Wyndham
Location during Wyndham's business hours for the purpose of monitoring
Wyndham's operation of the Equipment and the ISIS Workstation, inspecting the
Equipment, performing such repairs, maintenance, or support services as may be
necessary, or removing the Equipment; provided, however, that ISIS 2000 will
not during the course of such monitoring, inspection, repair, or removal
unreasonably interfere with Wyndham's business.
10. REPRESENTATIONS AND WARRANTIES
A. ISIS 2000'S REPRESENTATIONS AND WARRANTIES AND LIABILITY FOR
BREACH THEREOF ARE LIMITED TO THOSE EXPRESSLY SET FORTH IN THE SERVICE
AGREEMENT.
B. WYNDHAM WAIVES CERTAIN CLAIMS AND RELEASES ISIS 2000 FROM
LIABILITIES AS SET FORTH IN THE SERVICE AGREEMENT.
C. INDEMNIFICATIONS SET FORTH IN THE SERVICE AGREEMENT APPLY HERETO.
11. TERM
This Agreement commences on the date hereof and terminates upon
termination of the Service Agreement, and will terminate with respect to the
Equipment located on any Property on the date that Property ceases to be owned
or controlled by Wyndham.
12. TERMINATION
<PAGE> 60
ISIS 2000's right to terminate this Agreement shall be identical to and
coextensive with the termination rights of the parties as set forth in the
Service Agreement.
13. OWNERSHIP OF EQUIPMENT
It is understood and agreed that: (1) all Equipment will remain the sole
property of ISIS 2000 unless sold to Wyndham pursuant to a separate sales
agreement; (2) Wyndham will not remove any identifying marks from any
Equipment; (3) Wyndham will not subject the Equipment to any lien or
encumbrance; and (4) Wyndham will return. the Equipment immediately upon the
termination of this Agreement. ISIS 2000 is granted the right to enter the
premises on which Equipment is located and remove the Equipment, without
liability for doing so, upon termination of this Agreement.
14. ENTIRE AGREEMENT
Exhibits A and B are a part of this Agreement. This Agreement, together
with the Service Agreement and Schedules thereto, constitutes the entire
agreement and understanding of the parties on the subject matter hereof and, as
of the effective date, supersedes all prior agreements, whether written or
oral, between the parties hereto concerning the subject matter hereof. This
Agreement may be amended or modified only by written amendment or supplement
signed by the party to be bound thereby. All provisions of the Service
Agreement which do not contradict this Agreement apply to this Agreement and
are incorporated herein by reference.
15. SERVICE AGREEMENT CONTROLLING/CROSS DEFAULTS
The parties hereto agree that this Agreement and the Service Agreement
shall be construed and interpreted in such a manner as to be consistent and
complimentary. However, in the event of an ambiguity, conflict or
inconsistency, the terms and provisions of the Service Agreement shall control
and be the sole authority. A breach of the Service Agreement shall be deemed a
breach of this Agreement and shall entitle the non-defaulting party to exercise
all rights and remedies permitted herein and in the Service Agreement.
<PAGE> 61
IN WITNESS WHEREOF, Wyndham and ISIS 2000 have executed this Agreement as of
the day and year first above written.
WYNDHAM HOTEL CORPORATION ISIS 2000
By: By:
----------------------------------- -----------------------------------
Title: Title:
--------------------------------- ---------------------------------
Date: Date:
--------------------------------- ---------------------------------
<PAGE> 62
SCHEDULE 2.2
GDS INTERFACES
Subject to Customer's agreements with the following GDS Vendor and any other
generally accepted and recognized GDS (in accordance with Section 2.2.2 of the
Agreement), ISIS 2000 will implement interfaces between ISIS Central and such
GDS Vendor:
Amadeus
Galileo
Gemini
Sabre
System One
Worldspan
<PAGE> 63
SCHEDULE 3.2.2
ONLINE DATA STORAGE
ISIS 2000 will maintain sufficient disk capacity on ISIS Central to accommodate
Wyndham's data storage requirements for current and future reservations,
property descriptions, and frequent guest records. Sufficient disk capacity
will be maintained for historical reservation data for a minimum of thirty days
after the departure date of such reservations.
Historical reservation records will be transferred to tape before purging.
The computer tape will be formatted to microfiche and provided to Wyndham at
cost.
<PAGE> 64
SCHEDULE 5.1
OTHER SERVICES
Pouches - ISIS 2000 will initiate daily (except weekends) courier pouch service
to the Wyndham Caribbean resort properties for delivery of deposit, customer
service, reservations and administrative information. For such services, ISIS
2000 will charge Wyndham a fee equal to 120% of ISIS 2000's fully allocated
cost of providing such services.
Brochure Fulfillment - ISIS 2000 will provide address labels and fulfillment
instructions to be forwarded for fulfillment as specified by Wyndham. Brochure
labels are included in the booking fee.
Customer Service - ISIS 2000 will document initial customer service calls and
forward the information to a Wyndham customer service representative as
specified by Wyndham. ISIS 2000 will forward all follow-up calls to Wyndham's
customer service representative. ISIS 2000 will include this service in the
booking fee.
<PAGE> 65
SCHEDULE 7.1.2
BOOKING FEES
Booking Fee: A booking fee will be charged for each net reservation created on
the ISIS System or in GDS on behalf of the Property. This fee will be based
full absorption of all ISIS costs, including costs of capital leases, 10%
return on capital, interest and principal repayment on loans, and taxes. The
booking fee for a reservation will be based upon the category of booking. These
categories are GDS Bookings, TRC Number Bookings for a commercial hotel, TRC
Number Bookings for a resort hotel, Terminal Bookings and Bookings made for a
wholesaler. Each of these fees will be computed by including all directly
assignable costs such as labor, telephone charges, GDS booking fee, and
dedicated supervision. In addition to directly assignable costs, indirect costs
including overhead costs and financing costs will be distributed to categories
of bookings on a basis agreeable to Wyndham. The total of directly assignable
and indirect costs will be accumulated for each category of booking and divided
by the number of bookings in each category. The booking fee will be computed
based upon actual cost for each month.
<PAGE> 66
SCHEDULE 14.1
FAILURE OR DELAY OF SERVICE; WARRANTY
In cases of failure or delay in providing the ISIS Services, ISIS 2000's
liability to Wyndham will be as follows:
1. For programming enhancements failure or delay: liability limited to an
amount equal to ISIS 2000's charge to Wyndham for the specific enhancement
request that fails or is delayed except that, in the case of a delay, the
amount may be reduced to an amount equivalent to the ratio of days delayed to
days originally estimated multiplied by the amount of the charge to Wyndham for
the specific enhancement.
2. For failure or delay in the functional capabilities or data content of
the ISIS System: liability limited to ISIS 2000 correcting the function or data
at its own expense in a timely manner.
3. For failure or delay in the reservation service or non-delivery of
reservations to Wyndham properties: liability not to exceed the ISIS 2000 price
to Wyndham for the subject reservations.
<PAGE> 1
EXHIBIT 10.29
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into this _____ day of May, 1996, by and between ____________________ (the
"Indemnitee") and Wyndham Hotel Company Ltd., a Texas limited partnership
("Wyndham").
Recitals:
The Indemnitee is the owner of 1,000 shares of common stock of AMMB,
Inc. (the "Corporation"), and is the President and a director of the
Corporation.
The Corporation is the holder of liquor licenses for one or more hotels
managed by Wyndham.
The Indemnitee has requested that Wyndham indemnify and hold the
Indemnitee harmless from any and claims, demands, liabilities, costs, fines and
expenses (including reasonable attorneys' fees) (collectively, "Liabilities")
incurred, resulting from or arising out of the Indemnitee's ownership of the
common stock of the Corporation and service as an officer and director of the
Corporation, except for such Liabilities caused by the gross negligence,
willful misconduct or willful violation of applicable law by the Indemnitee.
Wyndham is willing to provide such indemnification on the terms and conditions
set forth herein.
For and in consideration of the premises and of the mutual covenants and
agreements set forth herein, the Indemnitee and Wyndham agree as follows:
1. Indemnification. Wyndham shall indemnify and hold harmless the
Indemnitee from and against any and all Liabilities incurred, resulting from or
arising out of the Indemnitee's ownership of the common stock of the
Corporation and service as an officer and director of the Corporation, except
for such Liabilities caused by the gross negligence, willful misconduct or
willful violation of applicable law by the Indemnitee.
2. Transfers of Shares. In consideration of the indemnification
provided pursuant to paragraph 1 above, the Indemnitee agrees that, (i) except
pursuant to this Agreement or as directed by Wyndham, Indemnitee will not
transfer, assign or pledge any shares of capital stock of the Corporation and
(ii) upon the request of Wyndham, whether made before, upon or after any
termination of the Indemnitee's employment by Wyndham, the Indemnitee will
immediately transfer to Wyndham, or to Wyndham's designee, all of the
Indemnitee's right, title and interest in the Corporation, including all shares
of capital stock of the Corporation held by the Indemnitee (without the payment
of any additional consideration therefor by Wyndham), and will cooperate with
Wyndham to effect the transfer of any liquor license or
<PAGE> 2
licenses owned or held by the Corporation to Wyndham or Wyndham's designee. The
Indemnitee also agrees that, upon the request of Wyndham, he will pledge all of
his shares of capital stock of the Corporation as collateral for any financing
obtained by Wyndham or any affiliate of Wyndham.
3. Further Assurances. Promptly upon the request of either party,
the other party hereto will execute any and all documents, instruments and
agreements as may be requested by the requesting party in order to carry out
the intent of this Agreement and to perfect or give further assurances of any
of the rights granted or provided for herein.
4. Miscellaneous. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective successors and
assigns. This Agreement shall be governed by and construed under the laws of
the State of Texas.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
WYNDHAM HOTEL COMPANY LTD., a Texas
limited partnership ("Manager")
By: Wyndham Hotel Management
Corporation, a Texas corporation,
General Partner
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of Wyndham Hotel Corporation
<TABLE>
<CAPTION>
Jurisdiction of
Incorporation/ Names Under Which
Name Organization Entity Does Business
---- ------------ --------------------
<S> <C> <C>
Wyndham Management Corporation Delaware Wyndham Management Corporation
Wyndham Hotels & Resorts
Wyndham Garden Hotels
GHALP Corporation Delaware GHALP Corporation
Wyndham IP Corporation Delaware Wyndham IP Corporation
WH Interest, Inc. Texas WH Interest, Inc.
Rose Hall Associates Limited Partnership Texas Rose Hall Associates Limited Partnership
WHC Caribbean Limited Jamaica WHC Caribbean Limited
Waterfront Management Corporation Delaware Waterfront Management Corporation
WHCMB, Inc. Delaware WHCMB, Inc.
Wyndham Hotels & Resorts (Aruba) N.V. Aruba Wyndham Hotels & Resorts (Aruba) N.V.
WHC Rose Hall Limited Jamaica WHC Rose Hall Limited
WHC Vinings Corporation Delaware WHC Vinings Corporation
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333-2214) of our reports dated March 8, 1996 on our audits of the financial
statements and financial statement schedules of Wyndham Hotel Corporation. We
also consent to the reference to our Firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Dallas, Texas
May 14, 1996
<PAGE> 2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333-2214) of our report dated February 27, 1996 on our audits
of the financial statements of Garden Hotel Associates LP. We also consent to
the reference to our Firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Dallas, Texas
May 14, 1996
<PAGE> 1
EXHIBIT 24.1
DELEGATION OF POWERS BY ATTORNEY-IN-FACT
The undersigned is the duly appointed attorney-in-fact for each of the
signatories to the Powers of Attorney attached hereto as Exhibit A (the "Powers
of Attorney"), which Powers of Attorney are incorporated by reference herein
for all purposes. Pursuant to the powers granted under the terms of the Powers
of Attorneys, the undersigned hereby appoints Carla S. Moreland (the
"Substitute") as his substitute with respect to all powers set forth in the
Powers of Attorney with full power of further substitution and resubstitution.
The Substitute shall have full power and authority to act in the undersigned's
stead as attorney-in-fact and to do and perform every act necessary to carry
out all or any of the powers described in the Powers of Attorney as fully as
could the undersigned if personally present.
Dated: May 11, 1996. /s/ JAMES D. CARREKER
---------------------------------------
James D. Carreker
<PAGE> 2
EXHIBIT A
POWERS OF ATTORNEY
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Dallas, State of Texas, on the 30th day of April, 1996.
WYNDHAM HOTEL CORPORATION
By: /s/ JAMES D. CARREKER
----------------------------------------
Name: James D. Carreker
Title: President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on April 30, 1996.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James D. Carreker and Anne L.
Raymond, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission and any State or regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ JAMES D. CARREKER President, Chief Executive Officer and Director
- ------------------------------- (principal executive officer)
James D. Carreker
/s/ ANNE L. RAYMOND Chief Financial Officer,
- ------------------------------- Executive Vice President and Director
Anne L. Raymond (principal financial officer)
/s/ JOHN P. KLUMPH Vice President - Corporate Controller
- ------------------------------- (principal accounting officer)
John P. Klumph
/s/ HARLAN R. CROW Director
- -------------------------------
Harlan R. Crow
/s/ SUSAN T. GROENTEMAN Director
- -------------------------------
Susan T. Groenteman
/s/ ROBERT A. WHITMAN Director
- -------------------------------
Robert A. Whitman
/s/ DANIEL A. DECKER Director
- -------------------------------
Daniel A. Decker
</TABLE>
II-6
<PAGE> 4
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ LESLIE V. BENTLEY Executive Vice President and Wyndham Garden
- ------------------------------- Division President
Leslie V. Bentley
/s/ ERIC A. DANZIGER Executive Vice President and Wyndham Hotels and
- ------------------------------- Resorts Division President
Eric A. Danziger
/s/ STANLEY M. KOONCE, JR. Executive Vice President - Marketing, Planning and
- ------------------------------- Technical Services
Stanley M. Koonce, Jr.
</TABLE>
II-7
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Dallas, State of Texas, on the 30th day of April, 1996.
WYNDHAM HOTEL CORPORATION
By: /s/ JAMES D. CARREKER
----------------------------------------
Name: James D. Carreker
Title: President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on April 30, 1996.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James D. Carreker and Anne L.
Raymond, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission and any State or regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ JAMES D. CARREKER President, Chief Executive Officer and Director
- ------------------------------- (principal executive officer)
James D.Carreker
/s/ ANNE L. RAYMOND Chief Financial Officer,
- ------------------------------- Executive Vice President and Director
Anne L. Raymond (principal financial officer)
/s/ JOHN P.KLUMPH Vice President - Corporate Controller
- ------------------------------- (principal accounting officer)
John P.Klumph
/s/ HARLAN R. CROW Director
- -------------------------------
Harlan R. Crow
/s/ SUSAN T. GROENTEMAN Director
- -------------------------------
Susan T. Groenteman
/s/ ROBERT A. WHITMAN Director
- -------------------------------
Robert A. Whitman
/s/ DANIEL A. DECKER Director
- -------------------------------
Daniel A. Decker
</TABLE>
II-7
<PAGE> 6
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ LESLIE V. BENTLEY Executive Vice President and Wyndham Garden
- ------------------------------- Division President
Leslie V. Bentley
/s/ ERIC A. DANZIGER Executive Vice President and Wyndham Hotels and
- ------------------------------- Resorts Division President
Eric A. Danziger
/s/ STANLEY M. KOONCE, JR. Executive Vice President - Marketing, Planning and
- ------------------------------- Technical Services
Stanley M. Koonce, Jr.
</TABLE>
II-8
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Dallas, State of Texas, on the 30th day of April, 1996.
WYNDHAM MANAGEMENT CORPORATION
By: /s/ JAMES D. CARREKER
----------------------------------------
Name: James D. Carreker
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on April 30, 1996.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James D. Carreker and Anne L.
Raymond, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission and any State or regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ JAMES D. CARREKER President and Director
- ------------------------------- (principal executive officer)
James D. Carreker
/s/ ANNE L. RAYMOND Vice President and Director
- ------------------------------- (principal financial officer)
Anne L. Raymond
/s/ JOHN P. KLUMPH Treasurer
- ------------------------------- (principal accounting officer)
John P. Klumph
</TABLE>
II-9
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Dallas, State of Texas, on the 30th day of April, 1996.
GHALP CORPORATION
By: /s/ JAMES D. CARREKER
----------------------------------------
Name: James D. Carreker
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on April 30, 1996.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James D. Carreker and Anne L.
Raymond, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission and any State or regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ JAMES D. CARREKER President and Director
- ------------------------------- (principal executive officer)
James D. Carreker
/s/ ANNE L. RAYMOND Vice President and Director
- ------------------------------- (principal financial officer)
Anne L. Raymond
/s/ JOHN P. KLUMPH Treasurer
- ------------------------------- (principal accounting officer)
John P. Klumph
</TABLE>
II-10
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Dallas, State of Texas, on the 30th day of April, 1996.
WYNDHAM IP CORPORATION
By: /s/ JAMES D. CARREKER
----------------------------------------
Name: James D. Carreker
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on April 30, 1996.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James D. Carreker and Anne L.
Raymond, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission and any State or regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ JAMES D. CARREKER President and Director
- ------------------------------- (principal executive officer)
James D. Carreker
/s/ ANNE L. RAYMOND Vice President and Director
- ------------------------------- (principal financial officer)
Anne L. Raymond
/s/ JOHN P. KLUMPH Treasurer
- ------------------------------- (principal accounting officer)
John P. Klumph
</TABLE>
II-11
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Dallas, State of Texas, on the 30th day of April, 1996.
WH INTEREST, INC.
By: /s/ JAMES D. CARREKER
----------------------------------------
Name: James D. Carreker
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on April 30, 1996.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James D. Carreker and Anne L.
Raymond, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission and any State or regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ JAMES D. CARREKER President and Director
- ------------------------------- (principal executive officer)
James D. Carreker
/s/ ANNE L. RAYMOND Vice President
- ------------------------------- (principal financial officer)
Anne L. Raymond
/s/ JOHN P. KLUMPH Treasurer
- ------------------------------- (principal accounting officer)
John P. Klumph
/s/ HARLAN R. CROW Vice President and Director
- -------------------------------
Harlan R. Crow
</TABLE>
II-12
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Dallas, State of Texas, on the 30th day of April, 1996.
ROSE HALL ASSOCIATES LIMITED
PARTNERSHIP
By: WHC CARIBBEAN LIMITED
By: /s/ HELMUT SCHUSTER
-----------------------------------
Name: Helmut Schuster
Title: Chairperson
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on April 30, 1996.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James D. Carreker and Anne L.
Raymond, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission and any State or regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ HELMUT SCHUSTER Chairperson
- ------------------------------- (principal executive officer and Authorized United
Helmut Schuster States Representative)
/s/ JUDY LOWE HENDRICK Managing Director and Treasurer
- ------------------------------- (principal financial and accounting officer)
Judy Lowe Hendrick
/s/ SUSAN T. GROENTEMAN Director
- -------------------------------
Susan T. Groenteman
/s/ STANLEY M. KOONCE, JR. Director
- -------------------------------
Stanley M. Koonce, Jr.
/s/ ERIC A. DANZIGER Director
- -------------------------------
Eric A. Danziger
Director
- -------------------------------
William A. Clarke
</TABLE>
II-13
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Dallas, State of Texas, on the 30th day of April, 1996.
WHC CARIBBEAN LIMITED
By: /s/ HELMUT SCHUSTER
-----------------------------------
Name: Helmut Schuster
Title: Chairperson
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on April 30, 1996.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James D. Carreker and Anne L.
Raymond, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission and any State or regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ HELMUT SCHUSTER Chairperson
- ------------------------------- (principal executive officer and Authorized United
Helmut Schuster States Representative)
/s/ JUDY LOWE HENDRICK Managing Director and Treasurer
- ------------------------------- (principal financial and accounting officer)
Judy Lowe Hendrick
/s/ STANLEY M. KOONCE, JR. Director
- -------------------------------
Stanley M. Koonce, Jr.
/s/ SUSAN T. GROENTEMAN Director
- -------------------------------
Susan T. Groenteman
/s/ ERIC A. DANZIGER Director
- -------------------------------
Eric A. Danziger
Director
- -------------------------------
William E. Clarke
</TABLE>
II-14
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Dallas, State of Texas, on the 30th day of April, 1996.
WATERFRONT MANAGEMENT CORPORATION
By: /s/ JAMES D. CARREKER
----------------------------------------
Name: James D. Carreker
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on April 30, 1996.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James D. Carreker and Anne L.
Raymond, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sip any and all amendments (including post-effective amendments) to this
Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission and any State or regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ JAMES D. CARREKER President and Director
- ------------------------------- (principal executive officer)
James D. Carreker
/s/ ANNE L. RAYMOND Vice President and Director
- ------------------------------- (principal financial officer)
Anne L. Raymond
/s/ JOHN P. KLUMPH Treasurer
- ------------------------------- (principal accounting officer)
John P. Klumph
</TABLE>
II-15
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Dallas, State of Texas, on the 30th day of April, 1996.
WHCMB, INC.
By: /s/ JAMES D. CARREKER
----------------------------------------
Name: James D. Carreker
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on April 30, 1996.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James D. Carreker and Anne L.
Raymond, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission and any State or regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ JAMES D. CARREKER President and Director
- ------------------------------- (principal executive officer)
James D. Carreker
/s/ ANNE L. RAYMOND Vice President and Director
- ------------------------------- (principal financial officer)
Anne L. Raymond
/s/ JOHN P. KLUMPH Treasurer
- ------------------------------- (principal accounting officer)
John P. Klumph
</TABLE>
II-16
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the city
of Dallas, State of Texas, on the 30th day of April, 1996.
WYNDHAM HOTELS & RESORTS (ARUBA) N.V.
By: /s/ JAMES D. CARREKER
----------------------------------------
Name: James D. Carreker
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
indicated capacities on April 30, 1996.
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints James D. Carreker and Anne L.
Raymond, and each of them, such individual's true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for such
individual and in his or her name, place and stead, in any and all capacities,
to sign any and all amendments (including post-effective amendments) to this
Registration Statement and any registration statement related to the offering
contemplated by this registration statement that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and to Me the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission and any State or regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ JAMES D. CARREKER President and Managing Director
- ------------------------------- (principal executive officer)
James D. Carreker
/s/ ANNE L. RAYMOND Vice President
- ------------------------------- (principal financial officer and Authorized United States
Anne L. Raymond Representative)
/s/ JOHN P. KLUMPH Treasurer
- ------------------------------- (principal accounting officer)
John P. Klumph
/s/ HARLAN R. CROW Managing Director
- -------------------------------
Harlan R. Crow
</TABLE>
II-17
